Montréal... The Ultimate Saint-Lawrence Cruise Experience

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1 Montréal... The Ultimate Saint-Lawrence Cruise Experience Step off the ship and right into Montréal s unique and festive atmosphere, where old meets new and Europe meets North America. A few moments spent walking along the inviting streets, shopping and indulging in some local treats, and you ll want to take a few extra days to make the experience last. Montréal s port being right at the heart of the city and only 20 minutes from the airport, there s no excuse to let the opportunity slip away. Tourisme Montréal, Stéphan Poulin No cruise along the St. Lawrence River would be complete without a stop in Montréal. Enjoy!

2 Uneven playing field for North American ports Despite the new Emissions Control Area, a combination of European economic woes and a new scrubber deal for a major cruise line should ensure a good 2013 and even better 2014 for many North American ports. Tony Peisley reports. Stein Kruse Michael Mierzwa Betty McMillan Kevin Sheehan René Trépanier Len Waterworth 59

3 Montreal skyline in Autumn 60 Last year s imposition of an Emissions Control Area (ECA) up to 200 miles around the North American coastline had the potential according to many industry voices to decimate cruise traffic to and from the US and Canada. It is still early days but the story so far is less straightforward, with the ECA appearing to be having a negative impact on some North American ports while benefiting others notably those in Florida. As part of a new plan to deploy all four of its ships at either Miami or Port Canaveral from next January, Disney Cruise Line shortened a Disney Wonder winter programme out of Galveston. My guess is that the switch is to do with the ECA, says Galveston Port Director Michael Mierzwa, as that ship will now be cruising to the Bahamas, which means most of the itinerary will be in non-eca waters. This reduces the fuel cost significantly, as the lowsulphur variety is currently about 20% more expensive. Other areas such as Canada/New England are still waiting for the axe to fall. Betty McMillan from the Port of St John says: We are at a huge disadvantage against other areas, as cruises coming here are in the ECA 100% of the time. Ships leaving California and Florida ports can go just a few miles to be outside the ECA in Mexico or Bahamas waters. The way the ECA concept was originally presented, noone would be placed at a disadvantage; but that is just not the case. Every ship cannot be switched to the Caribbean, but there are still other areas without ECAs like Australia where cruise lines can send their ships. Cruise The Saint Lawrence Executive Director René Trépanier is more sanguine about the ECA. In the short term, he says, we haven t felt a difference. The ports (Québec and nine others) within the association remain concerned about the ECA impact, but are still bullish about their future given their current traffic growth. This saw a record 230,000 passengers and 90,000 crew visit in 2012, when both Royal Caribbean International and Norwegian Cruise Line returned to the region. This year positive developments include a Seabourn ship homeporting in Montréal for three cruises and Holland America Line offering cruises in the summer, as well as the usual fall season for at least the next three years. These will be homeporting in Québec and Montréal. This will be the second summer that HAL has significantly increased its capacity in a region that its President and CEO Stein Kruse has described as cost acceptable, and a similar deployment will follow in was our best-ever year, says Trépanier should be about the same and 2014 looks OK. But we are not sure about 2015, as the lines are still deciding. Kruse too has already put a question mark against what will happen from 2015 when the ECA fuel sulphur limit is reduced still further. But the association has at least been boosted by the continuation of regional funding to the tune of C$475,000 for Individual ports including Baie-Comeau, Sept- Iles and Iles de la Madeleine have also received state funding for cruise and tourism infrastructure projects. Even if we lose 10% (of traffic), we re still a new market in a growth pattern and by 2020 (when sulphur limits are reduced in non-eca waters) we will not be at such a disadvantage, says Trépanier. I am sure we will see a slowdown in our growth, but I believe we will get through it without too much damage. In fact, for the moment the main factor in cruise traffic patterns for many North American ports is something happening thousands of miles away rather than just 200 miles offshore. What Royal Caribbean Cruises Ltd. has described as a capacity correction and others see as a rapid exit to more profitable regions has resulted in ships switching from Mediterranean to Asian, South American, Australian and North American deployments. Anywhere, in fact, where the economies are an improvement on the parlous state of those in the eurozone and the UK. The previous five-year rush to Europe and the growing tendency for ships deployed in the Mediterranean to extend their summer seasons to November had affected North American port traffic and not in a good way. Also, the recent pattern of newbuilds being immediately deployed to spend their inaugural and subsequent summer seasons in Europe has been broken, with the likes of the two NCL Breakaway newbuilds being scheduled to cruise out of New York and what is still the world s busiest cruise homeport: Miami. Passenger numbers through Miami stalled at the 4 million mark over the past few years, and fell to 3.77 million in 2012 but helped by that Disney switch, the arrival of Norwegian Getaway for year-round cruising and the backfrom-europe trend it is forecasting a record 4.3 million this year and 4.5 million in The second and third busiest homeports, Port Canaveral and Port Everglades, are also seeing growth along with

