The Cayman Islands and the Caribbean cruise industry have enjoyed a mutually beneficial relationship for many years. Currently, three business-related themes are converging that could strengthen this alliance substantially in the coming years:
The government has moved to begin a long-sought upgrade of Grand Cayman’s port, including deepening the harbor off George Town and a shipping channel to the cruise terminal and also building piers that will permit ship-to-shore entrance and egress for passengers instead of relying upon the tender system now in place.
The government has approved plans to construct two piers in George Town, able to accommodate four ships at an estimated cost of between $100 million and $200 million.
Even through the recent worldwide recession, major cruise lines have maintained enviable growth of both passengers and revenue. The main industry trade association claims better than 8 percent growth, while a New York analyst and scholar, operating independently of the cruise lines, says it’s a very respectable 7 percent growth rate that suffered little during recent lean years.
Cruise line companies, starting in 2009 when Royal Caribbean Cruise Lines took delivery of two mega-ships – which carry some 6,300 passengers in high comfort – have begun planning a shift from smaller, under-4,000 passenger liners to those half again as big. That’s the size vessel they think will prevail in the future.
Taken together, these developments argue strongly that Cayman, a well-known and popular destination for passengers and a profitable one for the cruise lines, is on track to improve its positioning against other markets in the region and capture more visitors in the coming years, if a new port/port access is developed.
After a somewhat slower than expected 2013, Cayman recorded 861,517 cruise visitors in the first six months of this year, the Department of Tourism said. Predictions from industry insiders are for a 2 million passenger year as soon as 2015.
Michele Paige, president of the Florida-Caribbean Cruise Association, which includes 15 member lines operating more than 100 vessels in Florida, Caribbean and Latin America waters, said in an interview that “Cayman is an excellent partner for our cruise lines. They have a beautiful country that our passengers love to visit, and they find wonderful amenities there.”
She added, though, that “for the last 15 years Cayman has looked at building a deep-water port and more efficient way to get passengers to the terminal. It hasn’t happened. Tendering is not an optimal deal. It’s a hassle. It’s a system that’s not worthy of such a sought-after destination as Cayman.”
Paige says there is no agreement for her trade organization or its parent group, the Cruise Line International Association, to help financially with the cost of dredging or rebuilding George Town’s port and terminal. And she has heard of no commitment on the part of any cruise line that serves the market to contribute, either.
Royal Caribbean International and Carnival cruise lines, the dominant players in Cayman with 80 percent of the cruise business here, both referred all questions about cruise affairs in the Caribbean to the trade organization.
Cruise visitor benefits
Cayman enjoys many benefits from ship-borne visitors, though they account for less tourist spending than air arrivals. Economic studies show that cruise visitors, who may spend up to six or eight hours on shore, spend on average of $100 a day each in port.
“That means that whenever an average ship disembarks, tendering, say, 3,500 passengers and part of its crew to the terminal for a … visit, that’s half a million dollars that goes to the people of Cayman Islands,” says Paige.
She notes that if the visitors do not have to pay for a tender ride from anchored ship to terminal, “they will have even more pocket money to spend onshore.”
However, if such a ship cancels Cayman as its destination, “that’s a half-million dollar loss for the local economy,” Paige says. Restaurants, cab drivers, bartenders, local attractions, shopkeepers and vendors don’t get as big a payday if a ship doesn’t come into port.
Paige makes a convincing argument that there’s good economic value in Cayman’s relationship with the cruise lines that anchor in the harbor. The 2-million passenger year forecast translates into $200 million over 12 months from passengers and crew members who come ashore.
Bigger ships, more passengers
Meanwhile, the global network of 410 cruise ships in service this year (including some large craft that navigate scenic rivers in Central Europe), with more than 467,000 beds and an expectation of almost 21 million travelers in 2014, has plans for the next decade and beyond. Of major concern for the industry association is the corporate welfare of its member cruise lines: How to book more passengers and collect higher revenue from them.
