INVESTIGATION OF THE CRUISE LINER INDUSTRY

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INVESTIGATION OF THE CRUISE LINER INDUSTRY
DRAFT STUDY RESULTS 7.16.08 MITCHELL DUPLESSIS
PROJECTS (PTY) LTD LANDDESIGN
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CRITICAL TOPICS COVERED

• The modern cruise industry and the overall
  prospects for continued growth at a global and
  regional level
• Infrastructure and services required by homeports
  and ports-of-call
• Insights on other cruise regions business
  successnotably, Australia / New Zealand and
  South America
• Recommendations as to how Cape Town should
  consider moving forward and to become a greater
  participant within the industry

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SEC1 GLOBAL CRUISE CHARTERISTICS
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GLOBAL CRUISE INDUSTRY MODERN ROOTS

• 1970s transatlantic voyages for travel and
  leisure, not transportation
• North Americas love affair with the Love Boat
• Caribbean entrepreneurs and development of the
  Fun Ships
• The cruise ship as the destination

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CRUISE INDUSTRY GROWTH IN PASSENGERS
GLOBAL PASSENGER LEVELS HAVE DOUBLED EVERY DECADE
SOURCES CLIA, 2006 AND CIN, 2008
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CRUISE INDUSTRY FEATURES OF GROWTH

• Phenomenal success in developing new products and
  sustained interest in cruising
• Adept at converting land-based resort guests into
  cruise passengers
• Deliver a high level of passenger satisfaction,
  leading to repeat clientele
• Model adaptable to changing market conditions
• Lines have limited competition, reduced
  operational costs, and diversified revenues

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LEADING CRUISE CONGLOMERATES
SOURCE CIN, 2008
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LEADING CRUISE CONGLOMERATES
ROYAL CARIBBEAN 5 brands, 38 Vessels, 79,446
total berths Celebrity Royal Caribbean
International Pullmantur CDF Azamara
NCL / STAR CRUISES 3 brands, 16 Vessels, 36,484
total berths NCL NCL America Star Cruises
MSC Cruises 1 brand, 10 Vessels, 19,530 total
berths MSC
CARNIVAL CORPORATION 11 brands, 89 Vessels,
169,584 total berths Carnival Cruise
Lines Iberocruceros Princess Cruises AIDA Cunard
PO Cruises - UK Seabourn Cruise Lines PO
Cruises - Australia Holland America Ocean
Village Costa Cruise
SOURCE CIN, 2008
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PRIMARY CRUSING REGIONS
?
?
?
?
?
SOURCE CIN, 2008
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PRIMARY CRUSING REGIONS
SOURCE CIN, 2008 Others below 2 include
Transatlantic, Canary Islands, Bermuda, New
England / Canada, Hawaii, Panama Canal, Indian
Ocean / Red Sea, Domestic Waterways, Antarctica,
World, Africa.
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PRIMARY CRUSING REGIONS
S E A S O N A L
Y E A R R O U N D
S E A S O N A L
SOURCE CIN, 2008
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CURRENT GLOBAL INDUSTRY CHALLENGES

• Dollar weakness
• Fuel costs
• Cruise lines operations
• Impact to key destination delivery components
  airlines, shore excursions, ground transportation
• Security and terrorism
• Inability to raise ticket prices
• Weakness of the Caribbean cruising region

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CURRENT GLOBAL INDUSTRY OPPORTUNITIES

• Key industry growth fundamentals still in place
• Greatly improved reach into new consumer markets
• British, French, Italians, Germans, Australians,
  South Americans, Asians
• Highly sophisticated operations
• Global sources for passengers, employees, and
  supplies
• Yield management for ticket pricing and onboard
  revenue
• Continued consumer demand
• CLIAs indicates 33.7 million Americans intend to
  cruise next three years
• Dollar weakness

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GROWTH OF INDUSTRY SUPPLY
RCCLS OAISIS OF THE SEAS
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GROWTH OF INDUSTRY SUPPLY, 2000-2008
SOURCES CIN, 2008 AND WWW.CRUISECOMMUNITY.COM,
JULY 2008
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GROWTH OF INDUSTRY SUPPLY, 2000-2012
38 VESSELS ON ORDER 22.3 BILLION IN NEW
INVESTMENT
SOURCES CIN, 2008 AND WWW.CRUISECOMMUNITY.COM,
JULY 2008
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FORECAST GROWTH OF INDUSTRY SUPPLY
798,700
612,700
372,100
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FORECAST GROWTH OF INDUSTRY PASSENGERS
31.2 MIL
24.0 MIL
15.2 MIL
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FORECAST GROWTH IMPLICATIONS

