Staff: Katie Schmid,
Infrastructure Division
Roberto
Ragone, Infrastructure Division
Christian
Hylton, Counsel
The New York City Council
Committee
on Waterfronts
David Yassky, Chair
Committee
on Economic Development
James Sanders, Jr., CHAIR
Infrastructure
Division
Marcel Van
Ooyen, Deputy Chief-of-Staff
February 3, 2004
Oversight: The Future of
the Cruise Line Industry in
New York City
INTRODUCTION
On
February 3, 2004, the Committee on Economic Development, chaired by Councilmember
James Sanders, Jr., and the Committee on Waterfronts, chaired by Councilmember
David Yassky, will hold an oversight hearing to examine the state of the ship
cruise line industry in New York City.
The Committee will explore measures for strengthening the industry’s
competitiveness, and will also look at the potential benefits to the City’s
economy that would result from carrying out effective strategies. The hearing will focus on the current
conditions of the piers proposed for future use by the cruise line industry on
the West Side of Manhattan and in Brooklyn; the types of enhancements needed
for these piers to accommodate larger ships and other charges in the industry;
and any additional infrastructure-related issues that must be addressed, such
as transportation access into and out of the piers. The hearing will also look at the role the City should play to
ensure the viability of the industry.
Invited to
testify are Congressman Jerrold Nadler; Assembly Member Joan Millman; Andrew
Alper, President of the Economic Development Corporation; Joseph J. Seymour,
Executive Director of the Port Authority of New York and New Jersey; Nancy List
of the Bayonne Local Redevelopment Authority; Michael Crye, President of the
International Council of Cruise Lines; Terry Dale, President of the Cruise
Lines International Association; Cristyne Nichols, President of NYC & Co.;
Kenneth Adams, President of the Brooklyn Chamber of Commerce; Gary Lesnevich,
Vice President of P&O Ports, Giora Israel, Executive Director of the New
York Cruise Alliance; Richard M. Copland, President and CEO of the American
Association of Travel Agents; Lynn Martenstein, Vice President of Corporate
Communications at Royal Caribbean Cruises;
Sabato Cartucci, President of American Stevedoring; Rene Mack, President
of Travel and Lifestyle Practice, and representatives of Community Boards 2 and
6 in Brooklyn and Community Board 4 in Manhattan.
Background
Growth of North American Cruise Line
Industry in the United States
Since
the 1990’s the ship cruise line industry has experienced a resurgence in
interest among vacationers. An aging
population, the economic recession, and the 9/11 terrorist attacks have steered
consumers towards cruises for leisure travel.
Cruise lines are increasingly popular among the large number of older
baby boomers, many of whom have relatively larger disposal incomes and are
approaching retirement. Vacationers in
general, many of whom have traveled by air less because of the recession and
terrorist attacks, are looking at cruise lines—particularly those accessible by
car, as a safer and more secure alternative.
Because
of the popularity of the North American cruise lines, the industry has expanded
in the United States, which is contributing a growing share of global cruise
passengers. According to a study by
Business Research and Economic Advisors (BREA) for the International Council of
Cruise Lines, in 2002 an estimated 7.5 million residents of the United States
took cruise vacations throughout the world and accounted for 82 percent of the industry’s global
passengers. In the same year, ports
in the United States handled 6.5 million cruise embarkations, which represented
an increase of 10.2 percent from 2001.[1]
The
national economy as well as state and local economies have benefited from the expansion of the cruise line industry
from five different sources of expenditure, including: [2]
§
Spending by
cruise passengers and crew for goods and services associated with their
cruises, including travel between their places of residence and the ports of
embarkation and pre- and post-vacation spending;
§
The shore-side
staffing by the cruise lines for their headquarters, marketing and tour
operations;
§
Expenditures
by the cruise lines for goods and
services necessary for cruise operations, including food and beverages, fuel,
hotel supplies, and equipment, navigation and communication equipment
§
Spending by
the cruise lines for port services at U.S. ports-of embarkation and
ports-of-call; and
§
Expenditures
by cruise lines for the maintenance and repair of vessels at U.S. shipyards, as
well as capital expenditures for port terminals, office facilities, and other
capital equipment.
While
providing employment to more than 28,000 residents of the United States, the cruise industry and its passengers
generated just under $12 billion in direct spending in the United States during
2002, increasing 8.8 percent over 2001.
Accounting for direct spending and the indirect spending (multiplier
effects), the economic benefits produced by the cruise lines industry by crew
and passengers amounted to $20.4 billion in industrial gross product (IGP) in
the United States. This translated
into 279,000 jobs paying a total of $10.6 billion in wages and salaries. More than half of the IGP and jobs was a
boon to seven industries: business
services, financial services, durable goods manufacturing, non-durable goods
manufacturing, wholesale trade, airline transportation, and transportation services.
