Authors: Dr. Athanasios Pallis, Dr. Jean-Paul Rodrigue, and Dr. Theo Notteboom
Ports and destinations have developed an interest in hosting cruise activities. Cruise ports and terminals are under transformation, aiming to achieve growth.
1. An Expanding Cruise Port System
With the growth in cruise shipping and businesses, cruise ports are gaining importance. The port is vital for assuring schedule reliability and allowing a continuous passenger (dis)embarkation and transfer to onward journeys and day excursions. This underlines the considerable financial contribution of cruising to the port cities or nearby touristic destinations. Once cruise lines express an interest in a destination, allowing for economic and geopolitical conditions, its relevance relies on port and shore characteristics. The presence of sufficient port-specific and port-related infrastructures, the absence of intense use that might lead to congestion and disruption, and the modernization of infrastructures to provide efficient and effective port services are crucial parameters allowing the usage of a port as part of an itinerary.
Ports also realize the opportunity to provide services to an industry that offers to local economies more than returns to the port itself. With the direct and indirect impacts by many cruise-related activities, including passengers and crew spending, to port cities or nearby touristic destinations, interests to increase the number of cruise passengers have been supported by broader communities and decision-makers. Admittedly, passenger and crew spending contributes significantly to the cruise hosting economies. Cruise lines expenditures for goods and services in support of their operations and the many other indirect and induced effects to provide additional motivation for hosting cruise activities. The rising importance of port-city integration coincides with the growth of the industry. Cruise activities are part of the agendas carried by port authorities and other port-managing organizations to link the port with visible benefits for the local economies. All these contribute to using different cruise itineraries and reduce the high level of concentration of the global cruise port system observed in the past.
In the 20th century, the global cruise port system has been characterized by a high level of regional concentration as well as a clustering of port visits. However, in the 21st century this concentration diminished rapidly, as an expansive global itinerary building by cruise lines and a growing interest in advancing cruise activities by many cruise ports has increased the number of ports hosting notable levels of cruise activities.
2. Typologies of Cruise Ports
Ports offering services to cruise lines vary in many respects as the aim of cruise shipping is different from that of cargo shipping. Cruise lines focus on the provision of amenities to cruise passengers, rather than just transportation services. The presence of these two elements, transport and tourism, results in multiple criteria for a typology of cruise ports. The first group of criteria is similar to those observed in cargo port markets. Τhe second group reflects the peculiarities of the cruise market, including the catalytic influence of the tourism element.
A. The port element
Depending on their role in cruise itineraries, cruise ports come into the following categories:
- Home ports (turnaround ports or hub ports) are the ports where passengers begin or end their cruises. Most commonly, they are both the commencing and the ending point of a designed itinerary. About 80% of all cruises end up in their port of origin, implying that cruises are usually set up as loops. There has been a growing number of homeports where passengers in whole and part can begin or end their journey, so the future of the cruise industry may include more itineraries that passengers partially undertake.
- Ports of call (transit ports) are an intermediate stop en route to another destination. Cruise vessels call for a few hours before continuing their itinerary, offering their guest the opportunity to visit the port-city and nearby touristic attractions.
- Hybrid ports blend the two categories as they are the starting and ending point for some cruise itineraries but also act as an intermediate point for other cruise itineraries.
Within the Spanish market, which is the biggest in Europe, Barcelona fulfills the function of a homeport. Seville, Valencia, Palma, and Gran Canarias play dual roles. There are even some ports, like Malaga, which can primarily play the role of port-of-call, but have also been used as a homeport.
The state of cruise port development provides a second typology criterion. The siting and setting of cruise port facilities are subject to constraints usually not found for cargo port activities. Cruise lines are expecting specific levels of services and space as more than 10 square feet are needed to serve each passenger check-in in less than 15 minutes and disembarkation in less than 20 minutes. Architects and builders are developing specialized terminals with many aesthetical characteristics. This is a major transformation, as most cruise terminals were reconversions of port facilities used for cargo operations, particularly if those sites were adjacent to downtown. However, the move from multi-purpose terminals or temporary docking facilities towards specialized cruise terminals is not universal. Sometimes, scarce port-land only allows for one pier to be dedicated to cruise. Alternatively, cruise lines can develop their own port of calls, such as private islands in the Caribbean.
The termalization of cruise ports implies advanced, autonomously operating cruise terminals of considerable size (e.g., Port of Barcelona), accompanied by the presence of cruise terminal operators that assume responsibility for operating, and in some cases constructing and developing these terminals.
