Ogden Point Cruise Market Assessment

August 16, 2012

Bermello, Ajamil & Partners Deployment

N. Europe 4 3 Caribbean 5 2 1 Mediterranean Mexico West Growth

20,000

18,000

16,000

14,000

12,000 ('000) 10,000

8,000

Passengers Passengers 6,000

4,000

2,000

0 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 09 10 11

Asia Europe North America

Since 1995, worldwide passenger levels have tripled Sources: CLIA, PSA, B&A, 2009 Lines

Others, 14% RCCL, 24% Carnival Corp, 48% NCL, 7% MSC, 7%

Source: Cruise Industry News , B&A, 2012 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 – 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

70,000,000

61,745,591 60,000,000

50,000,000 50,434,483

40,000,000 40,021,527

30,000,000 Passengers

20,000,000 19,072,859

10,000,000

Low Medium High North American growth, 2000 - 2037

30,000,000 27,581,126 25,000,000 22,888,402

20,000,000 18,195,679

15,000,000

12,228,920 10,000,000

6,900,000 5,000,000

0

Historical Low Mid High

NA market growth – Low - 2%, mid – 3.5%, High – 5% Regional growth Alaskan cruise region

, Western (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 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

2,500,000

2,250,000 2,174,398 2,000,000 1,945,514

1,750,000 1,716,630 1,500,000

1,250,000

1,000,000 888,995 750,000 633,510 500,000

250,000

0

Historical Low Mid High

NA market capture – Low - 7.5%, mid – 8.5%, High – 9.5% Traffic generation Passenger throughput, 2000 - 2012

Victoria growth – 10 yrs. - 27.2% per annum / 5 yrs. – 4.9% per annum 1,200,000

1,000,000

800,000

600,000 475,176 400,000

200,000 53,276 0

Victoria Vancouver Nanaimo Prince Rupert Seattle

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 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% Cruise line feedback and SWOT 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  Limited local consumer market  Excellent infrastructure space (berths and uplands)  Speed & distance issues for Alaska calls  Marquee port (western US?)  Geographic location  POC requirement due to PSA  Tied to Seattle success via PSA  High quality services

 Success of NA cruise brands  Port congestion on peak days (berth demand)  Continuing growth of European cruise brands  ECA regulations highlighting fuel costs  Alaska issues with taxes and regulations  World cruise market competition  Development of Ogden Point as a destination  PSA rescinded  Redevelopment of transportation system  Local community concerns (social / environmental)

Opportunities Threats Victoria GVHA passenger throughput, 2000 - 2012

500,000 475,176 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 53,276 0

10 year per annum – 19.5% 5 year per annum – 7.6% Victoria market capture, 2000 - 2012

80.0% 70.0% 60.0% 53.5% 50.0% 51.5% 46.0% 40.0% 35.6% 30.0% 32.1% 23.3% 20.0% 16.8% 10.0% 8.4% 0.0%

5-year avg. – 48.6% 2012 Carnival Corp – 55.5% (HAL, Princess, CCL) RCCL – 17% (RCI, Celebrity) NCL – 17.5% 5 Others, 3.5%

NCL, 17.5% Celebrity, 10.0%

HAL, 24.9% Princess, 22.7%

DCL, 6.6% RCI, 7.0% CCL, 7.9% GVHA cruise calls, 2000 - 2012

250 229 200

150

100

50 45

0 GVHA cruise pax per call, 2000 – 2012

2,500

2,000 2,075

1,500 1,184 1,000

500

0 Forecasting Forecast methodology

• World forecasts GLOBAL

• Market capture of NA

NA • Market share to Alaska

• Market share to Victoria 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

1,200,000 1,104,584 1,000,000 948,128 800,000 804,711

passengers 649,559 600,000 475,176

Cruise 400,000 Likely composite - 2.8% per annum 200,000

0

Historical Market Composite Likely Composite Deployment 1 Deployment 2 Seattle Berth Capacity Constrained 3 Berths Passengers per sailing, 2004 - 2037

3,500

3,000 3,064

2,624 2,500 1.6% Annual Growth 2,000 2,075 1,888 1,500

1,000

Passengers per sailing 500

0 Cruise call projection range, 2004 - 2037

450 400 350 330

300 309 276 250 229 200

Cruise Calls 150 100 111 50 0

Historical Market Composite Likely Composite Deployment 1 Deployment 2 Seattle Berth Capacity Constrained Victoria berth scenario, 2004 - 2037

2013 2018 700,000 649,559 600,000 4 5 1.5% growth 500,000 475,176 400,000

300,000

Passengers 262,462 200,000

100,000

0

Historical Scenario 3 Scenario adds no new berths (demand outstrips capacity) Growth primarily through vessel capacity increases 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 Moving forward 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

TOURISM CRUISE LINES AND INFRASTRUCTURE: ASSOCIATED AIRPORT, SERVICE PROVIDERS HOTEL, TRANSPORTATION

PORTPlan: Focus on Delivery of the Destination

CITY / COMMUNITY ATTRACTIONS & SITES Ogden Point Cruise Market Assessment

August 16, 2012

Bermello, Ajamil & Partners