[3]
Growth of Cruise Line Industry in New
York City and New York State
New
York State comprised 7.5 percent for the North American industry, $902 million in direct spending on the
cruise line industry. These
expenditures generated an estimated 11,289 jobs paying $547 million in income, amounting on average to more than $48,000 per job
created. New York’s impact is related primarily to cruise embarkations
and cruise industry purchases.
Moreover, other major business sectors in New York City gained from the
spending of the cruise industry and its passengers including: Air
transportation and travel agent industries; Providers of credit card services
and vessel insurance; Advertising and marketing services; Manufacturers of
textile and apparel products; Legal
services; Lodging; and Processors of
gourmet foods. [4]
The
Port of New York is the nation’s fifth busiest cruise port behind the three
major Florida ports and the Port of Los Angeles. In 2002, 326,000 passengers embarked on their cruises from
Manhattan’s West Side terminals.
Passengers and crew were estimated to have spent $20 million in New York
City in 2002 with approximately half ($9.4 million) spent on embarking
passengers who stayed one or more nights in New York City. Passengers who stayed overnight in New York
spent an average of over $355 during their stay, which averaged 2.1 nights.[5]
The
numbers have estimated to have grown significantly for 2003. More than 887,000 passengers passed through
the Passenger Ship Terminal on Manhattan’s West Side in 2003, up from 425,000
ten years ago. The industry and the economy
also potentially benefit from return customers. Based on
research from Royal Caribbean of other ports, once a passenger
visits a port, 25-30 percent will return for a 7-10 day visit in the next 2-3
years.
New Developments /
Related Issues
Passenger
Ship Terminal Improvements
The
New York City Passenger Ship Terminal, located between 47th and 53rd Streets on
piers 88, 90, and 92, was constructed in the 1930's and renovated in the 1970's
by the Port Authority of New York and New Jersey. In 1997 the New York City Economic Development Corporation
assumed ownership of the piers, and entered into a 10-year lease with P&O
Ports. The piers also serve as a venue
for trade shows when cruise ships are not docked.
On
January 15 the Economic Development Corporation announced $50 million in
improvements to the Passenger Ship Terminal on the West Side of Manhattan. These improvements include installation and
upgrades to stairways, escalators and elevators, taxi stands, and heating
system. Signage and safety improvements
will also be made.[6]
Related
Issue: Need for Sufficient Capital
Funds
Approximately
$23 million of the $50 million announced are improvements provided for in the
New York City capital budget for fiscal year 2003. Repairs and renovations sufficient to render the PST operable for
many years could cost as much as $600 million.[7]
Enhancements
to Brooklyn Pier 7
Because
of the growth of the cruise industry in New York, long term infrastructural
repairs necessary for the Passenger Ship Terminal to remain functional, and the
impending arrival of the Queen Mary II--a cruise ship so large it would not fit
in the Passenger Ship Terminal's berths--Carnival Corporation coordinated
several cruise lines active in New York to form the New York Cruise
Alliance. The Alliance approached EDC
with a proposal to construct a new terminal on Pier 7 in Brooklyn.[8] The project would construct a 1,000-car
garage and terminal that would act as a conference center and support two new
berths that could serve boats displaced while the PST was being renovated and
handle future growth. Pier 7 is 1,300
feet long, and unlike the PST could accommodate the QMII, which is 1,150 feet
long.[9] Carnival advanced this proposal in 2001,
but it was stalled by September 11th and the change of mayoral
administration.
Related
Issue: City’s Share of the Capital Cost
The
total capital expense of the project is expected to be around $100 million
dollars. Carnival is looking toward the
City to contribute as much at $25 million for infrastructural work, but has
indicated a willingness to negotiate, and would cover the rest of the costs
themselves.
Related
Issue: Prolonged Decision-making
Process; Delayed EDC Study
Over
the past two years, Carnival has continued to lobby for the City to commit to
the project, but no agreement has been reached. EDC is in the process of conducting study of the cruise industry
in New York City and any decision regarding Pier 7 will come after its
completion. While the study was
expected to be released in the fall of 2003, it is still not available.[10]
Related
Issue: Expiration of Lease for Piers
6-12
Concurrent
to EDC's cruise study, Port Authority and EDC are conducting a study of
alternate uses of Piers 6-12 in Brooklyn.
No decisions have been made regarding any future use of the area. The current tenant's lease will expire in
April of 2004. There has been no
indication from the Port Authority that they expect to continue their lease
with American Stevedoring, who could operate the stevedoring operations for a
cruise terminal, nor any sign that they are entertaining offers from other
potential tenants.