• Projection scenarios anticipate ports and
  destinations will rise to meet this opportunity
• Create demand for a number of present homeport
  and port-of-call facilities to expand over the
  mid- to long-term, encourage expansion into new
  market regions
• Seasonal capacity placement challenges
• As a trend, expansion of supply and the
  subsequent need of cruise lines to expand their
  overall regional coverage is a favorable trend
  for Cape Town

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SEC2 SOUTHERN AFRICA CRUISE CHARTERISTICS
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SOUTHERN AFRICA CRUSING REGION
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SOUTHERN AFRICA CRUSING REGION

• Southern Africa, which includes pan-Southern
  Africa offerings and often island destinations
• Seychelles and related cruises to the islands of
  Reunion, Mauritius and others
• Specialty cruises to St. Helena
• Repositioning cruises
• World cruises

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ESTIMATES OF SOUTHERN AFRICA MARKET SHARE
SOURCES CIN, 2008 AND MDA / LDI, 2008 Notes
Assumes Southern Africa welcomes one third of
Indian Ocean capacity and one-fifth of world
capacity.
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VESSELS OPERATING IN THE REGION, 2008/09
SOURCES INDUSTRY WEBSITES, 2008,
WWW.CRUISECOMMUNITY.COM, 2008, MDA / LDI 2008
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VESSELS OPERATING IN THE REGION, 2008/09

• An estimated 83 cruises are planned for the
  2008/09 season market capacity of 31,657
  passengers
• An estimated 16 different vessels in the region
• Vessels in the market on a variety of different
  segments and predominately directed toward a
  European cruise audience
• Average cruise duration is a lengthy 18 days
• The cruise season is generally from October to
  April most cruises offered December and January

SOURCES INDUSTRY WEBSITES, 2008,
WWW.CRUISECOMMUNITY.COM, 2008, MDA / LDI 2008
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VESSELS OPERATING IN THE REGION, 2008/09

• Itineraries contribute 102 vessels calls to South
  African ports, with an estimated 45 of these
  arriving to Cape Town (44)
• Of the leading four cruise industry
  conglomerates, Royal Caribbean is absent from the
  list of lines offering cruises in the region
• Primary regional homeports identified include
  Cape Town, Durban, Mombasa, and Mahe

SOURCES INDUSTRY WEBSITES, 2008,
WWW.CRUISECOMMUNITY.COM, 2008, MDA / LDI 2008
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VESSELS OPERATING IN THE REGION, 2008/09
SOURCES INDUSTRY WEBSITES, 2008,
WWW.CRUISECOMMUNITY.COM, 2008, MDA / LDI 2008
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VESSELS OPERATING IN CAPE TOWN, 2007/08
SOURCES VA WATERFRONT, 2008
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SOUTHERN AFRICA CRUSING REGION

• Southern Africa / Africa, which includes
  pan-Southern Africa offerings and often island
  destinations
• Seychelles and related cruises to the islands of
  Reunion, Mauritius and others
• Specialty cruises to St. Helena
• Repositioning cruises
• World cruises

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FIT OF CAPE TOWN WITHIN MARKETS
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CAPE TOWN COMPETITION WITHIN MARKETS

• Cape Town has limited competition for cruise
  activities in the region
• Durban the only facility with a similar
  arrangement of port infrastructure, upland /
  shore excursion activities and strategic position
  
• Other South African destinationsRichards Bay,
  Port Elizabeth, East London, Mossel Bayall
  present a reasonable port-of-call option
• Unlikely to be selected over Cape Town by a
  cruise line
• A more important point is the opportunity and
  need for increased collaboration among
  destinations

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CURRENT REGIONAL CHALLENGES

• Region is one of the smallest amongst other
  global deployment areas
• Generally not on the radar of primary cruise
  operators other than an occasional call /
  operation as part of a repositioning or world
  cruise
• Flight and vessel repositioning costs also limit
  some lines in their thinking about deployment to
  the region
• Concerns on regional safety and stability
• Uncertain size of regional consumer base

