Jacksonville Port Authority Renews Effort to Keep Carnival Cruise Lines

Financial News & Daily Record

 

A year after backing away from a deal to bring a cruise ship terminal to Mayport, the Jacksonville Port Authority has launched its search for a permanent home for Carnival Cruise Lines in Jacksonville.

Port Authority CEO Rick Ferrin addressed the Seaport-Airport Special Committee Tuesday and updated it on the authority’s progress with the cruise terminal.

“Carnival remains bullish on Jacksonville,” said Ferrin. “They have weathered the storm of the current economy because families know they are a good value and there is stability there.”

The Port Authority’s temporary cruise facility is at Dames Point, bordered by Heckscher Drive and State Road 9A. The Port Authority has been working with Carnival to develop a permanent cruise ship terminal that would allow the company to increase the number of ships it can dock in Jacksonville.

The authority has a list of about 20 sites that it will review and plans to present options to its board of directors in 60 to 90 days so it can make a presentation to Carnival concerning cruises departing from Jacksonville.

By designating a site, it can then determine how much the project will cost and what kind of commitment it will need from Carnival.

“We believe they would be willing to give us a 10-year commitment to stay in Jacksonville, which shows their desire to be in Jacksonville. Normally, agreements are year-to-year or, at best, five years,” Ferrin said.

The Port Authority will use three initial criteria for assessing potential locations for Carnival Cruises: it must be east of the Dames Point Bridge because of the height of the boats, which prevent them from traveling under the structure; the site must have 1,200 feet of wharf space; and the property must be owned by the Port Authority or by a willing seller.

What has changed since the Port proposed a terminal in Mayport?

The ability to access credit to build the project.

“We didn’t know the durability to endure the economy nor did we have the ability to borrow money,” said Ferrin. “Borrowing money was expensive because you had such a tightening of credit. Both of those things have eased considerably. We think by the time we needed to borrow money we could probably borrow it at a percentage that we could afford.”

Committee Chair Daniel Davis liked what he was hearing from Ferrin’s report.

“Through this process, I think you will see a lot of win-win situations for the community, the city and the port,” said Davis.

The committee is charged with helping the Port Authority and Jacksonville Aviation Authority find and secure the resources needed to accommodate the city’s growing seaport business and the economic development opportunities at Cecil Field; identifying potential state and federal funding sources for these improvements; and acting as the liaison with local, state and federal officials to help prioritize infrastructure projects and assist with funding sources that stimulate economic development.

Some Natives Concerned About Impact of Growing Cruise Industry in Charleston SC

ABC News

As South Carolina's cruise industry expands, some worry more ships and people could hurt the charm that draws visitors to Charleston in the first place.

The South Carolina Coastal Conservation League is concerned that the ships bring in too many people too quickly, causing congestion and pollution. The environmental group is suggesting officials approve rules to further regulate the industry.

"What a lot of businesses rely on is keeping that small, historic, unique sense of place that is Charleston," said Katie Zimmerman, a project manager with the group.

"What does that do when you start bringing people in on these giant cruise ships? When you look at the cruise ship and see it on the skyline, it's a wall and you can see it from everywhere," she added.

The South Carolina State Ports Authority is working with the city on redeveloping its existing cruise terminal and 55-acre tract around the terminal and Union Pier on the Charleston Cooper River waterfront.

Officials say a modern cruise terminal is needed to handle the growing cruise business. Beginning this spring, Carnival Cruises will base its 2,056-passenger Carnival Fantasy in Charleston.

Ports Authority CEO Jim Newsome has said the agency will work with the cruise companies and the city to mitigate impacts of additional cruises.

On Monday, Celebrity Cruises' Celebrity Mercury, which carries more than 1,800 passengers, made a port call in the city on its way to Key West. Fla.

"We will also continue to work with the community to ensure Charleston gains the economic benefits of the cruise ship industry while maintaining the city's character and quality," he wrote in a recent op-ed article.

The Conservation League is suggesting the city limit cruise ships to one arrival at a time, and cap the number of passengers and the heights of the vessels.

Plans for a new cruise terminal include having only one berth for ships so there would only be one there at a time, said Mayor Joseph P. Riley Jr.

"I'm confident that what we're working on with the Ports Authority will balance and scale," the mayor added, noting the authority expects about 70 cruise calls a year — a little more than one a week.