The uninterrupted growth of cruising has resulted in the opening of a window of opportunities to several firms, including cruise lines, specialized cruise terminal operators such as Global Ports Holding, wishing to undertake new or additional investments in the cruise business, and sometimes to follow a path of internationalization. The leasing of cruise terminals to third parties and the development of new terminals have become common. In some ports, cruise lines are directly involved in the financing, building, and operations of terminals). In other ports, local cruise terminal operators (frequently being port agents) are joined by other companies that have developed interests in taking control over cruise ports and specialized purpose vehicles (SPVs) built by terminal operating companies. This led to the emergence of international operators.
As cruise activities in ports gain operational autonomy, public authorities are pursuing various partnerships with third parties, aiming to finance and develop growth strategies. Cruise port governance has been revisited with the classification of cruise ports as either public, private, or operated by a third party other than the managing entity of the port might be considered simplistic.
Two additional classifications of cruise ports are based on the transportation element of cruising and facilitate a better understanding of the heterogeneity of the cruise port industry. The first is the size of the cruise ports. With many ports becoming very large entities handling more than one million passenger movements per year, cruise ports might be classified as being of significant size, or very large, large, medium, or even a small cruise port that hosts very few calls and passenger movements per annum.
The other criterion is the seasonality of cruise activities (i.e., Low, average, high, very high), which refers to the extent that cruise activities in a region and cruise vessels call at a particular port during just a few months.
B. The tourism element
Cruise ports also come into three main categories depending on their role in tourism within their regions. They can be a destination port where few, if any, excursions occur outside the port area and the touristic attractions of the linked port-city. They can also be a gateway port that mostly serves as a point of embarkation or a balanced port offering a combination of port area amenities and inland excursions. Each of these categories implies different development strategies to service the market.
A different classification results from the level of touristic attractiveness of each cruise port and its linked port-city and destination. Some of the ports are marquee ports that, due to exceptional touristic attractions in proximity, are essential to be visited during cruises in the region. Others are discovery ports, commonly seen as having the potential to attract the interest of prospective cruisers.
Accessibility stands as another relevant classification of cruise ports. The dominant way for reaching the port, such as flight and cruise, drive and cruise, or train and cruise, influences the type of operations and infrastructure the port needs to provide.
C. Cruise port services
The services offered to cruise lines at a cruise port differ depending on the function of the port along an itinerary. Expected services to be on offer by a transit port are a subset of those available at home ports. Generic facilities expected by all cruise ports include entrance and berthing facilities. The second group of services is offered to the cruise vessels and cruise lines, and the third group of services is being provided to cruise passengers. A home port is expected to provide additional services that facilitate cruise passengers and their activities.
3. The Competitiveness of Cruise Ports
While cruise ports serve a derived demand, such as the wish of cruisers to visit a specific destination, their competitiveness stands to a certain degree as a cause for attracting cruise calls. Seeking to develop a new product, cruise lines have added new cruise ports to itineraries and attract land-based holidaymakers or returning customers. This search continues and is associated with the destination features, such as tourist attractions, shore excursion potential, and security. However, ports and their facilities, such as berth access, land infrastructure and logistics, maritime services such as pilot and tugs, and landside operation such as security, procedures, and luggage handling, affect the growth of cruising in a given port. Besides, cruise ports are not necessarily monopolistic in the offered amenities and access to inland touristic attractions. Substitution remains possible.
The capacity of ports to develop a cruise terminal is less costly than the development of other port facilities, such as container terminals. Superstructures and processes are less demanding in terms of sophistication. However, the quality of port facilities (infrastructure), the efficiency of services and operations, the levels of port fees (costs) can explain only part of the attractiveness of a cruise port. With cruise passenger satisfaction being the foundation of cruise shipping, a cruise port relies on additional factors to become a port of call and hosting cruise passenger movements.
First, the extent that the port is well-positioned for integration in itineraries, as the location of the destination remains fundamental. Ports located in must-see destinations still need to be part of an appealing itinerary to be a popular cruise destination. A second factor is the tourist attractiveness of the destination. This is primarily determined by characteristics of the area (climate, socio-cultural and natural factors, or proximity to touristic attractions), with the port industry and stakeholders having only a secondary influence. The third factor is the accessibility of the destination. Port proximity to an airport with airlifts to source markets, a train station with good connections, and highways supporting the increasingly popular drive and cruise concept might determine the potential to host home port traffic.
Taking for granted that a port has applied all the steps to enhance security levels, the next factor is the quality port services and services offered. Port fees stand as a success factor as well. The last two factors are generally the most easily adaptable compared to other success factors. Nevertheless, a cruise port that performs weaker on location, tourist attractiveness, and accessibility than another port is not likely to match the performance by making changes in facilities, services, or fees.