Terminals
in Bayonne
On
December 19, 2003, Royal Caribbean Cruises, Ltd. signed a letter of agreement
with the Bayonne Local Redevelopment Authority to construct and operate a
cruise terminal on the site of the 430 acre former Bayonne Military Ocean
Terminal. This terminal will serve as
seasonal homeport for two ships, including the 3,114 passenger Voyager of the
Seas and the Nordic Express, coming to the New York area for the first time in
May of 2004. The site will be connected
to PATH and Amtrak trains by light rail, taking passengers to Newark Airport,
and passengers will be shuttled by ferry from Manhattan.[11]
Related
Issue: New York Loss of Market Share to
New Jersey
While
Carnival remains New York's largest cruise line, Royal Caribbean shares a
significant portion of the market, with 14% of all passengers in 2000.[12] Royal Caribbean’s move to Bayonne
represents a short-term setback and perhaps a long-term lost opportunity for
linking the growth of the New York City
economy with the expanding presence of a prestigious company in the cruise line
industry. Creating a foothold across
the water in Bayonne may set the stage for a competitive market.
Related
Issue: Opportunity Cost from Losing
Royal Caribbean to New Jersey
As
for a ship the size of the Voyager, operating expense and provisioning amount
to over $1 million per call. This
includes food and supplies, fuel loading, and all fees and taxes. Port costs alone, which are completely lost
when a boat docks in New Jersey rather than New York, come to approximately
$140,000 per landing. This $1 million
number is exclusive of hotel nights, Broadway tickets, taxi rides, restaurant
meals, hotel rooms, and other spending that would also be generated by the
Voyager’s presence in New York City.
Given
that 26 percent of cruise passengers fly to New York City, if Bayonne becomes a significant terminal, Newark
Airport will siphon off flights from JFK and LaGuardia airports. The taxi, limo, and hotel industries would
also be impacted by a cruise line market transplanted to Bayonne, since forty
percent of cruise ship passengers take a taxi or limo to West Side terminal and
12 percent stay overnight in a hotel.
Conclusion
The
committees will explore the decision making process following proposals to
renovate the Passenger Ship Terminal and construct a new cruise terminal on
Pier 7 in Brooklyn. Delays in City
action concerning these proposals have prevented an agreement regarding any
developments through the end of 2003, save the commitment made by Royal
Caribbean in December to move operations to Bayonne, NJ from New York. The committees are concerned that New York
will lose more lines to New Jersey if EDC continues to delay action, and want
to ensure that the Council has a complete understanding of the economic
significance of such a loss.
Appendix
1
Predicted
Employment and Economic Output Growth Generated by Construction, Operation, and
Trade Show Use of Brooklyn Pier 7 Cruise Ship Terminal
(all figures in 2001 dollars)
|
Activity |
Increase in New York State Economic Output |
New York State Jobs Generated |
Increase In New York City Economic Output |
New York City Jobs Generated |
Increase in Brooklyn Economic Output |
Brooklyn Jobs Generated |
|
Design and
Construction of $95 million Terminal at Pier 7 |
$76.4 million |
721 person years
of additional employment |
$63.1 million |
536 person years
of additional employment |
$10.3 million |
108 person years
of additional employment |
|
$61.4 million in
direct spending in 2008 expenditures due to additional cruise industry
economic activity will generate** |
$103.2 million |
844 full-time
equivalent jobs |
$96.7 million |
753 full-time equivalent
jobs |
$42.4 million |
403 full-time
equivalent jobs |
|
Spending by out of
town visitors to Pier 7 when being used as a venue for trade shows and
exhibitions would generate*** |
$100.6 million |
1321 full-time
equivalent jobs |
$67.0 million |
893 full-time
equivalent jobs |
$30.2 million |
460 full-time
equivalent jobs |
|
Tax and Fee
Revenue |
$6.4 million |
|
$7.4 million |
|
|
|
**Including spending on services related to the arrival and departure of ships; local purchasing of provisions by cruise lines; spending by passengers; and spending by crew members while they are in port
*** Total attendance, including local residents and day-trippers, is expected to total appx. 200,000 in 2008
Source:
"An Assessment of the Economic Impact of the Proposed Pier 7 Cruise Ship Terminal," completed by Appleseed for the New York Cruise Alliance (January 2003).
Appendix 2
Cruise
Passenger Embarkations at the Port of New York, 2000
|
Carnival* |
102,734 |
33% |
|
Celebrity |
80,528 |
26% |
|
Cunard &
Seabourn* |
18,987 |
6% |
|
Holland America* |
3,617 |
1% |
|
Norwegian |
|
0% |
|
Premier |
15,120 |
5% |
|
Princess |
20,220 |
7% |
|
Regal |
21,185 |
7% |
|
Royal Caribbean |
43,452 |
14% |
|
Other |
3,500 |
1% |
|
Total |
309,343 |
100% |
*subsidiaries of Carnival Corporation
Source:
"An Assessment of the Economic Impact of the Proposed Pier 7 Cruise Ship Terminal," completed by Appleseed for the New York Cruise Alliance (January 2003).