Cruise lines leaving Houston high and dry as attention turns to Asia

The Port of Houston is losing both of its homeported ships
next year, a victim of a growing focus by North American cruise lines on
shifting deployments to Asia.

Both Norwegian Cruise Line and Princess Cruises have
announced 2016 schedules that do not include a ship sailing from Houston, where
western Caribbean itineraries are typically offered.

It is the most tangible fallout yet from the cruise
industry’s high interest in China, Australia and other Asian markets.

Brian O’Connor, vice president of public relations at
Princess Cruises, said the departure from Houston is the final domino in a
chain that started when the line moved the Sapphire Princess from Australia to
China. The China cruises were announced in 2013 and started in May 2014.

The redeployment of several ships ultimately led Princess to
move the Caribbean Princess from Houston to Fort Lauderdale in late 2016, where
it will still offer some western Caribbean routes.

But for Texas cruisers, the news means a reduced choice of
cruise lines and homeports. Following the moves, instead of five lines sailing
from the state, there will be three, and they will depart only from Galveston.

The change doesn’t sit well with Vic Freeland, a retired
firefighter who lives about 45 minutes from Austin and is a huge Norwegian
Cruise Line supporter.

“Certainly, we’re sad that they’re leaving,” said Freeland,
who has tried Carnival Cruise Line and Royal Caribbean International but has
cruised much more with Norwegian.

Though Asia deployment is the first cause cited by Princess
and others in accounting for the change, another factor could be the expiration
next year of financial incentives offered by Houston to lure cruise lines to
its Bayport Cruise Terminal.

And Carnival has made a strong push in the last several
years in New Orleans and Galveston, raising the level of competition in the
crowded western Caribbean.

Norwegian was the pioneer of what it dubbed “Texaribbean”
cruising when in 1997 it launched weekly service with the old 848-passenger
Norwegian Star. Since then, it has dropped the market and returned twice, first
in 2007 and again in 2014.

Norwegian did not provide a direct rationale for the latest
pullout. But in comments on a teleconference with Wall Street analysts, Frank
Del Rio, CEO of the cruise line’s parent, Norwegian Cruise Line Holdings,
highlighted new Asian service as the cutting edge of its latest deployments.

For the first time in recent memory, Norwegian is sending a
ship, the 2,348-passenger Norwegian Star, on Asian and Australian itineraries
next year. That will be independent of any decision to position a ship there
for Asian-sourced passengers.

Without identifying it, Del Rio said the new deployment
“replaces our lowest-yielding seven-day product.”

At the same time, the Norwegian Jade will move from Houston
to Tampa, where it will continue to offer seven-night western Caribbean cruises
but also mix in a few 10- and 11-night itineraries. The Jade replaces the
Asia-bound Norwegian Star, which has been sailing from Tampa.

A somewhat similar game of musical chairs sent the Sapphire
Princess to China from Singapore and the Diamond Princess to Singapore from
Australia. The Emerald Princess, which had been sailing from Houston, was moved
to Australia this year to cover the hole left by the Diamond Princess. Princess
plugged the gap by moving the Caribbean Princess to Houston but concluded that
wasn’t a good long-term strategy.

“It didn’t make commercial sense for us to market and
operate one ship from Houston, so we moved the Caribbean Princess to Fort
Lauderdale, where we get economies of scale,” O’Connor said.

That will leave Houston with no cruise ships and a deserted
96,000-square-foot terminal after next spring.

Stan Swigart, port director of marketing and communications,
confirmed the view that the port’s misfortune arises from the ascendency of
Asia.

“The reasons we’re getting is that they’re redeploying
vessels to the Asian and Australian markets, and Houston was just not in the
mix,” Swigart said.

Next year also marks the expiration of a reported $6.7
million in financial incentives extended to Princess and Norwegian in 2012 to
induce them to sail from Houston’s then-vacant terminal.

A drawback for Houston is the building’s interior location
off the Houston Ship Channel some 30 miles from the Gulf of Mexico.

“Galveston’s closer to open water than we are. That may play
into it,” Swigart said. “Cruise lines are really finicky. They shuffle the deck
a lot, just to keep it fresh.”

After Norwegian’s last departure, in 2007, the $81 million
terminal saw no cruise passengers from 2008 to 2013. It was used as a lay-berth
port and for ship repairs, Swigart said. At the moment, there are no cruise
ships on the horizon that want to dock there, he said.

That’s not the case in Galveston, where Texas-based cruising
will consolidate after next year. Carnival has bulked up its presence there,
announcing that it will move its newest ship, the Carnival Breeze, to Galveston
in 2016 to join the Carnival Liberty and the Carnival Freedom. It also reached
a marketing partnership with the Dallas Cowboys and took other steps to attract
business.

Galveston is also home to a Disney Cruise Line ship, the
Disney Wonder, and to a Royal Caribbean International ship, the Navigator of
the Seas.

In November, Royal plans to replace the 3,276-passenger
Navigator with the 4,000-passenger Liberty of the Seas. A 60,000-square-foot
expansion of the terminal that Royal uses in Galveston was to have been
completed by then, but a redesign has pushed back the opening until the spring,
port spokeswoman Cristina Galego said.

The expanded terminal will seat an additional 2,000
passengers. Galego said Royal Caribbean has asked the port to provide an
air-conditioned tent as a passenger waiting area until the terminal work can be
completed.