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Driving Force

A resurgent cruise industry is driving revenue – and growth – at ports worldwide.

Galveston
Courtesy Galveston Wharves

Published Apr 11, 2024 1:37 PM by Allan E. Jordan

(Article originally published in Jan/Feb 2024 edition.)

 

Ports and their surrounding communities are benefiting strongly from the rebound in cruising. Both homeports and destination ports for cruise ships experienced strong growth in 2023 many reporting record numbers.

However, the growth brings new challenges as ports work to support the industry and attract new ships and more people to their communities.

The Port of Galveston, Texas, for example, successfully positioned itself to become a leading homeport and, as a result, major cruise lines are sending their newest and largest cruise ships to Texas.

Galveston Wharves Port Director & CEO Rodger Rees notes that cruise revenue is now nearly two-thirds of the port’s total revenue, which is expected to grow 12 percent in the year ahead.

Galveston highlights its “phenomenal 42 percent growth” to 2.98 million passenger embarkations and debarkations in 2023.

Economic Stimulus

“Cruise ships provide a much-need economic stimulus for area businesses,” says Port of Seattle Executive Director Steve Metruck, reporting a record year with just under 1.8 million revenue passengers and 291 cruise calls in 2023. Cruise lines extended the season based on demand for Alaska tourism. Seattle estimates $4 million in regional economic impact from each homeported cruise ship at berth or nearly $900 million in economic impact for the total season.

Miami-Dade County Mayor Daniella Levine Cava points out that the rebound in cruising helped PortMiami regain its position as the world’s largest homeport. PortMiami in FY 2023 handled just over 7.3 million passengers, setting a new record and up from just over 4 million in 2022. PortMiami was also nearly seven percent ahead of its previous record in FY 2019, the year before the pandemic when just over 6.8 million passengers passed through the Dodge Island facilities.

Last year’s dramatic growth ensured it reclaimed first place versus Port Canaveral in central Florida, which was first in 2022 with 4.07 million passengers, grew to 6.8 million in 2023 and expects 7.3 million in 2024. “PortMiami continues to drive our economy forward, creating opportunities for residents and businesses across our county,” says the Mayor.

These impacts are not limited to just the large homeports. The Great Lakes St. Lawrence Seaway Development Corporation notes the boost in tourism dollars across its region and especially in Duluth, Minnesota and Milwaukee, Wisconsin. Both cities became turnaround ports as seven cruise lines took advantage of the emerging trend in exploration and luxury cruising in the “warm water” market, providing access to niche destinations.

The area had its best season ever with close to 200,000 passengers in 2023 and 700 vessel calls between the 17 U.S. and 18 Canadian ports. The Port of Cleveland in Ohio might seem like an off-the-beaten-path cruise port but says “2023 was an outstanding year for cruising” with officials across the region optimistic about the future.

Growth Expectations & Challenges

“All indications point to more people cruising – whether it’s on new ships that offer shorter itineraries or returning cruise guests who are attracted to grand and world voyages,” says Glenn Wiltshire, Acting Director of Port Everglades. “We budgeted for 1.9 million cruise guests in FY 2023. Instead, we had 2.88 million, which was a pleasant surprise that spoke to the pent-up demand.”

Port Everglades anticipates more than 3.7 million cruise passengers this year although officials admit it’s a conservative figure and they might “very well top” the port’s previous four-million record.

Many ports experienced similar strong results and have optimistic outlooks. Adam Deaton, Principal for Cruise Business at the Port of San Diego, says 2023 was the port’s busiest season since 2010.

Others, like the Port of Seattle, which had its second consecutive record year, expect a fairly stable market. Weekend berths are full in 2024 for Seattle, but it has some mid-week availability for more cruise ships, notes Linda Springmann, Director of Cruise Operations & Maritime Marketing. She adds that 2024 is the port’s 25th anniversary of homeporting cruise ships, “reflecting on how far this market has come and how integral it is to the region.”

Managing this growth, however, presents a new set of challenges. Both the major home ports and destination ports emphasize the need for coordination and working together with industry, businesses and the community. The large influx of people creates challenges for everything from transportation and traffic jams to parking.

“Segmenting the market is the most important step ports can take,” says Grant Holmes, Vice President, Global Cruise & Superyachts at Inchcape, which in addition to its port agency business is now consulting with ports and governments to develop strategies to attract cruise ships.

“There’s nothing worse than the wrong size ship in the wrong port,” Holmes explains, noting he guides emerging ports on the importance of building the right infrastructure and tourist product backed up by an economic impact plan to support opening up ports to cruising. Inchcape is helping countries such as Oman, which looks to go from three to 11 cruise ports, while also focusing on the potential of new niche destinations for luxury cruising such as Tanzania, East Africa and the Indian Ocean’s Vanilla Islands.

