Gold Coast Cruise Ship Terminal Business Case Industry Overview Gold Coast City Council. Technical Report A December, 2012

Gold Coast Cruise Ship Terminal Business Case Industry Overview Gold Coast City Council Technical Report A December, 2012

Document Control Job ID: 16626 Job Name: Industry Overview Client: Gold Coast City Council Client Contact: Luke Adair Project Manager: Ashley Page Email: ashley.page@aecgroupltd.com Telephone: 07 3831 0577 Document Name: GCCST Technical Report A - Industry Overview FINAL.docx Last Saved: 14/12/2012 11:43 AM Version Date Reviewed Approved Draft v1.0 9 November, 2012 ARP Draft v2.0 19 November, 2012 ARP Final Report 12 December, 2012 ARP ARP Disclaimer: Whilst all care and diligence have been exercised in the preparation of this report, AEC Group Limited does not warrant the accuracy of the information contained within and accepts no liability for any loss or damage that may be suffered as a result of reliance on this information, whether or not there has been any error, omission or negligence on the part of AEC Group Limited or their employees. Any forecasts or projections used in the analysis can be affected by a number of unforeseen variables, and as such no warranty is given that a particular set of results will in fact be achieved. i

Executive Summary Background The Gold Coast is Australia s premier tourism destination offering visitors a broad range of experiences. While the Gold Coast does not have a dedicated cruise ship facility, the opportunity to establish a Gold Coast Cruise Ship Terminal (GCCST) has been identified as having potential to grow Queensland and regional tourism. The focus of this study is to provide an industry tested, financial and economic assessment of establishing and operating a cruise ship terminal on the Gold Coast. This information will assist the Gold Coast City Council support submissions to the Queensland and Commonwealth Governments for financial support, should Gold Coast City Council determine to support the development. This document forms one of five (5) technical reports relating to the study and presents core information relating to the cruise industry, related trends and issues affecting the industry into the future. Industry Overview The global cruise sector primarily focuses on major tourism destinations including cities with ports capable of accommodating large vessels. Cruise ships generally focus on warmer climates often following the summer seasons in Europe, North America and the Southern Hemisphere. According to the Cruise Lines International Association (CLIA), the major cruise destinations/itineraries (by passenger bed days) are the Caribbean and the Mediterranean, which account for over half of the global total. During the last five years, the destinations that have recorded the highest growth include Australasia/South Pacific, Europe/Scandinavia and Transatlantic. Figure E.1: Cruise Passenger Bed Nights by Region Source: CLIA (2012) Caribbean Mediterranean Europe/Scandinavia Alaska Bahamas Mexico (West) Transatlantic Australasia/South Pacific Trans Canal South America Hawaii Other 0 5 10 15 20 25 30 35 40 Passenger Bed Days (Million) The number of cruise lines operating in Australia has increased in recent years as the Australian cruise industry has grown. In 2011-12 there were 24 cruise lines that had a ship visit Australian ports. During 2011-12, three cruise lines based five cruise ships in Australia for the entire year with six cruise lines basing nine ships in Australia for the summer season. ii

Passenger Numbers Annual Growth (%) Gold Coast Cruise Ship Terminal Business Case In 2011-12, there were 42 cruise ships that visited Australian ports, which was on par with 2010-11. In 2011-12, 21 cruise ships visiting Australian ports had passenger capacities of more than 1,000, with eight having passenger capacities over 2,000. Cruise itineraries in Australia generally revolve around visits to the major cities (which have the infrastructure capable of accommodating large vessels) including Sydney, Brisbane, Melbourne, Hobart and Fremantle. Common itineraries within Australia include the South Pacific, Queensland Coast, New Zealand, Around Australia, Indian Ocean and legs of world cruises. The international cruise industry continues to grow with CLIA estimating that major lines carried 16.37 million passengers in 2011, a 10% rise from 2010. North America and Europe represent the major source markets for global cruising. The Chinese cruise market is recording major growth with more Chinese residents taking cruises. International Cruise Council Australasia (ICCA) estimates that 623,294 Australians undertook a cruise in 2011, an increase of 34% from 2010. Over the last decade, the number of Australians undertaking a cruise has increased at an average rate of 20.5%. Anecdotal evidence suggests there is a strong prevalence of repeat cruisers indicating the strong growth experienced will likely result in a stable and sizeable market into the future. Figure E.2: Australian Cruise Passengers 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Passengers Annual Growth 40% 35% 30% 25% 20% 15% 10% 5% 0% Source: ICCA (2012) Cruise ships visited 31 different Australian ports in 2011-12, equating to a total of 736 port visits. This was a significant increase of 163, or 28.4%, from the 2010-11 total of 573. Tourism organisations, ports and governments have begun to realise the economic benefits and growth potential associated with the cruise industry in Australia. Forward Outlook The outlook for the cruise shipping industry in Australia and globally is positive with strong growth projections. The outlook for the industry includes: Firm projected growth in global cruise passengers; Expected boom in Chinese cruise market with the number of Chinese residents taking a cruise continuing to increase; Continued strong growth in the number of Australian cruise passengers, including increased market penetration; Sustained growth in Australian cruise activity with the number of port visits by domestic and international cruise ships increasing; New cruise lines entering the Australian market due to strong project demand, which will increase capacity and range of itineraries; iii

