South Carolina gaining more from cruise ship industry spending, report says

A new report showed an uptick in cruise industry spending in the United States last year, including added dollars for South Carolina.

The cruise ship industry spent $117.7 million on goods and services in The Palmetto State in 2012, up roughly 3.8 percent from the $113.4 million in 2011, according to a report released this week by Cruise Lines International Association. The Washington-based trade group represents cruise lines, travel agents, port authorities and destinations, according to its website.


The state with the largest impact from the cruise ships industry was Florida, which received $7 billion, or 36 percent of the direct expenditures generated by the cruise industry in the country.

South Carolina climbed a single ranking to 25th in 2012, receiving 0.6 percent of overall direct expenditures tied to the cruise industry, according to the report.


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Judge asked to rule in Charleston cruise terminal lawsuit

All sides involved in a lawsuit challenging a $35 million cruise ship terminal on the Charleston peninsula agree on one point: They want a federal judge to rule on the case to avert a costly trial.

Two preservation and environmental groups sued the Army Corps of Engineers for allowing the State Ports Authority to drive five pilings as part of the project at Union Pier Terminal.

Both sides spelled out their arguments for a favorable ruling from U.S. District Judge Richard M. Gergel in a flurry of documents filed Monday.

The case is one of several legal challenges to the SPA’s cruise business. The heated debate is pitting peninsular neighborhood associations and other groups against the local maritime industry and the city.

The tone grew sharper three years ago, after Carnival Cruise Lines moved its 2,056-passenger ship Fantasy to Union Pier, making Charleston a year-round cruise-passenger destination.

The city and SPA have said the industry is regulated properly and that pleasure ships will never be more than a niche operation.

Opposition groups want to clamp down on the big vessels, saying they’re damaging the Historic District by generating more tourists, vehicles and pollution.

The SPA is proposing to turn a vacant warehouse at the north end of Union Pier into a passenger terminal to replace its obsolete cruise facility near the end of Market Street. It’s seeking to have the lawsuit tossed.

Assistant U.S. Attorney John Douglas, who represents the Corps of Engineers, argued that the pile-driving permit the agency approved last year was proper. The work is maintenance on an existing structure, he said.

The SPA said the pilings would have minimal impact.

“The five piling clusters are being added to the thousands of pilings that presently support Union Pier,” the maritime agency says in a document this week.

Attorney Blan Holman, who represents the plaintiffs, said the work isn’t maintenance because the use of the empty cargo warehouse would change. He also said the project would have consequences beyond the waterfront.

“The record overwhelmingly demonstrates that construction of a new home terminal for 10-story high, 1,000-foot-long cruise ships in the heart of the best-preserved city in the United States has at least the potential for impacts on historic properties and the human environment,” Holman says in his written argument.

He also says the Army Corps did not consider other sites for the new cruise building in North Charleston, Mount Pleasant and at the SPA’s Columbus Street Terminal.

The Preservation Society of Charleston and the S.C. Coastal Conservation League filed the lawsuit last year. They are seeking to revoke the federal permit. They also want more studies and public review.

The case could go to trial in November if Gergel declines to make a ruling.

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Just the cruise facts

You may recall the thesis we posted a few weeks ago. It is really quite interesting the very different approaches taken by two very similar and competitive cities.

The debate over cruise ships in Charleston has been intractable. Port officials are adamant that they should be the ones to rein in their cruise business if it gets out of hand. Preservationists and neighbors argue that the city needs to use its authority to limit the number and size of cruise ships here. The city, they say, is already suffering from too many people, too much air pollution and cruise ship profiles that dwarf the city’s scenic skyline.
The two sides are locked in a legal battle.

So it might be interesting to read, in a guest column on today’s Commentary page, how Savannah decided to avoid such cruise-related strife.

And it might be interesting to consider the dispassionate perspective of a scholar on the subject.

Lauren Perez Hoogkamer recently completed her thesis for a master of science in historic preservation and a master of science in urban planning at the Graduate School of Architecture, Planning and Preservation at Columbia University.

