INVESTIGATION OF THE CRUISE LINER INDUSTRY

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

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

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

8. LEADING CRUISE CONGLOMERATES

9. PRIMARY CRUSING REGIONS

10. PRIMARY CRUSING REGIONS

11. PRIMARY CRUSING REGIONS

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

15. GROWTH OF INDUSTRY SUPPLY, 2000-2008

16. GROWTH OF INDUSTRY SUPPLY, 2000-2012

17. FORECAST GROWTH OF INDUSTRY SUPPLY

18. FORECAST GROWTH OF INDUSTRY PASSENGERS

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

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

24. VESSELS OPERATING IN THE REGION, 2008/09

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

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

27. VESSELS OPERATING IN THE REGION, 2008/09

28. VESSELS OPERATING IN CAPE TOWN, 2007/08

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

36. 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

38. 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

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. CRUISE LINE DESTINATION SELECTION CRITERIA

44. 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

45. CRUISE FACILITY PLANNING MODULE

46. 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

47. MOVEMENT TOWARD MULTI-USE FACILITIES

48. 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

49. BELL STREET PIER, SEATTLE

50. 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

52. CASE STUDY: AUSTRALIA + SOUTH AMERICA

53. CASE STUDY: AUSTRALIA + SOUTH AMERICA Australia / New Zealand and South America are emerging cruise regions Operations in Australia / New Zealand and South America are generally seasonal Both regions offer a mix of itinerary offerings and varied ports-of-call Australia / New Zealand and South America showcase different approaches to growing their businesses

54. AUSTRALIA / NEW ZEALAND CRUISE REGION

55. AUSTRALIA / NEW ZEALAND CRUISE REGION Area hosts regional operators marketing their products to predominately Asian and Australian consumers as well as North American and European lines Star Cruises and P&O Cruises Australia comprise the primary regional operators, offering itineraries on 8 different vessels supporting 79.3% of passenger capacity in the region during 2008 Primary non-regional operators in 2008 included Princess, Royal Caribbean, Celebrity, Costa and Holland America

56. AUSTRALIA / NEW ZEALAND CRUISE REGION Strong organizational agencies: Cruise Down Under and Cruise New Zealand Diversity of itinerary offer Continued success in building a home grown consumer base of consumers 160,947 Australians�or 61% percent of total passenger numbers of 263,435 in 2007�choose to sail in the region Homogenous, familiar market Access to growing Asian travel and leisure areas Challenged to keep up with port improvements High airlift costs for North American passengers

57. SOUTH AMERICA CRUISE REGION

58. SOUTH AMERICA CRUISE REGION The South America cruising region includes the southern cone, Brazil, the continent�s northwestern Pacific region, and the Western Caribbean Costa Cruises, MSC Cruises, and Royal Caribbean comprise the primary operators, offering itineraries on 9 different vessels supporting 52.1% of passenger capacity in the region during 2008

59. SOUTH AMERICA CRUISE REGION Proximity to the Caribbean; low repositioning and airfare costs Caribbean �oversupply� has made pursuit of a strong South America option a useful Strong primary and adjacent sub-regions Antarctica, Amazon River, Galapagos Islands Market supported by a diverse base of international visitors and a home grown consumer base Improving facilities Historically challenged by cabatoge laws Disorganized promotional / organizational entities

60. CASE STUDY IMPLICATIONS Buildup of both cruise regions has been a patient, long-term endeavor Long been welcoming small levels of cruise operations and traffic, slowly building on the success of the industry overall The presence of a well-organized, regional entity marketing to the cruise lines is felt to have had a positive impact in the Australia / New Zealand buildup of cruise levels Both regions have growing local consumer base Multiple, marketable itinerary options Generally stable regions and markets

62. OVERALL POSITION ASSESSMENT

63. EXTERNAL OPPORTUNITIES Positive global cruise market growth fundamentals Desire of cruise lines and their clientele to explore new regions and destinations Configuration of the Southern Africa region High travel and leisure enthusiast aspiration for an accessible African travel experience Increased global brand identification with South Africa and Cape Town as a destination Favorable government policies toward tourism and related businesses and investment FIFA 2010 opportunity as a showcase

64. EXTERNAL THREATS Mobility of the cruise industry Regional safety and security issues, both real and perceived by potential cruising guests Significant repositioning distances and costs associated with the entire itinerary offer Limited / unknown, complex consumer base within the region Unclear vision and direction for the region Lukewarm reception by cruise lines for Southern Africa at present Eastern position of the Cape Town in the region