Port of Antwerp-Bruges Account Manager for Cruises, Piet Vandenkerkhove, says the new generation of large cruise ships creates infrastructure challenges for established ports, which need to ensure they have all the logistics in place to deal with the large numbers of passengers. The Port of Antwerp-Bruges is also addressing the challenge of overtourism at the country’s main attractions, in particular the city of Bruges, by working with destination managers and introducing a new booking policy to have a better spread of cruise calls and passenger numbers.

Similarly, the Port of Seattle launched a free luggage program whereby passengers can check their bags onboard to help cruise ships that have tight 10-hour turn times. It reduced luggage-handling time in the cruise terminals, transportation hubs and at airport check-in counters by 21 percent. Passengers can explore Seattle at the end of their cruise without the burden of luggage.

“Continual communication with our cruise partners, the stevedoring companies, the International Longshoremen’s Association, the Biscayne Pilots Association and regulatory agencies are key to smooth and successful ship calls,” notes Hydi Webb, PortMiami Director & CEO. “The port is also continuing to invest in its facilities to ensure that operations remain as efficient as possible.”

New Terminals

New terminals are one of the biggest investments required with many of the ports partnering with the cruise companies. PortMiami together with Royal Caribbean International, Norwegian Cruise Line and Virgin Voyages opened signature new terminals in the past few years.

Carnival Cruise Line and PortMiami renovated a terminal to meet the needs of the line’s largest new ships, and recently the Miami-Dade Board of County Commissioners also approved Royal Caribbean Group’s plans for a renovated Cruise Terminal G, which is expected to open in late 2027.

MSC Cruises, working with PortMiami, broke ground in March 2022 for what is destined to be the largest cruise terminal in North America. A four-story building, Terminal AA/AAA is designed to accommodate 36,000 passenger movements a day and will be able to berth two of MSC’s largest cruise ships when completed in the fall of 2024. MSC estimates the project represents an investment of approximately $350 million.

Terminals are critical to ports. Galveston’s Rees says, “Our records were driven by opening a third cruise terminal in late 2022” that permitted Royal Caribbean to homeport the 225,000-gross-ton/5,500 passenger Allure of the Seas in Texas. Now the line hints the third record-setting, 250,000-gross-ton Icon-class cruise ship could be launched in 2026 at Galveston.

Rees calls the third terminal a “huge success,” which he looks to duplicate in a partnership with MSC Cruises on an estimated $142 million fourth cruise complex, replacing an unused cargo terminal. MSC recently announced Galveston will be its fourth U.S. homeport. Carnival Cruise Line and Galveston also invested $52 million in its terminal before Carnival Jubilee (183,500 GT) in December 2023 became the first newly built cruise ship to homeport in Galveston.

Similarly, Port Everglades reimagined a 104,000-square-foot terminal for Disney Cruise Line. The port has a 15-year agreement that includes a minimum of 10.6 million passenger movements as Disney committed to homeporting two cruise ships in Port Everglades. Port executives are now exploring renovations to Terminals 21 and 29 as part of agreements with Carnival Corporation and Royal Caribbean Group.

Even the Port of San Diego, which says it has the infrastructure to handle the level of business it expects, is making improvements for greater passenger volumes, says Deaton. It just completed an approximately $14 million project to repair and upgrade the B Street pier and approved the first interior renovation of the port’s main cruise terminal in over 37 years.

Environmental Initiatives

As cruising continues to grow, ports face new challenges, especially from emerging environmental regulations.

Ports ranging from Port Canaveral, PortMiami, Port Everglades and Galveston to Antwerp in Europe, among others, have all worked to introduce ship-to-ship LNG bunkering, supporting the industry’s first LNG-fueled cruise ships. Antwerp-Bruges is now exploring the potential of bunkering alternative (low- or zero-emission) fuels at the Zeebrugge cruise quay.

In 2022, Seattle, Vancouver (Canada) and Juneau (Alaska), along with the cruise lines, launched an initiative to explore the feasibility of the first cruise-driven “green corridor” along the Pacific Coast to serve the Alaska cruise industry.

Near-term, the big challenge is shore power. Seattle boasts it was the first to offer shore power connections in 2004, and now more than a third of cruise ships docked at its two terminals with shore power connections utilize the capability. It’s poised to extend shore power to its third terminal as is the Port of San Diego, which first introduced shore power in 2010 – four years ahead of state regulations.

Ports are investing in shore power infrastructure while looking to power providers to increase capacity. PortMiami, for example, is about to complete a multiyear project to bring shore power connections to five terminals in 2024, but due to limited available power only three cruise ships at a time will initially be able to connect.

 Similarly, neighboring Port Everglades reports it’s proceeding with a study targeting shore power by 2028. The independent study forecasts costs, including upgrades by FPL to the power supply and distribution, will be approximately $20 million per terminal for a total cost of $160 million.

Driving Force

Supporting the growth of the cruise industry comes with a high price tag for many of the ports around the world, but the economic benefits justify the investment. 

Cruising is likely to continue to be a driving force, shaping the operations of an increasing number of ports worldwide as the industry continues to grow. – MarEx

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.