Slow recovery and Mexico's woes take toll on San Diego cruising

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Mexican Riviera's challenges

The Port of San Diego’s Cruise Market Update included input from key cruise line decision-makers on challenges in the Mexican Riviera market. Below is a sample of those anonymous comments:

• “Violence is keeping people away (Mazatlan).”

• “Mexico offers very low ticket revenues.”

• “Itineraries require high speeds and high fuel consumption to get to any interesting ports.”

• “A port halfway down Baja that is purpose-built would be a big help, as passengers view Mexico as a ‘been there and done that’ option.”

A stubbornly slow economic recovery and consumers’ concerns about crime in Mexico have conspired to wreak havoc on the Port of San Diego, which as recently as three years ago was serving almost a million cruise passengers per year.

This year’s volume is expected to be about a third of that, and a recent report suggested that relief would not come quickly.

At a Sept. 13 meeting, members of San Diego’s Board of Port Commissioners were told that cruise industry recovery there would not begin until 2015, and it could be another 10 years after that before passenger volume returned to 2008 levels.

The bad news came in the form of a report titled “The San Diego Unified Port District Cruise Market Update,” which had been compiled by a Miami-based planning consultant.

The report’s authors placed the blame for the port’s woes on California’s prolonged economic downturn and public perceptions about crime in Mexico.

If San Diego cruising is to rebound, the report’s authors asserted, the port will have to wait out Southern California’s economic recovery, while the Mexican Riviera, long the mainstay of cruise itineraries from San Diego, will need to create new port destinations that are “untarnished by violence.”

Cruise passengers coming through the port of San Diego peaked in 2008, with more than 916,000 passengers on 254 sailings; this year the volume is estimated at 307,000 on 104 sailings, a drop of about 65%.

Projections indicate that passenger volume could reach 500,000 in 2018, 800,000 in 2025 and could perhaps again approach 1 million in 2030.

The report estimated that passenger volume will hit its lowest point — 200,000 —in 2012 because two ships are scheduled to pull out of the market next spring.

Holland America Line today has a 60% market share, by passenger berths sold, for San Diego sailings and represents the lion’s share of the port’s capacity. The cruise line has announced it will redeploy the 1,926-passenger Oosterdam, which currently operates Mexican Riviera itineraries, to Australia.

Carnival Cruise Lines has the second-largest presence in San Diego, with the 2,500-passenger Carnival Spirit operating Mexico and Hawaii cruises this winter. That ship also is being redeployed next April, first to Alaska and Hawaii, then to Australia. Together, the two ships account for about 250,000 passengers a year: 187,000 sailing on the Oosterdam and about 67,000 on the Spirit.
San Diego cruise port
Last year, Carnival repositioned the 2,000-passenger Carnival Elation from San Diego to Mobile, Ala., a move that was seen as the first big blow to the port.

The impact of further reductions in San Diego cruising could be economically significant; the port estimates that every roundtrip sailing from San Diego contributes $2 million to the local economy.

Ship redeployments away from Southern California also affect local and regional travel agents, who no longer can offer as many homeport cruises.

Gerry Eide, who opened a Cruise Planners franchise in San Diego in 2005, is among the agents who are feeling the impact.

Recalling the boom years, Eide said, “A lot of people wanted to jump on a ship in their homeport. They didn’t want to fly if they could help it.” Mexican Riviera cruises, she said, constituted at least one-third of her bookings.

That has all changed now.

“I’ve had many clients say to me that they don’t want to go to Mexico,” Eide said. “People who were booked ended up canceling. … I’m probably doing half the business I was doing a few years ago, and that’s mostly because of the Mexico perception.”

Eide traveled with her son to the Mexican Rivera last January, to Mazatlan, and walked the seven miles to the city’s so-called Golden Zone of shops and hotels.

“We had no problem, and we didn’t see any problems,” she said, adding that she planned to return to Mexico in October, aboard the Oosterdam.

But this time the ship won’t be calling at Mazatlan. Like other lines, Holland America Line decided early this year to replace the port call with two days in Puerto Vallarta or additional time in Cabo San Lucas, said HAL spokeswoman Sally Andrews.

“Discussions are continuing with the Mexican government and local officials in Mazatlan to determine the appropriate time to resume port calls there,” Andrews said.

The report drew a comparison between the issues plaguing the San Diego port and the ones that hampered Cartagena, Colombia. The walled city on a peninsula had been insulated from mainland Colombian violence and drug issues, the report said. In the late 1990s its cruise business began to grow, but in 2001 and 2002, visitors to the destination by air and sea plummeted after the U.S. State Department issued travel warnings.

By 2003, it had lost 75% of its cruise passenger base and saw no recovery until 2007. This year, the Cartagena port expects a passenger volume of 350,000, just slightly more than San Diego, but the majority of visitors will be South Americans and Europeans, the report noted.

The San Diego report does point to bright spots that will play into San Diego’s long-term recovery.

While it acknowledged that “all projections are driven by conditions in the Mexican cruise destinations and the overall state of the U.S. economy,” the report also noted that California provides the second-largest market of cruisers, behind Florida, and that cruise lines want to locate where their customers are.

San Diego has a strong drive market, the report noted, “with a number of customers coming from Arizona and New Mexico.” Additionally, San Diego offers a convenient “airport to seaport experience.”

Click to read the full report. Under Board Agendas, click “9/13 regular meeting,” then click Item 21.

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