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CURRENT REGIONAL OPPORTUNITIES

• Key industry growth fundamentals
• Diverse region with similar characteristics and
  itinerary diversity as other successful areas
• Marquee ports-of-call and homeports
• The region has shown consistency in preserving
  its share of the growing global industry
• 2010 FIFA World Cup event
• Successfully delivered by South Africa, this
  event could serve as an important catalystmuch
  like Olympics in Barcelona and Australiato move
  the regional cruise market forward

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CLIA 2008 MARKET PROFILE
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FORECAST GROWTH OF REGIONAL SUPPLY
417,711
87,644
52,117
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REGIONAL FORECAST GROWTH IMPLICATIONS

• Business as usual will likely yield limited
  results low to medium trend line
• Activity in marketing and organizational
  components key to regional viability
• Assuming Cape Town continues to see 44 of
  capacity, passenger throughput could be 126,000
  by 2020 under the high scenario
• With cruise homeporting primary element of Cape
  Towns business, revenue passengers could
  approach 250,000

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SEC3 CRUISE INDUSTRY NEEDS FOR OPERATIONS
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CRUISE LINE DESTINATION SELECTION CRITERIA

• Appeal as a travel and leisure destination
• Type and quality of cruise tourism infrastructure
  needed to support vessel operations and movement
  of passengers
• A market basis and strategic fit within a greater
  cruise ship deployment scheme

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CRUISE LINE DESTINATION SELECTION CRITERIA
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CRUISE LINE DESTINATION SELECTION CRITERIA
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CRUISE LINE DESTINATION SELECTION CRITERIA
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CRUISE LINE DESTINATION SELECTION CRITERIA
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CRUISE LINE DESTINATION SELECTION CRITERIA
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PRIMARY VESSEL INFRASTRUCTURE

• Channel, navigation and access features
• Secure vessel berth
• Berth and related infrastructure
• Apron area and gangway
• Water and other services to ships
• Passenger reception area
• Security, customs and immigration (inbound /
  outbound)
• Basic passenger services
• Ground transportation area (GTA)
• Tour buses parking,
• Taxi and shuttle areas for crew
• Parking
• Access features

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CRUISE FACILITY PLANNING MODULE
Source BA, 2005.
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CHALLENGE FACED IN FACILITY DEVELOPMENT

• In their most simplistic development application,
  cruise terminals have highly constrained revenue
  generating capabilities
• Port charges generally cannot cover terminal
  developments
• Majority of benefit is experienced at the
  community level
• In their role as facilitators of trade and
  commerce, ports sustain large capital investments
  in docks, harbors, and terminals

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MOVEMENT TOWARD MULTI-USE FACILITIES
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MOVEMENT TOWARD MULTI-USE FACILITIES
Challenges
Opportunities

• Create revenue opportunities
• Reduce project risk
• Higher utilization of infrastructure
• Enhanced destination experience
• Portrayal of community image
• Urban renewal / redevelopment
• Public access to the waterfront

• Increased capital outlay
• Transportation and parking
• Conflicts among land uses
• Conflicts among water uses
• Regulatory environment
• Future expansion
• Management skill
• Safety and security
• Public access to the waterfront

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BELL STREET PIER, SEATTLE
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Bell Harbor International Conference Center

• Conference Center
• 4,366 m2 facility that can accommodate groups
  from 10 to 1,000 guests
• One 300 person auditorium
• 14 banquet and meeting rooms
• Shared use of cruise terminal areas for events
  and exhibits, especially off-season

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SEC4 CASE STUDY
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CASE STUDY AUSTRALIA SOUTH AMERICA
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CASE STUDY AUSTRALIA SOUTH AMERICA

• Australia / New Zealand and South America are
  emerging cruise regions
• Operations in Australia / New Zealand and South
  America are generally seasonal
• Both regions offer a mix of itinerary offerings
  and varied ports-of-call
• Australia / New Zealand and South America
  showcase different approaches to growing their
  businesses

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AUSTRALIA / NEW ZEALAND CRUISE REGION
GROWTH IN ASIA CRUISE PASSENGER CAPACITY
PRIMARY OPERATIONS AREA
SOURCE CIN, 2008
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AUSTRALIA / NEW ZEALAND CRUISE REGION