"I think that's just right," he said. "A port city ought to have cruise ships as a natural thing. You want ports and waterfronts to be real activity."

Authority spokesman Byron Miller said the cruise business is a small but important part of tourism in the city.

"This year Charleston will have 4.2 million visitors. The cruise ship business this year will have 100,000," he said.

He said cruise lines don't want to destroy the charm that makes Charleston an attraction.

Charleston will have 67 cruise ship calls this year among the more than 2,000 container and other ships which stop at the state's ports. A city like Key West, he said, has more than 400 cruise calls a year.

Haiti Cruise Stops: 'Without This, We Don't Eat'

AP

With the Celebrity Solstice cruise ship anchored just offshore this beautiful expanse of white sand Friday, vacationers stretched out on beach chairs in the sun, sipped cold beer and pina coladas with pineapple slices on the rim and listened to Haitian folk music.

The beach resort of Labadee is just 60 miles (100 kilometers) from Port-au-Prince, but it's a world away from the devastation of the Haitian capital, where some 200,000 people are believed dead in an earthquake.

The cruise ships that stop here have become the center of a controversy: Should vacationers relax and have fun with so much suffering elsewhere on the island? Or would it be worse to halt the port calls and deprive locals of what they earn from tourism?

Royal Caribbean is also donating $1 million, delivering food and water on every call and pledging net revenue from Labadee to the relief effort

Jameson Charitable, 20, stood near the pier with a sign offering tours. "Without this," he said, motioning toward the boat, "we don't eat." He said he makes $15 every time a Princess Cruises ship comes in.

About 200 people work here, and a few hundred more vendors and service providers are allowed in whenever ships arrive. The resort enclave, which has a beach, a zipline in the mountains and other activities, is leased by the Haitian government to Royal Caribbean International, which also owns the Celebrity cruise line.

Royal Caribbean allowed a team of journalists from The Associated Press to visit Labadee on Friday, but the cruise company's spokeswoman, Tracy Quan, would not allow them to interview or photograph cruise passengers.

Carol Myers, 53, a nurse from New Jersey, was not on the cruise ship but was enjoying the beach. She had spent an intense week tending to earthquake victims in a hospital in the nearby town of Milo, and was decompressing for a few hours before her scheduled return to the U.S. on Saturday.

"I almost feel guilty for being here after what happened," Myers said, sitting in a beach chair in blue scrubs. "But the people need a job, the people need to eat."

Royal Caribbean President and CEO Adam Goldstein said the decision to continue with scheduled stops in Labadee was an easy one. The site sustained no damage, and he said the Haitian government welcomed the ship. The country reaps a fixed cost per passenger, plus annual fees and the cash tourists spend on local goods at a marketplace where artisans and artists sell trinkets and crafts.

Royal Caribbean is also donating $1 million, delivering food and water on every call and pledging net revenue from Labadee to the relief effort. Maryse Kedar, president of Royal Caribbean's Haitian subsidiary, SOLANO, said the cruise visits are "the only substantial commerce taking place in northern Haiti."

But the cruise line found itself on the defensive after criticism spread online. Melissa Bacchus, a Brooklyn, N.Y., teacher, was among several veteran cruisers to dominate message boards on sites like Cruisecritic.com with the debate.

"I do think morally it is wrong for Carnival Cruises to go (to Labadee), where less than 60 miles away people are suffering," Bacchus said in an interview. "And because we have the resources, we have the wealth, we can frolic using the beauty of their island?"

Bacchus suggested Royal Caribbean pay Haiti its regular port fees, but not actually stop there. She said they could also give local artisans money to go back home and assist in the relief effort.

Haiti Tourism Minister Patrick Delatour said Royal Caribbean continuing the trips was "courageous" and important to his nation's recovery. "We applaud this decision and feel the criticism they are receiving in the media is not only unfair but conveys a complete lack of understanding of the overall condition in Haiti following this horrific disaster," he said.

Still, public relations experts quoted by AdAge.com said Royal Caribbean Cruises had made a mistake by mixing leisure business with humanitarian efforts. "The brand will take a hit," Paul Gallagher, managing director of WPP's Burson Marsteller's issues and advocacy practice, was quoted as saying.

Haiti shares the island of Hispaniola with the Dominican Republic. The Dominican Republic suffered no damage from the earthquake, but the government is clearly worried that vacationers may cancel trips on Celebrity Cruises here because of the disaster on the other side of the border.