Her topic?

Assessing and managing cruise ship tourism in historic port cities: Case Study, Charleston, South Carolina.

After extensive research in Charleston and globally, Mrs. Hoogkamer makes several recommendations for an assessment and phased management plan that would allow the city to “reap the benefits of cruise tourism while mitigating costs and protecting invaluable cultural resources.”

To date, neither the State Ports Authority nor the city of Charleston has been willing to place enforceable restrictions on the cruise business here despite repeated requests for such by residents.

Mrs. Hoogkamer suggests pausing the Union Pier project in order to conduct baseline studies and assessments of the “potential impacts on the overall environment, economy, and community, including historic and cultural resources.” She further suggests that the State Historic Preservation Office might require this assessment, given the cruise terminal’s proximity to historic Charleston.

Mrs. Hoogkamer concludes that a heritage tourism management plan should be created by the city, state, preservation professionals and the tourism/cruise industry, and that Charleston and the SPA implement appropriate taxes, fees and funds to offset management and maintenance costs.

This money could go toward preservation and environmental conservation — perhaps shoreside power to reduce air emissions from cruise ships idling at dock.

Finally, she concludes that “strict and binding passenger and ship quotas and limitations” should be implemented — something, again, that residents have asked for but the city and SPA have refused.

Mrs. Hoogkamer’s proposals mirror and expand upon some proposed locally. She does include a caveat about her research — Tim Keane, Charleston’s director of planning, preservation and sustainability, cut their interview short after 15 minutes, and both SPA representatives, Allison Skipper and Patrick Moore, canceled their meetings for last-minute engagements.

That’s too bad. It isn’t too late for the SPA and the City of Charleston to listen to reason and codify restrictions so that Charleston can profit from the cruise industry without being damaged.

But first they have to show an open mind.

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FACTS steer Savannah away from cruise folly

The recent announcement by Carnival Corporation that the company is pulling its ships from home ports in Norfolk, Baltimore and Boston this year flashes a warning light for cities with millions in taxpayer funds sunk in cruise terminals.

Coincidentally, on the day Carnival issued the press release, Savannah City Council voted unanimously against developing a cruise ship terminal. Despite the glowing picture of new revenue and jobs painted by the city’s consultants, when the citizens and council members looked at the facts, they found the problem now facing Norfolk, Baltimore and Boston: The business case for a terminal simply wasn’t there.



The facts that make cruise terminals questionable investments are not unique to Savannah. Of course, the cruise lines industry isn’t likely to talk about them. Terminals in the U.S. are built with public funds, and cruise lines love to have ports compete with each other for their business.

If you’re a cruise corporation CEO, what’s not to like? Cities, states and port authorities spend taxpayer money or borrow long-term to build terminals. Cruise companies put up no financial stake. And if their business equation shifts, the standard industry contract allows them with minimal notice to sail away.

Ironically, on the day Savannah City Council voted to kill the cruise terminal idea, Carnival Cruise Lines, the world’s largest cruise corporation, did just that. Carnival announced it was pulling its last ship from Norfolk later this year and that it will pull another ship from Baltimore in 2014. Norfolk’s under-used terminal is already saddling its taxpayers with over $1 million a year in debt service and operating costs. Baltimore was considering expanding its terminal; the port apparently needs to think again.

For Charleston, the analysis that led to Savannah’s “no” vote is worth a look. The challenges facing terminals like Charleston’s are growing. In addition to Norfolk, five similar terminals built since 2000 — Philadelphia, Mobile, Houston, San Diego and Honolulu — are either closed or operating deep in the red. It’s not just the cruise corporations’ tactics — their habit of pulling out with little notice as they follow shifts in the market — that should cause worry. Trends in the cruise industry suggest that strategic business risks for such terminals are rising as well.

Cruise corporations are building bigger ships, making those in the 2000-plus passenger range like the Carnival Fantasy a shrinking share of their fleets. Terminals that service older, smaller ships are going to compete for fewer vessels.