A. Port choice and itineraries
Cruise ports aim to be part of different cruise itineraries since cruise lines sell itineraries, not destinations, implying greater flexibility in selecting ports of call. The selection of an itinerary by cruise lines is the outcome of several commercial considerations:
- Potential revenue generation and costs, such as shore excursion revenues plus shipboard revenue, port costs, and fuel costs (including the impact of fuel-related regulations).
- Operational considerations, such as geographic location (competing and complementary ports on the itinerary), the distance between ports of call (cruise ships can cover up to 280 nautical miles per night), infrastructure, days of the week that a cruise might call, evening and overnight calls.
- Brand positioning (exotic ports of call for premium services).
- Guest interest and satisfaction (customer-oriented industry).
- Marketability (with itineraries being as strong as the weakest port).
- Economic trends and market research include evaluating changes in disposable incomes and the demographics of the customer base.
Once the above criteria result in a narrow list of alternative options, the attention turns on the included cruise ports. Cruise lines are interested in selecting ports that:
- Are not congested.
- Provide quality port facilities.
- Apply transparent berthing policies and other facilities.
- Have the potential to attract cruisers from diversified passenger source markets.
The geographical proximity and connectivity to other cruise ports are vital. Synchronizing a cruise port location with the time and speed preferences of cruise lines, particularly the possibility of being included in itineraries involving several ports, is vital. This formula is the outcome of the fact that ships ideally travel at 18 knots for 14 hours. This means that the maximum overnight travel distance is 250 nautical miles, whereas, and with a speed of 20 knots, the maximum overnight travel distance increases 280 nautical miles.
Ports are carefully considered to maximize the commercial potential and utilization of onboard assets. Ships are constantly moving between ports of call, and shore leaves are of low duration, such as 4.3 hours on average in the Caribbean, even if a cruise ship will stay at a port 10 to 12 hours. A standard cruise itinerary is a loop beginning and ending at a hub port (also called a turn port or port of embarkation) and typically lasting seven days with 3 to 5 ports of call depending on their respective proximity. Cruises of 10 to 21 days are also offered, but they tend to have lower profit margins as customers tend to spend less as the cruise progresses.
The distribution of cruises by the number of days reveals the characteristics of cruise itineraries. The share of cruise lasting seven days is dominant (47%), with other prevalent duration in the range of 3 to 5 days. This illustrates a scheduling issue for cruise shipping lines as they maximize their asset utilization through a continuous turn of cruise ships. For instance, a ship usually finishes a weekly cruise early in the morning and begins a new one on the evening of the same day. In the 8 to 12 hours window between the end of the inbound cruise and the beginning of the inbound cruise, passengers must check out and disembark, facilities are cleaned, waste discarded, stores replenished, the ship refueled, basic maintenance performed, and outbound cruise passengers must check-in and embark. The design variables of itineraries within this time frame mainly concern the number and order of port calls, the synchronization with the (international) air transfers at the turn ports, vessel speed, and vessel size.
Since the cruise industry appears fundamentally to be driven by supply, supply saturation, as opposed to demand saturation, often constrains future developments and imposes limitations on an industry that has continued to grow rapidly until the COVID-19 pandemic. While large hub ports can accommodate additional port calls, it is the smaller “exotic” or “must-see” (marquee) ports that cruisers are seeking to visit that present challenges for additional capacity. Berth availability and the ability of small communities to accommodate large tourist influxes of short duration has become a salient issue. However, the massification of cruise ships is placing a scale and scope challenge for several cruise ports that are facing the dilemma of the generation of tourism income and the environmental and social disruptions large cruise ships are associated with. This leads to further market segmentation between large ports called by mega-ships and smaller ports called by smaller ships offering a specialized cruise experience.
This is likely to incite further involvement of the cruise industry in terminal operations, a trend that has already started taking place. The next step involves developing new cruise terminals co-located with service amenities such as hotels, attractions, condominiums, and shopping malls. Paradoxically, a similar trend was observed in container shipping in recent decades as several shipping lines became, through parent companies, terminal operators. Irrespective of ownership structure, the emergence of transnational cruise terminal operators (currently observed at a limited scale) might transform the industry in the coming years further. While a further fragmentation of itineraries is likely to occur, closer integration between the cruise port and the cruise shipping industry is expected.
B. Infrastructure upgrade
The availability of adequate port infrastructure and the organization of cruise hosting operations efficiently and securely remain among the conditions for generating the interest of cruise lines to include a port in a cruise itinerary. Cruise ports need docks able to accommodate the new generation of cruise ships efficiently. Requiring new infrastructures poses significant challenges, especially to those ports that are facing land scarcity or the need for regular dredging of their basin. In the latter case, there is a need to minimize the potential impact on the sea flora and fauna (through land reclamation) and process and use the dredging operation products.
