Current Trends & Considerations in Cruise …

1 By: Coastal Systems International, Cruise industry has experienced incrediblegrowth over the past three decades,expanding at an annual rate of with the strong overall growth ofthe industry, the Cruise lines are addingsignificant vessel capacity - reported to include23 new vessels by the end of 2014. Thecurrent generation of newbuild ships willprovide the largest Cruise ships built to date,including the Carnival Magic(3,652 PAX),Norwegian Epic(4,100 PAX), and the RoyalCaribbean Allureand Oasis of the Seas(5,400 PAX) (Source: CLIA, 2008 & 2010). The Cruise industry's growth is generatingconsistent demand for new berths. Cruisedestinations are also evolving significantly,expanding from basic pier structures to comprehensive day destinations withentertainment, retail, and dining facilities. TheCaribbean region - long the world's largest andmost economically important Cruise market - ispoised to continue capturing the majority ofglobal Cruise passengers; however, asignificant expansion of port and tourismcapacity will be required to accommodate theburgeoning Cruise demand.

2 The typical Cruise ship carrying 2,550passengers and 480 crew membersconservatively generates over USD $285,000in passenger and crew expenditures during asingle port-of-call visit (Source: BREA, 2009).Based on these significant operationalrevenues, Cruise destination developers andthe Cruise lines have been successful insecuring financing for large-scale, multi-milliondollar development projects. This volume of Perspective reviews currenttrends in Cruise destination development anddelineates important developmentconsiderations that must be addressed in theearly stages of project design and Trends & Considerations in CruiseDestination DevelopmentVolume 6 Smaller Cruise ports such as Roatan, Honduras, which occupies approximately 2 hectares of lands reclaimed from theseabed, are used as embarkation points for a variety of shore TrendsDeveloping Cruise destination infrastructurecan require a significant investment in termsof land acquisition and infrastructuredevelopment.

3 Costs for basic piers andassociated marine works can vary between$USD 10M-40M, and total development costsfor large Cruise destination ports such asFalmouth in Jamaica that recently opened inMarch, 2011 were reported to be $USD Cruise industry has been trending towardthe design and construction of comprehensivedestination developments - whereby investorscan finance the basic capital costs for cruiseinfrastructure based upon the long-termcapture of significant operational revenues(associated with shore excursions, leasing ofcommercial and retail space, and in someinstances the sale of residential units). The Cruise lines themselves are increasinglyinvesting in port destination facilities, asevidenced by Royal Caribbean International'srecent investment in the Falmouth, Jamaicaand Roatan, Honduras Ports; Carnival CruiseLine's investment in Grand Turk, TCI;Norwegian Cruise Line's investment in itsprivate island at Great Stirrup Cay, Bahamas;and multiple other port and private islanddestinations throughout the world.

4 Given the trend toward larger ships that canaccommodate 3,000+ passengers, the cruiselines have expressed a preference for ports ofcall with a pier structure to facilitate the rapidoffloading/onloading of the increasingly greaternumbers of passengers who visit foreign portfacilities. Where fixed piers are not viable (dueto physical or economic constraints), a high-efficiency vessel tendering operation providesan alternative mechanism to accommodatemovement of high volumes of market is also trending toward thecreation of authentic ports of call that capturethe history and local culture of a cruisedestination - this is particularly evident in thenewly opened Falmouth, Jamaica Port whichincorporates the history of the town ofFalmouth into the port promotional materialsand shore excursions. The revitalization of theFrederiksted waterfront in St.

5 Croix, Islands, provides another example of anexisting waterfront town that has beenredeveloped to support Cruise -based tourismand also appeal to local residents. These"authentic" ports can either integrate within anexisting town or be located adjacent to anestablished population center; however, thesetypes of port facilities require adequate landspace to accommodate the infrastructure andamenities to support and entertain thousandsof visitors on a daily basis. The next generation of Cruise vessels, such as RoyalCaribbean International s Genesis Class, will requirelarger port facilities capable of accommodating upwardsof 3,000 passengers per vessel revitalization of the Frederiksted waterfront in , USVI, created an authentic and attractive visitorexperience at the Ann E. Abramson Cruise architectural design elements of the waterfront arereflective of the history and culture of the town.