4 a number of other North American ports. In fact Port Canaveral overtook Port Everglades (3.69 million) in 2012 and was only 13,000 short of beating Miami for the number one spot. This renewed growth is timely as with the ECA factor some were questioning the expensive terminal and other cruise infrastructure development plans at several of these ports. Port Everglades has recently completed a $54 million upgrade of four terminals; it will be refurbishing a fifth terminal and also extending one berth to handle the largest cruise ships. The other main Florida port, Tampa, invested a more modest $2.5 million in upgrading its terminal and other cruise facilities last year when it saw its passenger numbers increase to a record 974,000. Its traffic remains, though, very seasonal, with winter very busy but summer quiet. It is keen to attract cruise lines to operate from the port yearround. Another port set to invest more in its infrastructure is New Orleans which after a six-year process has finally received the transfer agreement from the Maritime Administration for the Poland Avenue site, which it wants to develop as its third cruise terminal. Less than a year ago the port completed its $20 million project to renovate and expand its Julia Street terminal. This has already paid off in terms of second successive record year for cruise passengers, with numbers increasing by more than a third to 1 million. The economic impact for the city and state is higher pro rata than for many other US homeports, because of the greater number of pre- and post-cruise stays booked in the iconic city. About three-quarters of homeporting passengers take this option. Along the same Gulf Coast, Galveston may have lost one ship due to the ECA but Houston, which is about to return to the cruise sector with new Princess and NCL programmes, sees a possible ECA benefit. We may just have an advantage, as we are home to the biggest petrochemical complex in the country, says Port of Houston Authority Executive Director Len Waterworth. This means there will be no availability issues for the lowsulphur fuel here, as there are in other parts of the country. Whether there will also be a fuel price advantage remains to be seen, though. US East Coast ports are more concerned by the ECA, as so much of their business comes from ships making those 100% ECA Canada/New England cruises. New York has a hedge against this problem in the form of both summer and winter Caribbean programmes from the port, which include more non-eca miles on the itineraries. This has not gone unnoticed by neighbouring Boston, which is now looking at the possibility of doing the same in order to maintain its recent growth which saw it handling a record number of passengers 380,000 for the fiscal year to September Although it had to close down briefly as a result of Superstorm Sandy, 2012 was a good year for New York s cruise terminals. Disney cruised from there for the first time, and Carnival Cruise Lines started its first year-round McMillan: We are at a huge disadvantage against other areas, as cruises coming here are in the ECA 100% of the time. programme from the port. In preparation for Norwegian Breakaway this spring NYCruise has spent $4 million on new passenger boarding bridges to add to the $250 million it has already spent in recent years upgrading its Manhattan terminals and building a new one at Brooklyn (which will soon be enhanced by a shore power connection the first at any US East Coast port). Another East Coast port, Baltimore, achieved a record passenger total 221,000 in Further down the East Coast, Charleston continues to grow its cruise traffic. The port plans to go ahead with a new cruise terminal, despite continuing local opposition from conservation groups. There is no such problem in Savannah. It has very little cruise traffic, and no homeporting at all, but the city council is keen to see a lot more and appears to be backed by the local community. Its council is investing in a second study into the viability of turning the facility into a homeport, which could potentially be handling 350,000 passengers by Only on the US West Coast are some ports bucking the general upward trend in cruise calls and passenger numbers. San Diego has gone into free-fall, having lost 60% of its business in just a few years. Calls fell from 105 to 80 last year, and will probably drop to 70 this year. Plans for a new $28 million terminal have been put on hold, but it is going ahead with the $6 million refurbishment of an existing one. Los Angeles has seen its cruise traffic fall by a similar amount (to 450,000) since 2008, which is why having spent $42 million on its World Cruise Centre it has no immediate plans to take up the option to build a second cruise terminal as part of a proposed $1.2 billion 61

