San Diego Magazine / January 2005 / Terminal Blues

 Email  Print  Feed

Terminal Blues

ON DECEMBER 4, LOCAL OFFICIALS greeted the 500,000th cruise-ship passenger to come through the port of San Diego in 2004, marking the occasion with pier-side festivities. The event symbolized the growing impact the cruise industry has on the region’s economy—roughly $400 million last year. This nearly doubled the numbers from 2003; by 2010, port officials expect a million cruise-ship passengers a year, with an annual economic impact approaching $1 billion.

While this deserves celebrating, San Diego risks falling victim to its own success. Cruise line operators complain about the inadequate terminal at the B Street Pier and threaten to take their ships elsewhere if the facility is not upgraded within the next few years. But the San Diego Unified Port District, which operates the terminal, says it doesn’t have the money.

Peter Q. Davis, chairman of the Port District’s board of directors, says the cruise ship business outgrowing the terminal is a good problem to have. He’s confident the money can be found. But if signs of progress are not visible soon, the cruise lines could pull out of San Diego as quickly as they moved in. “We see a tremendous marketplace for cruise ships, but our terminals and piers are very old,” Davis says. “Now we’ve got to find the money—hopefully from the city, county and state, who all benefit from the funds that are coming in from the cruise ships.”

He acknowledges it will be a tough sell, because these other government entities “have been basically getting this economic benefit for free.” But if they don’t ante up, that benefit could evaporate as fast as a coastal marine layer. “Frankly, the cruise lines are saying if we don’t upgrade, and we don’t show them that we have the capacity to do it, they may have to find an alternate port,” Davis says.

Cruise lines now homeporting in San Diego include Holland America Line, Celebrity Cruises and Carnival Corporation. None responded to requests for comment.

The dilemma surfaced because of fundamental changes in the cruise industry over the past three years. The industry has experienced huge growth since September 11, 2001, when the terrorist attacks transformed the business in North America. By 2000, the cruise lines had begun experimenting with what’s known as “homeporting”—placing ships closer to population centers rather than having them based almost exclusively in southern Florida.

“September 11 accelerated that trend,” says Christine Fischer, spokesperson for the International Council of Cruise Lines in Arlington, Virginia. “After 9/11, people didn’t want to fly, especially internationally, so more people began taking cruise vacations.”

San Diego is emblematic of this trend, adds Brian Major, director of public relations for the Cruise Lines International Association, the marketing arm of the ICCL. “Passengers responded to this new availability,” says Major. “It allowed people to drive to the ship from big regional areas rather than fly, or if they did fly, it didn’t require an overnight stay.”

Rich Skinner, a travel agent who operates Cruise Holidays of Woodinville near Seattle, says his clients find San Diego “really attractive, because they don’t have to overnight in Florida.” San Diego also has an advantage over Los Angeles because it’s so compact. The cruise ship terminal is near the airport and downtown, and the major tourist attractions are close by.

“Now we’re starting to see some options out of San Diego that haven’t been available before, like the Sea of Cortéz and going as far south as Acapulco and Manzanillo, which gives us a nice variety of product,” Skinner says. Other itineraries include cruises to Hawaii or trips through the Panama Canal, and this month a ship will depart San Diego on a 100-day voyage to Venice, Italy. “Whether it’s for the family market or seniors market or the upscale market, it allows us a lot of choice,” Skinner says.

Another factor influencing the increasing popularity of cruise vacations is security. Cruise lines have had industry-wide security measures surpassing those of airlines since 1996. All bags, passengers and crew are screened, and all passengers are issued ID cards.

However, the growth in San Diego’s cruise ship traffic has overwhelmed the facility on the B Street Pier, despite a $4 million upgrade in 2002. The terminal was designed to handle just one ship at a time in the north berth, so the Port District erected two large tents on the pier to serve as a second terminal and a U.S. Customs facility for the south berth. But when two or three ships are in port at the same time, the thousands of passengers waiting to board a ship in the south berth often have to stand in the hot sun without access to refreshments or restrooms.

The question is: How badly does the region as a whole want the cruise-ship business? The Port—so flush with cash two decades ago that it built the bayside convention center for the city of San Diego —does not believe that it, alone, should shoulder the financial burden of redeveloping the cruise ship terminal. In fact, because of the convention center construction and expansion, the Port is obligated to spend $60 million on projects in the other four cities comprised by the Port Pistrict: Chula Vista, Coronado, Imperial Beach and National City.

IRONICALLY, THE CRUISE INDUSTRY, while having a huge economic impact on the region as a whole, provides little direct benefit to the Port District itself. Of the total economic impact, the Port received about 1 percent, or $3.8 million, in berthing, wharfage and passenger fees last year—and most of that went toward operating the terminal.

By comparison, a single homeport turnaround has an estimated $2 million economic impact. About a quarter of that is tourist spending, including sales and transient occupancy taxes, but most of it goes to local merchants who provision the ship with food, retail items and fuel, as well as other items and services ranging from fresh flowers to piano tuning. “We make a very small profit on the cruise-ship business,” says Ron Popham, senior director of the Port’s maritime division. He also says the fees the Port does collect are kept as low as possible to remain competitive with the ports of Los Angeles and Long Beach.

In fact, Carnival wants to bring in even bigger ships that carry 3,500 passengers, rather than the typical 2,000- passenger ships calling on San Diego now. But not unless San Diego makes major improvements.

The Port’s interim plan calls for a second passenger loading bridge to service the south berth, at a cost of roughly $6 million. The funds will likely come from the Port’s capital development fund. Long term, however, the pier itself needs to be overhauled to make it earthquakeproof. That alone could cost upwards of $20 million. Building a new terminal could double that. Port officials hope to issue a request for proposal this month to solicit bids from potential contractors. Construction would begin in 2008 or 2009.

“The cruise ship lines want to be sure that we’re making progress,” Popham says. “Because if we don’t show any progress, they’ll probably pull out, and we’ll be left with the visitation ships and the odd homeport.”

And if the Port upgrades the terminal and the ships leave anyway? Davis believes the cruise industry is here to stay —and aims to see that it does. He wants financial assistance from the other government entities that benefit.

“We need a consortium of leaders to get together and come up with a strategy for addressing this problem, to make it a higher priority,” Davis says.