The optimal design and planning of cruise ports and their terminals underline long-term arrangements between ports and cruise lines. When securing a long-term commitment of one or more cruise lines, the cruise port is incited to provide adjustments to its operations. Such long-term commitments are defined through negotiations between ports and cruise lines.
Once the port infrastructure is in place, and the port is operational, the managing entity of the cruise port needs to develop a strategy developing homeporting activities and the desired cruise market segments. Competition for both transit and home port cruise businesses is growing, with ports and destinations working to evaluate the benefits of each option to direct their efforts to the most convenient business opportunity. The most significant challenges in the search for competitiveness are:
- Developing relationships with cruise lines, with the aim being to secure a long-term engagement.
- The accommodation of calls by bigger in size cruise ships.
- The evolution of the relationships with people and businesses around the ports offers improved services to the passengers and cruise ships calling the port.
- The exploitation of the potential of overcoming the seasonality of the host cruise activities via year-round cruising.
A common denominator of these efforts is the need to enhance the economic, social, and environmental sustainability of the attracted cruise activities.
C. Relationships with cruise lines
Improving the relationships with cruise lines is the major challenge for cruise ports. The most important issue to be addressed is the presence of attractive shore excursions that can be provided to cruise lines. The integrative efforts of the port and stakeholders in organizing transportation infrastructures and tourist services ashore and offer enough options to cruise passengers critical issues. The potential of many shore excursions incites itinerary planners to include the port in the offered cruise programs.
The long-term engagement of cruise lines to the use of a cruise port is a strong indication of its prospects as a destination. To expand its presence in the cruise market, a port may need to adapt to organizational structures, operational procedures, governance regimes, or strategies. The presence of cruise lines for more than a few calls, and the commitment for a multi-year presence, appear crucial. The availability of landside transportation is another issue creating controversies between ports and cruise lines, with ports and destinations having to collaborate in resolving any bottlenecks.
The demand for port services does not depend on port operations. Cruisers are primarily interested in agile transportation to the port-city or the tourist destination. Less discussed are unexpected call cancelations by cruise lines is also high in the agenda of cruise ports. Perhaps contrary to what may be expected, other arrangements appear to be more challenging than tariffs. Two significant challenges to be jointly addressed by ports and cruise lines include the cooperation between ports and cruise lines when scheduling itineraries and berth allocation.
Berth allocation is a long-term planning issue for ports with vital social implications. The practice refers to the planning of which cruise vessels will visit the given port on a specific day for a particular time span. Ports need to arrange the slot to be reserved for a particular vessel call two years in advance. The reason is that the cruise line needs to define its cruise itineraries and then inform travel agents who will need to sell the cruise to potential customers. For several reasons, such planning is not always happening. Given the limitations imposed by the geographical distances between ports included in an itinerary and the lengths of cruises, several operators berthing for the same hours is not rare. The problem of berth allocation is even more critical in smaller, secondary cruise ports. In small picturesque destinations, cruise calls might mean the relatively unpleasant situations of a crowded location on certain days or hours, even distortion of other tourist activities. In bigger ports, this might take the form of congestion at the arrival of bigger ships on which thousands of people are cruising.
The arrival of two average-size cruise vessels at a given port means more than 6,000 passengers disembarking at the same time. Yet, in some cases, congestion in small and medium destinations is produced simply because of a small additional number of calls. Without effective planning, these destinations may be subject to the pressure and the negative effect of too many passengers that can hardly be accommodated to allow for a positive experience. In several cases, the presence of cruises is marked by seasonality, deteriorating the problem that smaller tourist destinations face.
However, while the debate on how best to apply berth allocation is at the top of the agenda between the key stakeholders, this debate remains in many respects inconclusive. Technical issues of its application (time scale, details of the berthing allocation) but also the need of all ports included in an itinerary to synchronize with the system, the diverging needs of each cruise line, the treatment of double bookings and cancellations of booked cruise berths, are vital. With the number of players involved, this discussion is complex to resolve.
D. Scale of cruise port calls
The early goal of the cruise industry was to develop a mass market since cruising was, until then, an activity for the elite. A way to achieve this was through economies of scale as larger ships could accommodate more customers and create additional opportunities for onboard revenue sources. The first dedicated cruise ships began to appear in the 1970s and could carry about 1,000 passengers. By the 1980s, economies of scale were further expanded with cruise ships that could carry more than 2,000 passengers. Today, the biggest cruise ships have a capacity of over 6,600 passengers, with the capacity of each of the 50 biggest cruise vessels in operation having exceeding 3,000 passengers. For instance, the Oasis-class ships, which as of 2018 accounted for the largest cruise ship class, have a draft of 31 feet and a capacity of about 6,600 passengers and a crew of 2,200. Comparatively, a containership of 2,500 TEU requires a draft of 33 feet, while a containership of 8,400 TEU requires a draft of 46 feet. Draft issues that have plagued container ports are a much more marginal constraint for cruise shipping. Additionally, cruise ships can anchor and use tendering services, which opens a wide array of ports of call. However, the standard deviation is significant, and such numbers need to be treated with caution. The current order book suggests a clear stabilization trend regarding maximum vessel size and underlines that there are limits to economies of scale in cruise shipping.
