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CARIBBEAN BUSINESS
Cruising For Success
Vacationers Choose Cruising In Record Numbers;
How Can Puerto Rico Attract More Of Their Business?
Puerto Rico Ports Authority And Tourism Company
Seek Ways To Cash In On Colossal Growth In Cruise Ship Passenger
Visits
Smooth Sailing For Floating Resorts
by Evelyn Guadalupe-Fajardo
January 27, 2000
Copyright © 2000 CARIBBEAN BUSINESS. All Rights Reserved.
The number of cruise ship passengers visiting the Port of San
Juan has jumped 37% in the past 10 years, paralleling the climb
in number of people taking cruises. In fact, cruising has been
the fastest growing segment of the vacation market for the same
period.
Of the 56 cruise ships that called on the Port of San Juan
668 times last year, 21 made San Juan their home port--the destination
where a cruise begins and ends its journey. Those ships brought
nearly 1.2 million passengers to the port during fiscal 1998-99,
resulting in a total economic impact for the island of an estimated
$300 million in visitor expenditures.
Ships that designate San Juan as home port ships are profitable
for the Ports Authority because the vessels are serviced in the
harbor for fuel and other supplies and every passenger aboard
must pay a head tax to arrive and depart from the island.
Home port vessels bring passengers who can extend their stay
on the island as well as employees who spend money in shops and
on food and entertainment.
Today, out of 40 cruise ships (including those visiting Puerto
Rico on a maiden voyage) scheduled on the Ports Authority's 1999-2000
roster, 11 have already designated San Juan as home port. The
1999-2000 cruise ship itinerary is still subject to change and
more ships will be added in the months to come. Insiders predict
the final number will be 19, two ships lower than last year.
Although the number of cruise ship visits to San Juan have
been declining steadily for the past 10 years, the number of passengers
have grown. In fiscal 1990, cruise ships made 906 visits to San
Juan, by 1999 the number dropped to 668. However during that same
period, cruise passenger visitation increased from 866,000 to
nearly 1.2 million passengers.
The average expenditures per passenger per visit to San Juan
in 1995 was estimated at $158, according to a Price Waterhouse
passenger expenditure survey conducted then. A new expenditure
study, also by Price Waterhouse and sponsored by the Puerto Rico
Tourism Co., is scheduled to be completed in April.
So port-of-call or in-transit cruise ships, which make San
Juan one of many stops in their itinerary, are profitable for
the merchants in Old San Juan.
If you build it, they will come
A new generation of megacruise ships being built today will
attract even more passengers to San Juan, but only if a terminal
is built to accommodate these vessels.
The Ports Authority is currently negotiating with Royal Caribbean
to build a $240 million cruise ship terminal in Old San Juan to
accommodate Eagle class vessels and allow for mixed-used development
in the harbor.
Hector Rivera, executive director of the Ports Authority, will
meet with Jack Williams, president of Royal Caribbean, in Miami
to discuss some parameters within which the Ports Authority is
willing to contribute to this project.
Ports Authority's three parameters are that it would make a
maximum investment of $40 million if Royal Caribbean invests $240
million to construct the mega-cruise ship terminal, Ports Authority
is to receive 6% interest revenue on those $40 million, and Royal
Caribbean's fee payments to Ports Authority would have to be net
of any income generated from other cruise ships docking at the
pier.
If the deal falls through, Ports Authority plans to transform
three cargo piers into tourism docks to accommodate the Eagle
class vessels.
Last year, Royal Caribbean International launched its first
Eagle class ship, Voyager of the Seas, to date the biggest cruise
ship in the world.
The Voyager is a 142,000-ton, 3,114-passenger capacity ship
almost twice the size of the older Vision class ships which are
72,000-ton vessels and carry up to 2,000 passengers.
This year, Royal Caribbean plans to launch Explorer of the
Seas, a megaship that lists San Juan as a port-of-call. In 2001,
Adventure of the Seas, another Royal Caribbean megaship is scheduled
to launch and will likely designate San Juan as home port.