Larger cruise ships being constructed and deployed to Australia; Projected growth in the overall Asian cruise market with potential development of more Pacific itineraries; Capacity constraints in some Australian ports represents an opportunity for the Gold Coast to attract cruise ship visits though may also impede growth in the overall cruise market; and Investment requirements in Australian cruise infrastructure by ports and governments. Cruise Potential for Gold Coast The outlook for the cruise shipping industry in Australia and globally is positive, which represents strong potential for the cruise sector in the Gold Coast. Key industry trends and implications for the proposed cruise terminal at the Gold Coast are outlined in the table below. Table E.1: Cruise Potential for the Gold Coast Industry Trend The cruise industry in Australia has recorded significant growth over the last decade and has been one of the fastest growing tourism sectors in the country. The sector is expected to continue to record strong growth into the future. China is expected to be the fastest growing cruise market over the next decade as the sector gets out of its infancy. This will likely result in Chinese residents taking more cruises domestically as well as throughout Asia and globally with the potential for Chinese ships to visit Australia during the Northern Hemisphere winter. The major ports of Sydney and Brisbane are projected to record the strongest demand growth over the next few years though are experiencing capacity constraints in terms of port and cruise infrastructure. The Portside Cruise Terminal in Brisbane is particularly constrained in its ability to accommodate mega cruise ships. International cruise lines are investing in Australia. They are bringing more ships to Australian waters and are also basing them here both seasonally and permanently. The Panama Canal expansion project will also improve the efficiency of relocating ships from the Caribbean to Australia. There is also a major trend towards the construction of larger ships and deployment of bigger ships to Australian waters. The cruise industry in Australia has recorded significant growth over the last decade which has facilitated significant changes in the industry across itineraries, ships and operators. The industry is continuing to evolve at a fast pace as demand continues to grow. The Gold Coast is strategically located on the Eastern Seaboard of Australia, which provides it with access to popular Australasian itineraries such as the Great Barrier Reef, South Pacific and New Zealand. The development of port and cruise infrastructure is critical to attracting cruise ship visits. There are numerous recent examples of international ports that have developed cruise terminals and attracted more cruise ship visits. These terminals have generally provided the necessary capacity to accommodate mega cruise ships, particular examples of note include Fort Lauderdale, Dubai and Hamburg. Implications for the Gold Coast The continued growth in the local cruise sector is expected to create opportunities for cities such as the Gold Coast to attract cruise ship visits, where appropriate facilities and tourism experiences are available. There is potential for the Gold Coast to consider the implications of the Chinese market when developing the cruise terminal including planning for facilities and products to align with Chinese tourism experience demands and leverage existing assets which are attractive to Chinese travellers. The development of a dedicated cruise terminal in the Gold Coast, capable of accommodating mega cruise ships, has the potential to alleviate the capacity constraints at other Australian ports. Potential to work closely with cruise lines to ensure any new facility meets their future requirements. Opportunity to design the cruise terminal to meet future anticipated trends, rather than being locked into existing infrastructure. Opportunity for an interim cruise facility to be developed that caters for short and medium tern demand and a longer term infrastructure solution that can be designed when the breadth of the future market is more broadly understood. The Gold Coast is also likely to be attractive to international itineraries such as world and Asia/Pacific cruises with potential to leverage the Gold Coast s global brand. Important that the Gold Coast develops a cruise terminal capable of accommodating mega cruise ships and learns from the successes of other developments. iv

Industry Trend The projected growth in the Chinese and Asian cruise market is expected to result in more cruise itineraries visiting ports throughout Asia over the next decade. This includes the likely growth and development of more Asian cruise lines. Source: AECgroup Implications for the Gold Coast Growth potential for cruise itineraries involving Gold Coast and Asia. v

Table of Contents DOCUMENT CONTROL... I EXECUTIVE SUMMARY... II TABLE OF CONTENTS... VI 1. INTRODUCTION... 1 1.1 BACKGROUND... 1 1.2 PROJECT OBJECTIVE... 1 1.3 PURPOSE OF THIS DOCUMENT... 1 2. INDUSTRY OVERVIEW... 2 2.1 INDUSTRY STRUCTURE... 2 2.2 CURRENT ACTIVITIES... 2 2.2.1 CRUISE OPERATORS... 2 2.2.2 ITINERARIES... 3 2.2.3 CRUISE SHIPS... 5 2.2.4 CRUISE PASSENGERS... 5 2.2.5 PORTS... 7 2.3 FORWARD OUTLOOK... 8 3. CASE STUDIES... 10 3.1 REGIONAL CRUISE TERMINALS... 10 3.1.1 CAIRNS... 10 3.1.2 GOTHENBURG... 10 3.2 MAJOR CRUISE TERMINALS... 11 3.2.1 DUBAI... 11 3.2.2 HAMBURG... 12 3.2.3 FORT LAUDERDALE... 13 4. PLANNING CONTEXT... 14 5. SWOT... 16 6. KEY FINDINGS & IMPLICATIONS... 17 6.1 CRUISE POTENTIAL FOR GOLD COAST... 17 6.2 ALIGNMENT WITH GOVERNMENT POLICY... 17 REFERENCES... 19 APPENDIX A: CRUISE SHIPS IN AUSTRALIA... 20 APPENDIX B: AUSTRALIAN PORT VISITS... 22 APPENDIX C: CRUISE SHIPS UNDER CONSTRUCTION/ORDERED... 24 vi

