Ogden Point Cruise Market Assessment August 16, 2012 Bermello, Ajamil & Partners Deployment N. Europe Alaska 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 – 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 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 • 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 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 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% 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.