Market Potential Cruise Operations Port of Jacksonville

1. Market PotentialCruise OperationsPort of Jacksonville Presented to Board of Commissioners Jacksonville Port Authority January 26, 2009 Presented by Andrew J. Moody, Ph.D.

2. Presentation Overview • Scope of Work • Background • Market Analysis • Growth Analysis

3. Scope of Work • Objective: Assess the potential deployment opportunities at the Port of Jacksonville • Key factors affecting deployment opportunities • Relocation and construction of new terminal • Expansion of the North American fleet and its destination deployment • Source market for cruise passengers • Cruise executives’ perceptions of ports • Competition among similarly sized ports • Growth and deployment strategies of individual cruise lines

4. Background • Port is currently a single ship port offering year-round 4- and 5-day cruises to the Bahamas on the Fascination. • Approximately 80% of passengers arrive by ground transportation and 20% by air. • More than 50% of all passengers and 75% of drive-to passengers reside in 5 states (FL, GA, NC, AL, SC) • Current cruise potential is limited due to size of terminal facilities and air draft constraint. • Relocation and expansion of the cruise facilities at Mayport will allow the port to support larger cruise ships. • Fascination and Celebration, before it, have been sailing at over 100% capacity.

5. Historical Cruise Performance Cruise Sailings and Passengers Cruise Revenues * Estimated from year-to-date sailings and occupancy

6. Summary of Cruise Operations • When operating on a full–year schedule the Fascination will generate: • 78 sailings • Nearly 180,000 passenger embarkations • $3.9 million in cruise revenues • an average of $21.80 per passenger • or nearly $50,000 per sailing • On average the Fascination has been sailing at 110% of capacity

7. Market Analysis – Key Components • North American Fleet: Supply & Deployment • Demand: Primary Source Market • Competitive Environment Among Tier 3 Ports • Potential Caribbean Itineraries from Jacksonville

8. Overview of N.A. Cruise Industry • Industry is entering a reduced growth phase brought about by the global economic recession. • Newbuilds will remain reasonably strong through 2010 and then decelerate through 2013 following a pattern similar to that after 9/11. • Declining yields will drive down construction with a lag. • Some planned and committed projects have been cancelled • Others are being re-negotiated. • European deployments are being re-evaluated with several ships being redeployed to North America.

9. Overview of N.A. Cruise Industry • Cyclical downturn in newbuilds re-emerges • Downward trend in newbuilds continues Annual New Vessel Introductions, 2000 - 2018 North American Fleet by Segment – 2000-2018 • Average size of cruise ships continues to increase

10. Deployment of N.A. Fleet • With more and larger cruise ships joining the N.A. fleet, bed day deployment in all destination markets will increase. • Overall the Caribbean will remain the largest destination market. • Eastern & Southern Caribbean will be a growth leader. • Western Caribbean and the Bahamas will experience a slight decline in market share. • European share of deployed capacity will fall in the short-term.

11. Overview of N.A. Cruise Industry • Broader Caribbean market still accounts for 40% of the industry’s global bed day capacity. Destination Deployment Bed- Days

12. Implications for Jacksonville • The North American fleet will continue to expand, albeit at a slower pace, providing more opportunities for smaller ports, like Jacksonville, to homeport ships displaced from larger ports. • Jacksonville is in a geographical location that will support cruise development in the expanding Eastern and Southern Caribbean.

13. The Caribbean and the Southeast Ports • Approximately 6.8 million passengers on more than 3,850 cruises visit the Caribbean annually. • The Eastern & Southern Caribbean has been gaining market share primarily at the expense of the Western Caribbean. • The ports of the Southeast account for about 75% of the cruises and passengers destined for the Caribbean. • The “Tier 1 and Tier 2” ports of South Florida account for about 94% of the passenger volume.