1. Introduction 1.1 Background Cruise ship holidays in Australia have continued to increase in popularity despite the relative flatness of the broader Australian tourism sector. The cruise shipping sector in Queensland has recorded considerable growth in recent years, though current port infrastructure limitations may constrain future growth. The Gold Coast is Australia s premier tourism destination offering visitors a broad range of experiences. While the Gold Coast does not have a dedicated cruise ship facility, the opportunity to establish a facility has been identified as having potential to grow the State and regional tourism and cruise industry. Establishment of a dedicated cruise terminal facility and associated operators would provide significant economic benefits for the Gold Coast region. 1.2 Project Objective The focus of this study is to provide an industry tested, financial and economic assessment of establishing and operating a cruise ship terminal on the Gold Coast. This information will assist the Gold Coast City Council support submissions to the Queensland and Commonwealth Governments for financial support, should Gold Coast City Council determine to support the development. The overall study will include the delivery of five (5) technical documents: Industry Overview (this document); Market Sounding and Demand Assessment; Financial Assessment; Economic Assessment; and Collated Information to support the Business Case. The overall study aims to address the following critical questions: How likely is it that the Gold Coast could generate enough cruise ship traffic for the terminal to be financially viable? What would be the likely economic impact to the Gold Coast of constructing and operating the cruise shipping terminal? 1.3 Purpose of this Document The purpose of this report is to provide an overview of the cruise industry to inform the preparation of the Gold Coast Cruise Ship Terminal (GCCST) Business Case. The Industry Overview Report includes a review of the project context (including completed studies and strategic plans), assessment of the global and domestic cruise industry and identification of case studies of comparable cruise terminal/facilities. The report highlights the key findings and the implications for the proposed GCCST development. 1

2. Industry Overview 2.1 Industry Structure Cruise Down Under (CDU), the peak industry marketing body for Australia and the Pacific cruise destinations, defines cruise shipping as: A vessel undertaking scheduled deep water cruises of two days or more with a passenger capacity of 100 or more. The cruise industry is comprised of a large number of parties, including: Cruise Operators: At the core of the industry are the cruise operators, which operate ships and are responsible for undertaking the cruises. Cruise operators are responsible for determining itineraries, organising cruises, marketing, selling cruises and working with ports, service providers and government. Ports: Ports are responsible for accommodating ships when visiting a destination and facilitate the safe disembarking and embarking of passengers and provision of services to the ships. Ports range from: o o Base ports: where cruises begin and end itineraries; and Transit ports: where vessels stop to allow passengers to get off the vessel for a short period of time before re-embarking and travelling to the next destination. Service Providers: Includes organisations that provide services to the cruise ship operators, ports and passengers, these include: o o o o o Port Service Providers: Organisations that provide services to the cruise ships while in the port and includes the port authority, port pilots, towage operators, fuel suppliers and other suppliers; Suppliers: Companies that supply goods and services to cruise operators including food, beverages and entertainment; Ship Services: Service providers for ships such as dry dock and slip yards operators, engineers, maintenance and refurbishment; Onshore Activities: Companies (often referred to as Ground Handlers) that provide services that are utilised by passengers and crew while off the ship including tour operators, tourism attractions, hospitality and accommodation; Travel Agents: Companies that sell tourism products on behalf of operators including booking passengers on cruises; and Government: There is a range of Federal, State and local government agencies responsible for regulating and assisting the cruise industry. Federal agencies include Customs, Quarantine, Immigration, Maritime Administration, Environment, Health and Bio Security, Infrastructure and Transport, Employment and Workplace Relations, Great Barrier Reef Marine Park Authority, National Parks Australia and Tourism. Queensland State agencies include, Maritime Safety, National Parks & Wildlife, Health & Bio Security, Transport, Natural Resources and Water, Environment, Infrastructure & Planning, and Tourism. At the local level, Local Government Authorities. 2.2 Current Activities 2.2.1 Cruise Operators The cruise industry has been dominated for the last 30 years by Carnival Corporation and Royal Caribbean International (RCI), accounting for significant market share. Carnival Corporation (including P&O Cruises, P&O World Voyages, Cunard, Princess Cruises, Holland America Line, Costa Cruises, AIDA, Iberocruceros and Seabourn) and RCI (Azamura Club Cruises, Celebrity Cruises) own numerous cruise lines. 2

The number of cruise lines operating in Australia has increased in recent years as the Australian cruise industry has grown. In 2011-12 there were 24 cruise lines that had a ship visit Australian ports (see Appendix A). Carnival Australia represented six of the cruise lines with RCI representing two lines. Cruise lines that based ships in Australia for the entire year in 2011-12 included: P&O Cruises Pacific Dawn, Pacific Jewel, Pacific Pearl and Pacific Sun; Princess Cruises Dawn Princess; and Orion Expedition Cruises Orion. Cruise lines that based ships in Australia for the summer season in 2011-12 included: Celebrity Cruises Celebrity Century; Classic International Cruises Athena; Cunard s Queen Mary 2; Holland America s Volendam; Princess Cruises Diamond Princess, Sea Princess and Sun Princess; and Royal Caribbean s Rhapsody of the Seas and Radiance of the Seas. 2.2.2 Itineraries The global cruise sector primarily focuses on major tourism destinations including cities with ports capable of accommodating large vessels. Cruise ships generally focus on warmer climates often following the summer seasons in Europe, North America and the Southern Hemisphere. According to CLIA, the major cruise destinations/itineraries (by passenger bed days) are the Caribbean and the Mediterranean, which account for over half of the global total. Figure 2.1: Cruise Passenger Bed Nights by Region Source: CLIA (2012) Caribbean Mediterranean Europe/Scandinavia Alaska Bahamas Mexico (West) Transatlantic Australasia/South Pacific Trans Canal South America Hawaii Other 0 5 10 15 20 25 30 35 40 Passenger Bed Days (Million) During the last five years, the destinations that have recorded the highest growth include Australasia/South Pacific, Europe/Scandinavia and Transatlantic. 3

