Luis Ajamil President and CEO
Bermello Ajamil & Partners, Inc.
October 2014
CRUISE SHIPS IN MICRONESIA
CHALLENGES AND OPPORTUNITIES
LUIS AJAMIL
BERMELLO, AJAMIL & PARTNERS
OCTOBER 2014
Cruise experience
Cruise line experience
1 THE CRUISE INDUSTRY
Worldwide expansion
1960 1970 1980 1990 2000 2010
Cruise passenger growth
0
5,000
10,000
15,000
20,000
25,000
Pa
sse
ng
ers
('0
00)
Asia Europe North America
Deployment
Alaska
4 Caribbean
1 Mediterranean
2
N. Europe
3
Mexico West
5
Top 25 worldwide attractions
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
Ma
gic
Kin
gd
om
Dis
ne
yla
nd
Glo
ba
l c
ruis
ein
du
stry
Tok
yo
Dis
ne
yla
nd
Eu
roD
isn
ey
Dis
ne
y S
ea
EP
CO
T
Dis
ne
ys
Ho
lly
wo
od
Stu
dio
s
Dis
ne
y A
nim
al K
ing
do
m
Un
ive
rsa
l Stu
dio
s
Ev
erl
an
d
Dis
ne
y C
alifo
rnia
Ad
ve
ntu
re
Se
aw
orld
Un
ive
rsa
l Stu
dio
s
Oc
ea
n P
ark
Na
ga
shim
a Isl
an
d S
pa
Isla
nd
s o
f A
dve
ntu
re
Ho
ng
Ko
ng
Dis
ne
yla
nd
Yo
ko
ha
ma
Ha
kk
ejim
ma
Un
ive
rsa
l Stu
dio
s
Lott
e W
orl
d
Eu
rop
a P
ark
Se
aW
orl
d
Bu
sch
Ga
rde
ns
De
Eft
elin
g
Tiv
oli G
ard
en
s
Ve
ga
s
Strategic industry growth factors
FACTORS CONSTRAINT
PASSENGERS >+40 M (NA only annual)
SHIPS YES
SHIP YARDS 12-14 SHIPS/YR
CAPITAL / PROFITABILITY NO
MANAGEMENT CAPACITY NO
CURRENCY FLUCTUATIONS NO
FUEL YES (NO)
ITINERARIES EXPANSION
WARM WEATHER PORTS EXPANSION
COMPETITION FEW COMPANIES
Cruise industry companies
RCCL, 24%
NCL, 7%
[CATEGORY
NAME], [VALUE]
CARN, 48%
OTH, 14%
Cruise line business model
• Control supply and demand through new-builds &
deployments;
• develop cruise itineraries that are easy and profitable sell
• ticket price is only a portion of the overall revenue possibilities
• Create revenue opportunities on-board & shore-side;
and,
• shore excursions
• destination-oriented deployments
• On-board retail options
• bar and casino revenues
• On-board services: spa, classes, experiences
• Control the expense side.
• balance cost of a destination against the value it produces
Success factors
• New products that generate sustained interest in cruising; • New, exciting vessels, diverse on-board products and services • New regions, itineraries and on-shore product offerings
• Converting land-based resort guests into cruise passengers;
• High level of passenger satisfaction; • leading to repeat clientele and lower conversion costs
• Adapt quickly to changing market conditions; and,
• Limited competition, reduced operational costs, and diversified revenues.
Capacities
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
0
2
4
6
8
10
12
14
Ca
bin
be
rth
s
Nu
mb
er
of
ship
s
Vessels Passengers
Average orders over the 10 year cycle
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Forecast world cruise growth
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
55,000,000
60,000,000
Pa
sse
ng
ers
Low Medium High
Forecasts
• The forecasts are based on current ship building
infrastructure
• Carnival’s Corporation announcement of exploring ship
building in China could be a game changer of
accelerating growth
2 CURRENT SITUATION
Guam cruise passenger throughput
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Guam vessel capacity
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Current situation
• Attracting vessels on round the world, repositioning or
Pacific cruises
• No major recurring patterns in region
• No nearby source markets of passengers
• No regular homeport operations
• Luxury and premium brands
• Explorer consumer
• Japanese, NA and limited European passengers
Asia – Pacific past trends (2013)
• North American and European operators have been
concentrating on building markets close to home
• Voyager of the Seas deployment will mark the beginning of
new regional competition.
