Caribbean on the Move

Seatrade Cruise Review
September 2007 Edition

Ticket pricing starts to stir, port investments rise and hurricane recovery progresses. Anne Kalosh reports
Signs are beginning to emerge that the Caribbean may be shaking the pricing albatross. Mid-year indications from the Big Three companies suggested rates had bottomed out and were starting to improve. Meanwhile, with Genesis-class ships looming on the horizon, big-bucks investments in major infrastructure projects are planned by islands like Jamaica, St. Maarten and Curacao. A new terminal is opening in Santo Domingo, and even tiny Tobago is committing funds to enlarge its piers.

At the same time, hurricane recovery presses on, with Mexico's Puerto Costa Maya vowing to rebuild after Hurricane Dean struck a direct hit. Further north on the Yucatan Peninsula, work on Carnival Corp. & plc's Cozumel pier is progressing toward completion next autumn, three years after Hurricane Wilma.

When it comes to pricing, Carnival Corp. & plc chief executive Mickey Arison sounded a cautiously positive note at mid-year, saying rates for sailings in the second half of 2007 appeared to have stabilised. Half-way through the year, booking volumes for Carnival Cruise Lines - which has the vast majority of its sailings in the Caribbean - were up 18% year over year on a 5.5% capacity increase for 2007. Royal Caribbean Cruises Ltd.'s own mid-year report in late July took a similar tone. Chief executive Richard Fain said that after a relatively slow start to the year, he was 'encouraged by the stabilised Caribbean pricing environment.' Like Arison, he surmised consumers were seeing the value of cruising versus other vacations.

Royal Caribbean cfo Brian Rice noted load factors for the first quarter of 2008 are 'much stronger' than they had been a year ago for Q1 2007. The No. 2 operator continues to lower its overall exposure to the region. In 2008, the Caribbean will comprise 54% of Royal Caribbean capacity, compared to 61% this year and 69% in 2005.

Reporting second quarter results in August, NCL Corp. ceo Colin Veitch also stated the Caribbean trade had 'stabilised'.

In its latest booking surveys, brokerage A.G. Edwards found Caribbean pricing maintaining its positive, improving trend with rates generally up in the mid to high single digits across the key brands.

However, analysts like Bob Simonson of William Blair & Co. remain concerned that economic factors like the sluggish real estate market and the US subprime mortgage crisis have yet to play out fully. Discretionary spending for lower and middle income consumers has suffered, but Simonson worries the troubles could migrate up to higher income levels.

After a respite from destructive hurricanes in 2006, the Caribbean has not been so lucky this year. Puerto Costa Maya is knocked off the charts for the near future after Hurricane Dean made a direct hit. More than half the pier was swept away.

'We will rebuild', was the immediate response by the privately owned port's investors, led by Isaac Hamui and his son, Teofilo Hamui, Costa Maya president and ceo.

A wide-ranging federally supported recovery initiative for the region is focused on developing a new waterfront in the nearby village of Majahual, reviving the colonial town of Bacalar and restoring the beaches of Playa del Carmen.

Juan Carlos Arnau, director of regional programs for Mexico's Tourism Secretariat, describes an investment of 18,3m pesos (US $1.2m) to breathe new life into Bacalar, one of Mexico's 32 'Magic Towns'.

An additional 36m pesos (US $3.2m) will go to other projects in the state of Quintana Roo such as supporting the beautification of Cozumel and nourishing Playa del Carmen's beaches. A further 45m pesos (US$4.1m) is being provided by the Secretariat of Transport for a total government effort of nearly 113m pesos.

'There are many small businesses in that area and they depend on the cruise industry to arrive in Majahual', Arnau notes.

At Cozumel, Carnival's pier, demolished by Hurricane Wilma in late 2005, is on target for completion in Fall 2008, says Giora Israel, corporate vp strategic planning and port development. Meanwhile, Cozumel will host the Florida-Caribbean Cruise Association conference this October.

Carnival Corp. recently finalised a 20-year agreement to provide $35.4m in construction financing for St. Maarten's second mega-pier, with Royal Caribbean kicking in $5.5m. The two-berth facility will cost $97.5m.

Carnival gained preferential berthing rights and eight of its brands, including three European operators, are intended to call. Construction is to begin in December, with completion by 2009.

Together with St. Maarten's four-berth pier, the new structure will make the island one of the Caribbean's busiest cruise destinations. It already draws 1.4m passengers a year.

Curacao's master planning process for its second mega-pier is advancing rapidly and includes phasing options for the development of a homeport terminal to support the market when it develops, informs Jan Sierhuis, vp marketing and commercial affairs for the Curacao Ports Authority.

The new pier will be capable of berthing Genesis-size vessels. Planners are weighing locations in the Otrobanda and Punda areas of Willemstad, with a site to be selected by March. Curacao wants the pier operational by 2010.

In other news across the region, Santo Domingo is set to inaugurate its Sans Souci terminal in December in time for new homeporting operations by RCI's Legend of the Seas. Built adjacent to Santo Domingo's colonial zone, the terminal was designed by Diconfo, a Dominican engineering firm, with technical expertise by Westmar. Spain's TEAM is supplying the loading bridge.

The Virgin Islands Port Authority approved a contract with Misener Marine Construction to dredge the center of Crown Bay's access channel to a depth of 32ft. The project is to be carried out in two phases, the first already under way.

Tobago, on a cruise marketing push under the direction of tourism secretary Neil Wilson, completed a $15m expansion of its cruise pier in Scarborough and will invest a further $59m to extend the Charlottesville pier. 'We're ready to get involved in the cruise industry in a pretty big way'. the secretary says.

Tobago recently gained calls by Oceania Cruises and Azamara Cruises, with Princess Cruises' Royal Princess booked for 12 visits in 2008 and nine the year after.