Ogden Point Cruise Market Assessment

August 16, 2012

Bermello, Ajamil & Partners

Deployment

Alaska

4 Caribbean

1 Mediterranean

2

N. Europe

3

Mexico West

5

Sources: CLIA, PSA, B&A, 2009

Since 1995, worldwide passenger levels have tripled

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 09 10 11

Pa

sse

ng

ers

('0

00

)

Asia Europe North America

Growth

RCCL, 24%

NCL, 7% MSC, 7%

Carnival Corp, 48%

Others, 14%

Source: Cruise Industry News , B&A, 2012

Lines

Success factors

• New products that generate sustained interest; – New, exciting vessels, diverse on-board products and services – New regions, itineraries and on-shore product offerings

• Converting land-based 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.

Regulatory

• Emission Control Areas – Impacts on fuel consumption

– Modified speed & distance

• Passenger Services Act – Seattle sailings require a far foreign port

– Victoria thrives on this regulation

– Is there potential for this to disappear long-term?

• Environmental Policy and Monitoring – Alaska monitoring & costs – tied into fee and fares

– Victoria cruise emissions, noise and traffic issues

• Address these issues pro-actively and positively to meet the needs of the community and insure growth of the industry

World cruise growth, 2011- 2037

40,021,527

50,434,483

19,072,859

61,745,591

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

Pa

sse

ng

ers

Low Medium High

North American growth, 2000 - 2037

6,900,000

18,195,679

22,888,402

12,228,920

27,581,126

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

Historical Low Mid High

NA market growth – Low - 2%, mid – 3.5%, High – 5%

Re

gio

nal

gro

wth

Alaskan cruise region

• Pacific Northwest, Western Canada (BC) and the Alaskan Coast

• Influenced by Hawaii, Pacific Coastal, Trans-Pacific, World, etc.

• Mainstay of North American summer market offerings – Competes with Med., Baltic & CNE

– Big 3 – Ketchikan, Juneau and Skagway

• Seattle and Vancouver primary feeders

• Victoria – significant for PSA requirement (Seattle market)

• Secondary ports – retain small ship, adventure, repositioning and conflict call status

Alaska growth factors

• World economy (short-term)

• Regulatory and environmental issues (mid to long-term)

• Alaska fees (short-term)

• Seattle and Vancouver berth expansion (mid- to long-term)

• POC berthing (mid to long-term)

• Fuel Costs (mid- to long-term)

• Airlift & hotel infrastructure (long-term)

• Panama Canal widening (long-term)

• New competitive markets (mid- to long-term)

• European entry into Alaska (mid- to long-term)

Alaska growth , 2000 - 2037

633,510

1,716,630

1,945,514

888,995

2,174,398

0

250,000

500,000

750,000

1,000,000

1,250,000

1,500,000

1,750,000

2,000,000

2,250,000

2,500,000

Historical Low Mid High

NA market capture – Low - 7.5%, mid – 8.5%, High – 9.5%

Tra

ffic

ge

ne

rati

on

Passenger throughput, 2000 - 2012

53,276

475,176

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Victoria Vancouver Nanaimo Prince Rupert Seattle

Victoria growth – 10 yrs. - 27.2% per annum / 5 yrs. – 4.9% per annum

Seattle growth – 10 yrs. – 37.4% per annum / 5 yrs. – 1.8% per annum

Traffic to and From Victoria, 2008 - 2012

PORT 2008 2009 2010 2011 2012 AVG.

From Ketchikan 118 103 122 111 125 116

From Skagway 28 26 56 51 71 46

From Juneau 3 49 21 10 0 17

From Ketchikan 55.7% 45.2% 53.3% 52.9% 54.6% 52.3%

From Skagway 13.2% 11.4% 24.5% 24.3% 31.0% 20.9%

From Juneau 1.4% 21.5% 9.2% 4.8% 0.0% 7.4%

To Seattle 143 176 187 160 193 172

To Vancouver 25 22 22 23 14 21

To San Francisco 18 19 7 15 14 15

To Seattle 67.5% 77.2% 81.7% 76.2% 84.3% 77.4%

To Vancouver 11.8% 9.6% 9.6% 11.0% 6.1% 9.6%

To San Francisco 8.5% 8.3% 3.1% 7.1% 6.1% 6.6%

Cru

ise

lin

e f

ee

db

ack

and

SW

OT

Key cruise line feedback

• Provides marquee value (may not be same through NA)

• Most lines prefer more hours in port (itinerary/market issues) – Need a strong complement of Alaska ports

– Distance / speed requirements are constraints

• Victoria consistently delivers as a port of call – Offers a great deal of high end touring options

– Lines prefer full day calls as they are better from a guest perspective

• Many lines would not call in Victoria if PSA was rescinded

• Most lines foresee no change in respect to ECA for the region

• It is a good idea to supplement the current shuttle buses to reduce the strain on the community – Water taxi concept linking Ogden Point with the downtown area

• As ships have become larger, port can now only accommodate 3 large ships at one time

Opportunities and Challenges

Strengths Weaknesses

Historic Alaska cruise offerings

Fit with a variety of cruise brand philosophies

Excellent infrastructure space (berths and uplands)

Marquee port (western US?)

