Cruise Lines Set Sail for Growth

By Sarah Sain

According to Cruise Market Watch, the cruise industry worldwide has had an annual average passenger growth rate of 7 percent from 1990 to 2018. Growth to date has been driven by new ships with larger capacities, ship diversification, more local ports, more destinations and new on-board/on-shore activities that match demands of passengers.

A total of six new ships were added in 2014 with a total passenger capacity of 17,410, and in 2015 and 2016, 17 more new cruise ships will be debut. These new ships will add billions in annual revenue to the cruise industry.

Seaports talked to three of the largest cruise ports in the U.S. to get their thoughts on this year-over-year growth and how ports can keep up in terms modern facilities that meet the needs of passengers.

PortMiami welcomed nearly 4 million passengers in 2013 and is homeport to 13 cruise lines. The port has seven cruise terminals. In 2012, the port unveiled a $15 million upgrade to Terminal D that included adding square footage, building new facilities for security screening, passenger check-ins and a “VIP” area.

More than 3.6 million passengers made their way through Port Everglades in 2013. In early December, Port Everglades will open its new, fully renovated $24 million Cruise Terminal 4, which now includes a revamped transportation area, more parking spaces, 50 check-in counters and two new loading bridges to expedite the embark and debark process. Cruise Terminals 2, 19, 21 and 26 were completely updated in December 2012 as part of a $54 million renovation project.

The Port of New Orleans marketed itself as “two vacations in one” to the nearly 1 million passengers who went through the port in 2013. The port completed a $23 million renovation on its Julia Street Wharf terminal in 2011 and is currently building its third terminal, a $30 million, 130,000-square-foot complex along Poland Avenue. The terminal is expected to open in fall 2016 and accommodate ships with up to 4,000 passengers.

What a Passenger Wants

PortMiami Director Juan Kuryla, PPM, said the port continually improves its facilities with the customer in mind – customer meaning the cruise lines and their passengers.

Kuryla said unlike an airport, where a passenger knows they maybe be in the terminal or at the gate for 45 minutes or more, cruise passengers want to get through the terminal and onto the ship as quickly as possible.

“Passengers want to park or be dropped off close to the terminal,” he said. “They also want a beautiful terminal that smells good, feels good and is clean. That’s the ambiance we try to create.”

Access: That’s what Port of New Orleans President and CEO Gary LaGrange, PPM, said all cruise passengers are after – access to nearby parking, access on and off the ship, and access to the city and its restaurants, hotels and entertainment.

Port Everglades Chief Executive and Port Director Steve Cernak, PPM, agreed that cruise passengers desire convenience above all else at when at the port.

“Our cruise terminals must be efficient inside for quick embarkation and debarkation,” he said. “Outside there must be an organized system for taxi, shuttles, buses and private vehicles to safely and quickly pick-up and drop-off passengers.”

Cernak also noted the importance of WiFi for passengers waiting to start their cruises, along with charging stations and other electronic conveniences. Port Everglades is upgrading its bandwidth this season for faster connections.

Funding Facilities

When it comes to funding renovations of cruise facilities or building new terminals, there are different models that a port can take, but at the end of the day, the approach taken has to benefit the port and the cruise lines.

Kuryla said PortMiami in the past typically built its terminals and incurred the debt, taking that into account when it later established passenger rates with the lines.

But today the port is in a different position. It has facilities in place and a base of passengers guaranteed through long-term agreements, so when it looks at large-scale facility investments for the future, it only does so in conjunction with an amendment to a current passenger agreement or a new agreement that will bring in more passengers to the port.

“We are currently in conversations with one line that could lead to a significant increase in passengers, for which we would need new facilities,” Kuryla said. “We will work with the line so that the additional passenger pledge will cover the operations and maintenance on the facility so that it is a win-win for the port and the line.”

On the other hand, Port Everglades is currently in the midst of completely renovating Cruise Terminal 4 without a cruise line partner because demand is so high for space at the port that it needed to move forward to accommodate existing customers. However, Cernak says he believes it is best to partner with the cruise line right from the start to set budgetary parameters and to get the correct ship specifications and anticipated terminal needs before construction begins.

“It is much easier to get it right in the beginning rather than have to reconstruct afterwards,” Cernak said.

In New Orleans, the port does not yet have a line committed to its new Poland Avenue Terminal, but LaGrange said sometimes in the case of new construction, the timeline that it takes to design and construct a new facility can be a hindrance.

“In the end, we think, if you don’t build it, they won’t come,” he said.

Financial Impact on the Community

Beyond the facilities, the cruise industry plays a direct role in the economic success of each of the cities we talked to, whether through revenue brought in from passengers or jobs.

The cruise industry at Port Everglades is responsible for supporting more than 5,000 direct, local jobs and another 5,500 indirect jobs statewide for a total of 11,435 jobs. This equates to approximately $554 million in personal income that is circulated in the local community through everyday spending and $775 million in state and local taxes.

At PortMiami, the cruise industry generates between $5 billion and $6 billion in economic impact to Miami-Dade County each year, and nearly 40,000 jobs can be directly or indirectly attributed to the port’s cruise business.

“The way I look at it, every time we’re at the table negotiating for an agreement, it’s for the community, not just the port,” Kuryla said.

In New Orleans, the total economic impact of the cruise industry is about $400 million each year, and more than 7,400 jobs are directly tied back to the industry. The Cruise Lines International Association estimates that cruise passengers spend an average $95 out of pocket in a port city, but passengers on average spend more than three times that amount ($335 per night) in The Big Easy.

“We say to our passengers that they are getting two vacations in one,” LaGrange said. “The fact is New Orleans is a top destination city, and people will travel here and will spend more money here than many other cities.”

Cruise Lines and of the Future

Cruise growth will remain strong in the years to come, especially if ports and lines know where and at who to look.

China, Southeast Asia and Australia will all become important cruise destinations, and the Caribbean will continue to remain popular.

Cernak said cruise lines should look to the millennial generation as a new market primed to get a taste for cruising.

“To reach this market, however, the lines are going to have to install new communications technology to keep these younger travelers connected, unlike older travelers who often prefer to disconnect while vacationing,” he said.

LaGrange, on the other hand, sees growth in the baby boomer generation.

“I think the baby boomers absolutely love cruising,” he said. “They’re looking for new ways to relax and spend some of the money they’ve worked so hard for, but, at the same time, they’re always looking at the affordable aspect of it as well.”

He also echoed Cernak’s observation that – no matter the generation – cruise lines will continue to look toward new excursions and on-ship adventures to keep passengers happy.

Said LaGrange: “If you told me years ago that they would put a rock climbing wall on a cruise ship, I would have said you’re nuts. Who knows what the next new things will be?”

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