John Tercek, Royal Caribbean Cruises Ltd. vice president of
commercial development, is hedging his bets. "It's not clear
if Explorer and Adventure of the Seas will call on the Port of
San Juan," he said. "It all depends on whether Puerto
Rico has a facility that can handle them [megacruise ships] because
the whole cruising experience starts when the passengers arrive
at the terminal."
The competition
The Port of Miami recently completed the first of three megacruise
ship terminals for Royal Caribbean.
"The Port of Miami built and paid for that terminal as
well as gave us pricing discounts on port charges, just for us
to transport our fleet there," Tercek said. "We (Royal
Caribbean) in return made a 15 year commitment with Miami."
As Royal Caribbean's traffic volume grows in the Port of Miami,
the company pays less.
"The mutual benefits are apparent," Tercek said.
"Now we have the type of terminal we want and need. It can
comfortably handle two Eagle class ships at a time."
Smooth sailing
Buoyed by a healthy economy, the world's cruise lines have
some 35 new vessels worth $10.5 billion due out by 2002, with
an additional 25, worth nearly as much, in the pipeline for delivery
over the next five years.
Celebrity Cruise Lines, Royal Caribbean's more sophisticated
fleet, is also building larger ships but more spaciously designed
to carry the same number of passengers. For example, the Millennium--an
85,000-ton ship carrying 1,950 passengers--is scheduled to make
its maiden voyage in June.
Like Royal Caribbean, Carnival Cruise Lines is also launching
megacruise ships of its own. In November, Carnival's new 102,000-ton
Carnival Triumph carried a record 3,413 passengers on its maiden
voyage from New York to eastern Canada.
Carnival has five newbuilds, with a total capacity of 12,000
or so passengers scheduled to come into service between August
and summer of 2003.
Given the potential for more passengers visiting San Juan from
these megacruise ships scheduled in 2002 and beyond, the local
government is devising enticements to keep these visitors on the
island for additional days, both pre and postcruise stays--seeking
to add more tourist dollars to the economy.
More ships, more dollars
Puerto Rico, undoubtedly the cruise ship capital of the Caribbean,
has been working hard to attract cruise lines. The dredging of
San Juan Harbor, the construction of new piers in Puerto Nuevo,
and the construction of new tourism terminals in Piers 7 to 9
and 11 to 14 are examples of their effort.
More than $2 billion will be invested in infrastructure, hotel,
entertainment venues, and parks--as part of the Golden Triangle
project.
The government has also implemented a series of initiatives
to improve cruise ship passenger's experience when arriving in
San Juan--by adding tourism information centers at the piers,
in the port areas, and expanding its Bienvenidos (welcome) programs--which
gives information about transportation and highlights the island's
tourist attractions--in both the ports area in Old San Juan and
Luis Muñoz Marin International Airport in Isla Verde.
Other initiatives by the government include new maps and activity
brochures provided to cruise ship passengers to highlight Old
San Juan's attractions and an enhanced LeLoLai program.
"We used to have a Tourism Co. representative hand out
Que Pasa tourist guide magazines at the ports area, but it was
impossible to hand out these guides to all those cruise ship passengers,"
said Marta Torres, director of Special Events at the Tourism Co.
"Now what we do is refer them (passengers) to La Casita tourism
information center to pick up a copy of ¿Qué
Pasa?."
Also, the Tourism Co. updated a film in 1997 about Puerto Rico
that is shown aboard many cruise lines.
On board Royal Caribbean ships that visit San Juan, there are
tour excursion information provided to passengers in their cabins
about the activities that can be done in San Juan, according to
Tercek.
"Typically a person (shopping advisor) gives a live presentation
to the cruise ship passengers about what shore excursions are
available and where they can go shopping when they reach a specific
destination," Tercek said. "Also a video of that presentation
is shown on TV in the cabins."
The local government is gung-ho to maximize room night production
from the cruise industry pre/post stay vacations to increase the
number of room nights cruise ship passengers spend on the island
and the economic impact left by these visitors.
Why wouldn't the government be anxious to attract more cruise
business which is generates $7 billion-a-year worldwide and expects
to increase total passenger capacity by 57 percent by 2002.
According to Cruise Lines International Association (CLIA),
only 11% of the U.S. population have cruised, while another 56%
of American adults are considering it.
