The cruise ship industry has taken a hit, and that's affected San Diego. We look at whether the situation has improved as 'cruise season' gets underway.
Bob Nelson, Commissioner, Port of San Diego
Related Story: Will Cruise Ship Season Be Profitable For San Diego?
CAVANAUGH: San Diego's big bay is Alive today with three cruise ships delivering thousands of apartments. And a tortured mother-daughter relationship gets laughs and tears at Mo'olelo performing marts. This is KPBS Midday Edition.
CAVANAUGH: I'm Maureen Cavanaugh. It's Thursday, September 29th. First degree's top story on Midday Edition, the port of San Diego ushering in the start of cruise season. Three ships carrying more than 6,000 passengers arrived in port today. The last time we talked about San Diego's cruise ship industry on Midday Edition, the news was a lot more somber. Carnival cruise lines had just announced it was pulling one of its ships from home port in San Diego. That news came on the heels of a dramatic decline in the overall cruise ship industry in San Diego. We'll find out first degree today if the situation is improving. I'd like to welcome bob Nelson, he's commissioner of the port of San Diego. May I call you Bob?
NELSON: Yes, you may.
CAVANAUGH: Welcome to the show. You're launching the start of cruise season at San Diego. Is this the part of the year when we get most of the cruise traffic in San Diego?
NELSON: Yes, traditionally, as we begin to enter October, we start seeing a lot more activity, particularly as people are headed south down into the better weather town there. And as you said, today, we actually have three ships in port at the same time.
CAVANAUGH: Tell us what it's like down there these three big cruise ships and thousands of passengers. Describe the scene to us.
NELSON: Well, it's a logistical malady or I guess you'd have to say there's people arriving and departing, people heading out on excursions throughout the region, actually to see things from Balboa Park, the zoo, off up to marine world, or pardon me, sea world. Get in trouble for that with the low economy people. And you have a lot going on there, and delivery of goods. So -- and a lot of traffic, but a lot of traffic control. I was down there this mortgage, and even though there was an awful lot going on, traffic was moving, and people seemed to be in good spirits
CAVANAUGH: And of course you got a picture-perfect day for all this as well.
NELSON: It was definitely a Chamber of Commerce day.
CAVANAUGH: How much money do you estimate each ship brings into San Diego?
NELSON: Those ships as with the three who are here today who are merely making a stop here on their way from one place to another brings about a million dollars of economic activity on our area each time they come here. We have some ships that are home ported. That is, they begin their itinerary in San Diego and return here. Those have about a $2 million impact.
CAVANAUGH: So the passengers on board the ship, even though they stay here just for one day are responsible for a million dollars in activity?
NELSON: Right. The passengers themselves through their direct expenditures, and also the ships in -- provisioning and what not, as they move along. But it's mostly the passengers. Did you go to Balboa Park today or if you go to the or if you're going to -- the answer zoo, or if you're going to be at sea world or sea port village, you're going to see lots of people wandering around who don't have the tan you would expect from a San Diegan.
CAVANAUGH: I'm speaking with Bob Nelson, a commissioner on the port of San Diego. And as I said in the introduction, when we talked about the San Diego's cruise industry last time on the show it was about the fact that Carnival lines was pulling the cruise ship, spirit, from San Diego. What were the reasons that they did that?
NELSON: All right. Well, in speaking with the various senior executives at the different cruise lines, there's actually a number of factors. One of them, of course, is affecting not only San Diego and Los Angeles but also the entire world. And that is just the economic slowdown. There's a few people who are cruising, and people are looking for a much more value-oriented cruising and what not. And also part of what has made San Diego so successful during the last ten years or so as a cruise home has been Mexico. And there's a combination of issues in Mexico that have come to play. The tourism industry in Mexico is off very seriously partially because of the economic slowdown, but also because of perception on the part of many people that it's a dangerous place to be. Well, that is true. There are places in Mexico that are undeniably dangerous places to be. They are not associated with cruise destinations, or excursion destinations when you're in Mexico. But if you live -- don't live close to Mexico, if you live somewhere else in the United States or perhaps elsewhere in California, you may not have an appreciation that stopping in Puerto Vallarta or stopping in Cabo San Lucas, is not the same as being in Juarez in the middle of a Varrio where you're got gang violence going on.