Passenger Bed Days in 2011 (Million) Gold Coast Cruise Ship Terminal Business Case Figure 2.2: Growth in Cruise Passenger Bed Nights by Region 40 35 Caribbean 30 25 20 Europe/ Scandinavia 15 10 5 Mexico (West) 0-10% -5% 0% 5% 10% 15% 20% Annual Growth 2006-2011 (%) Source: CLIA (2012), AECgroup Hawaii Alaska Other Mediterranean Bahamas Australasia/South Pacific Trans Canal South America Transatlantic Cruise itineraries in Australia generally revolve around visits to the major cities (which have the infrastructure capable of accommodating large vessels) including Sydney, Brisbane, Melbourne, Hobart and Fremantle. Common itineraries within Australia include (those, on a prima facie assessment of being most likely to incorporate the Gold Coast in their itinerary are bolded): South Pacific: Ships taking a round trip from either Brisbane or Sydney (lasting about 1-2 weeks) with stops in ports such as Noumea, Ouvea, Lifou, Vila, and Isle of Pines; Queensland Coast: Ships taking a round trip from either Sydney or Brisbane (lasting about a week) and visiting several ports along the coast such as Cairns and Whitsundays; Australasia: Ships leaving from Sydney, Melbourne or Brisbane and visiting several ports in New Zealand and Australia. Itineraries are sometimes round trips or finish in New Zealand with a return cruise back to Australia; Around Australia: Cruises circumnavigating Australia, taking approximately 30 days and visiting a range of ports around the country; Indian Ocean: Cruise ships based in Fremantle and taking itineraries that travel along the north-western coastline of Australia or across the Indian Ocean to India, South Africa or South East Asia; International Transit: Ships on world voyages visiting around 10 ports in Australia/New Zealand. Some ships will travel along the eastern seaboard while some also include South Australia and Western Australia on the itinerary; and Top End: Ships travelling around the top end of Australia between Broome and Townsville and into South East Asia. 4

Passenger Numbers Annual Growth (%) Gold Coast Cruise Ship Terminal Business Case 2.2.3 Cruise Ships In 2011-12, there were 42 cruise ships that visited Australian ports (see Appendix A). The number of cruise ships has almost doubled since 2004-05 though remained stable in the last year. Over a third (15) of the ships that visited in 2011-12 were based out of an Australian port(s) at some stage during the year in Sydney, Brisbane, Melbourne, Perth, Cairns, Adelaide, Darwin and Newcastle. In 2011-12, 21 cruise ships visiting Australian ports had passenger capacities of more than 1,000, with eight having passenger capacities over 2,000. This was also a record and higher than the 18 ships that visited in 2010-11. The Queen Mary 2 with a capacity of 3,090 passengers was the largest cruise ship to visit Australia. In 2011-12, the total passenger capacity of cruise ships visiting Australia was 54,063 compared with 49,254 in 2010-11, representing an increase of approximately 10%. During the last eight years, the size of cruise ships visiting Australia has increased with the average ship length up from 207m to 219m, average tonnage increasing from 41,130t to 51,395t and average passenger capacity increasing from 1,039 to 1,287. Royal Caribbean s Voyager of the Seas (at 311m and with a capacity of 3,138 passengers) will become the largest cruise ship ever to base itself in Australia when it bases out of Sydney and Fremantle during the 2012-13 summer season. CLIA identified 13 ships that were introduced to the market in 2011 with a total of 14,886 beds. This included four ships with passenger capacities over 2,500 and seven ships with passenger capacities under 250. This reflects the current trend toward the construction of mega cruise ships and smaller expedition style ships. 2.2.4 Cruise Passengers The international cruise industry continues to grow with CLIA estimating that major lines carried 16.37 million passengers in 2011, a 10% rise from 2010. North America and Europe represent the major source markets for global cruising. The Chinese cruise market is recording major growth with more Chinese residents taking cruises. The China Cruise and Yacht Industry Association estimated that there were approximately 400,000 Chinese residents who went cruising in 2010 (compared to 110,000 in 2008). The growth is attributed to the increase in the Chinese middle class and changing perceptions of sea travel and cruising. International Cruise Council Australasia (ICCA) estimates that 623,294 Australians undertook a cruise in 2011, an increase of 34% from 2010. Over the last decade, the number of Australians undertaking a cruise has increased at an average rate of 20.5%. Figure 2.3: Australian Cruise Passengers 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Passengers Annual Growth 40% 35% 30% 25% 20% 15% 10% 5% 0% Source: ICCA (2012) 5

Market Penetration (%) Gold Coast Cruise Ship Terminal Business Case The strong growth is reflected in the increasing market penetration (% of the population taking a cruise) of the cruise sector in Australia. The market penetration in Australia was 2.7% in 2011, which is the second highest in the world behind the USA (ICCA, 2012). Figure 2.4: Australian Cruise Market Penetration 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: ICCA (2012) The biggest source markets for cruising are NSW and QLD due to Sydney and Brisbane being the major base ports for cruise ships in Australia. Figure 2.5: Australian Cruise Passengers by State WA 8.9% ACT 3.1% VIC 16.3% NSW 39.9% TAS 1.5% SA 5.4% Source: ICCA (2012) QLD 24.3% NT 0.6% As the cruise sector in Australia has grown over the last decade, it has evolved and expanded. Trends in passenger characteristics and market sectors include: Continued growth in demand for family and multigenerational cruises: which is reflected by the continued growth in the large cruise sector that allows for the inclusion of an extensive range of facilities and activities on each ship that cater for all ages. 6

