AAPA Seaports
Investments by cruise lines have skyrocketed in recent years. The name of the game is to please passengers, and cruise lines are doing that with bigger ships, varied onboard experiences, sustainable operations, and more.
The existing global fleet of 430 cruise ships and 700,000 lower berths is about to jump with the introduction of 52 new ships and 107,000 lower berths through 2028.
The industry and its passengers have been decidedly optimistic and it doesn’t look like the conveyor belt of new builds will slow anytime soon. Or does it?
At a time when the cost of money has soared, ongoing capital investments by cruise companies, according to industry expert Luis Ajamil, speaking at the AAPA POWERS Summit in January, is triggering debt reduction strategies. “Lines have focused on increasing profitability and cutting costs. Cruise lines have reduced or temporarily halted planned capital spending and strategically focused on essential projects,” Ajamil said.
Surprisingly, one way to cut costs might be to buy a private island. Bermello, Ajamil and Partners provided a fuel-consumption analysis for a traditional multi-country seven-night itinerary, versus one that visits Bahamian and other ports of call closer to Florida’s top homeports. These new itineraries can generate $70-$140 fuel saving per passenger. With high passenger volumes, an investment in a private-island experience may prove to be a sound financial decision for many lines.
Plenty of new capital expenditures, according to the Cruise Line International Association’s 2023 State of the Industry report, are related to responsible tourism. The industry’s path to decarbonization is paved with advancements in technology, infrastructure and operations. For example, about 60 percent of ships scheduled to debut through 2028 will rely on LNG fuel as their primary propulsion, according to CLIA.
CLIA reports that all of these new ships, excepting expedition vessels, are scheduled to be fitted for shoreside power capabilities. Many will also deploy digital technology for energy efficiency, low-friction hull coatings for fuel efficiency, systems to protect marine life, exhaust-gas cleaning systems, and advanced systems for waste-water treatment, fresh-water production and waste repurposing. The costs are high, but sustainability initiatives are becoming imperative.
Landside Infrastructure
Investments by seaports and government entities have also risen. There are government channels to deepen, turning basins to widen, parking garages to build, aprons to broaden, and efficient arrival and departure facilities to develop.
Shore power connections are the industry’s current craze. Every cruise line wants one and every port wants to offer shore power, but there isn’t a plug-and-play solution.
According to CLIA, 40 percent of its cruise line member fleet is plug-in ready, with another 30 percent to be retrofitted, but only 3 percent of the world’s ports have onshore power. Only 29 cruise ports worldwide have at least some shore power right now. Another 20 will come onstream by 2025. Most of these are in Europe, with less than a dozen in North America. CLIA reports shore power can reduce emissions alongside by up to 99%.
Non-stop Landside Expansion
The cruise industry is in a growth mode. The COVID years are past, and 2023 passenger counts broke records at many seaports. CLIA forecasts about 36 million passengers in 2024, up from just under 30 million in 2019.
Port Everglades, for one, has fully recovered. Three new vessels chose to homeport there in 2023 and more are joining the ranks in 2024.
Port Acting Director Glenn Wiltshire outlined three major infrastructure projects: “Cruise Terminal 4 was reimagined by Walt Disney Imagineering exclusively for Disney Cruise Line guests. Once guests arrive at the terminal to embark on their voyage, they will ‘dive’ into the world of Disney and Pixar’s film, ‘Finding Nemo,’ with some of their favorite friends from the film displayed on colorful murals,” he said.
This move toward more experiential points of departure is likely to pick up speed, as immersive and experiential cruising are some of the top industry trends that CLIA is tracking.
Port Everglades has agreements with Carnival Corporation and Royal Caribbean Group to explore potential renovations to Cruise Terminals 21 and 29, according to Wiltshire. They are currently in discussions with both organizations on the scope of the renovations.
The days of ports building cruise docks singlehandedly are long gone. New investment models often include substantial cruise company commitments.
In Galveston, the Galveston Wharves and MSC Cruises are negotiating an operating agreement to build a fourth cruise terminal to meet the port’s growing cruise demand. Port Director & CEO Rodger Rees said, “The port expects to begin construction on the estimated $142 million cruise complex, including a terminal and parking garage, in 2024 and open the terminal in late 2025.”
This year the port already boasts reservations for 388 sailings with the potential for more, and expects more than 1.6 million cruise passengers. The port expects to top its 1.49 million passenger record set in 2023, which was driven by the opening of Galveston’s third cruise terminal in late 2022.
“In 2023, we partnered with Carnival Cruise Line on a $53 million improvement project at Cruise Terminal 25, our oldest terminal. Major improvements will expedite passenger embarkation and debarkation, meet federal requirements for U.S. Customs and Border Protection operations, and prepare the terminal for larger ships like the Carnival Jubilee, which sailed on her inaugural cruise Dec. 23 carrying 6,200 passengers,” said Rees.
To efficiently accommodate their massive drive market, Galveston continues phased construction of its 2-mile-long interior roadway to efficiently move cruise-related traffic. The port is also investing $2.9 million to expand on-site parking to serve cruise terminals 25 and 28.
At PortMiami, spokesperson Alfredo Pereira said the port is continuing to invest in its facilities with a sharp focus on efficiency, and on the full cruise experience.