• Industry supply over the last two years has tightened
• Once cruise lines begin to place new orders and expand
capacity, markets such as the Asian-Pacific region will have
more appeal
• While there is much interest in consumers in the Asian-
Pacific market, few lines understand how to tap into
this growing travel and leisure base
• Huge size of the overall market and diverse consumer groups
WHAT A DIFFERENCE A YEAR MAKES
THINGS ARE CHANGING
• Starts with an increase in global
capacity
• Commitment to Asia - Pacific
• Developing the source market
• Visiting Guam
• Guam as a base for Micronesia
GLOBAL
ASIA/ PACIFIC
SOURCE MARKET
MICRONESIA
GUAM
A start to the local cruise industry
Today
• Asia – Pacific is the talk of the industry
• Other markets are already beginning to feel the
commitment to this region
• Royal Caribbean is putting its brand new Quantum of
the Seas in Asia
• Carnival is relocating its COO to Asia and exploring
local ship building
• Australia has been the most successful growth market
for the industry
• More is yet to come
The potential cruise
market expansion is
tremendous
The Caribbean
UNITED STATESNew Orleans
Mexico City
MEXICO
Gulf of Mexico
BELIZE
GUATEMALA
EL SALVADOR
CUBA
JAMAICA
HONDURAS
COSTA RICA
PANAMA
Medellin
Bogotá
HAITIKingston
BAHAMASNassau
DOMINICAN REPUBLIC
Caribbean Sea
North
Atlantic
Ocean
TRINIDAD
GU
YA
NA
Caracas
Port-of-Spain
COLOMBIA
VENEZUELA
Cali
North
Pacific
Ocean
Miami
Port Everglades
Tampa
Cancun
Puerto Morelos
Playa del Carmen
Cozumel
Vera Cruz
Galveston
Key West
Havana
Freeport
Montego Bay Ocho Rios
Port Antonio
Cap Haitien
Puerto Plata
Santo Domingo
Port-au-Prince
BRAZIL
Georgetown
& TOBAGOCristobal
Balboa
Panama
San Blas Is.
San Andres
Providencia Is.
Puerto CortesPuerto Barrios
Belize City Turneffe Is.
Guanaja Is.Roatan
GRAND CAYMAN
Cartagena
ARUBA
CURACAO
BONAIREWillemstad
Margarita Is.
PUERTO RICO
ST. THOMAS (U.S. VIRGIN IS.)
ST. CROIX
ST. LUCIAMARTINIQUE
DOMINICAGUADELOUPE
BARBADOS
Bridgetown
GRENADAST. VINCENT
Fort-de-France
ANTIGUABARBUDAST. M
AARTINANGUILLA
ST. CHRISTOPHER
NEVIS
Acapulco
Panama Canal
LimónPuerto Caldera
ST. JOHNS (U.S. VIRGIN IS.)
Georgetown San Juan
NICARAGUA
WESTERN
CARIBBEAN
LOWER SOUTHERN
CARIBBEAN
LOWER WESTERN
CARIBBEAN
EASTERN CARIBBEAN
BAHAMAS
TRANSCANAL
Itineraries are key for recurring patterns
• Lines are focused on cruise itineraries • easy
• profitable
• sell to cruise consumers
• Diversity of destinations
• Manageable distances to reduce speeds and fuel consumption
• Creation of cruise itineraries that fit within consumer vacation patterns – mini-breaks
– week long cruises
Micronesia
• Diversity of history, culture and attractions
• Market Segmentation and expanded itinerary
opportunities
• Good airline accessibility
• Available port facilities and services
• Shore excursions, business opportunities
Interisland cooperation
• Ports should offer
complimentary
experiences
• Variety • Active
• Passive
• Cultural
• Eco-tourism
• Shopping
• Multi –national
• Marquee value
homeport
Port of call
Port of call
Port of call
Port of call
Cruise line owned destinations
3 ASIA-PACIFIC MARKET
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
Pa
sse
ng
er
Be
d N
igh
tsAsia cruise bed nights
SA
RS
3,085,500
3,768,540
4,306,903
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
Pa
sse
ng
ers
Historical Low (9%) Mid (10.5%) High (12%)
Projected Asia growth
Major Factors
• Natural potential for development.
