Cruises tend to inspire strong, sometimes fanatical devotion in those who take them. According to figures released by Cruise Line Industry Association (CLIA), as of the end of 2014, 62% of cruise passengers were ‘repeaters’, the average number of sojourns standing at 3.8. Seven years ago, 86-year-old Florida resident Lee Wachstetter even sold her Fort Lauderdale home and became a permanent resident of the Crystal Serenity, taking in, according to USA Today, more than 100 different ports since.
While a great testament to what the cruise industry can offer, this high degree of loyalty presents a challenge: it places pressure on cruise operators to continually think of new and interesting destinations. In Europe, it’s not such a big problem – cities like Barcelona, Lisbon and Venice are full of cultural and gastronomic experiences that the cruise lines merely have to tap into. The pressure is stronger in the Caribbean, where beaches, resorts and shoreside activities are the primary appeal. Having had her fill of the destinations on offer, Wachstetter hardly gets off the ship anymore.
Finding a great destination is one thing, finding one with sufficiently developed facilities to host a 200,000t cruise liner is another entirely. As well as the main pieces of infrastructure such as the pier, terminal and connecting roads, port development encompasses dredging, customs and immigration, public health, maritime security, environmental protection and a range of other activities and disciplines. Even if a government is keen on the idea of developing a cruise port, it often won’t have the money or the risk appetite to make the investment happen.
Increasingly, the cruise operators are taking matters into their own hands. In October last year, Carnival Cruise Line completed the $85-million development of the Amber Cove cruise port in the Dominican Republic, a 30-acre development that includes a pool with a slide, a zip-line and an array of private wooden cabana huts. In Belize, Norwegian Cruise Line put $100 million into the development of a port at Harvest Caye on the country’s south coast, originally scheduled to begin operations on 16 February but now delayed until November. This model of development is not confined to smaller destinations. According to local press reports, Royal Caribbean is negotiating the construction of a new cruise terminal at Port of Miami, which it will finance, design and build.
"It’s an exciting project," said Rob Zeiger, global chief communications officer for Royal Caribbean Cruises, in a written statement. "And it means even more to us knowing the jobs and economic activity that a new port terminal could bring to Royal Caribbean’s hometown."
The fact that Royal Caribbean is shouldering so much of the risk should be seen in light of the port having had its credit rating downgraded in 2014 due to the $1.1 billion of debt on its books.
"Striking new deals that have our private partners put out a lot of the capital is becoming pretty appealing," deputy port director Kevin Lynskey said in September 2015 when the news broke.
A delicate balance to strike
While the benefits to a cruise operator of developing a destination are clear, it’s an approach that comes with a lot of risks.
The construction of a port takes time, and governments come and go. While one prime minister might be eager to sign a port development agreement, his or her successor could be just as eager to tear it up. Just because the national government is in favour of a project, it doesn’t mean that municipal government or local people are as well. If residents of the nearby towns or cities are unhappy, it’s unlikely to create the feeling of warmth and hospitality that the cruise operators desire.
In Belize, Norwegian has faced opposition from local residents and environmental groups over fears that a new port could have a damaging impact on the coral reef and rare sea life, as well as affecting the livelihoods of local fishermen. In January, the country’s supreme court ruled that the Department of Environment did not follow the correct procedure when it approved the environmental impact assessment for the Harvest Caye port, with insufficient public consultation being one of the main gripes. Vivian Ewart, vice-president of passenger services at Norwegian, confirmed in an email that the project has been set back, though not explicitly stating why.
"We are dedicated to delivering the highest-quality amenities and services to our guests in one of the richest ecosystems in the region with a diversity of flora and fauna that is core to the Harvest Caye experience," she said. "As a result, the grand opening of Harvest Caye will take place in November 2016. Guests sailing on Western Caribbean cruises from now until mid-November will enjoy the beauty, adventure and rich history of this country with a call in Belize City."
Finalising destinations
Giora Israel is senior vice-president of global port development and destinations at Carnival, which came early to the idea of cruise operators developing destinations. Amber Cove was one of the first new destinations to come onto his radar in 1998, indicative of just how long and difficult the process can be. Local people often view the cruise operator as a kind of invader, barging into their lives and infringing their nation’s sovereignty. In Israel’s view, it is vital to carry out as thorough a consultation as possible, making it clear the whole time that you are a guest in the country and nothing more.
"It’s an extraordinary effort," he says. "For example, in Mahogany Bay [in Honduras, another destination developed by Carnival], I had four town hall meetings and, at the first one, 800 people showed up. We had a public hearing and people got up and said, ‘we like it very much but what do I get out of it?’. Or ‘can I open a shop in the port?’ Or ‘can my daughter, who is now a singer, sing on your ship?’. Ultimately, not everyone will open a shop in the port and not every daughter of every resident will be a singer on the ship, but we are creating a lot of understanding and openness because we are guests."
Emphasising the economic benefit of a project certainly helps. Designing something like a pier, which has to withstand hurricane-force winds, requires expertise that can’t be found in the Caribbean. For that, Carnival turns to contractors in Tampa or Houston with experience of building oil rigs in the Gulf of Mexico. The same goes for complex dredging operations, for which world-leading Dutch and Belgian companies are brought in. The construction of off and onshore infrastructure, however, is almost exclusively carried out by local companies, making a tangible difference to people’s lives.
"In Honduras, we worked with about 20 different companies," Israel explains. "We are not giving a turnkey to one construction company – we will hire a landscaping company, hire subcontractors to do various elements of the work and we are taking great pride that it’s all done in Honduras. In Amber Cove, all the land development work, except for a few little items that were made in the US, was done by Dominican companies."
Financing structures
For federal government, the primary concern is often financial. No government wants to commit tens of millions of dollars to a cruise port that nobody visits and then forever be associated with the resultant white elephant. Cruise companies have to be flexible in the way they structure deals and not see ownership of the port as a given.
At Harvest Caye, in return for Norwegian paying for the port development, the Belizean Government has promised that no other cruise terminal will be built on the south coast of the island for the next 25 years. In Miami, Royal Caribbean will handle pay for terminal development and a reported $9.5 million a year to lease the land from Port Miami. In return, it will get a lease that lasts somewhere between 20 and 60 years – "an extraordinarily long time", says PortMiami deputy port director Lynskey.
Such innovative financial structures are a good way of bringing small destinations into the fold with minimal risk. In the island of St Martin, Carnival gave the government a $30-million loan to build a new port that only has to be paid back if Carnival visits. The cruise operator gets its money back through withholding a certain percentage of its fees over a 20-year period. Through deals like this, St Martin gets a new port that it 100% owns and Carnival, in return for demonstrating its long-term commitment to the island, gets first rights on its use.
"We always try to make these structures a fair proposition. In any country, state or county, new governments come in and they wonder ‘why did we cut this deal?’ I don’t want every new government to say ‘what a stupid contract, I need to change this’. These are Catholic weddings – there are no divorces. [Agreements] have to be strong, and sustainable enough to take political issues, storms, hurricanes, earthquakes and God knows what."
The cruise industry is set to continue a course of rapid expansion, with 29 new vessels set to be launched between now and the start of 2020. This expansion will need to be supported by new destinations. In a market that gets more interesting and diverse all the time, you can’t keep offering the same product.