Marketing will focus increasingly on cities with mega-ship terminals such as Miami, Fort Lauderdale and Port Everglades. These ports already handle over 70 percent of all East coast cruise passengers; ports with smaller ships in the Southeast — Norfolk, Charleston, Mobile, and Jacksonville — together embark barely 5 percent.

As the saying goes, follow the money. For terminals like Charleston, the sliver of the market is likely to shrink in the years ahead.

There’s another trend that should concern all but the largest terminal operators. The cruise industry is shifting to Asia. It’s no secret. Its senior executives say so. Some 50 million Chinese traveled abroad in 2010; the number is projected to double by 2020.

Cruise corporations are already repositioning ships and building new terminals in Hong Kong, Shanghai and Singapore. For smaller terminals in the U.S., the industry’s forecasts mean only one thing: Expect even more competition for ships and greater risks that they’ll sail away as cruise lines respond to the world’s fastest growing travel market abroad.

Investing in a terminal makes sense only if the purported benefits exceed the risks and costs. In Savannah, even the “best case” predictions of jobs and revenue fell far short. The city’s consultants touted 1,000 new jobs. But a close look at the numbers revealed that a terminal in full operation in 2020 would generate at best a few hundred part-time, seasonal jobs with an average wage below the 2010 poverty level. The findings dovetail with analysis of Carnival’s operations in Charleston by Miley & Associates. They suggest the need to dig deeper into real data.

For landmark cities like Charleston and Savannah, costs and risks are not just financial. Terminal operations in the heart of a city bring pollution, congestion and the displacement of destination visitors. All are effects that can damage unique historic values as well as infrastructure, not to mention the quality of life. Savannah’s consultants inexplicably downplayed the estimated additional 1,500 cars on the streets on cruise ship turn-around days and the urban health hazards from toxic ship exhaust.

As Charleston unfortunately knows, cruise lines turn a blind eye to such problems. Their behavior figured prominently in Savannah’s “no” vote.

Facts, John Adams once said, are stubborn things. For Savannah, a cruise terminal represented major public costs with highly uncertain returns. That equation may be different elsewhere, but the cruise industry’s business model, including its success in shifting major burdens onto the backs of the taxpayers, is not.

Savannah’s citizens spoke out overwhelmingly against a terminal for good reasons. Why its political leaders listened and agreed with them is worth a close look.

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Kent Harrington is co-founder of Be Smart Savannah, a community discussion group concerned with public policy issues. Its website is

Savannah’s Savvy Cruise Course

Savannah abandoned its plans for a cruise ship terminal this week over the very concerns that neighbors of Charleston’s port, environmentalists and preservationists have with the industry here.

The difference is that Savannah City Council studied the idea for four years, analyzed its potential and decided it wasn’t a good investment gamble.



Indeed, Savannah spent $327,000 on two reports. The more citizens learned, the louder they protested.

Like Charleston, Savannah’s important tourist industry centers on its historic district. Preservationists studied how cruises and the crowds of passengers they carry have played havoc with Venice and other historic port cities.

Conservationists warned of the health hazards of toxic emissions from ships idling at dock. Council member Carol Bell wasn’t convinced that the business case for investing in a cruise terminal was sound.

In the end, Savannah City Council voted unanimously to withhold further funding for studying the project, essentially killing it altogether.

In contrast, Charleston City Council has been supportive of Carnival Cruise Lines using Charleston as a home port for the Fantasy. Even when petitioned by citizens not to eliminate cruises but to impose some reasonable, enforceable restrictions to the size and number of cruise ships coming here, council refused.

The Charleston and South Carolina medical societies have both sounding warnings about health hazards posed by cruise ship emissions, and have advocated for shoreside power to minimize them. The S.C. State Ports Authority has rejected the idea.

The Historic Charleston Foundation paid for a comprehensive analysis of the cruise industry that found the actual financial impact of cruise passengers in Charleston is far less than projections the SPA has released.

