Cruise ship home ports- not always the goldmine they promise

When cruise lines base ships in a coastal city, good things usually happen because cruise ship home ports generate good things. Just one cruise ship from any major cruise line can mean $millions in jobs and tourism dollars. Being a cruise ship home port can greatly enhance the image of a city too. Not every city is cut out to be a cruise ship home port but the ones that are, expect to be one for quite a while. Imagine their surprise in Mobile, Alabama when the one cruise ship they had gave notice; they are sailing away to be based elsewhere.

“We have made the very difficult decision to discontinue our cruise operations from Mobile effective October 22, 2011.” said Gerry Cahill, president and CEO, Carnival Cruise Lines

A difficult decision indeed. Cruise lines have a stake in the success (or failure) of a cruise ship home port as well. A lot of time and resources go into choosing a home port in the first place then the process of supplying the ship, booking passengers, arranging ports of call and other ongoing activities take place.

“We are extremely grateful for the many years of tremendous partnership, support and cooperation provided by the Alabama Cruise Terminal team, the local leadership in Mobile, area travel agents and the community at large.” added Cahill, noting “Unfortunately, we have not been able to achieve favorable financial results with this program.”

And that is the end of that.

They tried and they tried again but it just did not work out for Carnival in Mobile, Alabama begging the question: “Was Mobile a good choice for a cruise port in the first place?”

Well it certainly seemed so at the time. City leaders and government officials courted Carnival, built the new Alabama Cruise Terminal, but are left with an empty facility and a $26 million construction bill to pay. Mobile’s mayor is in Miami, trying to work things out with the cruise line as we see in this report from local television station WKRG. News

The issue at hand seems to be all about the prices being paid for a sailing aboard the Elation. While the ship sailed full, prices were lower than needed by the cruise line to reach the level of profitability they need to make staying there worthwhile.

So off to New Orleans the Carnival Elation goes.

Right now, New Orleans has the Carnival Triumph, a newer, bigger ship with more to offer, selling for about the same price.

Right now, a 5-night ride on the Elation goes for a starting price of $379 per person + tax on a mid-April sailing while the Triumph is has a starting price of $359 per person +tax. About the same.

But Carnival Triumph is moving to Galveston where a 5-night sailing in April of 2012 will start at $499 per person + tax. A much higher price. Take that $100 or so per person times the 2000 or so passengers on each sailing of the ship and we’re talking millions of dollars a year.

Other factors go into the decision to move a ship too.

“Additionally, the itineraries from Mobile require much higher relative fuel costs to operate and those fuel costs will become even more unfavorable with the implementation of the new ECA requirements starting in 2012.” said Cahill which brings up a whole other topic as cruise lines scramble (reposition ships, in this case) to make ends meet.

Cruise lines are already absorbing the higher price of fuel rather than pass it along to passengers in the form of the highly-unpopular fuel surcharge and nothing will be left off the table as an option to keep prices down.

This is by no means a Carnival-exclusive method of operation. While these decisions are tough ones for cruise lines to make, the very nature of their “mobile assets” makes moving ships a viable, if not prudent way to do business.

The entire U.S. west coast cruise industry has been transformed as ships from many lines were redeployed to more profitable waters. The common fear reported earlier with these moves is that less supply of ships in North America will force higher prices as cruise vacations continue to be in high demand. This move of the Carnival Spirit takes yet another ship from the U.S. West coast who recently lost Royal Caribbean’s Mariner of the Seas to Europe.

A realignment of assets among cruise lines and less capacity in North America could mean fewer choices and higher prices. Travel authority Arthur Frommer called the shifting of capacity to European waters “the biggest development in cruising” noting “you’ll see far fewer cabins and berths in the Caribbean.”

It may all boil down to an overzealous push by local leaders to attract cruise ships in the first place. The seductive allure of the considerable tourism dollars that just one ship can mean might cause government officials to look beyond elements of the deal that might come back to haunt them later.

In the case of the Carnival Elation in Mobile, Alabama, the cruise line, by contract, had to give the city just 90 days notice if they were moving a ship. There are those who might question the wisdom in agreeing to those terms when doing so included building a new cruise terminal the city would be obligated to pay for years into the future.

When would-be port cities throw their hat in the ring for consideration to be a home port for a cruise ship, they naturally want to portray their city favorably. Sometimes too favorably.

Both Brownsville, Texas and Savannah, Georgia have made similar bids for cruise line attention. Critics of the idea sounded off when preliminary feasibility studies came back painting a bit rosier picture of what might be than reality would indicate.

“The reality is they have as much chance to get a cruise ship to visit as they do in luring the Lakers from Los Angeles” said cruise industry expert Stewart Chiron CEO, speaking of a feasibility study done by Brownsville, Texas. “These results are based on the cow jumping over the moon, planets aligning and may also require peace on earth!” he added.

In the end, it all seems to boil down to money. The same money cities dream of coming out of a depression, honestly wanting to create jobs, fill hotels and put their city on the map.

Chiron concludes the big question is “Where will the cruise lines be able to reap the highest yields?”

Apparently not in Mobile, Alabama.