5 NORTHERN LIGHTS, ALASKA Bright Lights. Big City. Make Vancouver your Alaska cruise homeport and your guests will enjoy the best of both worlds: The wild beauty of America s last frontier and the delights of Vancouver, one of the world s greatest cities. It s easy to get here from practically anywhere. And Port Metro Vancouver s consistently high passenger satisfaction scores will reflect nicely on you. Alaska VANCOUVER, BRITISH COLUMBIA Vanc ncou ouve r

6 Sea walk at Stanley Park, Vancouver redevelopment of the Los Angeles waterfront. San Francisco is, though, forecasting a significant increase in traffic this year to 200,000 from 136,000 in 2011 when the first phase of its Pier 27 terminal development is completed in May. The second and final phase will be operational in July Vancouver is also forecasting strong growth in 2013, with a 23% rise to 820,000 passengers as the Alaska market continues to recover. Its battle with Seattle for supremacy as that market s homeport is set to continue. In 2012 Seattle remained well in front with a record 934,000 passengers up from 2011 s 886,000, and nearly 70,000 ahead of its own projections. It was also about 267,000 ahead of the Canadian port. Seattle Port s Peter McGraw points out that flycruise passengers benefit from onboard airline check-in, expedited disembarkation and on-site concierge services. Economic benefits from its cruise tourism contributed $416 million in revenue to Seattle businesses, $18 million in state and local taxes and generated more than 4,300 jobs. Seattle has a new caller this year in Celebrity Solstice, but Disney switches to Vancouver. That means Victoria loses calls, so its traffic will fall slightly from the 2012 peak of 500,000. Every ship call generates a C$2 million impact for Vancouver, but the city remains concerned about environmental issues. Its shore power option was utilised on only about 40% of its 161 cruise calls last year. Total passenger numbers for the four British Colombia (BC) ports (Nanaimo and Prince Rupert are the others) rose marginally to 1.2 million in 2012, generating C$1.3 billion in economic benefits. The Vancouver traffic growth alone would ensure an overall increase across BC, but both Prince Rupert and Nanaimo also have more calls scheduled this year. Their fortunes, though, remain inextricably linked with that of the cruise sector in Alaska where on the one hand ports are expected to continue their gradual recovery from the sharp drop in traffic caused by the imposition of a $50 head tax (since reduced) in 2013 but, on the other, the spectre of the ECA effect looms large. The potential for a loss of cruise traffic even greater than that self-inflicted by the head tax is one of the major Sheehan: Installing and operating the scrubber does involve a substantial cost but, although very expensive, it makes financial sense when compared with the even higher cost of using low-sulphur fuel. factors driving the state s legal challenge to the federal government s decision to include its coastline within the ECA restrictions. Another key US cruise region Hawaii was facing a similar impact from the ECA, especially as its major cruise client, NCL, runs a US flag operation which cruises solely within ECA waters. But there is significant news here, says NCL Chief Executive Kevin Sheehan: We had our eyes wide open to this, as we have the only ship in the industry that sails year-round in Hawaii. So we have decided to fit the ship with a scrubber, which will be in place by the end of March. This will meet the requirements to clean the fuel, so that we can continue to use the usual type and do not need to change to the more expensive low-sulphur variety. This has been cleared with the Environmental Protection Agency and we will be looking at doing the same on other ships and programmes as the cost of the low-sulphur fuel varies from market to market, mainly because of availability or capacity issues. This volatility may settle down over time, but we wanted to make sure we were in control of our own destiny with the Hawaii ship. This is a first step, but we are pretty confident that the technology will work as we talked to a lot of providers to narrow down our choice of unit. We also have Meyer Werft looking to have this technology in the new ships being built for us. Installing and operating the scrubber does involve a substantial cost but, although very expensive, it makes financial sense when compared with the even higher cost of using low-sulphur fuel, particularly in a market like Hawaii. Coming on top of a similar scrubber move by RCI for at least four of its ships, it suggests that the industry may be slowly finding a way to mitigate the cost and impact of the ECA. If so, this can only be good news for North American ports and any other ports affected (now or in the future) by ECA or other emissions-related fuel restrictions. 63