Cruisers tend to drive here and board. They take their meals on the ship. And when they return, they tend to get in their cars and go home, rather than stay a few extra days in Charleston.

Similarly, a retired economics professor in Savannah analyzed the marketing study produced for council. He found it unrealistically rosy and noted that it lacked references or empirical support.

And a grassroots group called Be Smart Savannah has been warning people about other cities facing financial woes after being abandoned by cruise lines. This week, Carnival announced it will no longer use Norfolk as a home port. And it left Mobile after a cruise terminal was built for it.

Of the 10 people who addressed Savannah’s council on the issue, only one was supportive of the terminal, and he represented a company with a financial interest in one of three possible terminal sites.

As in Charleston, there has been controversy in Savannah over the best place for a cruise terminal.

The sister cities’ cruise-related issues are very much alike.

The major difference is that Savannah City Council studied, listened, learned and decided it was the wrong move.


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Savannah City Council Votes NO to Cruise Ships

This just in from our friends at Be Smart Savannah

Savannah City Council – just moments ago – voted NOT to proceed with further studies associated with bringing cruise ships to Savannah. That NO vote means that Savannah has said NO to cruise ships in their harbor.

Here is an article from this morning’s paper too:

Carnival sees fewer bookings, replaces its CEO

by, SCOTT MAYEROWITZ AP Business Writer

NEW YORK—Passengers remain hesitant to book cruises, despite deep discounts. But that didn’t stop Carnival Corp. from eking out a $41 million second-quarter profit thanks to lower fuel costs and the timing of some administrative expenses.

The Miami-based company also announced Tuesday that Micky Arison, who has been CEO since 1979 and is the son of Carnival co-founder Ted Arison, is being replaced by Arnold W. Donald, who has served on the company’s board for the past 12 years. Arison will continue to serve as chairman of the board.

The profit was nearly triple the $14 million the world’s largest cruise company earned during same period last year, a quarter which it suffered from steep losses on fuel prices bets known as derivatives.

Earnings totaled of 5 cents per share this quarter, up from 2 cents a share last year at this time. Revenue fell 1.7 percent to $3.48 billion.

Excluding one-time items, Carnival’s earnings were 9 cents per share. Analysts polled by FactSet had expected earnings of 6 cents per share on revenue of $3.56 billion.

Shares of Carnival rose $1.67, or 5 percent, to close at $34.89 Tuesday.

Arison led the company through an aggressive expansion that included the acquisition of several brands, including Holland America, Costa Cruises, Cunard and Seabourn. In 2003, he oversaw a merger between Carnival Corp. and P&O Princess Cruises. Today, Carnival runs cruises under 10 brands.

However, Arison came under fire during Carnival’s bad publicity earlier in the year when a string of its cruise ships suffered through mechanical problems and fires. The most dramatic of them was the Carnival Triumph where passengers were stranded at sea for five days as toilets backed up and air conditioners failed. There were media reports of raw sewage seeping through walls and carpets.

Arison, who also owns the Miami Heat basketball team, took some heat of his own for attending a game while the crisis was ongoing.

Donald founded and led Merisant, a company whose products include sweetener brands Equal and Canderel. He also held multiple senior management roles at Monsanto over the course of 20-plus years, including president of the company’s consumer and nutrition sector and president of its agricultural sector.

The Triumph nightmare was followed up with problems on three other Carnival ships: The Elation, Dream and Legend—all which made big headlines.

None of that helped restore confidence in vacationers who are still wary after the January 2012 sinking of the Costa Concordia, also owned by Carnival.

In its earnings release Tuesday, Carnival said that advance bookings for the rest of 2013 are running behind last year’s levels, even at lower prices. Bookings on its namesake Carnival line are particularly weak.

Arison said in a statement that Carnival is working to market the “truly exceptional vacation values” that cruises offer through travel agents and other industry partners.