Cruise ships tend to have a low draft since they do not carry cargo; they are more volume than weight. This confers the advantage of access a large number of ports and therefore multiplying itinerary options since the setting of a pure cruise port leans on criteria different from commercial ports. Cruise ports tend to be located close to either city centers (cultural and commercial amenities) or natural amenities (e.g., a protected beach). On average, these sites do not have very deep drafts, and dredging would be socially or environmentally unacceptable. For instance, the Oasis-class ships, which as of 2018 accounted for the largest cruise ship class, have a draft of 31 feet and a capacity of about 6,600 passengers and a crew of 2,200. Comparatively, a containership of 2,500 TEUs requires a draft of 33 feet, while a sovereign class containership of 8,400 TEUs requires a draft of 46 feet. Draft issues that have plagued container ports are a much more marginal constraint for cruise shipping. Additionally, cruise ships can anchor and use tendering services, which opens a wide array of ports of call.
The growth in cruise ship size imposes physical restrictions on destination ports. Ports must guarantee sufficient draughts, berthing lengths, and cruise terminals capable of handling efficiently large volumes of passengers. To receive a mega cruise ship, a cruise terminal must guarantee at least 10 meters of draught, 425 meters of berth length, and a navigation channel 132 meters wide, assuming good weather and other navigational conditions. Limits might also relate to landside operations, such as space for the apron area, the ground transportation area, road communications, the capacity of destinations to serve more cruisers, and the social acceptance of further growth of cruising. Physical limitations of piers berth lengths and drafts have historically limited cruise development, and many ports do not meet these requirements and would require major upgrades to host mega cruises.
E. Seasonality of cruise activities
Despite the remarkable growth of cruise activities, the seasonality of many cruise itineraries implies that an array of cruise ports are used during a peak season but may receive limited, if any, cruise ship calls outside the main season. A 40 weeks cruise season is considered by many as the maximum duration per year, but uncommon. One of the implications is that cruise terminals remain unused for a lengthy period. Those responsible for developing cruise ports might also be more skeptical about allocating more port areas to cruising. The reason is that this is an activity marked by seasonality when other factors, such as the port land scarcity, and the request for more space by cargo port activities, add pressures to devote available port land to cargo. Societal pressures for year-round utilization, so that the port-city and related destinations that enjoy cruise tourism benefits put pressure on ports to develop conditions for expanding the cruise season.
Cruise lines set itineraries to maximize customer satisfaction (and revenues) but must consider the seasonality of the demand. These fundamental market characteristics imply that ports host deployed vessels involved in three different types of itineraries to allow maximum capacity utilization in combination with the maximization of earnings per passenger and lowering of expenses (mostly via lower fuel consumption):
- Perennial, responding to a region that is served throughout the year due to the resilient demand (with high/low periods) and stable weather conditions; the Caribbean and, to a lesser extent, the Mediterranean and its adjoining seas, are such markets. Perennial markets can have a seasonality implying that although they are serviced throughout the year, there have periods of lower demand.
- Seasonal, to serve periodical market potential in periods with good weather conditions; with the Baltic, Norway, Alaska, and New England standing as typical examples. Ideally, cruise lines would prefer only to service perennial markets since this would represent a close to optimal use of ship assets. However, like the tourism industry in general, seasonality is an important component of the demand for cruises implying that some markets are serviced for a few months, mainly during the summer.
- Repositioning, between perennial or seasonal markets; a practice evident between the Caribbean and Mediterranean, and Alaska and Hawaii, though following the globalization of the market in recent times has expanded to additional markets (i.e., the Mediterranean and the Indian Ocean).
The repositioning strategies of cruise lines involve cruise itineraries scheduling based on the coupling of cruise markets and deploying a cruise vessel in both markets for specific periods. This coupling is based on the proximity of markets, cost issues, and the sourcing of passenger patterns. For instance, North Asia and South East Asia are two such markets, with their coupling based on the same sourcing of passengers, the demand for the same product, warm alternative weather, and low-cost repositioning. The coupling of North Asia and Australia provides a warm alternative, robust yields, and low-cost repositioning. An Australia/Pacific-Alaska coupling is justified on the same sourcing of passengers, the same product offered in both markets, and warm alternative weather for cruise passengers at different times of the year. Finally, the coupling of the Meditteranean market and the North America/Caribbean markets is based on the same sourcing of passengers, the offering of the same product, the warm alternative, and the low-cost repositioning of the vessels. For cruise ports, this coupling of markets implies cruise calls by deployed ships and cruise passengers hosting in parts of the year only.
