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INVESTIGATION OF THE CRUISE LINER INDUSTRY

FULL STUDY. INVESTIGATION OF THE CRUISE LINER INDUSTRY. DRAFT STUDY RESULTS | 7.16.08 MITCHELL DUPLESSIS PROJECTS (PTY) LTD | LANDDESIGN. CRITICAL TOPICS COVERED. The modern cruise industry and the overall prospects for continued growth at a global and regional level

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INVESTIGATION OF THE CRUISE LINER INDUSTRY

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  1. FULL STUDY INVESTIGATION OF THE CRUISE LINER INDUSTRY DRAFT STUDY RESULTS | 7.16.08 MITCHELL DUPLESSIS PROJECTS (PTY) LTD | LANDDESIGN

  2. CRITICAL TOPICS COVERED • The modern cruise industry and the overall prospects for continued growth at a global and regional level • Infrastructure and services required by homeports and ports-of-call • Insights on other cruise regions business success—notably, Australia / New Zealand and South America • Recommendations as to how Cape Town should consider moving forward and to become a greater participant within the industry

  3. SEC1GLOBAL CRUISE CHARTERISTICS

  4. GLOBAL CRUISE INDUSTRY: MODERN ROOTS • 1970s transatlantic voyages for travel and leisure, not transportation • North America’s love affair with the “Love Boat” • Caribbean entrepreneurs and development of the Fun Ships • The cruise ship as the destination

  5. CRUISE INDUSTRY: GROWTH IN PASSENGERS GLOBAL PASSENGER LEVELS HAVE DOUBLED EVERY DECADE SOURCES: CLIA, 2006 AND CIN, 2008

  6. CRUISE INDUSTRY: FEATURES OF GROWTH • Phenomenal success in developing new products and sustained interest in cruising • Adept at converting land-based resort guests into cruise passengers • Deliver a high level of passenger satisfaction, leading to repeat clientele • Model adaptable to changing market conditions • Lines have limited competition, reduced operational costs, and diversified revenues

  7. LEADING CRUISE CONGLOMERATES SOURCE: CIN, 2008

  8. LEADING CRUISE CONGLOMERATES NCL / STAR CRUISES 3 brands, 16 Vessels, 36,484 total berths NCL NCL America Star Cruises ROYAL CARIBBEAN 5 brands, 38 Vessels, 79,446 total berths Celebrity Royal Caribbean International Pullmantur CDF Azamara MSC Cruises 1 brand, 10 Vessels, 19,530 total berths MSC CARNIVAL CORPORATION 11 brands, 89 Vessels, 169,584 total berths Carnival Cruise Lines Iberocruceros Princess Cruises AIDA Cunard P&O Cruises - UK Seabourn Cruise Lines P&O Cruises - Australia Holland America Ocean Village Costa Cruise SOURCE: CIN, 2008

  9. PRIMARY CRUSING REGIONS      SOURCE: CIN, 2008

  10. PRIMARY CRUSING REGIONS SOURCE: CIN, 2008; Others below 2% include: Transatlantic, Canary Islands, Bermuda, New England / Canada, Hawaii, Panama Canal, Indian Ocean / Red Sea, Domestic Waterways, Antarctica, World, Africa.

  11. PRIMARY CRUSING REGIONS S E A S O N A L Y E A R R O U N D S E A S O N A L SOURCE: CIN, 2008

  12. CURRENT GLOBAL INDUSTRY CHALLENGES • Dollar weakness • Fuel costs • Cruise lines operations • Impact to key destination delivery components – airlines, shore excursions, ground transportation • Security and terrorism • Inability to raise ticket prices • Weakness of the Caribbean cruising region

  13. CURRENT GLOBAL INDUSTRY OPPORTUNITIES • Key industry growth fundamentals still in place • Greatly improved reach into new consumer markets • British, French, Italians, Germans, Australians, South Americans, Asians • Highly sophisticated operations • Global sources for passengers, employees, and supplies • Yield management for ticket pricing and onboard revenue • Continued consumer demand • CLIA’s indicates 33.7 million Americans intend to cruise next three years • Dollar weakness