“We believe these initiatives, combined with slower supply growth, will lead to increased yields,” he said. “In addition, we remain focused on reducing our fuel dependence. By year end, we will achieve a 23 percent cumulative reduction in fuel consumption since 2005 and expect our research and development efforts in fuel saving technologies to continue to bear fruit.”

Those fuel-savings efforts seem to be paying off. In the quarter that ended May 31, the company saw a 14-percent drop in its fuel bill. The company spent $555 million on fuel, down from $645 million during the same quarter last year. Cruise companies, airlines and other large consumers of fuel typically make bets, called derivatives, on the price of oil to hedge again any sudden spikes. Last year, Carnival lost $145 million in the second quarter on such bets. This year, that loss was narrowed to $31 million.

During the second quarter, the company took delivery of Princess Cruises’ 3,560-passenger Royal Princess, the first of a new class of ships for Princess. Additionally, Carnival Sunshine entered service in May following a $155 million modernization.

Read more: Carnival sees fewer bookings, replaces its CEO – The Denver Post
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Almost 4 years on, SC cruise plan still in court

The Associated Press

CHARLESTON, S.C. — It’s been almost four years since the South Carolina Ports Authority announced plans to build a new $35 million cruise terminal in downtown Charleston. Under the original schedule, that terminal would be open now. Instead, questions about the terminal and the city’s year-round cruise industry raised by environmental and neighborhood groups have ended up in court.

Lawsuits are in state and federal court, and an administrative law judge in January will hear concerns about a permit issued by state regulators for the terminal at the site of an existing warehouse. Final resolution won’t come until next year at the earliest.

According to court schedules:

— The state Supreme Court has given attorneys until July 8 to file briefs on whether cruises constitute a public nuisance and violate city zoning ordinances. This is in a state case the court agreed to hear without it first going through lower courts. The Preservation Society of Charleston, the South Carolina Coastal Conservation League and neighborhood groups have sued Carnival Cruise Lines seeking to block cruise operations and have the court declare it illegal to build the terminal.

— A November trial date has tentatively been set in federal court for a lawsuit brought by the Conservation League and the Preservation Society against the U.S. Army Corps of Engineers. In the case, moved from Washington, D.C. last year, the plaintiffs seek to invalidate a Corps permit saying more federal review of the terminal’s effect on the city’s historic district is needed.

— Chief South Carolina Administrative Law Judge Ralph Anderson has set a Jan. 27 date to hear a challenge of a Department of Health and Environmental Control permit allowing five pilings to be drilled for the project. Regulators have said putting in pilings is in line with what has been going on along the waterfront for centuries. Any decision by the court can then be appealed to state court.

Jim Newsome, president and CEO of the Ports Authority, all three cases raise important issues that need to be resolved not just for the cruise industry, but for the operation of the port in general.

“We’re not in a rush,” he said. “We will see these things through in a proper way.”

The dispute over the terminal and the city’s expanded cruise industry has been raging for several years. Three years ago, Carnival Cruise Lines permanently based its 2,056-passenger liner Fantasy in Charleston, giving the city a year-round cruise industry. Before that, cruise lines made port calls at Charleston, but no ships were based in the city.

Opponents say the added tourists, traffic congestion and smoke from the cruise liners are destroying the historic fabric of the city. The city and Ports Authority say the industry is being managed properly and cruises will never be more than a niche industry in Charleston.

Blan Holman, an attorney for the Southern Environmental Law Center, says it’s about balance between cruise operations and protecting the city’s historic character, upon which tourism and the cruise industry depend.

“We are hopeful that the city of Charleston will agree it has the power, and the responsibility, to oversee a cruise operation based in Charleston,” he said in a statement. “The city of Charleston has exerted its authority to safeguard the harbor and surrounding community for hundreds of years.”

Newsome is optimistic the issues will be resolved and the terminal project will go forward.

“We are going to build a new cruise terminal at the northern end of Union Pier, and we are going to keep a modest-size cruise industry as we have said all along,” he said.

Copyright The Associated Press


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