North American Port Strategies

While year-end numbers are not yet in, the North American cruise industry will have carried a record number of passengers in 2003 and expects to continue to set new records in the foreseeable future.

That translates into booming business for most cruise ports, and a seemingly attractive business proposal for new ports seeking cruise ships.

The (development) driver is the cruise industry’s economic impact on local communities. Only the big cruise ports are actually making money on their cruise business.

In Philadelphia, Port Director Melissa Grimm said that while there are ports that make money off their cruise business, Philadelphia is working towards that goal. “You need volume to earn money on cruise traffic,” she said. “Our traffic barely covers costs, and our parking lot revenue is vital. But ports must be focused to see beyond the tariffs,” she added. “The passengers yield hundreds of hotel room bookings, and people will come back.

“We are looking at conversion too,” Grimm added. “‘We want to entice people to come back for land stays. They go on vacations anyway – so why not to Philadelphia?”

So far, the port has spent some $15 million on terminal facilities, and recently finished installing an escalator and elevator, facilitating access for disabled passengers. An off-site luggage facility was also added, where passengers park and drop off their luggage before taking a trolley to the terminal.

Grimm is also working to make sure that travel agents know about the port and its ships.

She is also betting that the high number of first­ time cruisers sailing from Philadelphia will attract more ships. A survey showed that 43 percent of the passengers sailing out of Philadelphia are first-time cruisers, which Grimm counts as a big plus for the port. Eighty percent lived within two hours from Philadelphia.

Norfolk may have gone one step further. Said Stephen Kirkland, cruise marketing manager: “Our website is a good indication of how we are trying to help the cruise lines. It is as passenger-friendly as possible, and we have our own booking agent. Inquiries are forwarded to the city’s preferred travel agent.”

Norfolk also plans to “blitz” travel agents in the region about its new cruise ships.

So far, the port has invested $250,000 in a temporary facility to process passengers. But design work has started on a new terminal which Kirkland said would cost $30 million.

The rationale in Norfolk is that the port is owned and operated by the city and cruise traffic will generate direct revenue for the city.

According to Rita Vandergaw, senior director of marketing and communications at the port of San Diego: “Being a homeport sounds wonderful, and it has significant economic impact. We did a survey that shows each ship leaves behind $2 million and helps support some 1,600 jobs, but it also comes at a big cost.

“However, as a port you have to look at what is good for the community; our goal is to break even,” she explained.

As the cruise traffic has grown, the port has outgrown its cruise terminal, and is now also using two tents in order to process all the passengers when two ships are in port. According to Vandergaw, plans call for a new facility, and the port is working to get the financing from both public and private sources.

In Tampa, Cruise Marketing Manager Gina Rathbun, said that the port is trying to involve the whole community to take advantage of the 800,000 passengers who pass through. “We estimate that the impact of passengers and crew to be about $40 million in 2003, in addition to the servicing of the ships and pre- and post-hotel stays,” she said.

Rathbun said that cruise lines are looking at more cross-marketing opportunities, and to gain a better understanding of the markets they are sailing from. Working with Royal Caribbean International (RCI) and with members of the community, Rathbun explained that they are beginning to track passenger spending at participating resorts and attractions.

Tampa has just completed its Cruise Terminal 3 to the tune of $20 million; and it is home to RCI and Celebrity Cruises.

“We have great utility on Monday, Friday and Saturday,” Rathbun added, “but we are looking for more business on Sunday.”

Meanwhile, Tampa is looking at an additional terminal in the 2005-timeframe, according to Rathbun, who said that strategic planning dictates looking forward.

Vancouver has seen 20 years of steady growth, although its passenger traffic dipped slightly in 2003 to 953,376, from 1.1 million in 2002, due to the loss of three- and four-day cruises, and increased competition from neighboring Seattle.

Vancouver, which completed an expansion of its Canada Place terminal in 2002, has been focusing on operational improvements, according to Peter Xotta, director of the business development group, and will continue those efforts in 2004, to accommodate the larger ships more efficiently, and to manage the traffic and passenger flow.

“The larger vessels have posed challenges for most ports,” Xotta said, “and we have also worked to facilitate the traffic flow in the airport, and to and from the airport.

More parking spaces are also being added to accommodate the higher rate of drive business.

“The airport has a new area dedicated to cruise passengers where busses can go directly from the ship, so passengers avoid duplication of screening. RCI and Celebrity also ran a pilot program last year allowing passengers to check in for their flights while still onboard the ships.

“Our mission is to grow the volume of passengers balanced with financial prudence,” Xotta continued, adding that the port also needs to extract as much utility as possible from its facilities by being as efficient as possible. He envisioned more off-season sailings, even evening departures. “We will do everything we can before we build another new terminal,” he added.