The Dominican Ministry of Tourism has issued repeated statements that it was unaffected by the quake, including pointing out that Port-au-Prince is hundreds of miles (kilometers) and several mountain ranges away.

That message was lost on travelers like Debbie Ulin, a 39-year-old mother of two in Hillsdale, N.J., whose family and two others canceled a group trip planned to the Dominican beach resort of Punta Cana for February.

"With everything happening as it did, we sort of all came to the realization that it's probably not the best time to be traveling to the Dominican right now," Ulin said. "As selfish as I feel when I say that, it's not so important, my vacation. We didn't feel like it would be the safe place to go with the families this soon after the devastation has occurred."

Arthur Applbaum, a Harvard University professor of ethics and public policy, said that while it shows "moral sensitivity to be disturbed by the thought that one is vacationing on the beach when others are suffering nearby ... it also shows insufficient moral reflection to think that proximity makes a moral difference.

"The people of Haiti are suffering whether you take your beach vacation in the Dominican Republic or in Hawaii," he said, "and it is a failure of the moral imagination not to be equally troubled in Waikiki."

Smooth Sailing Ahead For Carnival

Barron's

INVESTORS THINKING OF TAKING the plunge and buying cruise-line operator  Carnival Corp. (ticker: CCL) should get on board.

This morning, JPMorgan analyst Kevin Milota upgraded shares of Carnival and its smaller peer  Royal Caribbean Cruises (RCL) from Neutral to Overweight.

Milota wrote that the move was prompted by a recovery in fundamentals for the cruise industry as well as in consumer confidence and the macroeconomic environment.

Milota also noted that shares are trading at discounts to historical valuations despite recent gains. His new target prices for Carnival and Royal Caribbean are $43 and $34, respectively (See Stocks to Watch Today).

Carnival was recently up 1% to a recent $34.12, and Royal Caribbean was 5% higher to $27.25. As Milota noted, the shares have gained 73% and 332%, respectively, since the beginning of March, when many stocks hit new lows.

Royal Caribbean Cruises still trades at 19 times forward earnings, so while not glaringly overbought, it is not as cheap as Carnival, priced at just over 15 times.

Likewise, Carnival has substantially higher operating and profit margins, as well as average returns on assets and equity. Carnival has more debt -- $10.1 billion versus Royal Caribbean's $7.3 billion -- but a much stronger cash position too, with nearly one billion on its balance sheet.

Carnival has also been able to turn in a steadier performance throughout the downturn than Royal Caribbean. The former has beat analysts' expectations every quarter since the recession began in late 2007, and done so by a double-digit margin each quarter since mid-2008. Conversely, Royal Caribbean has had a choppier history, as it turned in high double-digit misses when it reported in January and July.

Many small-caps have outrun larger rivals this year, and Milota wrote that Royal Caribbean will "react at an accelerated pace" to Carnival, in racking up either gains or losses. Yet longer term, Carnival is still projected to outpace Royal Caribbean, 15% to 12.5%, according to analysts' estimates for the next three to five years.

Both companies should of course benefit as the economy begins it slow slog upward. Milota noted that longer booking windows and a pickup in demand should finally allow the industry to clock some positive net yields going forward.

Additionally, Carnival Cruises can use its market-leadership position -- as it has done previously -- to negotiate with greater leverage with vendors to keep costs down.

In sum, all indications suggest that things should be moving full steam ahead for Carnival in the coming months.

On the Call: Carnival Corp. CEO Micky Arison

AP

Oasis of the Seas, Royal Caribbean Cruises Ltd.'s behemoth boat that set sail this fall, got worldwide attention for its size. The largest cruise ship in the world, the 16-deck, $1.5 billion vessel is nearly 40 percent larger than the industry's next-biggest ship and five times larger than the Titanic.

So then, it'd stand to reason that competitors should be concerned? Right?

Guess again, said Carnival Corp. CEO Micky Arison, who spoke to investors on a conference call Friday.

QUESTION: What kind of impact is Oasis having on Carnival Cruises business?

RESPONSE: We haven't seen any impact. If there is an impact, and clearly we haven't seen any, it's in the additional exposure something like Oasis gets. That brings more attention to the cruise industry. ... So the net effect, if anything, would be positive. Beyond that, we haven't really seen any impact.