CAVANAUGH: The ships last time we talked, Carnival cruise ship was pulling its ship, spirit. It pulled the ship Elation the year before. So what are the ships that are arriving here today?
NELSON: Right. Well, today we've got three ships in port. Two of them are from Holland-America lines, the Stattendam, and the Vesterdam, and we also have the Sapphire Princess in. And during the course of the season we'll have home port activity out of HollandAmerica, royal Caribbean, celebrity, and Carnival also.
CAVANAUGH: Do you have to keep places like HollandAmerica interested in places like San Diego?
NELSON: To the contrary, a lot of the improvements that have been made in the cruise terminal area have been from funds they've advanced to us. And carnival has built their own terminal up in long beach. The -- it's not a matter of us making concessions. The whole thing has to come together. There has to be demand in terms of people who can afford to take a cruise and want to use their money taking a cruise. There needs to be an offering of when you're on the cruise, is it interesting and exciting? That's part of the other challenge that we face with Mexico. And I have been in Mexico City meeting with officials there. Our CEO, Wayne Darbo, our chair of the port commission, Scott Petering have been in meetings in Ensenada with the governor of Baja. And with leaders in Ensenada, and one of the issues is that you went on a cruise in 1990, you'd never been to Mexico, you loved it. You came back in 2,000, and everything was the same. It's my impression, the Mexican government is raise rising to the challenge. Creating new opportunities, that are going to be 2 or 3 new places to go, I'm not sure how much they've talked about it publicly, so I want to be cautious. But one that's going to be a very exciting ecoexperience and a chance to get up and close with whales. And another one, which is a town that is historic, it's kind of like if Old Town here in San Diego were still Alive and living --
CAVANAUGH: One of those recreations.
NELSON: But it's the real thing.
CAVANAUGH: Sure, yes.
NELSON: It's still like that. And then also they're looking at potentially some major expenditures in Cabo San Lucas to help create that as a better port of call.
CAVANAUGH: Give us an overall sense of the hit that the cruise industry has taken here in San Diego. I know you lost about 30% of business in 2010. The port was estimated up to a first% decrease this year. Is that still your projection?
NELSON: It's about a 50% decrease in this current season over last season. Overall, it's down about 2/3 from our peek in 2008. We have over 910,000, I think it's 917,000 passengers at that time. We're going to be way off that this year. Slightly over 300,000, I would think, this year as we add additional calls during the year.
CAVANAUGH: And how much do you estimate that actually hits San Diego's economy being off that much in an industry that's really pretty important to our tourist industry?
NELSON: Well, we'll see, I would think, about $200 million in total economic activity this year. And that's going to be down from, you know, probably something in the area of I would say 7 or $8 million as much as that, maybe not quite that much, but close to that in 2008. So it's a big hit.
CAVANAUGH: And of course you have your -- the brand-new Broadway pier that, $228 million renovation. Should people are now wondering whether or not that was money well spent in light of the drop in business at the port. What would you say to people who have doubts with that now?
NELSON: First of all, I think it's a fantastic building. And it's been a greats success. It's today in full operation, and we of course could not have had three ships today were it not for having built the Broadway pier and pavilion. It's also turned into a fantastic event facility. The America's cup will be bringing an entirely new racing activity here in San Diego in November called the AC America's cup 45, which is going to be a very high speed, high -- it's essentially NASCAR on the water. And the home base for that will be the Broadway pier and the pavilion we've built there, it's a great building, what's called a lead-certified building, which means it's designed with a great deal of environmental sensitivity. It functions extremely well, both as a terminal for cruise ships, but also for events. I think we have this weekend also arts activity, performing arts activities down there. There's 64 different cultural and arts groups that are going to be in that building and on the pier this weekend. So it's a great amenity for the entire community beyond the fact that it certainly is helping us deal with our cruise demand.