“Continued investments in capital infrastructure projects are critical to support and improve our cruise operations. The development of new cruise terminals and auxiliary infrastructure projects, such as roadways and the tunnel, and provisioning buildings and garages, also allow us to better handle the higher passenger traffic and increased demand,” Pereira said.
The port’s newest ship, Royal Caribbean’s Icon of the Seas, is also the world’s largest at almost 1,200 feet in length. It can carry up to 7,600 passengers. That volume of passengers, moving in and out of the port in a very small window of time, necessitates attention to transportation infrastructure within the port and beyond. The port works hand-in-hand with its communities and partners to optimize the connectivity for travelers.
Also, shore power is in the works. The Miami-Dade County’s Shore Power Program is a partnership between PortMiami, five cruise partners, and Florida Power & Light Company. “PortMiami will be able to plug in three ships safely and simultaneously on any given day. Upon completion in spring 2024, PortMiami will be the first major cruise port on the U.S. eastern seaboard with shore power capability at five cruise berths,” said Pereira.
Other capital projects at PortMiami include a Facial Biometrics System, in collaboration with U.S. Customs and Border Protection, to expedite debarkation process, and Building Management Systems which monitor the use of electricity in cruise terminals and parking garages.
Like most cruise ports, both Miami and Galveston have LNG fueling capability.
At the Port of Vancouver in Canada, 2023 was a record year. A total of 332 vessels called during the April to October 2023 season, and 1.25 million passengers crossed the docks.
Vancouver is a popular port of call and Canada Place cruise terminal was recently recognized as North America’s Leading Cruise Port 2023 by World Travel Awards and North America’s Best Cruise Terminal in the World Cruise Awards.
The port is preparing for a continuing passenger surge. A port spokesperson said, “We continue to work with industry, destination and government partners around plans for a new cruise terminal outside of Burrard Inlet that would help meet future demand and accommodate larger visiting cruise ships, and will share further details on these plans in the future as they progress.”
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Spotlight on Watts Marine
AAPA-member Watts Marine is a shore-power pioneer. “We now have ten systems in North America … and are working on a third Seattle system which should be online this season making Seattle our 11th system,” said Mike Watts, one of the company’s principal owners.
“After installation of our proprietary system, we work with the port to provide the connecting services to the ships as well as the ongoing maintenance, our preferred model. In our model, we work in ports after we install our proprietary system. We prefer that. We are plugging in a billion-dollar floating asset and nothing can go wrong. Our systems are robust, safe, and reliable,” Watts added.
Shore power is on many port wish lists, mostly to serve cruise vessels with their considerable energy-use, but increasingly for other types of vessels. Fortunately, according to Watts, the newest ships often have lower requirements load wise. They are simply being built with more efficient systems.
Some of the key factors that need to be addressed before a port can offer shore power are local utility infrastructure and their sources of electricity. “It can take years for them to upgrade their infrastructure and capacity,” Watts said. The same goes for their sources of electricity, which may not be as clean and green as a port wishes. And competition for power is an ongoing consideration. For example, “Big companies building massive data centers need a large electrical supply too,” Watts said, and electrical demand in the Americas keeps rising.
Watts Marine doesn’t manufacture the main components for shore power, but it sources from suppliers and may modify to suit, while maintaining integrity of certification, as part of its turn-key approach. “Every port is different. Some serve a wide variety of cruise ships. Each of our systems is different but we keep our equipment simple. Our systems are standardized per the IEC requirements,” said Watts. Simple design can simplify operations and maintenance. Still, considerations like humidity or icing, tropical weather, or hurricanes, can dictate a more robust housing for components, or modified operation routines, among other tailored elements.
Owners and operators around the world are increasingly challenged to meet ever stricter emissions standards. Investing in a shore power system helps lower ship owners’ fuel costs by eliminating the need to run diesel auxiliary engines, can help increase a port’s competitiveness, and can speed up compliance. “It can help the industry get ahead of industry regulations,” said Watts.
Infrastructure Investments Widespread
There are dozens of other cruise infrastructure developments moving ahead elsewhere in the Americas, although, as the world’s overwhelmingly most popular cruise destination, the itineraries of the Caribbean/Bahamas and Bermuda have the rosiest outlook, according to CLIA. Future consumer demand is strong, and while some ports can use their facilities more days of the week to accommodate growth, others must build.
New cruise developments are popping up, for example, in the Bahamas, at Nassau and at Grand Bahama Island, and in Belize, at the new Port Coral. The private escape trend is gaining traction with Disney’s planned Lighthouse Point on Eleuthera, and Carnival Corporation’s refresh of its Half Moon Cay private island in the Bahamas. Also, the Virgin Islands Port Authority recently announced plans to expand its cruise ports on both St. Croix and St. Thomas.
A New Look
Now that COVID is in the rear-view mirror, capital investments in cruise ports are again making headlines.
The new assets and infrastructure have a new look. Many are built in partnership, introducing new perspectives and varied expertise to projects. For example, there is a lean into making the point of departure or arrival or stopover an immersive experience. Private islands are increasingly popular. And almost all new waterfront infrastructure, regardless of location, is preparing for larger vessels, with more passenger capacity, and with sustainability elements in this new era of what CLIA calls “responsible tourism”.
Caribbean/Bahamas/Bermuda itineraries remain the world’s most popular, so homeports serving those itineraries are introducing a steady stream of investment plans. Cruising is back to being one of the hottest segments of global tourism. Infrastructure developments have to keep pace.