  14. GROWTH OF INDUSTRY SUPPLY RCCL’S OAISIS OF THE SEAS

  15. GROWTH OF INDUSTRY SUPPLY, 2000-2008 SOURCES: CIN, 2008 AND WWW.CRUISECOMMUNITY.COM, JULY 2008

  16. GROWTH OF INDUSTRY SUPPLY, 2000-2012 38 VESSELS ON ORDER; $22.3 BILLION IN NEW INVESTMENT SOURCES: CIN, 2008 AND WWW.CRUISECOMMUNITY.COM, JULY 2008

  17. FORECAST GROWTH OF INDUSTRY SUPPLY 798,700 612,700 372,100

  18. FORECAST GROWTH OF INDUSTRY PASSENGERS 31.2 MIL 24.0 MIL 15.2 MIL

  19. FORECAST GROWTH IMPLICATIONS • Projection scenarios anticipate ports and destinations will rise to meet this opportunity • Create demand for a number of present homeport and port-of-call facilities to expand over the mid- to long-term, encourage expansion into new market regions • Seasonal capacity placement challenges • As a trend, expansion of supply and the subsequent need of cruise lines to expand their overall regional coverage is a favorable trend for Cape Town

  20. SEC2SOUTHERN AFRICA CRUISE CHARTERISTICS

  21. SOUTHERN AFRICA CRUSING REGION

  22. SOUTHERN AFRICA CRUSING REGION • Southern Africa, which includes pan-Southern Africa offerings and often island destinations • Seychelles and related cruises to the islands of Reunion, Mauritius and others • Specialty cruises to St. Helena • Repositioning cruises • World cruises

  23. ESTIMATES OF SOUTHERN AFRICA MARKET SHARE SOURCES: CIN, 2008 AND MDA / LDI, 2008; Notes: *Assumes Southern Africa welcomes one third of Indian Ocean capacity and one-fifth of world capacity.

  24. VESSELS OPERATING IN THE REGION, 2008/09 SOURCES: INDUSTRY WEBSITES, 2008, WWW.CRUISECOMMUNITY.COM, 2008, MDA / LDI 2008

  25. VESSELS OPERATING IN THE REGION, 2008/09 • An estimated 83 cruises are planned for the 2008/09 season; market capacity of 31,657 passengers • An estimated 16 different vessels in the region • Vessels in the market on a variety of different segments and predominately directed toward a European cruise audience • Average cruise duration is a lengthy 18 days • The cruise season is generally from October to April; most cruises offered December and January SOURCES: INDUSTRY WEBSITES, 2008, WWW.CRUISECOMMUNITY.COM, 2008, MDA / LDI 2008

  26. VESSELS OPERATING IN THE REGION, 2008/09 • Itineraries contribute 102 vessels calls to South African ports, with an estimated 45 of these arriving to Cape Town (44%) • Of the leading four cruise industry conglomerates, Royal Caribbean is absent from the list of lines offering cruises in the region • Primary regional homeports identified include Cape Town, Durban, Mombasa, and Mahe SOURCES: INDUSTRY WEBSITES, 2008, WWW.CRUISECOMMUNITY.COM, 2008, MDA / LDI 2008

  27. VESSELS OPERATING IN THE REGION, 2008/09 SOURCES: INDUSTRY WEBSITES, 2008, WWW.CRUISECOMMUNITY.COM, 2008, MDA / LDI 2008

  28. VESSELS OPERATING IN CAPE TOWN, 2007/08 SOURCES: V&A WATERFRONT, 2008

  29. SOUTHERN AFRICA CRUSING REGION • Southern Africa / Africa, which includes pan-Southern Africa offerings and often island destinations • Seychelles and related cruises to the islands of Reunion, Mauritius and others • Specialty cruises to St. Helena • Repositioning cruises • World cruises