Some cruise regions are less affected by seasonality, with the Caribbean one of the few perennial markets. The number of monthly passengers is relatively stable throughout the year in markets serviced by North American ports with passengers between 800,000 and one million per month, which a December/January peak season. However, a closer look reveals specific seasonality patterns. The Caribbean market and its sub-regions dominate to account for more than 90% of the passengers during the high winter season and around 55% of the passengers during the low summer season. The seasonality of Alaska, Bermuda, and Canada/New England is also evident, with cruise lines attempting to optimize the utilization of their assets year-round by repositioning to take advantage of seasonality. An unexpected pattern is a lack of seasonality for the Bahamas, mainly the outcome of the leading cruise lines building private ports reserved for their exclusive use.
Seasonality does not restrict the development of a cruise region, such as for the Mediterranean and its adjoining seas, a most dynamic cruise region. Between May and October, each month accounts for 10-12% of the traffic. In total, 75% of the cruise passenger movements that occur annually in this cruise region happen during these six month. The total passenger movements registered during the three winter months (January, February, December) stand at only 7% of the total annual movements. This has incited discussions on achieving year-round but with limited outcomes. Winter activities are linked with single call operations of a different size than in the rest of the year. In the Mediterranean, less than 850 calls out of an annual total exceeding 12,500 calls happen from December to February. However, for these months, each call is associated, on average, with more passengers. January is the month with the highest rate of passengers per call (2,314 pax), followed by February (2,153 pax) and December (2,095 pax). Cruise lines develop fewer itineraries, as repositioning vessels take place, with cruises marked by a substantially higher level of utilization. From a port and destination perspective, respective adjustments of operations are essential.
Due to seasonality, cruise terminals can represent an underutilized asset prone to risks. For many ports, the cruise terminal remains a temporary facility with berth(s) supporting other uses when cruise ships are not calling. An approach is to use a cruise terminal as a multi-purpose facility, often built for another rationale that can include an adjacent hotel, convention center, events hall, or any other revenue-generating infrastructure that would gain on being on the waterfront.
F. Cruise ports: competition and co-opetition
The growth of the cruise industry to the evolution of complex relationships between cruise ports. The central element is the fact that cruising develops based on itineraries rather than destinations. There is an interdependent relationship between competition and cooperation between two or more rival ports competing in a given market.
Ports compete with each other, aiming to be included in the itineraries organized brands deploying vessels in a specific cruise port region. Yet not all compete for the same market. The development of distinctive market segments, such as contemporary, premium, and luxury cruises, means several ports target either by choice or due to capacity and destination restrictions for some market segments. Contemporary cruises and luxury stand as the most popular market segments. The competition is more intense between ports of the same category. Cruise lines are interested in creating itineraries, including ports of different sizes. Each port provides various experiences, permitting passengers to select among options for accessing their departing port. For example, competition develops between marquee ports to be part of as many itineraries as possible or between different destination ports. There is also competition between small ports or between ports enabling drive-to-cruise. With the number of ports entering the market increasing, this competition is intensifying. Thus the increase in market size allows sustaining a wide range of activities.
In the case of home ports, competition is even more intense than in ports of call. In this case, the geographical location of the competing ports turns to be of limited importance. Especially when the ports are marquee ports, the geographical concern is limited on the location of other ports available to confirm attractive itineraries than the location of the home port per se. In the case of home ports, features and facilities of the cruise port and the destination are most significant, as are the quality and the variance offered by the existing chain of suppliers (i.e., bunkering, provisioning) having the capacity to serve homeporting calls.
While competing, cruise ports also develop cooperation practices as a critical strategy to establish their market position. This also takes place among cargo ports, but in the case of cruising, ports do so to the extent that their relationship can be described as the perfect case of co-opetition. The latter refers to competing entities generating a number of advantages and opportunities produced through active inter-organizational relationships. The key concept is to collectively benefit from the growth of the cruise industry via networking and promotion of regions as cruise destinations, next to individual ports. Recalling that the size of a market has rapidly expanded and changed in the last decade alone, sharing knowledge on best practices about cruise port development and management is also part of the observed cooperation of cruise ports. Among the drivers behind co-opetition is the knowledge that cruise lines select itineraries, not individual destinations or ports. Co-opetition can lead to some forms of commercial partnerships between ports in view of improving itinerary attractiveness and promoting certain ports of call combinations. In this vein, co-opetion develops between marque ports and nearby ports-of-call, between boutique destinations, etc., intending to attract the deployment of vessels in the region and the offering of more itinerary building alternatives.