6 Project Siting ParametersNew Cruise destinations should ideally be locatedalong existing Cruise navigational corridors - tomaximize the opportunity to draw multipleoperators and vessels to the port facility. Cruiseports are optimally located adjacent to deepwater, given the significant depths required tosupport deep-draft Cruise vessels, which can drawmore than 10 meters (33 feet). Cruise portsshould also be located in semi-protected orsheltered areas to facilitate operations insuboptimal weather conditions including times ofmoderate wind and wave activity. For Cruise portscontemplated in more exposed areas, a variety ofengineering and design options exist to providefor safe mooring conditions. These options mayinclude dredging, land reclamation, breakwateror jetty structures, creation of piers with internalwave attenuation devices, and other the industry trend toward larger ships,prospective Cruise destination developers shouldalso consider the feasibility of pier construction inthe overall development program.

7 Existing cruisepiers located in the Caribbean and throughout theworld are generally less than 600 meters inlength (2,000 feet); however, to minimizeconstruction costs of an extended pier structure,potential project sites located within significantlycloser proximity to deepwater (within 300 metersof the 10 meter depth contour) would beconsidered more ideal for pier construction. In terms of identification of appropriate tracts ofreal estate to support Cruise destinationdevelopment, typical Cruise ports in the Caribbeanoccupy a minimum land area of approximately 2hectares (for a pier structure accompanied by abasic arrival facility to facilitate offloading toshore excursions, such as Castries, Saint Lucia;Roatan, Honduras; or Nassau, The Bahamas). Cruise ports increase in size to approximately 4hectares for more comprehensive facilities (suchas Cozumel, Mexico), and can occupy greaterThe marina basin at Norwegian Cruise Line s GreatStirrup Cay private island destination provides berthingfor multiple tender vessels - providing a safe tenderingsystem in a protected basin that can accommodatelarge volumes of Cruise passengers.

8 The daydestination (including beach and recreationalamenities) is located immediately adjacent to thetender of an appropriate development site for acruise project requires consideration of multipleaesthetic, physical, environmental, regulatory, andfinancial factors. Sites should ideally be located withinclose proximity to deep water and established cruisecorridors. than ten hectares when multipleentertainment venues are incorporated (suchas Carnival's port in Grand Turk, TCI or theprivate island destinations prevalent in theBahamas). Given the significant appreciation that wouldbe anticipated to occur in real estatesurrounding the Cruise destinationdevelopment, developers should seek tocapture as much surrounding real estate aspossible (in addition to the basic tract of landrequired for onloading/offloading operations)to optimize the return generated by thedevelopment project in the mid to long-term.

9 Predevelopment ActivitiesThe following pre-development activities aretypically required to position these projects as"turn-key" - ready for presentation toqualified investment entities for receipt ofsenior debt or equity implementation funding:Detailed Property Mapping, includingcompletion of boundary surveys, capture ofhigh-resolution aerial photography, andpreparation of topographic and Geotechnical Analysis, toprovide structural design criteria for cruisepier and any associated dredging or filling ofthe seabed (if required).Coastal Engineering Analysis, to provideplanning and structural design criteria forcruise pier and upland Impact Analysis, to identifyimpacts and mitigation required and serve asprecursor to preparation of finalEnvironmental Impact Assessment (EIA)which will likely be required as a componentof project site surveying (both physical and environmental)is needed to generate a basemap for the potentialproject site - which will provide the basis for landplanning and engineering design.

10 The use of LIDAR laser-based remote sensing provides a cost-effectivemechanism to map large areas of marine geotechnical investigation is oftentimesrequired to confirm a project site s suitability toaccommodate Cruise pier structures and any requireddredge/fill operations. A jack-up barge is typicallyutilized as a stable platform for offshore Feasibility Evaluation, to definethe regulatory approval process and provide afeasibility assessment regarding the likelihoodof securing relevant permits and entitlementsat the political, administrative, and Planning and Architectural Layout,to provide a "project vision" for presentation toinvestors and to identify upland real estatecomponents for inclusion in the Pier and Site/Civil EngineeringDesign, to provide construction documents forscheduling/costing of Financial Proforma,summarizing project costs and revenuestreams and Return on Investment (ROI).