14. The “Tier 3” Ports of the Southeast • Jacksonville and Mobile are the dominant “Tier 3” ports in the region • Both are year-round and single-ship ports serving a single destination market • Charleston and Norfolk are seasonal ports Cruises and Passengers by Port of Embarkation

15. The “Tier 3” Ports of the Southeast • Charleston and Jacksonville offer cruises to the Bahamas • Mobile cruises are destined for Mexico • Cruises from Norfolk sail to Bermuda and the Caribbean • Charleston and Norfolk ships are being redeployed in 2010 • Celebrity adding 5 calls in Charleston in 2010 • Carnival adding 4 calls in Norfolk and 2 in Charleston in 2010 Cruise Itineraries of the Tier 3 Southeast Ports

16. The Cruise Port Evaluations

17. The Jacksonville Source Market • Source market defined by 2-, 4- and 6-hour drive times • Constrained to the south by Tampa and Port Canaveral • Constrained to the west by Mobile • Core target market consists of individuals between the age of 25 and 80 with a household income over $40,000

18. Target Market Size 1.50 Million Households 3.90 Million Individuals Non-Vacationers (39%) 1.52 Million Individuals Vacationers (61%) 2.38 Million Individuals Past Cruisers (45%) 1.07 Million Individuals Cruise Prospects (55%) 1.31 Million Individuals Potential Caribbean Cruisers (61%) 0.65 Million Individuals Non-Caribbean Cruisers (39%) 0.42 Million Individuals Potential Caribbean Cruisers (60%) 0.79 Million Individuals Target Caribbean Cruisers 1.44 Million Individuals The Jacksonville Source Market • 1.44 million potential Caribbean cruise passengers Non-Caribbean Cruisers (40%) 0.52 Million Individuals

19. The Jacksonville Source Market • High growth market with region’s largest population center • Nearly 50% of the target cruise market resides within a 2-hour drive of Jacksonville • Penetration rates of projected drive-to cruise volume at Jacksonville for 2009 • 10% of potential Caribbean cruisers • 6% of all potential cruisers • 3.7% of all total “core” target market

20. Implications for Jacksonville • Proposed relocation and construction of new terminal facilities enhances the port’s image and operating characteristics. • Charleston, Jacksonville’s nearest Tier 3 competitor, is considered to be the least attractive port. • Jacksonville is considered to have adequate drive-to capacity. • With adequate fly-to capacity, Jacksonville can also attract passengers for longer cruise itineraries.

21. Destinations in the Bahamas • The Bahamas is capable of supporting multiple cruise itineraries.

22. Existing Itineraries from Florida Ports • Canaveral to the Eastern Caribbean – Disney Magic • Similar cruises can be easily originated in Jacksonville.

23. Existing Itineraries from Florida Ports • Canaveral to the Eastern Caribbean – Freedom of the Seas • A similar cruise could be offered from Jacksonville with ship with sufficient speed and range.

24. Existing Itineraries from Florida Ports • Miami to the Eastern Caribbean – Carnival Triumph • Also possible from Jacksonville.

25. Implications for Jacksonville • 7-day or longer itineraries to the Eastern Caribbean are certainly feasible from the Port of Jacksonville. • Cruises to the Southern Caribbean while unlikely would have to include at least one call at a Eastern Caribbean port and be 10 days. • 7-day cruises to the Western Caribbean are feasible with an initial call at Key West and two calls in the Western Caribbean.

26. Summary of Market Analysis • Increase in North American fleet will result in a trickle down of homeport deployment from the major to minor ports. • Caribbean deployment will continue to increase with the Eastern Caribbean increasing its market share. • Jacksonville has only a small penetration into its drive-to market for potential Caribbean cruisers and should be able to attract more passengers from this market.

27. Summary of Market Analysis • Relocation and construction of the new cruise facility will enhance the port’s image and cruise operations. • There are numerous cruise itineraries throughout the Caribbean that can be offered from the Port of Jacksonville.

28. Growth Analysis – Key Components • S.W.O.T. Analysis • Target Cruise Lines • Summary of Potential Itineraries • Tier 1 Ports: Capacity and Displacement Effects • Potential New Deployments in Jacksonville • Estimates of Passenger and Revenue Growth

29. S.W.O.T Analysis • Port’s strengths outweigh its weaknesses and its opportunities overshadow the threats.

30. Target Cruise Lines • Carnival • Steady expansion and committed to the Caribbean • Will redeploy ships from Europe • Has been successful at Jacksonville • Has been willing to add capacity at the port • Norwegian • Has a strong focus on drive-to markets • Moving out of Charleston • Opportunity for redeployment from other East Coast ports • Overall operations under review