POC requirement due to PSA

High quality services

Limited local consumer market

Speed & distance issues for Alaska calls

Geographic location

Tied to Seattle success via PSA

Success of NA cruise brands

Continuing growth of European cruise brands

Alaska issues with taxes and regulations

Development of Ogden Point as a destination

Redevelopment of transportation system

Port congestion on peak days (berth demand)

ECA regulations highlighting fuel costs

World cruise market competition

PSA rescinded

Local community concerns (social / environmental)

Opportunities Threats

Vic

tori

a

GVHA passenger throughput, 2000 - 2012

53,276

475,176

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

5 year per annum – 7.6% 10 year per annum – 19.5%

Victoria market capture, 2000 - 2012

8.4%

16.8%

23.3%

32.1% 35.6%

46.0% 51.5%

53.5%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

5-year avg. – 48.6%

2012

Celebrity, 10.0%

Princess, 22.7%

RCI, 7.0% CCL, 7.9%

DCL, 6.6%

HAL, 24.9%

NCL, 17.5%

5 Others, 3.5%

Carnival Corp – 55.5% (HAL, Princess, CCL)

RCCL – 17% (RCI, Celebrity)

NCL – 17.5%

GVHA cruise calls, 2000 - 2012

45

229

0

50

100

150

200

250

GVHA cruise pax per call, 2000 – 2012

1,184

2,075

0

500

1,000

1,500

2,000

2,500

Fore

cast

ing

Forecast methodology

• World forecasts

• Market capture of NA

• Market share to Alaska

• Market share to Victoria

GLOBAL

NA

ALASKA

VICTORIA

Preliminary projection overview

• Projections anticipate that the cruise industry will continue to follow fundamental positive trends – Forecast methods and various assumptions inherent in each incorporate

our best interpretation of demand and supply

• Projections are un-constrained in nature and do not take into account the potential berth capacity, utilization or other limiting factors of Victoria or downstream ports (scenario 3 exception)

• Conducted separate projection models – Trend regression, regional market capture, Seattle berth capacity

– 3 Scenarios based on cruise line trends and opportunities • Scenario 1 - considers SEA/VAN berth capacity and additional new berths

• Scenario 2 considers capacity based upon revision of PSA

• Scenario 3 - provides constrained outlook: no new berths in Victoria

Cruise passenger projection range, 2004 - 2037

948,128

804,711

475,176

1,104,584

649,559

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Cru

ise

p

ass

en

ge

rs

Historical Market Composite Likely Composite

Deployment 1 Deployment 2 Seattle Berth Capacity

Constrained 3 Berths

Likely composite - 2.8% per annum

1,888 2,075

2,624

3,064

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Pa

sse

ng

ers

pe

r sa

ilin

g

Passengers per sailing, 2004 - 2037

1.6% Annual Growth

Cruise call projection range, 2004 - 2037

309 330

229

111

276

0

50

100

150

200

250

300

350

400

450

Cru

ise

C

alls

Historical Market Composite

Likely Composite Deployment 1

Deployment 2 Seattle Berth Capacity

262,462

475,176

649,559

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Pa

sse

ng

ers

Historical Scenario 3

4

2013

5

2018

Constrained Victoria berth scenario, 2004 - 2037

Scenario adds no new berths (demand outstrips capacity)

Growth primarily through vessel capacity increases

1.5% growth

Future berth demand

• Peaking causes berth demand issues – Thu – Sat berth demand issue in all scenarios (manage calls in peak months)

– Develop 4th berth in conjunction with Seattle (or soonest) with a 5th berth demand in 2018 (based upon likely scenario)

• Berth demand is likely for 4 berths into the future with management of berths – Larger vessel deployments likely in region (Solstice in 2013)

– Need for facility to accommodate vessels with berth length of 330 meters

• Berth and passenger demand drives development phasing and requirements for master planning

Mo

vin

g f

orw

ard

Recommendations

• Berths – There is a likely need for a 4th berth soonest

• Management of berth assignments is required into the future

– Future infrastructure should accommodate 330-m., 150,000 GT, 3,000 plus passenger vessels

• Terminal and uplands – Incorporate combined CBSA into Ogden Point

– Master Plan should further develop upland layouts for GTA, passenger and vehicle movements

Recommendations

• Address community issues through planning process – Traffic movement and noise considerations

– Use alternative modes of movement – via water, etc.

– Use master planning process to separate cruise operations from community via technological mitigation

– Education, management and cooperation of owner and stakeholders

• Victoria Marketing efforts – Develop NA consumer market – build the knowledge base of Victoria

– Join forces with Victoria and BC tourism

– Continue cruise line efforts and strengthen relationships

– Focus on new opportunities - European brands / Asian (long-term)

Recommendations

• Planning – Where does cruise fit in the overall waterfront plan?

• Should be the primary driver of future development for Ogden Point

– Master Planning next steps

• Layout alternatives

• Cost / Benefit analysis

• Financial assessment of alternatives (ROI)

• Financial and phasing plan

• Funding

• Management and operations planning

Comprehensive approach

CRUISE LINES AND

ASSOCIATED

SERVICE PROVIDERS

ATTRACTIONS & SITES

TOURISM

INFRASTRUCTURE:

AIRPORT,

HOTEL,

TRANSPORTATION

CITY / COMMUNITY

PORT Plan:

Focus on Delivery of the Destination

Ogden Point Cruise Market Assessment

August 16, 2012

Bermello, Ajamil & Partners