3. Home Ports
A cruise port is, in principle, interested in being a homeport for one or more cruise lines, as the total impacts port city are generally regarded as more significant. This is due to three causes:
- The tendency of cruise lines to purchase goods and services from port suppliers.
- Passengers are likely to stay longer in the city and overnight at local hotels.
- The spending of crew members.
A cruise passenger spends six to seven times more at a home port than at a port-of-call. Further, the modernization and upgrade of cruise vessels result in a significant downturn in the average expenditures per cruise passenger ashore and an increase in the share of onboard expenditures. Still, homeporting continues to have a major impact on the selected port and the associated city and touristic destination. In the late 2020s, research at the major cruise port of Europe revealed the benefits of homeporting in Barcelona, Spain, were on average €202 spending per cruise passenger hosted, with an overnight stay in a hotel, compared to a respective €57 average expenditure of cruise passengers without an overnight stay. Comparatively, a holiday tourist would spend an average of €156 in the city with an overnight stay in a hotel. Cruise Lines International Association (CLIA) estimates passenger spending before boarding a cruise at $376 and $101 for a port of call.
A. Criteria for selecting a home port
The criteria for selecting a home port relate to the characteristics of each port and the criteria that a cruise company uses to identify and assess a potential home port. Despite the case-by-case approach in determining a home port, there are some major conditions that a cruise port must fulfill.
Cruise lines use sophisticated selection criteria to select a homeport. At the same time, cruise ports and related decision-makers assess their potential and develop their governance, management, and operational strategies, in a way that will fit the expectations of cruise lines. For most users, a cruise involves two travel segments, the first being air travel to the home port airport (with a return trip), and the second is the cruise itself. Therefore, it is essential that a well-connected airport with significant airlift capacity services the home port, representing a touristic destination. This is the case for Miami, Fort Lauderdale, and San Juan, respectively well-connected airports and acts as home ports for Caribbean itineraries. Barcelona and Civitavecchia (near Rome) are major home ports for the Mediterranean that are well serviced by air transportation. Poorly connected airports are commonly associated with higher airfares, which impair the competitiveness of the city for mass tourism. There are several customer benefits linked to having more cruise embarkation points available such as drive-to convenience (particularly in North America) and fewer airport hassles. More drive to ports also increases the likelihood of cruising, the reason why cruise lines will call ports along the American Gulf Coast and Eastern Seaboard such as New York, Tampa, Galveston, Baltimore, and New Orleans.
Changes in existing homeporting choices are getting more common, even in established, comparatively stable cruise markets. The increasing scale of cruise vessels, the larger scale of port operations to serve more visitors per call, and the provision of a new cruise product underscored by market segmentation, are all conditions resulting in re-planning existing itineraries or scheduling new ones. Local socioeconomic characteristics might also work towards reforming itineraries. A notable example is the changes in the Adriatic Sea due to new regulations applying to the major homeport of Venice. In emerging cruise regions, such as Australia, South America, and the Far East, the planning of new itineraries is even more frequent. The setting and the size of the cruise market might change further following the standstill produced by the COVID-19 pandemic in 2020 and the first half of 2021. The new conditions and protocols for serving cruise vessels will probably add to the evolution of new itineraries. They might further alter the criteria taken into consideration when a cruise line decides which port to use as home port.
None of the ports with minimum infrastructure and enhanced in-port and destination experiences for deployed vessels in a specific geographic cruise region have renounced on being a home port in this context. Knowing the criteria for being selected by cruise lines is essential for both existing and aspiring home ports. Especially as few parameters might be taken for granted, the geographical location seems to be of limited importance as vessels deployed in a region have the option to select one of the many departing options. Cruise ships might prioritize the attractiveness of destinations or the need to access appropriate port infrastructures, superstructures, supplies, and services to facilitate the ship and the passengers. The deployment of continuously growing size cruise ships generates further incentives for homeporting, at least in destinations that have yet to reach their carrying capacity.
A potential home port might decide to invest in increasing cruise traffic and the related added-value supply chains. Favoring cruising and fulfilling a social function may harm cargo activities as homeporting demands space within the port zone. The docking or anchorage facilities are usually limited, and the coexistence of the two industries becomes complicated by individual requirements. Second, financing infrastructure improvements, as the increasing size of ships and the growth of the business put pressure on adjusting operations and strategies, as cruise operators constantly demand better facilities. However, although generally described as a placeless business, the offering of cruises heavily relies on local attractions. Cruise lines, ports, and cities are highly interrelated and need to establish collaborations such as joint ventures where cruise lines invest in the ships, while destinations invest in port facilities and tourism attractions. Further strategies that eliminate any challenges associated with the use of public space in port cities hosting substantial numbers of homeporting cruise activities need to be elaborated.
