New Cruise Terminals & Piers: A Risky Business?

A local news station in Houston is reporting that for the first time, a cruise ship has sailed from its home port at the Bayport Cruise Terminal in Houston. Princess Cruises' Caribbean Princess set sail earlier this week for a four day cruise to Progresso, Mexico.

The remarkable part of the story is that the cruise terminal was built long ago and has sat largely unused. The cruise terminal was completed in 2009 at a cost of $108 million with bond money that the local taxpayers have been paying for the past 4 to 5 years. 

Empty and abandoned cruise terminals are a risk that struggling U.S. cities and powerless Carnival Cruise Line - 800 Pound Gorilla Caribbean islands run while dealing with the rich and powerful cruise lines.

A Houston port official excitedly talked about all of the employment benefits which finally are coming from the cruise terminal:

"You have the line handlers, you have our wonderful longshoreman association that's providing the handling of the baggage, stevedores that are handling our parking, so there are just a variety of jobs and economic impact that's created from this cruise operation." 

But such success is usually a long time coming and is often fleeting.

Just ask Mobile Alabama.

The city built an expensive cruise terminal as part of its "partnership" with Carnival Cruise Line.  When the cruise line pulled its cruise ship from the Alabama port, the city was left with a debt of $35,000,000.

Carnival thought that it could make more money by re-positioning its cruise ship in either New Orleans or Tampa, and left Mobile high and dry.  Ironically, the only cruise ship to return to Mobile in the last couple of years was the Carnival Triumph which had to be towed to port following the infamous "poop cruise' earlier this year.     

Carnival never enters into a contract with a port promising to commit ships to the port for a finite number of years. So cities like Mobile build their new terminals on a wish and a prayer.

One-sided deals in favor of the cruise lines are the business norm. Carnival is the proverbial 800 pound gorilla. Port cities can either sign the bad deal or the cruise line goes elsewhere. And Carnival can break the deal whenever it wants and for any reason, good or bad.

Just ask Norfolk, Virginia. Carnival abandoned it last month leaving the city with a $30,000,000 debt for a new cruise terminal that the local taxpayers are stuck with paying. Carnival cited the additional operating costs associated with new environmental emission regulations which prohibit the use of cheap, toxic bunker fuel which can still be burned on cruises out of Miami.

The here-today, gone-tomorrow exploitation of cities like Houston, Mobile and Norfolk is particularly bad in the Caribbean ports. Take, for example, Antigua.  Carnival dropped Antigua like a hot potato. Carnival broke up with its Caribbean "business partner" with a "Dear John" letter sent via e-mail. The sudden and unexpected pull-out costs the Caribbean island $40,000,000 annually.

Consider what's happening in Tortola too. Carnival cruise ships announced that it is pulling the Sunshine, Freedom, Liberty, Glory and the Valor from the island. Carnival may return if and when Tortola invests into improving its cruise facilities. 

The latest news from the Caribbean is that the Cayman Islands is trying to figure out how to pay $200,000,000 for two new cruise ship piers so that Carnival and Royal Caribbean passengers don't have to tender in from the cruise ships to the island. The Cayman Islands has a GNP of less than one billion dollars a year; however, Royal Caribbean alone will collect closer to 7 billions dollars a year. Carnival will collect far more than that.

The Caymans can't possibly pay for the news cruise piers by itself. But if it decides to "partner" with these giant, rich cruise lines, it may find itself paying for much of the cruise project and ongoing operating expenses with no legally enforceable assurances from the cruise lines.   

It's risky business for poor cities and tourist-dependent Caribbean islands with no sustainable businesses to trust the cruise lines.  Cruise lines like Carnival are cutthroats. They hold all of the cards and will up and leave in a split second if they can make a better deal elsewhere. 

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Comments (1) Read through and enter the discussion with the form at the end
John Goldsmith - November 8, 2013 3:58 PM

"The Golden Rule"
He who has the gold, makes the rules. Any large corporation, believing they have the advantage will exploit that advantage to the benefit of their bottom line. In order to achieve a different result the consumer has to make the move, but with the marketing and the proffesionals that the corporations hire.Good Luck with that.

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