San Diego turning into cruise hot spot, but it has catching up to do

[Jason]

San Diego turning into cruise hot spot, but it has catching up to do

By Jennifer Davies,

Despite its scenic bay and proximity to Mexico, San Diego has long struggled to attract cruise ship lines to its port.

JOHN GIBBINS / Union-Tribune

Cruise passengers arrived in San Diego last weekend after a 7-day voyage down the Mexican coast.Not only were its facilities considered subpar, but the cruise lines also weren't sure there was enough demand to support additional ships beyond the traditional West Coast ports of Los Angeles and Long Beach.

But with the cruise industry growing rapidly – it plans to add a ship almost every two months through 2010 – San Diego is becoming a hot cruise destination.

It solidified that position this fall when Carnival Cruise Line said it would make San Diego the year-round port for its 2,052-passenger ship Elation, running four-and five-day cruises to Mexico. While San Diego has ships ported on a seasonal basis, the Elation is the first ship to be based here year-round, carrying an estimated 177,000 people on 78 voyages annually.

But the addition of the Elation is only part of the story. Since 2000, the number of cruise passengers coming through San Diego has increased almost 180 percent, rising from 186,452 passengers to 519,394 for this year.

By way of contrast, only 21,000 cruise passengers came through San Diego in 1996.

Rita Vandergaw, marketing director for the Port of San Diego, said cruise lines are finally realizing what the area has to offer – such as the potential for varied itineraries, ease of access and an attractive shoreline.

“San Diego is perfect for the cruise business,” Vandergaw said.

San Diego is also in many ways a beneficiary of the overall cruise industry's expansion. With the number of ships increasing dramatically, the cruise lines have had to move ships to new locations.

That fact, coupled with lower prices, has transformed cruising from a niche vacation for the rich to one that is available and appealing to a large swath of the population.

Still, San Diego faces fierce competition from ports on the East Coast that offer more diverse itineraries and from new port cities that have better facilities. For instance, San Diego must use a tent for passengers if there are more than two cruise ships, and its port is more than 80 years old.

JOHN GIBBINS / Union-Tribune

Taxis lined up to pick up passengers from the ship Oosterdam. Local hotels and restaurants get a boost from cruise visitors who spend time in San Diego.“Our cruise ship terminal is not first class. It's below average, and it does affect attracting cruise ships,” said Carl Winston, director of San Diego State's hospitality and tourism management program and a member of the port's cruise advisory board.

Terry Thornton, vice president of marketing planning for Carnival Cruise Lines, said his company was working with the port to upgrade its facilities, adding “San Diego has a little catching up to do.”

Millions of dollars in improvements are planned to alleviate those roadblocks to expansion over the next four years, Vandergaw said. The question is how to pay for them. In the coming year, the Port plans to spend between $10 million and $12 million on pier improvements and a temporary terminal.

Ideally, Vandergaw said, the Port would like to spend between $60 million and $130 million on long-term improvements that would include a new passenger facility, a ground transportation area as well as a parking facility and upgrades to the pier, which was originally built in 1922.

“Clearly, there are many obstacles we still have to overcome, including how do we finance and pay for this infrastructure,” Vandergaw said.

Those improvements could be critical in attracting more home-ported ships as the cruise industry continues a massive fleet expansion that it started about 20 years ago.

While going on cruises used to be considered only for older, well-heeled consumers, the industry has tried to create vacations and itineraries for every income and interest, said Heather Leisman, director of merchandising for Orbitz.

“You remember back to the Love Boat. That's what people thought about cruising,” she said.

Stanley Buchin, a professor at Boston University's School of Hospitality Administration, said Carnival was key in the evolution of the cruise industry as it started offering more affordable trips by dramatically cutting costs. He estimated that today a cruise line's costs are about half of what they were 20 years ago as the companies have improved their technology and built bigger ships, which are more cost-effective.

According to the Cruise Lines International Association, cruise ship capacity increased on average by 7.6 percent a year between 1981 to 2005.

Demand so far has kept pace with supply as the number of people who take a cruise has climbed from 1.4 million in 1980 to almost 9.7 million in 2005.

Robert Simonson, an analyst who covers the cruise industry for William Blair & Co., said the industry will continue to grow because of its high satisfaction rate of almost 95 percent and still relatively low penetration rates.

“It's one those 'Try it, you'll like' scenarios,” Simonson said.

The recent increase in passengers has largely been fueled by the cruise industry's expansion into new home ports such as Galveston, New Orleans and Seattle.

By offering cruises leaving from various locations, the industry has made taking a cruise more affordable and convenient, an important consideration especially after the 9/11 terrorist attacks, said Terry Dale, president and CEO of Cruise Line International Association. Now, 75 percent of the U.S. population lives within a four-hour drive of a cruise ship port.

“With the whole home-port phenomenon, the industry has brought cruising to everyone's backyard,” Dale said.

Thornton estimated that about 30 percent of the passengers for the Elation will be from within a five-hour drive of San Diego. While Carnival has long run year-round cruises out of Los Angeles and Long Beach, Thornton said, the company found that there is a large segment of the Southern California market who would rather leave from San Diego than the other two ports.

But California ports still face fierce competition from their East Coast and Gulf Coast counterparts.

Florida, with ports in such traditional hubs as Miami and Port Canaveral, has more than 55 percent of all U.S. embarkments. But its percentage of total embarkments was down almost 10 percent from 2003 to 2005 as more cruise ships moved to new ports.

Texas, with ports in Galveston and Houston, has had the highest rate of growth in embarkment increasing at an average rate of 30 percent. Galveston is now the fifth-largest port for passenger embarkment while San Diego ranks 12th in the United States.

Buchin said San Diego is at a slight disadvantage in that cruises to the Caribbean continue to be more popular than those to Mexico. Miami became a cruise hub because the various Caribbean islands provided the perfect distance for a variety of cruises.

Still, Vandergaw said San Diego has a number of options, including cruises to Mexico, the Sea of Cortez and Hawaii.

David Peckinpaugh, CEO of the San Diego Convention & Visitors Bureau, said the region has to be aggressive in attracting more cruise ships because they are a boon to the local tourism economy. When ships leave out of San Diego, instead of just stopping for a port of call, it helps hotels, restaurants and local attractions. “We definitely view the cruise industry as a vital cog in our tourism industry,” he said.

[jtutak]

Port Webcam http://live6.truelook.com/face/newface.jsp...overlay=default

[JoeyandDavid]

San Diego is a wonderful embarkation point we have sailed out of there only once, but it was a wonderful experience. The proximity to the airport to Amtrak Stop to the freeway makes it just a nice option for us from Los Angeles

[Suzila]

We haven't sailed out of there as a launch point, but we have stopped there a number of times. I like the idea you can get right off the ship and the trolley to take you around town is close by. Plus, we have family and friends who live there, so it's always a nice place to stop.