Miami posted its fourth record year in a row in 2003, with nearly four million revenue passengers, up 8.7 percent over 2002. The port is also in the process of building two new terminals for Carnival Cruise Lines at a cost exceeding $60 million.

According to Juan Kuryla, assistant port director for intergovernmental affairs and promotion, both Carnival and RCI have given long-term commitments to berth ships in Miami, in lieu of discounted tariffs.

The latest ship to join Miami’s homeport fleet was Oceania Cruises’ Regatta this past fall, while Norwegian Cruise Line’s (NCL) Norwegian Dawn has made Miami a port of call on her year-round program from New York.

“Our challenge as a port is to continue to provide efficient service in a competitive environment, while also providing funding for infrastructure,” said Kuryla, who noted that the new terminals allow the port to process more passengers in the same time frame as smaller ships in the past.

“We have worked closely with both RCI and Carnival to make sure that the new terminals meet their needs,” Kuryla added. Changes have also been made to comply with the security mandates, but without creating bottlenecks for passengers, Kuryla pointed out.

All provisions are inspected manually, with dogs, and with X-ray equipment, according to Kuryla.

He estimated that the Port of Miami has spent $55 million on security improvements, while the annual security operating budget has grown from $4.1 million in 2001 to $11.5 million for 2004.

Miami’s record day had eight ships in port, while normal weekends count five to six ships. Nearby Port Everglades has handled up to 50,000 passengers in a single day, which it believes is a world’s record, and can accommodate up to 14 ships – although two of those will stay at anchor and wait for available berth space.

This year, Port Everglades will welcome seven new ships, including the Queen Mary 2 and the new Caribbean Princess. Infrastructure development includes widened roadways and the installation of new security plazas where all vehicles are stopped for inspection before entering the port area. Total spending on security has been $37 million, including a new security operational center. Operating costs for security are expected to be $8 to $9 million per year, according to Ellen Kennedy, manager of corporate community relations.

Seattle expects more than 500,000 cruise passengers in 2004, up 41 percent from 345,000 in 2003, according to Tino Salucl, general manager of cruise services.

Next year, Princess Cruises will operate two of its newest ships, the Diamond and Sapphire Princesses, on Inside Passage cruises roundtrip from Seattle. Holland America Line (HAL) will be adding the Oosterdam alongside the Amsterdam, and NCL will return with the Norwegian Sky, while the Norwegian Star is replacing the Norwegian Sun. Celebrity brings in the Mercury.

“We can accommodate three ships a day, with 6,000 to 7,000 passengers in and out,” said Salud.

Seattle completed its second cruise terminal last May, and is not ready to build another terminal yet, according to Salud. The new terminal cost $17 million.

He would also like to see ships using midweek departures, but conceded that was not very likely.

Boston has reported record traffic for 2003, with 100 calls and 200,319 passengers, each of which the port said translates into $500 to $1,500 in revenue for the city and the region.

Galveston has what Port Director Steven Cernak described as a private-public agreement with Carnival Corporation, which provided the financing for its $9 million Terminal 1. The port and the cruise line entered into a 10-year agreement for the duration of which Carnival will enjoy preferential berthing rights.

Galveston is also looking at upgrading its Terminal 2, and plans are underway for a third terminal, according to Cernak. “Cruise compliments the interests of the community and contributes to the development of the waterfront tourist area,” he said. Efforts to get cruise ships to homeport in Galveston started some 10 years ago, and paid off when Carnival showed up in 1999. But once you have the business, new challenges emerge. “Now we have to provide facilities as quickly as demand requires,” Cernak explained.

Corpus Christi has a terminal, but no calls from ocean-going cruise ships yet, although it is accommodating river barge cruises. The port is considering a new multi-use facility for larger ships. The land that would be used is only eight nautical miles from the Mexican Gulf.

Manatee, which proved its capabilities with regular homeporting for Regal Cruises is also looking for a new cruise customer.

In British Columbia, Prince Rupert has a new terminal under construction, slated to be completed before the season starts. The port is also working collectively with other ports in the region – under the umbrella “Cruise B.C.” to attract more ships. St. John’s in Newfoundland and Labrador, which homeports smaller ships, has a cruise committee consisting of volunteers representing the city, the port, ship agents, tour operators, local merchants and attractions, ensuring that everybody is working together to accommodate the ships.

Ships are also turned around in Quebec City, which last fall was the site for the fifth annual Canada/New England cruise symposium, hosted by the St. Lawrence Cruise Association. Among the topics discussed were trends in terminal design, operational considerations for both ports and cruise lines, the development of marketing initiatives with the cruise lines, and how to sell destinations to travel agents.

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