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INVESTIGATION OF THE CRUISE LINER INDUSTRY

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Title: INVESTIGATION OF THE CRUISE LINER INDUSTRY


1
INVESTIGATION OF THE CRUISE LINER INDUSTRY
DRAFT STUDY RESULTS 7.16.08 MITCHELL DUPLESSIS
PROJECTS (PTY) LTD LANDDESIGN
2
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

3
SEC1 GLOBAL CRUISE CHARTERISTICS
4
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

5
CRUISE INDUSTRY GROWTH IN PASSENGERS
GLOBAL PASSENGER LEVELS HAVE DOUBLED EVERY DECADE
SOURCES CLIA, 2006 AND CIN, 2008
6
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

7
LEADING CRUISE CONGLOMERATES
SOURCE CIN, 2008
8
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
9
PRIMARY CRUSING REGIONS
?
?
?
?
?
SOURCE CIN, 2008
10
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.
11
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
12
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

13
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

14
GROWTH OF INDUSTRY SUPPLY
RCCLS OAISIS OF THE SEAS
15
GROWTH OF INDUSTRY SUPPLY, 2000-2008
SOURCES CIN, 2008 AND WWW.CRUISECOMMUNITY.COM,
JULY 2008
16
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
17
FORECAST GROWTH OF INDUSTRY SUPPLY
798,700
612,700
372,100
18
FORECAST GROWTH OF INDUSTRY PASSENGERS
31.2 MIL
24.0 MIL
15.2 MIL
19
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

20
SEC2 SOUTHERN AFRICA CRUISE CHARTERISTICS
21
SOUTHERN AFRICA CRUSING REGION
22
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

23
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.
24
VESSELS OPERATING IN THE REGION, 2008/09
SOURCES INDUSTRY WEBSITES, 2008,
WWW.CRUISECOMMUNITY.COM, 2008, MDA / LDI 2008
25
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
26
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
27
VESSELS OPERATING IN THE REGION, 2008/09
SOURCES INDUSTRY WEBSITES, 2008,
WWW.CRUISECOMMUNITY.COM, 2008, MDA / LDI 2008
28
VESSELS OPERATING IN CAPE TOWN, 2007/08
SOURCES VA WATERFRONT, 2008
29
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

30
FIT OF CAPE TOWN WITHIN MARKETS
31
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

32
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

33
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

34
CLIA 2008 MARKET PROFILE
35
FORECAST GROWTH OF REGIONAL SUPPLY
417,711
87,644
52,117
36
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

37
SEC3 CRUISE INDUSTRY NEEDS FOR OPERATIONS
38
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

39
CRUISE LINE DESTINATION SELECTION CRITERIA
40
CRUISE LINE DESTINATION SELECTION CRITERIA
41
CRUISE LINE DESTINATION SELECTION CRITERIA
42
CRUISE LINE DESTINATION SELECTION CRITERIA
43
CRUISE LINE DESTINATION SELECTION CRITERIA
44
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

45
CRUISE FACILITY PLANNING MODULE
Source BA, 2005.
46
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

47
MOVEMENT TOWARD MULTI-USE FACILITIES
48
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

49
BELL STREET PIER, SEATTLE
50
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

51
SEC4 CASE STUDY
52
CASE STUDY AUSTRALIA SOUTH AMERICA
53
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

54
AUSTRALIA / NEW ZEALAND CRUISE REGION
GROWTH IN ASIA CRUISE PASSENGER CAPACITY
PRIMARY OPERATIONS AREA
SOURCE CIN, 2008
55
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

56
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

57
SOUTH AMERICA CRUISE REGION
PRIMARY OPERATIONS AREA
GROWTH IN SOUTH AMERICA CRUISE PASSENGER CAPACITY
SOURCE CIN, 2008
58
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

59
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

60
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

61
SEC5 OVERALL CAPE TOWN POSITION ASSESSMENT
62
OVERALL POSITION ASSESSMENT
63
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

64
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

65
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

66
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

67
OVERALL POSITION ASSESSMENT
68
SEC6 RECOMMENDATIONS MOVING FORWARD
69
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.

70
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

71
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

72
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

73
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

74
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

75
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

76
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

77
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.

78
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)

79
INVESTIGATION OF THE CRUISE LINER INDUSTRY
DRAFT STUDY RESULTS 7.16.08 MITCHELL DUPLESSIS
PROJECTS (PTY) LTD LANDDESIGN
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