Port Visits (No.) Annual Growth (%) Gold Coast Cruise Ship Terminal Business Case Market segments have expanded: from the core mass market/budget traveller to include more sophisticated travellers looking for luxury travel and new experiences. Focus on experiential markets: increased traveller interest to visit and experience exotic and off-the beaten track destinations, which is in line with broader tourism trends. Continued growth in the small and luxury cruise sectors: as some older passengers and couples look for cruises with a higher focus on luxury and privacy and less children. 2.2.5 Ports Cruise ships visited 31 different Australian ports in 2011-12, equating to a total of 736 port visits. This was a significant increase of 163, or 28.4%, from the 2010-11 total of 573 (see Appendix B). Figure 2.6: Number of Cruise Ship Visits to Australian Ports 800 700 600 500 400 300 200 100 0 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 35% 30% 25% 20% 15% 10% 5% 0% -5% Source: CDU, Individual Ports, AECgroup Sydney, Brisbane, Melbourne and Darwin are the most frequented ports. Ports reporting strong growth were Sydney (+46), Brisbane (+27), Melbourne (+20), Geraldton (+12) and Freemantle (+11). 7

Figure 2.7: Number of Cruise Ship Visits to Australian Ports, 2011-12 Sydney Brisbane Melbourne Mackay/Whitsundays* Cairns/Yorkeys Knob Darwin Fremantle Hobart Port Douglas Broome Adelaide Burnie Geraldton Newcastle Townsville Port Arthur Albany Thursday Island Exmouth Other Note: * Includes Hamilton Island. Note: Some totals may not add up due to rounding issues. Source: CDU, Individual Ports, AECgroup Tourism organisations, ports and governments have begun to realise the economic benefits and growth potential associated with the cruise industry in Australia. Western Australia and the Northern Territory have recently undertaken research projects into the cruise sector which have highlighted the value of the industry to the economy. Darwin is looking to attract cruise vessel(s) to base themselves at the Port of Darwin. Port of Darwin is investing in fuel facilities (bunkering) to make the port more attractive to cruise operators. 2.3 Forward Outlook 0 20 40 60 80 100 120 140 160 180 200 Port Visits The outlook for the cruise shipping industry in Australia and globally is positive with strong growth projections. The outlook for the industry and implications for the proposed cruise terminal at the Gold Coast are outlined in the table below. Table 2.1: Forward Outlook for Cruise Industry Future Trend Global Passenger Growth: CLIA forecasts the recent firm growth of the cruise shipping industry, driven by steady introduction of new products, particularly new ships, is expected to continue through 2012 and beyond. Total passengers are forecast to exceed 17 million in 2012, representing an annual growth of 4.3%. Boom in Chinese Market: The number of middle class Chinese residents (typically the major market for cruise passengers) is projected to increase from 250 million in 2012 to over 600 million in 2020. The China Cruise and Yacht Industry Association have projected the number of Chinese residents taking a cruise will exceed one million in 2015. It is anticipated the Chinese market will be the fastest growing over the next five years with residents taking local and international cruises. Chinese tourists like wildlife, shopping and a clean environment. Implications for the Gold Coast Future cruise demand for the Gold Coast. Potential growth market for the Gold Coast and consider aligning with Chinese tourism experience demands. 8

Future Trend Growth in Australian Cruise Passengers: The increase in the number of Australians taking cruises is expected to continue. ICCA projects that the number of Australians taking a cruise could exceed one million by 2020, which represents annual growth of approximately 5% per annum. Growth in Australian Cruise Activity: After recording an increase of almost 30% in 2011-12, cruise ship visits to Australian ports are expected to increase by approximately 95 visits (almost 13%) to an estimated 830-840 in 2012-13. Growth is projected to be primarily driven by the Eastern Seaboard capital cities of Sydney (+71 visits) and Brisbane (+30 visits). Cruise Lines Entering Australian Market: Increased demand for cruising means operators are now looking to base additional and larger ships in Australia during the Australian summer. As cruise capacity continues to increase, Australia is witnessing a trend towards local deployment of ships, rather than one-off port visits (a total of 16 large ships will be based locally for a minimum of four months by October 2012, equating to a daily passenger capacity of 30,000 (ICCA). Panama Canal Expansion: The expansion of the Panama Canal will double the capacity of the Panama Canal by 2014 and allow larger ships to transit. This will make it easier and cost effective for more ships to visit Australia and base in the region during the Southern Hemisphere summer as they will no longer have to travel around the bottom of South America. Investment in Cruise Ships: Cruise lines throughout the world are investing in new cruise ships. CLIA forecasts that 14 ships will be introduced to the market in 2012 with a total of 17,984 beds. AMEM Communications estimates that there are 18 cruise ships currently under construction or ordered globally that are expected to be completed during 2013 and beyond (see Appendix C). Larger Cruise Ships: The trend towards the construction of mega cruise ships and smaller expedition style ships (with limited medium size ships between 500 2,000 passengers) is expected to continue. Of the 25 cruise ships currently under construction or ordered globally, 13 have passenger capacities over 3,000. (see Appendix C). Asian Cruises: The projected growth in the Chinese and Asian cruise market is expected to result in more cruise itineraries visiting ports throughout Asia over the next decade. This includes the likely growth and development of more Asian cruise lines. As China is in the Northern Hemisphere, there will be opportunities for Chinese cruise lines to bring their ships to Australia during their winter months and potentially bring Chinese tourists to Australia. Economic and Political Stability: Cruise lines are looking to expand into regions that have a strong economy and are political stable to meet demand and reduce risks. The strength of the Australian economy and cruise sector coupled with the economic struggles in Europe and political instability in the Middle East/Africa may see more ships sent to Australia. Port Capacity Constraints: Major ports such as Sydney and Brisbane are currently experiencing capacity constraints that are expected to increase into the future. Brisbane: Portside Cruise Terminal in Brisbane currently cannot service the large cruise vessels such as RCI s Rhapsody of the Seas, Radiance of the Seas, and Princess Cruises Diamond Princes. Portside Cruise Terminal is also only capable of berthing one cruise ship at a time. The Fisherman s Island multi-user terminal is used for larger ships though does not have dedicated cruise facilities. Sydney: The Sydney Harbour Bridge restricts the larger cruise ships from accessing the western side of the harbour. Investment in Australian Cruise Infrastructure: Tourism organisations, ports and governments throughout Australia are continuing to investigate opportunities to develop and upgrade cruise facilities. The last twelve months has seen the announcement of several moves to increase capacity in the Australian cruise shipping industry including: Sydney: A new $57 million cruise passenger terminal is to be built at White Bay to cater for up to 170 ships per year. The new terminal is expected to become operational by March 2013. In addition, in July 2012, the Commonwealth Government announced Sydney s Garden Island naval base will be shared with cruise ships with three cruise ships guaranteed a berth over the next two years. Townsville: Construction work on the new cruise ship terminal has commenced. The new ship terminal is expected to be fully operational by late 2013/ early 2014. Hobart: Construction of the $7 million Macquarie Wharf No.2 Upgrade project, which includes a terminal for cruise ships, has commenced and is expected to be operational by March 2013. Source: CDU, Individual Ports, AECgroup Implications for the Gold Coast Future cruise demand for the Gold Coast. Growth in future port visits which Gold Coast could attract. Additional ships that Gold Coast could attract. Additional ships that Gold Coast could attract. Additional ships that Gold Coast could attract. Need for Gold Coast cruise terminal to have capacity to accommodate mega cruise ships. Cruise itineraries involving Gold Coast and Asia. Additional ships that Gold Coast could attract. Additional ships that Gold Coast could attract. Gold Coast could accommodate overflow demand from Brisbane and Sydney. Increased competition from other ports in Australia. 9