• Area hosts regional operators marketing their
  products to predominately Asian and Australian
  consumers as well as North American and European
  lines
• Star Cruises and PO Cruises Australia comprise
  the primary regional operators, offering
  itineraries on 8 different vessels supporting
  79.3 of passenger capacity in the region during
  2008
• Primary non-regional operators in 2008 included
  Princess, Royal Caribbean, Celebrity, Costa and
  Holland America

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AUSTRALIA / NEW ZEALAND CRUISE REGION

• Strong organizational agencies Cruise Down Under
  and Cruise New Zealand
• Diversity of itinerary offer
• Continued success in building a home grown
  consumer base of consumers
• 160,947 Australiansor 61 percent of total
  passenger numbers of 263,435 in 2007choose to
  sail in the region
• Homogenous, familiar market
• Access to growing Asian travel and leisure areas
• Challenged to keep up with port improvements
• High airlift costs for North American passengers

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SOUTH AMERICA CRUISE REGION
PRIMARY OPERATIONS AREA
GROWTH IN SOUTH AMERICA CRUISE PASSENGER CAPACITY
SOURCE CIN, 2008
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SOUTH AMERICA CRUISE REGION

• The South America cruising region includes the
  southern cone, Brazil, the continents
  northwestern Pacific region, and the Western
  Caribbean
• Costa Cruises, MSC Cruises, and Royal Caribbean
  comprise the primary operators, offering
  itineraries on 9 different vessels supporting
  52.1 of passenger capacity in the region during
  2008

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SOUTH AMERICA CRUISE REGION

• Proximity to the Caribbean low repositioning and
  airfare costs
• Caribbean oversupply has made pursuit of a
  strong South America option a useful
• Strong primary and adjacent sub-regions
• Antarctica, Amazon River, Galapagos Islands
• Market supported by a diverse base of
  international visitors and a home grown consumer
  base
• Improving facilities
• Historically challenged by cabatoge laws
• Disorganized promotional / organizational entities

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CASE STUDY IMPLICATIONS

• Buildup of both cruise regions has been a
  patient, long-term endeavor
• Long been welcoming small levels of cruise
  operations and traffic, slowly building on the
  success of the industry overall
• The presence of a well-organized, regional entity
  marketing to the cruise lines is felt to have had
  a positive impact in the Australia / New Zealand
  buildup of cruise levels
• Both regions have growing local consumer base
• Multiple, marketable itinerary options
• Generally stable regions and markets

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SEC5 OVERALL CAPE TOWN POSITION ASSESSMENT
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OVERALL POSITION ASSESSMENT
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EXTERNAL OPPORTUNITIES

• Positive global cruise market growth fundamentals
• Desire of cruise lines and their clientele to
  explore new regions and destinations
• Configuration of the Southern Africa region
• High travel and leisure enthusiast aspiration for
  an accessible African travel experience
• Increased global brand identification with South
  Africa and Cape Town as a destination
• Favorable government policies toward tourism and
  related businesses and investment
• FIFA 2010 opportunity as a showcase

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EXTERNAL THREATS

• Mobility of the cruise industry
• Regional safety and security issues, both real
  and perceived by potential cruising guests
• Significant repositioning distances and costs
  associated with the entire itinerary offer
• Limited / unknown, complex consumer base within
  the region
• Unclear vision and direction for the region
• Lukewarm reception by cruise lines for Southern
  Africa at present
• Eastern position of the Cape Town in the region

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INTERNAL STRENGTHS

• Diversity of venues and the destination offer
  overall total quality guest experience
• Immediate engagement of primary waterfront
  amenities
• Basic port capability to welcome the industrys
  largest vessels
• Quantity and quality of airlift and hotel
  capacity
• Established maritime components
• Availably of options for improvement to cruise
  related / supporting facilities

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INTERNAL WEAKNESSES

• Multiple parties involved in the primary delivery
  of cruise facilities / operations
• Varied local enthusiasm for the cruise enterprise
  overall
• Conflict / priority of cargo operations within
  the Port area / basin
• Lack of dedicated cruise facilities for homeport
  operations

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OVERALL POSITION ASSESSMENT
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SEC6 RECOMMENDATIONS MOVING FORWARD
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RECOMMENDATIONS MOVING FORWARD

• Software. Programs and marketing efforts
  developed to ensure product quality, brand
  recognition, communication efforts and others.
• Operations. Functional enhancements that allow
  for improved cruise operations.
• Hardware. Strategies and action items to ensure
  that appropriate capital improvements are planned
  and developed to meet anticipated cruise industry
  throughput and facilities needs.