65. INTERNAL STRENGTHS Diversity of venues and the destination offer overall; total quality guest experience Immediate engagement of primary waterfront amenities Basic port capability to welcome the industry�s largest vessels Quantity and quality of airlift and hotel capacity Established maritime components Availably of options for improvement to cruise related / supporting facilities

66. INTERNAL WEAKNESSES Multiple parties involved in the primary delivery of cruise facilities / operations Varied local enthusiasm for the cruise enterprise overall Conflict / priority of cargo operations within the Port area / basin Lack of dedicated cruise facilities for homeport operations

67. OVERALL POSITION ASSESSMENT

69. RECOMMENDATIONS MOVING FORWARD Software. Programs and marketing efforts developed to ensure product quality, brand recognition, communication efforts and others. Operations. Functional enhancements that allow for improved cruise operations. Hardware. Strategies and action items to ensure that appropriate capital improvements are planned and developed to meet anticipated cruise industry throughput and facilities needs.

70. SOFTWARE: OVERARCHING OBJECTIVES A large portion of the ultimate success to be achieved by Cape Town and South Africa is reliant on moving forward with marketing efforts Establish a strong case for Southern Africa cruising with cruise lines Work to build a foundation of seasonal business with international consumers; and, Foster a local consumer base for cruise products. Emphasis should be placed on organizing the messages and messengers first Resources beyond those presently committed by Cape Town and elsewhere are going to be required

71. SOFTWARE: RECOMMENDATIONS Cruise marketing plan It is critical that Cape Town refine and implement a specific cruise marketing plan for the City and region. Hold a marketing goals workshop Identify the marketing audience Message development and refinement Messenger identification Formulation of a Cruise Cape Town Committee (CCTC) In-house education program Incentives packaging for cruise lines

72. SOFTWARE: RECOMMENDATIONS Market to the Cape Town community Development a cruise passenger visitor's kit Lead in development of Southern Africa Cruise Association Establish a methodology for port costs benchmarking Hold cruise tourism provider education sessions Establish strategic relationships with key ports in the region

73. SOFTWARE: RECOMMENDATIONS Conduction travel agent education sessions International Cruise Trade Show Participation Hold North American and European cruise operator visits Hold North American and European cruise operator familiarization trips Possibly linked with FIFA 2010 Work with tour providers to design new offerings suitable for cruise passengers Establish targeted provider program offerings Luxury, adventure, destination

74. OPERATIONS: OVERARCHING OBJECTIVES The smoothness of operations is as important as the quality of the facilities; think destination delivery Operational planning and coordination Benchmarking Guest security and safety assessments and programs Organization and communication

75. OPERATIONS: RECOMMENDATIONS Become deeply involved with the FIFA 2010 floating hotel destination delivery Sportscom (communication and sports marketing) Meet with Port / V&A regularly on threat assessment and security issues Conduct assessments for cruise passengers and generate a specific plan to share with the lines Hold public safety education sessions Become involved in homeport and port-of-call operations planning, especially for peak days

76. OPERATIONS: RECOMMENDATIONS Develop and implement a cruise benchmarking strategy Develop a scheduling plan for the committee Establish an operations audit and enhancements program based on benchmarking feedback Establish Cape Town primary and secondary venues and tour provider assessments Establish a smart-pass program

77. HARDWARE: OVERARCHING OBJECTIVES Additional cruise berthing and related terminal spaces are needed over the medium- to long-term Options need to be explored associated with the future role of V&A Waterfront, the Port of Cape Town (NPA) and City to create a win-win-win scenario that will be conducive to meeting future cruise industry opportunities To reduce risk as well as meet other needs observed in the maritime and commercial environment, multi- and mixed-use cruise development approaches should be pursued.

78. HARDWARE: RECOMMENDATIONS Establish a cruise facilities improvement plan Engage the cruise lines for assistance Financial component Prepare a MOU between V&A Waterfront, the Port and City on plan implementation Ensure a working, interim capital improvements plan for delivery of homeport and port-of-call needs Prepare a detailed plan, with emphasis on development of a mixed-use facility with supporting revenue inputs Implement the detailed plan timed to market conductions (cruise or mixed-use components)