This makes Disney's position on renegotiation good:
July 25, 2007
http://www.floridatoday.com/apps/pbcs.dll/article?AID=/20070725/BUSINESS/707250359
Port's cruise business faces a stormy future
BY SCOTT BLAKE
and DONNA BALANCIA
The future of the cruise industry at Port Canaveral is reaching a critical point, as port officials try to negotiate long-term deals with the port's three major cruise lines.
The Canaveral Port Authority has no contract with Carnival Cruise Lines, which means the industry's largest player could pull its two ships from Brevard County's seaport virtually without notice.
Meanwhile, the Port Authority's current one-year contract with Royal Caribbean International will run out at the end of the year, and its current long-term contract with Disney Cruise Line will expire next year.
Port officials hope to maintain Port Canaveral's position as a top cruise port, and retain the tourism-related riches that go with it. But that could be difficult.
Cruise lines have been looking more to the nation's West Coast and overseas to base their ships.
In May, Port Canaveral lost two of its seven cruise ships based here, one permanently and one temporarily.
Disney temporarily moved the Magic -- one of its two ships at Canaveral -- to Spain for summer Mediterranean cruises, and the company plans to send the Magic back to California for part of next year for seasonal cruises.
That same month, Carnival permanently moved the Elation -- one of its three ships at Canaveral -- to San Diego.
The cruise lines are building even-bigger ships, but it could take a new, larger terminal at Port Canaveral to land one of the vessels.
That could require an investment by the Port Authority of $50 million to $60 million or more -- something port officials are reluctant to do without a long-term guaranteed presence from a cruise line.
The Port Authority, which gets most of its revenue from cruises, could settle for one-year contract extensions with the cruise lines -- leaving one of the county's biggest economic engines in a fragile financial position.
And, for a long-term deal, the cruise lines could ask for more parking space and improvements or expansion of the port's existing terminals, potentially costing the Port Authority millions of dollars more.
'Great state of change'
The announcements of new cruise ships coming to the port have slowed down, and with cruise lines like Disney experimenting periodically with new locations, the prospect of permanently losing a ship cannot be ruled out.
"To say that the cruise industry is in a great state of change is an understatement," Canaveral Port Authority Chief Executive Officer Stan Payne said.
"The European, Asian, South American and U.S. West Coast markets are all emerging as significant competitors with us for cruise ships," Payne said.
Still, Port Canaveral has bargaining chips -- having spent tens of millions of dollars on road and parking improvements in recent years.
"Our proximity to Orlando, proximity to the open ocean, easy access to the terminals, large drive-to market, lower overall costs, high quality of service and long-standing relationships with our cruise partners are tools at our disposal," Payne said, "as we not only protect our current business, but push to grow."
Port Canaveral's high profile in the cruise industry does more than enhance the port's image. It has exposed millions of vacationers to Brevard County in recent years. That includes a portion who patronize local attractions, hotels, stores and restaurants.
Carnival was the first major cruise line to stake its claim at Port Canaveral, but the arrival of Disney a decade ago showed the industry that Caribbean voyages could work from Central Florida.
That opened up the cruise industry's biggest line of business to Port Canaveral, eventually catapulting it to the world's second-busiest cruise port behind Miami.
But Disney didn't come cheap. It required the Port Authority to spend more than $25 million for its own specialized terminal for Disney's exclusive use.
Disney has based its two ships at Canaveral -- the Magic and the Wonder -- most of the time, packaging the cruises with stays at its world-famous Orlando-area resorts.
Now, with Disney planning to start operating two additional ships by 2012, the company is considering its alternatives.
"We have a great relationship with Port Canaveral, and our terminal was built especially for
Disney Cruise Line," said Rena Langley, director of public affairs for Disney Cruise Line.
"Right now, our immediate area of focus is the first-ever Mediterranean cruises and designing the new ships," Langley said. "Our business is expanding, and we are looking at our options for the long term."
Langley said Disney is selling cruises based out of Port Canaveral through the end of 2008.
"Based on terms of contract, we'll automatically roll to a year-to-year contract in 2008," Langley said. "Central Florida will always be important to us because of Walt Disney World."
However, the Caribbean itineraries that helped make nearby Florida ports, including Port Canaveral, so popular have shown signs of weakness, as travelers' tastes change.
At the Seatrade Cruise Shipping Convention in March, the industry's annual meeting in Miami, a big topic of conversation was the apparent weakening of the Caribbean market, and how the industry would adapt to it.
Payne said he thinks the Caribbean slump was just temporary. He points to industry surveys that have found that most Americans still have never taken a cruise -- indicating a big market still exists for travelers not tired of the Caribbean.
Carnival, for one, has been complimentary of Port Canaveral.
'Very committed'
But the company isn't making any promises about the future, and has not indicated any plans to replace the Elation with another vessel at Port Canaveral.
"We are very committed to Port Canaveral, and have been successfully operating ships there for many years," Carnival spokesman Vance Gulliksen said. "In addition, we have a great working relationship with the Port Canaveral team, and receive strong support for our operation from all of the local officials."
However, "our deployment for 2008 is finalized now, and we do not anticipate adding any additional ships or transit call visits," Gulliksen said. "We are still evaluating some of our 2009 deployment, so we really do not have any input on additions to our Port Canaveral deployment at this time."
Payne, meanwhile, said he remains optimistic.
"I look at this from the viewpoint of an opportunity," he said. "And every opportunity has its challenges, and we're going to respond to it."
Contact Blake at 242-3644 or
sblake@floridatoday.com.