3. Case Studies The following cruise terminal developments have been identified as case studies for recent projects that have impacted the cruise sector. 3.1 Regional Cruise Terminals 3.1.1 Cairns The $13.6 million Cairns Cruise Liner Terminal was opened in November 2010. The terminal includes a new check-in area and gangway, cafes and bus and taxi-drop off zones. The terminal is able to accommodate two large cruise ships carrying up to 1,800 passengers at the same time. The terminal is also a multi-use building that can be used for major functions and as an extension of the convention centre. Cairns recorded 36 cruise ship visits in 2009-10 with total passenger days at port of 37,075. Following the opening of the terminal, Cairns recorded 44 visits in 2010-11 and 47 in 2011-12. This recorded average annual growth of 14.3%. Cairns is a base port for smaller cruise ships with itineraries involving cruises to the Great Barrier Reef, Top End and into Papua New Guinea. Cairns is also a transit port for international cruise ships taking world cruises and Asia/ Pacific itineraries as well as round trip cruises leaving from Brisbane and travelling up the Queensland coast. Port North (2012) estimate the current annual maintenance dredging requirement of the port is 320,000m 3. To enable future growth plans of the Port of Cairns, which include additional large vessels, will require a capital dredging task of over 5 million cubic meters and an operational dredging task of approximately 580,000m 3 to dredge the outer channel. Implications for Gold Coast The development of the new terminal has made Cairns an attractive destination for smaller cruise ships. The development of the GCCST would greatly increase opportunities to attract base ships. Impediments with the port in Cairns have restricted the terminal from accommodating some mega cruise ships, which are forced to berth at Yorkeys Knob. It is important that the development of the GCCST have capacity and be in a location to accommodate mega cruise ships. 3.1.2 Gothenburg The Frimhamnen Terminal was opened in Gothenburg, Sweden in May 2009. The multiuse berth is located towards the centre of the city and is shared with other users. The development included the provision of security facilities though did not include a dedicated terminal building. The terminal is constrained with larger ships unable to fit under the Älvsborg Bridge and are forced to dock at another location further away from the CBD. 10

Cruise Visits Gold Coast Cruise Ship Terminal Business Case Gothenburg recorded five cruise visits in 2002 and has recorded strong growth over the last decade. The port recorded growth over the next couple of years before stabilising at around 20 visits per year. Following the completion of the new cruise terminal, the number of ship visits almost doubled in the next year and have continued to record strong growth. Figure 3.1: Number of Cruise Ship Visits to Gothenburg 70 60 50 40 30 20 10 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Port of Gothenburg (2012) Implications for Gold Coast Gothenburg has a population of approximately 550,000, which is very similar to the population of the Gold Coast. The Frimhamnen Terminal is targeted towards smaller vessels with another location used for mega ships. The development of the terminal has coincided with strong growth in the number of cruise ship visits. Gothenburg is an example of how the development of a dedicated cruise terminal building is not necessarily required to attract cruise vessels. Gothenburg has successfully attracted more cruise ships by providing a location for cruise ships to berth that is close to the CBD. 3.2 Major Cruise Terminals 3.2.1 Dubai The Dubai Cruise Terminal opened in February 2010 and includes a 3,300sqm terminal building with the capacity to handle two ocean-going cruise vessels or 7,000 passengers simultaneously. The terminal replaced the original facility built in 2001. The port has both turnaround and home port facilities and can berth up to 4 ships at one time up to a length of 335 metres. 11