  30. FIT OF CAPE TOWN WITHIN MARKETS

  31. CAPE TOWN COMPETITION WITHIN MARKETS • Cape Town has limited competition for cruise activities in the region • Durban the only facility with a similar arrangement of port infrastructure, upland / shore excursion activities and strategic position • Other South African destinations—Richard’s Bay, Port Elizabeth, East London, Mossel Bay—all present a reasonable port-of-call option • Unlikely to be selected over Cape Town by a cruise line • A more important point is the opportunity and need for increased collaboration among destinations

  32. CURRENT REGIONAL CHALLENGES • Region is one of the smallest amongst other global deployment areas • Generally not on the radar of primary cruise operators other than an occasional call / operation as part of a repositioning or world cruise • Flight and vessel repositioning costs also limit some lines in their thinking about deployment to the region • Concerns on regional safety and stability • Uncertain size of regional consumer base

  33. CURRENT REGIONAL OPPORTUNITIES • Key industry growth fundamentals • Diverse region with similar characteristics and itinerary diversity as other successful areas • Marquee ports-of-call and homeports • The region has shown consistency in preserving its share of the growing global industry • 2010 FIFA World Cup event • Successfully delivered by South Africa, this event could serve as an important catalyst—much like Olympics in Barcelona and Australia—to move the regional cruise market forward

  34. CLIA 2008 MARKET PROFILE

  35. REGIONAL FORECAST GROWTH IMPLICATIONS • Business as usual will likely yield limited results; low to medium trend line • Activity in marketing and organizational components key to regional viability • Assuming Cape Town continues to see 44% of capacity, passenger throughput could be 126,000 by 2020 under the high scenario • With cruise homeporting primary element of Cape Town’s business, revenue passengers could approach 250,000

  36. SEC3CRUISE INDUSTRY NEEDS FOR OPERATIONS

  37. CRUISE LINE DESTINATION SELECTION CRITERIA • Appeal as a travel and leisure destination • Type and quality of cruise tourism infrastructure needed to support vessel operations and movement of passengers • A market basis and strategic fit within a greater cruise ship deployment scheme

  38. CRUISE LINE DESTINATION SELECTION CRITERIA Consumers Hotels Venues Airport Security Pricing Cruise Line Satisfaction Marine Attributes Leadership Marketing Community Awareness Economic Value Real Regional Estate Product

  39. CRUISE LINE DESTINATION SELECTION CRITERIA

  40. CRUISE LINE DESTINATION SELECTION CRITERIA

  41. CRUISE LINE DESTINATION SELECTION CRITERIA

  42. CRUISE LINE DESTINATION SELECTION CRITERIA

  43. PRIMARY VESSEL INFRASTRUCTURE • Channel, navigation and access features • Secure vessel berth • Berth and related infrastructure • Apron area and gangway • Water and other services to ships • Passenger reception area • Security, customs and immigration (inbound / outbound) • Basic passenger services • Ground transportation area (GTA) • Tour buses parking, • Taxi and shuttle areas for crew • Parking • Access features

  44. CRUISE FACILITY PLANNING MODULE Source: B&A, 2005.

  45. CHALLENGE FACED IN FACILITY DEVELOPMENT • In their most simplistic development application, cruise terminals have highly constrained revenue generating capabilities • Port charges generally cannot cover terminal developments • Majority of benefit is experienced at the community level • In their role as facilitators of trade and commerce, ports sustain large capital investments in docks, harbors, and terminals

  46. MOVEMENT TOWARD MULTI-USE FACILITIES

  47. MOVEMENT TOWARD MULTI-USE FACILITIES Create revenue opportunities Reduce project risk Higher utilization of infrastructure Enhanced destination experience Portrayal of community image Urban renewal / redevelopment Public access to the waterfront Increased capital outlay Transportation and parking Conflicts among land uses Conflicts among water uses Regulatory environment Future expansion Management skill Safety and security Public access to the waterfront Challenges Opportunities

  48. BELL STREET PIER, SEATTLE

  49. Bell Harbor International Conference Center • Conference Center • 4,366 m2 facility that can accommodate groups from 10 to 1,000 guests • One 300 person auditorium • 14 banquet and meeting rooms • Shared use of cruise terminal areas for events and exhibits, especially off-season

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