Two cruise lines sailing toward vital growth at PortMiami
Written by Michael Lewis on November 25, 2015
Two cruise line agreements up for approval next week reveal the massive economic impact the industry has in Miami-Dade – an impact that extends far beyond the nearly 2.5 million visitors who boarded cruises of two days or more here last year.
We’ve long measured the industry’s impact by the spending of outsiders who fly into Miami, perhaps spend nights in hotels and shop in area malls, then board ships headed for ports in other nations before returning to Miami and flying back home.
That measure has been rising and is likely to surpass 5 million movements – which means 2.5 million people board and then debark from the 36 cruise ships that berth here from 18 cruise brands.
But as the numbers of passengers increase in PortMiami, which is the world’s busiest cruise hub, so do other economic flows. As ship sizes and numbers rise, we see parallel growth in ships’ crews, who for years have provided a reliable flow of shoppers in downtown Miami.
Also with that growth come gains in business for those who provision cruise ships with everything from food and drink to disposable supplies. The county, which owns the port, has even begun to look toward on-port fuel operations.
The big cruise names – Carnival, Royal Caribbean and Norwegian and the brands that they own – have large local operations and expansion plans. This year’s big expansion was the Norwegian Escape, next year the Carnival Vista, in 2017 Royal Caribbean’s Enchantment of the Seas and Navigator of the Seas.
But on Dec. 1 the Miami-Dade County Commission will face updated pacts geared to expand the operations at PortMiami of two Europe-based cruise lines, London’s Disney Cruise Line and Geneva-based MSC Cruises.
While the Disney name is better known, thanks not to cruising but overall Disney fame, the growth of luxury brand MSC here under the proposed new berthing agreement with the port would have far greater impact.
MSC, the world’s fourth-largest cruise line with 12 ships and 6.4% of global cruise passengers, focuses on the Mediterranean, where it operates year-round. But in fiscal 2014, it moved its South Florida cruise operations from Port Everglades to PortMiami, agreeing to handle at least 80,000 passenger operations – 40,000 persons – here a year.
Now, under the agreement going to commissioners, MSC is to ramp up that number to at least 425,000 passenger movements a year, starting in December 2017 when it brings in its new MSC Seaside, capable of carrying 5,170 passengers.
MSC is also asking about a second berth for a ship in its Vista class, which can carry 5,715 passengers, if the seaport can fit it in. The port doesn’t have space now, which makes you wonder why commissioners are in such a rush to hand the port’s southeast corner to developers rather than figure out how to shift other port operations there to make room for ships like MSC’s, which can turn a profit for the port besides pulling in hundreds of thousands of visitors.
To handle the Seaside, by agreement the port must spend at least $25 million to upgrade its Terminal F – and it might spend more of its own volition to build up vital capacity for larger and larger ships. If there is an end to our cruise growth potential, it’s invisible now.
The port expects $9.6 million revenue from its current MSC operations over the next two years. Then numbers are expected to hit $7 million the following year, escalating to $9.8 million a year in 2027, the last year of the agreement, as port charges escalate at a 3% annual rate.
On the other side of the ledger, the port will pay MSC about $1.8 million of its annual parking income, based on passenger numbers. The line also gets $175,000 a year from the port for marketing and then a marketing incentive for all passenger movements over 425,000 a year – a payment that the port estimates at $200,000 annually, rising to $300,000 by the end of the agreement, showing that it expects MSC to far exceed the 425,000 guarantee.
The Disney agreement for a single family-friendly ship would be for two more years and pay the port about $7.8 million. The line’s passenger movements totaled 222,300 here in fiscal 2015, far above its 100,000 guarantee. Disney, like MSC, receives a slice of the port’s parking revenue but doesn’t get a marketing rebate.
While both cruise lines, like others, get passenger incentives, it’s not hard to see that the port is clearing far more than it pays out for the privilege of luring precious planeloads of tourists, hotel guests and shoppers into Miami. Figures released last week showed a 6,400-job gain in the visitor industry here over the past year. Many of those jobs are vital dividends from cruise industry growth.
With all of that going for them, we should expect these two cruise line contracts to sail smoothly through the county commission. What’s not to like?