In 2009, Dubai played a host to 87 cruise ships that brought 261,000 cruise tourists to the country. The new terminal provided an immediate boost with Dubai hosting 120 ships with more than 325,000 passengers in 2010. Since then, growth has slowed with Dubai expected to receive 110 ships in 2012 though the ships are considerably larger, which will result in passenger growth. These figures are set to rise over the coming years as the Arabian Gulf becomes a more popular winter cruise destination. Implications for Gold Coast The Gold Coast has similarities with Dubai in that it is a popular tourism region with a limited history in the cruising sector. Dubai is an example of how investment in cruising terminals have attracted vessels and tourists. Dubai has continually invested in its cruise facilities and worked closely with cruise lines to ensure facilities are attractive to operators. It is a good example to the Gold Coast of the value in working closely with the cruise industry in developing new infrastructure. While the terminal has not attracted more cruise ships in the last two years, the size of the terminal and increasing berthing lengths has allowed it to accommodate larger ships with more passengers. It is important that the GCCST ultimately has the capacity to accommodate mega cruise ships. 3.2.2 Hamburg The Hamburg Cruise Centre Altona was opened in April 2011 and included 2,000sqm of ground floor space, 20 bus spaces first floor and 300 motor vehicle spaces. The terminal has a berth capable of accommodating ships up to 300m. 12

Hamburg has recorded very strong growth in the number of cruise ship visits increasing from 104 in 2010 to 161 expected in 2012. Cruise itineraries from Hamburg include northern Europe, Scandinavia, Russia, Great Britain and the Baltics. Implications for Gold Coast Hamburg has been very successful in attracting more cruise ships as a result of the new terminal and taking advantage of growth in the northern European market. The terminal is an example of a practical building combined with modern architecture to complement the existing public urban space. 3.2.3 Fort Lauderdale The Cruise Terminal 18 in Fort Lauderdale, Florida was opened in November 2009. The terminal was developed especially to be able to accommodate RCI's 5,400-passenger Oasis of the Seas and Allure of the Seas ships, which are the largest cruise ships in the world. The terminal comprises an area of 22,300sqm, with seating for 3,000 passengers and separate embarkation and debarkation areas. The facility has more than 1,000 parking spaces within walking distance of the terminal. An estimated 292,000 passengers passed through the terminal on the Oasis of the Seas in 2010 with potential for the terminal to process over 1.2 million passengers in the future. Implications for Gold Coast The development of the Cruise Terminal 18 is an example of a successful public/ private partnership between Port Everglades and RCI worth over US$75 million. The project resulted in a custom built facility that benefited RCI that has attracted hundreds of thousands of tourists to Florida, with considerable economic benefits. A public/ private partnership may not be as applicable for the Gold Coast as there is not a specific need for a cruise company to accommodate new vessels with particular service characteristics. However, the project can be seen as a good example to the Gold Coast of how the close working relationship between Port Everglades and RCI resulted in mega ships basing in the port. 13

4. Planning Context There have been numerous planning strategies and documents prepared to facilitate economic and tourism growth and development in Queensland and the Gold Coast region. The following table provides an overview of key planning documents relevant to the potential development of a cruise terminal in the Gold Coast. Table 4.1: Planning Documents Document Description Implications for the Study Tourism 2020 Tourism Queensland Strategic Plan 2012-2016 Gold Coast and Destination Tourism Strategy 2012 2016 Gold Coast and Hinterland Tourism Opportunity Plan 2009 2018 Gold Coast Economic Development Strategy 2020 Gold Coast City Council Tourism Strategy Queensland Superyacht Strategy 2008-2013 Tourism 2020 is Australia's national strategy to enhance growth and competitiveness in the tourism industry. The Strategy aims to increase total tourism expenditure in Australia to between $135 to $160 billion by 2020. Tourism Queensland is the state tourism organisation in Queensland and is responsible for facilitating the promotion, marketing and development of tourism to and within Queensland. The Strategic Plan outlines the key aims of the organisation and how it plans to achieve the goals of growing the tourism sector. The Destination Tourism Strategy outlines a framework to guide tourism industry development in the Gold Coast and achieve a balance of economic, social and environmental outcomes. The Gold Coast and Hinterland Tourism Opportunity Plan was developed by the Queensland Government, Tourism Queensland and the Gold Coast Tourism Corporation to provide a direction for the sustainable development of tourism in the Gold Coast region to 2018. The Gold Coast Economic Development Strategy 2020 outlines actions to promote and facilitate the Gold Coast s sustainable economic development over the long-term, achieving high levels of growth without compromising the social, cultural and environmental attributes of the region. Gold Coast City Council Tourism Strategy outlines Council s aim to grow and promote the tourism industry through a sophisticated approach to tourism development that is ethically, socially, culturally, economically and environmentally sustainable. The Queensland Government developed the Superyacht Strategy to promote further growth in the marine industry. The Tourism 2020 Strategy has identified six key strategies to achieve growth. Strategies with implications for the cruise sector include: Grow demand from Asia; and Ensure tourism transport environment supports growth. The Queensland Government has set a growth target of $30 billion for the Queensland tourism industry by 2020. Improved cruise capacity is identified as one of the key drivers that is required for the growth potential of the Queensland tourism industry to be achieved. The Strategy outlines the importance of developing innovative product and infrastructure within the Gold Coast to facilitate industry growth. The plan identifies the need for new investment in infrastructure that supports the ongoing development of tourism to meet future visitor expectations and demands. This includes the need to improve gateways to the Gold Coast and the importance of holiday seaport infrastructure. The Economic Development Strategy appreciates the importance of the tourism sector to the Gold Coast economy, though highlights the need to diversify the economy. The Strategy identifies the need for physical infrastructure (including seaports) to support economic growth. The Strategy also outlines the need to advocate for public and private sector investment in key infrastructure. The Gold Coast City Council Tourism Strategy identifies Marine Tourism as a growth market for the tourism industry. One of the actions identified to develop the industry includes analysing the economic viability and tourism outcomes of the construction of a cruise ship terminal in the city. The Gold Coast is identified as a key location for the development of the super yacht sector. The Strategy identifies the key objective of facilitating world class marine infrastructure in the Gold Coast to attract super yachts. However, the strategy does not outline potential synergies with the development of cruise infrastructure. 14