The development of transport and tourism capacities is also critical. These concerns need to be addressed following a better understanding of the exact implications that the enduring increase of the size and capacity of cruise vessels and the resulting scale of operations produce.
Variation exists between regions as regards the embarkment preferences of passengers. In the US, driving distance from home, parking and customs immigration procedures are top of the list, along with a convenient airlift into the port city, cruise terminal facilities, and options for pre/post stays and surrounding port area interest following. However, while driving up to four hours is acceptable in the USA, in Europe, the respective limit is lower to a maximum of two hours. On the other hand, Europe has shorter train access to ports. Major markets such as the UK and Germany have taken advantage of convenient train-to-cruise patterns of less than three hours, such as Southampton and Kiele.
Home ports tend to be linked with specific source markets. This is due to proximity, access options, and not least preferences of cruise passengers to visit specific destinations. In Europe where multiple home ports exist, Americans use extensively Southampton, and Dover in the UK, Barcelona in Spain, Venice, and Civitavecchia in Italy. British passengers depart from the UK (Southampton; Dover), Spain (Malaga, Mallorca), and Malta. Germans depart from Hamburg, Kiel and other nationalities (Italians, Spaniards, French, Scandinavians) take advantage of the presence of home ports in their countries.
Each cruising area has its home ports, with the balance of traffic between homeporting and transit passenger movements varying from port to port. The biggest home ports in terms of size are located in the USA, the primary source market for cruise passengers. The biggest of all is Miami, with passengers moving in and out of a cruise trip standing at 50% of the total movements. From Miami (southern Florida), proximity favors Caribbean ports, with the frequency of visits declining further into the Southern Caribbean. The ratio of 50:50 of transit/home port passenger movements is observed in two other major home ports, Port Everglades and Port Canaveral. For home ports such as New York and Galveston, passengers beginning or returning from a cruise represent the total of cruise activities.
In the Mediterranean, the leading home port of Venice has the highest level of homeporting (87%). For Barcelona and Savona, the share of homeporting movements is lower, whereas the share is lower than 40% for the Balearic Islands and Civitavecchia. Three of the five major home ports (Venice, Civitavecchia, Savona) are in Italy. The country is strategically located at the center of the Mediterranean Sea, allowing the development of cruise itineraries both to the West and the East Mediterranean. It is a major source market for cruise passengers and well connected to other major source markets, like Germany and France. Regarding the rest of northern Europe, the major homeport is Southampton, UK, and Hamburg, Germany. The proximity to cruise source markets plays a vital role in the rising of these home ports, as the UK is the largest source market in Europe and Germany holds second place.
4. Localization of Cruise Supply Chains
Supplying cruise ships is another important element of the economic footprint of cruising. It relates to both the direct supply of goods and services through local companies or the infrastructure required to support the logistics of non-local supply, usually by container. The dramatic changes in the onboard cruise product, along with the growing size and design of cruise ships have contributed to changes in its supply chains and logistics. The latter has been facilitated by technological advancements and re-engineering the procurement processes. For instance, prior to the 2000s, the supply chain requirements for most US-based cruise lines were centered around Miami and the Caribbean. However, the cruise industry and its operators now operate in several regions of the world. This, together with the development of logistics and supporting IT management systems, has changed the face of cruise line supply. As a result, in several (major) ports and destinations, the increase in passenger traffic has been associated with a corresponding logistics volume in general.
This new environment creates opportunities for the consolidation and globalization of supplies. It also impacts the local and regional supply bases as improvement in the speed and fluidity of logistics operations requires the coordination of several suppliers. Simultaneously, the major cruise lines have also developed their supply chain infrastructure and support so that they now have strategic control points within major cruise destination hubs. Venice and Barcelona are two such hubs in the Mediterranean. However, there is an increasing requirement by the cruise lines to offer more local, regional and specialized products as part of the onboard guest experience. Therefore, local procurement remains a countervailing force to standard procurement. There is also an increased focus on the real cost of supplying goods to the ship, rather than just the commodity cost itself. Increasingly, there is also a focus on the environmental cost related to ship supply.
- Chapter 1.5 Ports and Cruise Shipping
- Chapter 3.1 Terminals and Terminal Operators
- Chapter 3.6 Cruise Terminal Design and Equipment
- Chapter 6.3 Effectiveness
- Chapter 7.4 Port-City Relationships
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