One major way the local government plans to attract more cruise
ship passengers to San Juan is to begin providing incentives to
travel agents and travel wholesalers, rather than to cruise lines,
to include an additional stay in the cruise packages they offer
to clients.
Since 1986, Ports Authority had given incentives to cruise
lines for passenger volume. Today, the agency has handed over
that responsibility to the Tourism Co., who in turn will provide
$2.5 million in incentives starting in July to help sell land-based
service and change the present passenger movement criteria into
room nights in the form of pre-and post-cruise stays.
As a result of these new incentives, island hoteliers are preparing
attractive hotel packages to try to lure more cruise ship passengers
to stay in San Juan longer.
Hoteliers agreed that challenges of attracting cruise ship
passengers to stay overnight in local hotels is compounded by
the fact that they continue to occupy precious airline seats without
staying in the hotels and these new megaships are comparable to
floating hotels with plenty of amenities onboard.
On the other hand, airlines make decisions about levels of
service partly based on reliable cruise ship passenger projections.
"The laws of supply and demand should force airline carriers
to be more responsive by adding more flights to the destination,"
said Gary Pugatch, marketing director for Wyndham Hotels and Resorts
in a previous interview with CARIBBEAN
BUSINESS.
Bigger ships means more amenities
Cruising is said to have become more popular than land-based
resorts, theme parks and excursions, according to the book Selling
the Sea, written by Carnival president Bob Dickinson and industry
expert Andy Vladimir.
The newer and bigger ships offer more amenities to keep their
passengers busy. For example, the Voyager of the Seas offers amenities
such as an indoor ice-skating rink, rock-climbing wall, nine-hole
golf course, 1,350-seat theater for broadway-type variety shows,
inline rollerblading track, full-length basketball court, 450-foot
long entertainment boulevard with shops, and eight restaurants
for dining, among other conveniences.
Yet another way that could be an economic benefit to Puerto
Rico of the cruise industry is for local distributors to provide
provisioning to these cruise lines.
"The door is open for provisioning," Tercek said.
"We want to buy more local products, but they have to meet
company standards."
Cruise lines do little provisioning at San Juan. It is a fact
that cruise ships that call on San Juan do their provisioning
in St. Thomas, which has a storing port.
Cruise lines do not buy their supplies from St. Thomas, but
they do pay a certain amount of harbor fees and salaries to move
the cargo containers.
All of the heavy products that cruise lines buy in bulks from
the U.S. mainland are shipped to St. Thomas to load on the vessels.
"The docks in Puerto Rico were not designed for the movement
of huge 40 foot containers," said Mike Ronan, director of
destination development at Royal Caribbean. "We need docks
that can handle the movement of containers, the unloading of passengers
as well as the loading of new passengers."
The pier infrastructure in Puerto Rico right now can not handle
all those purposes at once. Only the Pan American and Frontier
Pier can take on that burden.
Cruise line panelists at the Florida-Caribbean Cruise Association
(FCCA) Conference held in October at the Westin Rio Mar Beach
Resort & Country Club told several tourism ministers, who
were interested in providing products and services to the new
megacruise ships, that opportunity does exist for cruise lines
to buy more products and services in the Caribbean, but that this
process requires creative entrepreneurship on behalf of those
interested.
The cruise lines also claimed that some Caribbean islands could
not provide quality service nor the amount of products needed
in a reliable way to meet company standards.
Royal Caribbean reiterated the importance of its megacruise
ship terminal project by saying it would open a window of opportunity
as far as the possibility of provisioning is concerned in San
Juan.
"The project would provide infrastructure to supply water,
fuel and food," Tercek said. "The local distributors
have plenty of time (3 years) to get involved in this business."
Furthermore, Royal Caribbean has no current commitment with
San Juan, if it builds the megacruise ship terminal it would make
a significant commitment.
"If we have our larger ships based in San Juan we would
have to entice North Americans to get onboard these vessels,"
Tercek said. "That would mean free marketing for Puerto Rico."
This Caribbean Business article appears
courtesy of Casiano
Communications.
For further information please contact www.casiano.com
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