Document Description Implications for the Study Queensland Mega and Adventure/Expedition Cruise Ship Market Demand Study Source: AECgroup A demand study assessing the growth potential of the mega and expedition cruise segments in order to inform tourism and infrastructure policy decisions. The study identified impediments with existing ports including Brisbane and Cairns that may limit the growth potential of these ports. Capacity constraints and the ability to service larger vessels may make Cairns an attractive destination. 15

5. SWOT The SWOT (strengths, weaknesses, opportunities and threats) analysis is a tool that can be used to assess a region s competitiveness and growth potential. The analysis identifies 'internal' (strengths and weaknesses) and 'external' (opportunities and threats) factors for a region or industry. The SWOT analysis is commonly used in strategic planning exercises and can identify how a region or industry is presently placed and what opportunities and threats it may face in the future. The results of the SWOT analysis can be used to inform future decision-making. The figure below summaries the SWOT analysis for the potential GCCST development. Figure 7.1: Gold Coast Cruise Terminal SWOT Analysis Strengths Tourism industry in Gold Coast is well established. Gold Coast boasts significant tourism attractions and accommodation. Gold Coast airport can facilitate interstate and international passengers. Climate suitable to attract ships to base in the Gold Coast during the summer and take cruises to Great Barrier Reef, South Pacific and New Zealand. Available site for development. Political will and support for the facility. Weaknesses Proximity to the well established cruise sector in Brisbane. Cruise market in Australia is relatively seasonal with activity during the summer months. Limited existing port infrastructure in the Gold Coast to leverage. Potential limitations in early years to cater for Mega ships. Community opposition due to environmental and social issues. Ongoing dredging costs. Opportunities Cruise sector in Asia, Australia and Queensland recording strong growth. Market penetration of cruise industry in Australia increasing. Eastern Seaboard has a significant resident population to draw passengers from. Attract transit visits from cruises on international itineraries and ships based in Sydney on Australasian/South Pacific cruises. Leverage opportunities created by Australia being a popular Southern Hemisphere summer destination. Leverage global growth in cruise demand including emerging Chinese market. Develop a facility that is designed to accommodate mega cruise ships. Leverage capacity constraints at Portside in Brisbane. Threats Competition with Brisbane as proximity means cruise ships unlikely to stop at both ports. Investment in cruise infrastructure in ports such as Brisbane, Newcastle and Sydney. Cruise ships are highly mobile assets, with operators having the power to move ships out of Australia if demand falls. Unforeseen negative shocks to the cruise industry impacting activity. Risk of issues with potential project partners such as developers. Availability of government funding. Source: AECgroup 16

6. Key Findings & Implications 6.1 Cruise Potential for Gold Coast The cruise industry in Australia has recorded significant growth over the last decade and has been one of the fastest growing tourism sectors in the country. The sector is expected to continue to record strong growth into the future. The continued growth in the local cruise sector is expected to create opportunities for cities such as the Gold Coast to attract cruise ship visits. China is expected to be the fastest growing cruise market over the next decade as the population of middle class increases rapidly and the cruise sector gets out of its infancy. This will likely result in Chinese residents taking more cruises domestically as well as throughout Asia and globally. The growth in the Chinese cruise sector may also create opportunities for ships to visit Australia during the Northern Hemisphere winter, which could allow the Gold Coast to attract more ships. There is potential for the Gold Coast to consider the implications of the Chinese market when developing the cruise terminal and leveraging assets such as wildlife parks, shopping, casino and clean environment, which are key attractions for Chinese travellers. The major ports of Sydney and Brisbane are projected to record the strongest demand growth over the next few years though are experiencing capacity constraints in terms of port and cruise infrastructure. The development of a the GCSST, capable of accommodating mega cruise ships, has the potential to alleviate the capacity constraints at other Australian ports. The inability of the Portside Cruise Terminal in Brisbane to accommodate mega cruise ships represents an opportunity for the Gold Coast to attract these vessels. International cruise lines are investing in Australia due to the significant growth in the local cruise industry, relatively strong economy and stability. They are bringing more ships to Australian waters and are also basing them here both seasonally and permanently. The expansion of the Panama Canal and the growth in Asian itineraries will potentially increase the attractiveness and accessibility of Australia as a cruise destination. There is also a major trend towards the construction of larger ships and deployment of bigger ships to Australian waters. The Gold Coast has the potential to work closely with these cruise lines to ensure any new facility meets their requirements including being able to accommodate the larger ships that may visit into the future. The Gold Coast is strategically located on the Eastern Seaboard of Australia, which provides it with access to popular Australasian itineraries such as the Great Barrier Reef, South Pacific and New Zealand. The Gold Coast is also likely to be attractive to international itineraries such as world and Asia/Pacific cruises. The development of port and cruise infrastructure is critical to attracting cruise ship visits. There are numerous recent examples of international ports that have developed cruise terminals and attracted more cruise ship visits. These terminals have generally provided the necessary capacity to accommodate mega cruise ships. 6.2 Alignment with Government Policy The various economic and tourism planning strategies prepared for Queensland and the Gold Coast all highlight the importance of tourism to the state and regional economy and the importance of continuing to develop infrastructure to facilitate growth. This includes the development of gateway infrastructure (such as seaports) to increase the capacity of transport networks and facilitate international and domestic visitation. The Tourism Queensland Strategic Plan 2012-2016 identifies the cruise sector as a key segment for achieving tourism growth in the state. However, the various state plans do not include any recommendations for the development of a cruise terminal at the Gold Coast, which may reduce the likelihood of attracting State Government funding support for a development in the short term, without stated State Government support. 17