• Timing of cruise line expansion and strategy.
• Interline competition.
• Seasonality (by month).
• Daily fluctuations.
Seasonality
S E A S O N A L
S E A S O N A L
Y E A R R O U N D
Deployment patterns are beginning to emerge
• Summer in the North
• Beijing market
• Japan
• Korea
• Winter in the south
• Singapore base
• Others are coming
4 CASE STUDY – THE ATLANTIC
The Atlantic Corridor
The Islands
12 nights UK/UK
Nov 2014
14 nights UK/UK
Mar 2014
The Classics
24 nights Nov 2014
14 nights Mar 2014
The Classics - extension
14 nights Mar 2014
7 night Mar 2014
7 night Nov 2014
22 night Mar 2014
Inter – Islands and variations
22 night Mar 2014
7 night Nov 2014
15 nights
12 nights
8 days Nov 2014
Island hoping
16 days June 2014
West Med / Atlantic Islands
28 nights Dec 2015
Genoa-La Palma-Genoa
42 nights
London/London
Feb 2015
Transatlantic variations
27 nights FT. Lauderdale / Barcelona
Mar 2014
32 days Cape Town / Marrakesh
Segmented Accra
34 nights
Rome / Cape Town
October 2015
32 nights Nov 2014
West African Cruises
83 days UK / UK
Sep 2014
Around Africa
5 SHIPS
Average passengers per ship by year of construction
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Average ship length by year of construction
0
200
400
600
800
1000
1200
1980 1985 1990 1995 2000 2005 2010 2015
Av
era
ge
Le
ng
th (
fee
t)
RCI fleet
Past ship drivers – physical
• The width of the
panama Canal
• The air-draft of the
Verrazano Narrows and
Golden Gate bridges
• The draft of smaller
harbors (for non-
transatlantic)
Future drivers – market and economies
• More passenger amenities
• Better sales yields
• Outside cabins – larger perimeter
• Balconies
• Grander atriums
• Logistics
• Distribution of passengers
• Boarding and disembarking
• Better economics
• Crew to passenger ratios
• Power / fuel consumption
6 MANAGING GROWTH
Managing the Destination
• This is the area where planning is essential • Now is the time
• It is not just about a pier or dock or terminal.
It is about the destination as a whole…
• Meeting the needs and expectations of the visitor.
• Competing for economic and social impacts.
• Providing value for money .
• Managing resources today and for the future. • Not just stores, shops and restaurants
• Historic and natural resources, roadways, ports, parking areas,
environment, etc.
Passenger experience
• Providing an outstanding guest
experience
• Cruise lines are challenged to keep
the cruise experience exceptional
• Must deliver a variety of products &
services
• Must deliver a destination within a
short period – no second chance!