31. Target Cruise Lines • Celebrity • In the midst of a significant fleet expansion • Has a history with Jacksonville • New terminal should be beneficial • Market demographics must fit their passenger profile • Royal Caribbean • Steady expansion and committed to the Caribbean • Expanding in the Eastern & Southern Caribbean • Opportunity for redeployment from other East Coast ports

32. Potential Itineraries • Potential Eastern Caribbean cruise itineraries • A mix of the Bahamas and the Eastern Caribbean

33. Potential Itineraries • Potential Western Caribbean cruise itineraries • A mix of the Bahamas and the Western Caribbean

34. Capacity Utilization at Tier 1 Ports • Tier 1 ports in Florida are at or near capacity on prime weekend dates. • Even if not at capacity congestion at Miami and Port Everglades is a growing problem. • Cruise ship sailings and passenger volumes will continue to increase at these ports through 2011. • Redeployments and displacements will continue.

35. Port Canaveral • Port Canaveral averages 8 weekly cruises in March 2009 which will grow to 9 in 2010 • Deployment of Freedom of the Seas in 2010 reaches Sunday limit • Peak Saturday Passengers: 2009 – 4,800+; 2010 – 5,400+ • Peak Sunday Passengers: 2009 – 3,800+; 2010 – 7,400+ Available Berths: 3 Available Berths: 3

36. Port Everglades • Port Everglades averages 15 weekly cruises in March 2009 which will grow to 17 in 2010 • There is limited additional capacity and high passenger volumes on Saturdays and Sundays • Peak Saturday Passengers: 2009 – 16,000+; 2010 – 24,000+ • Peak Sunday Passengers: 2009 – 14,000+; 2010 – 16,000+

37. Port of Miami • Port of Miami averages 18 weekly cruises in March 2009 and 2010 • There is limited additional capacity and high passenger volumes on Sundays and Mondays • Peak Sunday Passengers: 2009 – 14,000+; 2010 – 14,000+ • Peak Monday Passengers: 2009 – 13,000+; 2010 – 13,000+

38. Redeployment in Action • Introduction of 3,652- passenger Carnival Dream • Displaces the 2,972-passenger Carnival Glory at Port Canaveral • Carnival Glory then displaces the 2,758-passenger Carnival Triumph in Miami • Carnival Triumph then displaces the 2,052-passenger Carnival Fantasy in New Orleans • Carnival Fantasy then displaces the 1,452-passenger Holiday in Mobile • Holiday is deployed outside North America • Introduction of 5,400- passenger Oasis of the Seas • Displaces the 3,114- passenger Navigator of the Seas at Port Everglades • Navigator of the Seas then displaces the 3,634-passenger Freedom of the Seas in Miami • Freedom of the Seas is then deployed at Port Canaveral as a second RCCL ship • Exhausts available berths on Sundays

39. Attributes of Potential New Deployment • Carnival is likely to continue to deploy larger ships at Jacksonville over time as full capacity is maintained. • Fascination Triumph Class Conquest Class • NCL will likely discontinue operations at Charleston and will deploy new F3 ship in Miami in 2010. • A ship like the Norwegian Spirit could be deployed on alternative Bahamas or Eastern Caribbean itineraries. • RCCL/Celebrity have reduced their presence in both Charleston and Norfolk in 2010 and will add numerous ships through 2011. • RCCL will deploy the Allure of the Seas at Port Everglades in 2011 resulting in a chain of redeployments. • Celebrity will be adding another two ships by 2011 and may be interested in moving the Century from Miami.

40. Deployment Potential • Expansion of cruise itineraries to the Eastern and Western Caribbean. • More than a doubling of passengers and cruise revenues

41. Summary • Expansion of the North American fleet with larger ships being deployed on Caribbean itineraries will continue. • Movement of ships from Tier 1 to Tier 2 to Tier 3 ports will be necessary. • Jacksonville is located so as to be able to source passengers throughout the southeast and to also access destinations throughout most of the Caribbean. • With the construction of a new terminal at Mayport, Jacksonville will be able to handle the largest cruise ships and have a competitive advantage over other Tier 3 ports. • As a result Jacksonville has the potential to more than double current passenger volumes and revenues over the next decade.