Last updated: 03:00 PM ET, Thu July 28 2016

Smooth Sailing Not Certain for US Cruise Ports

Cruise Line & Cruise Ship | Brian Major | July 28, 2016

Smooth Sailing Not Certain for US Cruise Ports

Photo courtesy of the Port of Houston Authority

Recent news that the Port of Houston is selling the gangway equipment from its failed cruise ship terminal recalls one of the few squalls to emerge in the cruise industry’s remarkable expansion over the last 20 years.

This week, county commissioners voted unanimously to sell Bayport Cruise Terminal’s gangway system, which once (although not nearly often enough) led passengers to ships docked in Houston for pampering vacation voyages to the Caribbean and Mexico.

A temporary facility opened in 2008 hosted a handful of vessels before a county bond issue commissioned the $108 million cruise port as part of a broad commercial maritime project. But following its 2009 completion, the facility failed to attract any ships for year-round or seasonal departures.

Houston’s hopes resumed in 2012, when county commissioners approved $6.7 million in incentives to persuade Norwegian Cruise Line and Princess Cruises to sail regularly from Bayport. But both lines opted this spring not to extend their contracts.

Houston officials originally sought to replicate the success U.S. ports experienced in the years following the 2001 terrorist attacks. Their crippling impact on international airline service led cruise operators to deploy vessels away from Europe and other international destinations.

As they do now, Florida’s ports in Fort Lauderdale, Miami and Orlando hosted the lion’s share of U.S. cruise departures in 2001. But with those facilities full, desperate operators turned to cities including Galveston, Texas; New Orleans and New York. Each city had previously hosted cruise ships on a seasonal basis, but prior to 2001 were not considered suitable for year-round departures.  

Indeed the new deployments represented a stunning change in philosophy for cruise operators. Most felt they already had a good thing going. The cruise business was growing rapidly with most ships departing from Florida. There was little incentive to change things.

As a cruise industry reporter for a weekly trade magazine, I can recall one highly respected executive telling me years earlier that cruise ships would “never” depart regularly from U.S. ports beyond Florida. The cruise lines were growing rapidly, utilizing their current formula and the largest companies saw no reason to rock the boat.

But a funny thing happened post-9/11: it became clear travelers very much liked what quickly became known as “homeport” cruising. The idea of driving a few hours to board a ship, in the process eschewing the increasingly challenging airport environment, not only appealed to regular cruise vacationers but encouraged travelers who had never cruised to sample a voyage.

READ MORE: The Importance of Cruise Port Infrastructure and Attractions

In short, the concept worked for everyone. By 2004 cruise lines were eager to establish new U.S. cruise ports. Embarkations at U.S. ports rose by 13.9 percent that year.

In retrospect, it’s hard to blame the Houston officials. They clearly hoped to replicate the success of nearby Galveston, where cruise ship calls generated $56 million in annual passenger onshore spending and $18.1 million in service expenditures in 2015, according to the Galveston Island Convention & Visitors Bureau.  

By 2014, embarkations in Galveston had reached 642,000 passengers according to Cruise Lines International Association (CLIA) data, a figure surpassed only by the Florida ports, each of which exceeded 1.7 million annual passengers that year.

Last year Galveston hosted 834,616 cruise passengers; the figure is expected to reach 870,000 this year. New York (576,000 annual passengers in 2014) and New Orleans (502,000) also shed their part-time status to become major U.S. homeports in the years following 2001.

Yet not all ports are created equally when it comes to cruise departures. Geography, the real estate mantra of “location, location, location,” and sheer luck all figure prominently in a port’s potential cruise fortunes.

In Houston’s case, the challenges began with Bayport Cruise Terminal’s location in an industrial area, a significant disadvantage compared with Galveston, New York and New Orleans, all situated in downtown areas near shops and restaurants.

Houston’s position along a commercial ship channel also means cruise vessels must sail two and one-half to three hours to reach the Gulf of Mexico. The Houston passage frequently takes even longer between November and April, when the channel is subject to fog conditions.

The long trip to international waters in Houston also means cruise passengers must wait to begin gambling and shopping, as ships are generally required to be outside of territorial waters before such activities can be offered. Galveston, located directly on the Gulf, presents none of these restrictions.  

The Bayport facility was never able to surmount these challenges. One county commissioner recently described the failed cruise terminal as “a huge gamble, and without question, the cards were stacked against the Port of Houston.”

Interestingly, industry trends point to continued expansion to “alternative” U.S. ports. Seattle and Long Beach and Los Angeles, California are each among the 10 leading ports in terms of U.S. embarkations. Cities including Baltimore and Norfolk, Va. continue to operate seasonal services, while Mobile, Ala. will welcome its first regular service since 2011 in November when Carnival Cruise Lines’ 2,059-passenger Carnival Fantasy launches regular sailings.

Moreover, CLIA statistics report U.S. embarkations increased 4.4 percent annually over the past five years and by 11 percent in 2014, the highest annual increase since 2004. “More and more passengers from the U.S. and elsewhere are beginning their cruises from ports in the United States,” officials say in a 2014 report.

But municipalities eyeing the cruise business plunge will need to weigh their options carefully. Clearly, one city’s cruise success is another’s potential failure. 

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