• A negative experience can tarnish a
passenger’s entire cruise vacation
The Paradox
……the more charming and attractive
the destination the more desirable……
The Life Cycle of the Urban/Port Waterfront
Settlement A Port is established City detaches
Declines Rediscovery
Ships are growing faster than waterfronts can be
transformed
Cruise ships enter the mix
• Bringing an urban use to a older waterfront
• The perfect blend between people and shipping
• But ----- cruise ships are also bringing certain issues that
need to be planned • Congestion
• Security
• Access
San Francisco
San Francisco
The San Francisco Embarcadero
The new San Francisco Terminal
San Francisco’s newest terminal first
• Totally integrated into the waterfront • Multiple uses
• Public park as a waiting area
• Public access to the wharf
• Green design • Recycled water system
San Francisco
San Francisco Pier 27
San Francisco Pier 27
Disappearing fence
Recycles its own water
Dublin
Fully integrating the port into the City
Will work with and without the ships
Integrating the riverfront
Facilitating traffic
New “Dublin – Times Square”
An active riverfront – “open to the public when ships are out”
7 ECONOMICS
Economics
• Economic impact is the key
• Plan to maximize return
• Port investment is difficult
• Passenger spending and logistics
North American port revenues (US$/pax)
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
Total expenditure per passenger
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00K
etc
hik
an
AK
Av
era
ge
US V
irg
in Isl
an
ds
Ju
ne
au
Ska
gw
ay
St
Ma
art
en
Prin
ce
Ru
pe
rt
Co
zum
el
Pu
ert
o R
ico
Na
na
imo
St
Kitts
an
d N
ev
is
Ca
rta
ge
na
BC
Av
era
ge
Ja
ma
ica
Va
nc
ou
ve
r
Ca
ym
an
Isl
an
ds
Be
lize
Ac
ap
ulc
o
Aru
ba
Vic
toria
Ba
ha
ma
s
Cu
rac
ao
Ca
bo
Sa
n L
uc
as
An
tig
ua
/ B
arb
ud
a
Ho
nd
ura
s
Ba
rba
do
s
St
Luc
ia
Co
sta
Ric
a
Turk
s a
nd
Ca
ico
s
Newest terminals in the newest markets
Singapore
Hong Kong Singapore +US$400 m
Hong Kong +US$350 m
Newest terminals in the newest markets
Singapore
Hong Kong
8 POLICY
Assembling the issues and meeting the challenges
Venues
Cruise
Operations
Access
Transportation
Funding
Product
Development
Marketing
Framework Policy
Cruise Industry Community
Private Sector
Building The Future
Ship Supply
Product
Demand
Product
Innovation
Marketing
Partner
Support
Infrastructure
Transportation
Planning
Economic
Impact
Environment
Experience Development Job Creation
Image Projection
Comprehensive policy framework
• Physical strategy
• Cruise facilities evaluation and capacity plan
• Site strategies
• Public and private uses, ISPS security
• Tourism development
• Building for land based and cruise tourism
• Regulatory framework – simplicity covering berthing
policy, environmental, etc.
• Financial strategy
• Setting tariffs
• Identifying issues requiring funding
• Lead by public or private sector
• Hard port infrastructure, operations, upland
development
Comprehensive policy framework
• Marketing strategy
• Cover consumer and cruise line outreach
• Make cruise easy to sell
• Use existing tourism lines of communication to
expand message
• Regional cooperation – name brand recognition
• Community strategy
• Focus on cooperation – address low hanging fruit
(traffic patterns, GTA use, separation of facilities and
community, education
• Vessel management - Caps on pax, hours, etc.
Destination strategies for regions and ports
• Organize at a regional level;
• Combine resources to effect consumer demand
• Educate and motivate the travel industry to sell the region
• Increase cruise line business acumen; and,
• Communicate on how the region can increase profitability
• Control expense side issues – taxes, fees & regulatory costs
• Increase flexibility.
• Change as market opportunities and / or challenges warrant
• Know your client today and who they will be tomorrow
9 CLOSING
Conclusions
• The future is bright – it will take a little time
• Use that time wisely to plan
• 2005 till today marks a major expansion in Australia / South Pacific
region
• 2015 will mark a major milestone for cruise line deployment and
beginning of focus on the Pacific
• RCCL deployment of the Quantum of the Seas
• Carnival Corporate commitment and ship building
• Strategies are broad to reach local source markets
• China
• Japan
• Korea
• This will open the entire Pacific region for growth
Conclusions
• Growth 1
• Guam will grow for traffic growth in the region
• Growth 2
• As the industry develops a Micronesia visitation product will
evolve
• Growth 3
• A Guam based market will evolve
• Guam
• As a port-of call
• As a homeport
October 2014