While it’s widely acknowledged that destinations get about $100 a day from each passenger who goes ashore, the big companies that run the ships are making more like $400 to $600 a day off those same passengers, their financial statements show. That is one of many incentives to buy bigger ships.
“The cruise lines have been very, very effective at finding ways to capture so much of their travelers’ spending,” says Jean-Paul Rodrigue, a Hofstra University professor who studies maritime economics with a recent focus on the cruise industry. His research shows that the whole economic infrastructure of a ship aims to get its captive customers to buy more drinks, more expensive meals and special services on-board, including helicopter rides, fishing excursions and diving lessons.
When at sea, passengers get plenty of ocean views, but what they don’t get is a beach, the professor says. So mega-cruise lines like Disney, Royal Caribbean, Princess, Norwegian and Holland America all have bought or lease their own islands or miles of private beaches, each with its own set of services, bars, restaurants, cabanas and excursions for sale. “So they have found even more ways to capture the passenger’s expenditures on a cruise,” he says.
Rodrigue has also studied the economic and passenger growth of the cruise industry and finds it doing quite well. The Cruise Line International Association, the largest trade organization, publishes its growth as 8 percent a year fairly consistently over two decades. Rodrigue’s figure is 7 percent.
Nevertheless, it’s an industry that courts many kinds of vacationers, including those who want to interact with the local population, and that’s one reason why the Bahamas, St. Thomas, St. Bart, parts of Jamaica and Cayman remain among the most popular destinations.
Other cruise customers seek the convenience of vacationing in a manicured place where everyone speaks their language and anticipates their needs (at whatever cost). The adventuresome ones are likely to say the “Disney-like experience” of private islands doesn’t really feel like traveling. For either kind of traveler, destinations still matter.
Among both groups, however, Cayman continues to have cachet. But Rodrigue says the likelihood is that the bigger the ships, the greater the tendency for attracting travelers who want to have the ship and its crew satisfy their needs and desires.
In years to come, as more mega-ships are introduced, the distinction between passengers favoring vast floating resorts and those seeking a more intimate climate might matter less.
Industry umbrella group CLIA North America, which represents 26 cruise lines, more than 10,000 travel agencies and 35,000 agents, makes it clear that bigger ships are going to be its members’ future, and ports from which cruises disembark, as well as the destinations their passengers want to visit, need to make sure they can handle the vessels and the crowds they will bring.
If not, they are likely to find themselves relegated to “niche market” status, visited only by yesterday’s ships with smaller passenger lists.
The trade organization’s message is that as international cruise companies expand their fleets and up-size their vessels, the moment of truth for these smaller and shallower ports is fast approaching.
“These super ships will be so much bigger than most of what you see now that cruise ports of origination and destinations all over the world will have to make very expensive changes to their port facilities, changes that also could threaten the environment of surrounding waters,” Rodrigue says.
That’s because of the effects dredging can have in environmentally sensitive water, potentially disturbing sea grasses, coral reefs and marine life.
Some ports find themselves impeded by too-low bridges between terminal and open water. Along Florida’s Gulf Coast, the Tampa Bay Port is considering moving its cruise terminal, which launches hundreds of Caribbean forays each year, 30 miles west into the Gulf of Mexico. The reason: The Sunshine Skyway Bridge spanning the mouth of the bay is too low to accommodate the huge ships expected within the coming years. The cost of moving the port could be upwards of $2 billion.
The corporate giants that own the cruise lines as well as trade groups say that whether to invest their resources in the improvements super ships demand is up to each of the dozens of more modest ports. The ship lines intend to stick to their own schedules of up-sizing their floating stock.
The best a destination can, according to Paige of the Florida-Caribbean Cruise Association, is: Be a lovely place to visit, with enough distinctive flavor to make visitors want to come back; don’t become a haven for criminals who prey on cruise passengers; offer good value for the money for goods and services; and make the community as easily navigable as you can, from the moment passengers depart from the cruise ship gangway until they return to their berth.