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SOFTWARE OVERARCHING OBJECTIVES

• A large portion of the ultimate success to be
  achieved by Cape Town and South Africa is reliant
  on moving forward with marketing efforts
• Establish a strong case for Southern Africa
  cruising with cruise lines
• Work to build a foundation of seasonal business
  with international consumers and,
• Foster a local consumer base for cruise products.
  
• Emphasis should be placed on organizing the
  messages and messengers first
• Resources beyond those presently committed by
  Cape Town and elsewhere are going to be required

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SOFTWARE RECOMMENDATIONS

• Cruise marketing plan
• It is critical that Cape Town refine and
  implement a specific cruise marketing plan for
  the City and region.
• Hold a marketing goals workshop
• Identify the marketing audience
• Message development and refinement
• Messenger identification
• Formulation of a Cruise Cape Town Committee
  (CCTC)
• In-house education program
• Incentives packaging for cruise lines

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SOFTWARE RECOMMENDATIONS

• Market to the Cape Town community
• Development a cruise passenger visitor's kit
• Lead in development of Southern Africa Cruise
  Association
• Establish a methodology for port costs
  benchmarking
• Hold cruise tourism provider education sessions
• Establish strategic relationships with key ports
  in the region

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SOFTWARE RECOMMENDATIONS

• Conduction travel agent education sessions
• International Cruise Trade Show Participation
• Hold North American and European cruise operator
  visits
• Hold North American and European cruise operator
  familiarization trips
• Possibly linked with FIFA 2010
• Work with tour providers to design new offerings
  suitable for cruise passengers
• Establish targeted provider program offerings
• Luxury, adventure, destination

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OPERATIONS OVERARCHING OBJECTIVES

• The smoothness of operations is as important as
  the quality of the facilities think destination
  delivery
• Operational planning and coordination
• Benchmarking
• Guest security and safety assessments and
  programs
• Organization and communication

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OPERATIONS RECOMMENDATIONS

• Become deeply involved with the FIFA 2010
  floating hotel destination delivery
• Sportscom (communication and sports marketing)
• Meet with Port / VA regularly on threat
  assessment and security issues
• Conduct assessments for cruise passengers and
  generate a specific plan to share with the lines
• Hold public safety education sessions
• Become involved in homeport and port-of-call
  operations planning, especially for peak days

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OPERATIONS RECOMMENDATIONS

• Develop and implement a cruise benchmarking
  strategy
• Develop a scheduling plan for the committee
• Establish an operations audit and enhancements
  program based on benchmarking feedback
• Establish Cape Town primary and secondary venues
  and tour provider assessments
• Establish a smart-pass program

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HARDWARE OVERARCHING OBJECTIVES

• Additional cruise berthing and related terminal
  spaces are needed over the medium- to long-term
• Options need to be explored associated with the
  future role of VA Waterfront, the Port of Cape
  Town (NPA) and City to create a win-win-win
  scenario that will be conducive to meeting future
  cruise industry opportunities
• To reduce risk as well as meet other needs
  observed in the maritime and commercial
  environment, multi- and mixed-use cruise
  development approaches should be pursued.

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HARDWARE RECOMMENDATIONS

• Establish a cruise facilities improvement plan
• Engage the cruise lines for assistance
• Financial component
• Prepare a MOU between VA Waterfront, the Port
  and City on plan implementation
• Ensure a working, interim capital improvements
  plan for delivery of homeport and port-of-call
  needs
• Prepare a detailed plan, with emphasis on
  development of a mixed-use facility with
  supporting revenue inputs
• Implement the detailed plan timed to market
  conductions (cruise or mixed-use components)

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INVESTIGATION OF THE CRUISE LINER INDUSTRY
DRAFT STUDY RESULTS 7.16.08 MITCHELL DUPLESSIS
PROJECTS (PTY) LTD LANDDESIGN