San Diego Business Journal

Those who regularly drive along the San Diego Harbor can't help but notice that the sparklingly magnificent cruise liners docked at the B Street Terminal are coming more frequently.

But unless they happen by while luggage-toting passengers are standing, waiting in long lines to board amidst those disembarking into the crowded, congested parking lot and street, or have taken a cruise out of San Diego themselves, they aren't getting the whole picture. And it certainly isn't what's expected of a top tourism destination, critics say.

However, Rita Vandergaw, the marketing director for the San Diego Unified Port District, is optimistic that that scene will soon be improved. Although the Port Authority doesn't have the $25 million to $50 million needed for a major reconstruction effort, including a parking garage , "We've got zip," Vandergaw said , officials are testing the waters with major cruise line companies to see if there's any interest in financing it.

Vandergaw declined to say which companies are involved in discussions, and nothing will be taken before the agency's seven-member board of commissioners until some concrete offers are made.

Yet it's easy to assume that one or two of the top three lines serving the port , Miami-based Carnival and Royal Caribbean International and Holland America Line, a Seattle-based Carnival brand , may be mulling such a proposal. None returned phone calls seeking comment.

Carnival recently loaned the port $8 million for interim fixes, including pier repairs. The Port Authority is repaying the note with revenue from an increase in its per-passenger fee. The company also announced it plans to port the Elation, a 2,052-passenger ship, in San Diego year-round for four- and five-day cruises to Baja, Mexico.

But talks are preliminary, Vandergaw stressed. She added that while a private-public partnership is the only option the Port Authority has, a financing arrangement could be forged with any type of company. She wouldn't pinpoint a construction date, saying only that the hope is that building could get under way by year-end 2008 and be completed by year-end 2010.

"I know there have been a lot of starts and stops over the years, but this time I'm confident something is going to happen," she said. "The stars are aligned this time and it looks like it's going to go forward and get done."

One false start resulted when port officials anticipated would-be developers of the Lane Field project, which calls for hotel development on a 6-acre tract the Port Authority oversees north of Broadway between Pacific Highway and Harbor Drive, would willingly toss development of the terminal into their proposals. But that didn't pan out. Earlier this month, the Port Authority's board voted to work with a consortium that proposes two hotels at Lane Field, but no terminal.

Cruise ship terminals aren't moneymakers, so it's easy to understand why a real estate developer with no vested interest would not be interested, yet the Port Authority was still disappointed that its strategy failed, Vandergaw said.

If They Rebuild It

Between 2003 and 2005, cruise ship embarkations for San Diego rose from 81,000 to 234,000, making it one of the fastest-growing cruise ship ports in the state, according to Arlington, Va.-based International Council of Cruise Lines.

The Port Authority's records show that maritime revenue, including that from cruise and cargo ships, rose to $35.2 million in fiscal 2006 from $23.7 million in fiscal 2005.

According to Port Commissioner Steve Cushman, who chairs the maritime committee, the dockings each generate from $20,000 to $35,000 in revenue for the agency.

"When you add that up on an annual basis, that's not much," he said. The real benefit, he added, is the regional economic impact that comes from the goods and services the floating hotels buy and the money their passengers spend onshore. Estimates range to more than $2 million per ship.

By the end of the year, the port will count some 225 cruise ship calls, of which 80 percent are home port calls, meaning that passengers board and disembark here.

"While the airport (Lindbergh Field) projects congestion, the cruise ship terminal already is congested," Vandergaw said.

Accommodating Crowds

Plans to rebuild or refurbish the circa-1925 B Street Terminal have been on the drawing board in one form or another for the past 15 years. There have also been several remodeling projects. But the facility still can't accommodate the increasing flow of passengers, and when two or three ships dock simultaneously, a tent is used to make up for a lack of counters and areas to process all of them inside the terminal.

Vandergaw and her team have worked diligently to woo and win new cruise ship calls over the years, but at this point, the main reason for wanting to improve the terminal is simply to retain the business at hand.

"We're concerned with keeping the cruise ships we have, rather than getting more business," Vandergaw said.

And for good reason. Two years ago, the port agency's top customers, including Holland America, basically put it on notice: Either shape up, or we ship out.

The ships get feedback from their passengers who rate them on everything from bed linens to port terminals, and San Diego's facility was earning poor marks for them.

"Those companies know that embarkation sets the tone for the entire cruise," said Brian Ek, spokesman for Priceline.com, an Internet travel agency.

That aside, the Port of San Diego is in an ideal position to garner more business, particularly with a new terminal. Ek predicts that tourism trends, including short two- to five-day cruises, like those to Baja and back, are becoming increasingly popular, as is "drive-to cruising," which could keep revenue from passengers' fees flowing into the agency's coffers.

"People don't have time these days for longer cruises, but they can still relax and decompress on short trips, and with air fares going up, more people are driving, rather than flying to port cities," he said.