CAVANAUGH: We heard about that arts festival on the show yesterday. Okay, so we have this beautiful new Broadway pier building that is attractive and welcoming to the cruise ship industry. Is there anything else that San Diego might be able to do to remain attractive or become more attractive as either a port of call or a home port?
NELSON: Well, yes. There are things. And we will be doing those. We need to make substantial improvements and upgrades to the main terminal, the B Street cruise terminal. That was originally a cotton warehouse. It's not much more than that today, and it really isn't very inviting. So we need to do some upgrades to that on the interior. And also on the exterior. Of I think the community deserves that we invest a little bit more in the exterior of that. So we're going to be doing that. We're finalizing plans now. We have architects involved and interior designers involved right now in how to make that in a cost-effective way an improvement without taking the whole building down and starting over. So we're using kind of a smart approach to use working with what we've got to make it much better. We also just received a -- an extensive analysis of the state of the cruise industry and where we fit into that. And it's helping to guide some of our strategies as we move forward.
CAVANAUGH: Do you think that there has been enough publicity about the fact that the places that the cruise ships go in Mexico are not necessarily those that are heavily involved in whatever drug violence there is in that country? I know every time I see something about -- in the national press about what's going on in Mexico, it's -- they don't seem to differentiate where the violence is actually happening.
NELSON: Right. And I think that's true. I don't really know what guidance or direction to give to the media because they've got their own constraints and it's hard to report that no dog got bit by a man today. So when something nasty happens, it gets reported. And there's certainly -- the Mexicans are the first ones to say there's been a lot of bad things going on down there but they're just not in places you would be going as a cruise passenger. I would also say there's generally -- I go down to northern Baja just to the Guadalupe valley wine region probably 3 or 4 times a year and stay down there. Before you get to Ensenada, you bang a left. And I'm half an hour from my home here in central San Diego, and I'm there in the lovely wine country. And there's never any problems or violence down there. The vast majority of Mexico is just fine. Just like the vast majority of San Diego is just fine, but there are probably certain places you wouldn't want to be in certain parts of the day or night. And it's the same in Mexico.
CAVANAUGH: I would imagine that the majority of San Diegans would say, well, that's good, we're happy there are three ships in port and happy they spend a lot of money here. But I think people have a hard time really translating what a pick-up or decline as we have gone through in the cruise industry actually means to our lives. Can you tell us that?
NELSON: Sure. It affects us in a couple different ways. For one, if you have anyone in your family or friends who are working in any of the many, many industries that are affected by it, whether that be for home porting, that's hotels. If you're working at the airport, they're flying in and out of our airplane, which is convenient to the cruise ship terminal and a main attraction of why San Diego does so well when the economy is doing well. And then also just the wide range of attractions I've mentioned, whether it's the zoo or whatever. A lot of people you'll see people in the gas lamp all over the gas limp today in restaurants and in taverns this. And in retail shops, Horton Plaza does a lot of balance business. And of course sea port village does a lot of business. These things translate into jobs for our neighbors and revenues for our community. Of because people are paying sales taxes, hotel tax when is they're here. It has a very strong positive effect that if you have anyone in your family that's involved in those things, you will see it firsthand, then as a taxpayer, if you like the fact these people are coming in and contributing tax dollars for our local government, they'll appreciate that as well.
CAVANAUGH: Have you made any projections as to when this thing might really turn around and you might see the cruise industry in San Diego start to grow again?
NELSON: We're preparing for a much stronger 2015, 3 years ahead now. That's what we're aiming at in terms of our planning for B Street, and we'll be ready for that. If you look at the cruise industry over time, it does take cycles. Things come and go from a different area, and we think it's going to cycle back here by about 2015, and we'll be ready for it.
CAVANAUGH: Bob, thank you so much for speaking with us.
NELSON: Thank you for having me, Maureen.