Cruise Feasibility Report with Hvide Sande as a special case

Transcription

1 Cruise Feasibility Report with Hvide Sande as a special case Prepared for: June 7, 2013 Prepared by:

2 Table of Contents 1. Introduction and Overview Summary of Analysis and Recommendations Worldwide Cruise Industry Cruise vessel trends and new-build program Cruise industry success factors European consumer demand Cruise line business model European growth factors Destination challenges: Cruise line needs Design Vessels Northern European Region Northern Europe itinerary types Position of Hvide Sande in relationship to the Northern Sea region Baltic Sea Region Danish Ports Economic Impacts The port of Hvide Sande Attractions - Hvide Sande and surroundings Interviews and SWOT Analysis Summary of interview responses SWOT Analysis Average cruise budget for a small destination Overall analysis of the case of Hvide Sande as a cruise destination Regional neighboring ports Conclusion Recommendations General guidelines for ports to engage on cruise business... 60

3 Table of figures Figure 1: Conventional cruise worldwide and regional expansion, Figure 2: Conventional cruise vessel deliveries and on order, Figure 3: Conventional cruise vessel deliveries and on order, Figure 4: Conventional cruise worldwide growth projections, Figure 5: Major worldwide cruise corporations passenger capacity, Figure 6: Major European cruise operators passenger capacity, Figure 7: Average passengers per ship by year of construction, Figure 8: Projected percentage of passengers per ship, Figure 9: Average length overall (LOA) of ships by year of construction, Figure 10: Northern Europe regional growth...25 Figure 11: Number of itineraries in the region that cross Hvide Sande Figure 12: Number of ships that sail in the Northern sea region Figure 13: Number of ships worldwide that fit in the pier of Hvide Sande Figure 14: Number of ships worldwide that fit in the port of Hvide Sande Figure 15: Number of ships sailing in the region that fit in the port of Hvide Sande Figure 16: Cruise itineraries crossing Hvide Sande with ships that fit in the port...32 Figure 17: The Baltic Sea Region Figure 18: Economic benefits comparison table Figure 19: Port of Hvide Sande Figure 20: Possible tender pier Figure 21: Number of ships worldwide that could fit in an expanded pier of 8m draft and 200m length. 50 Figure 22: Number of ships worldwide that could fit in the expanded port of Hvide Sande Figure 23: Number of ships sailing in the region that could fit in the expanded pier of Hvide Sande Figure 24: Number of ships that fit in the expanded pier of Hvide Sande and cross Hvide Sande Cruise Feasibility Report for Hvide Sande PG. 3

4 List of tables Table 1: Worldwide cruises market penetration, 2012 est Table 2: Destination challenges and cruise line needs Table 3: Northern Europe itinerary types, 2013 (not including West Europe and British Islands) Table 4: Hvide Sande fit in regional itinerary patterns Table 5: Ships that can fit in the pier and are operating in the region Table 6: Categories of ports in the Baltic Sea Region Table 7: Breakdown of expenditure by cruise passenger and crew in Copenhagen Table 8: SWOT exercise Table 9: Estimated yearly cruise budget for a small destination Cruise Feasibility Report for Hvide Sande PG. 4

5 List of annexes Annex 1: References and glossary Annex 2: Cruise vessels in order worldwide Annex 3: Emission Control Area and Marpol waste regulations Annex 4: Cruise Baltic Statistics Annex 5: List of worldwide cruise vessels that fit in the current harbor of Hvide Sande Annex 6: Cruise Statistics Danish Ports Annex 7: List of 122 cruise vessels worldwide with maximum length of 200 meters and 7 meters draft Annex 8: List of 30 cruise vessels in the region with maximum length of 200 meters and 7 meters draft Annex 9: Two examples of regional cooperation which have changed the perception of cruise lines Cruise Feasibility Report for Hvide Sande PG. 5

6 1. Introduction and Overview Consult DC has been commissioned by the Danish Center for Coastal Tourism to conduct a study to determine the possibilities of Hvide Sande becoming a cruise destination and the results are hereby delivered in the form of this feasibility report. In addition this study will provide valuable tools and recommendations for other similar smaller Danish ports to use when evaluating their potential to develop cruise tourism. At the start of this task Luis de Carvalho, the project leader from Consult DC, had an initial site inspection of Hvide Sande on March 20 th which included visiting the port and the main sites and attractions in the region. Luis also conducted meetings with the local stakeholders: Jan Bjarnason, project leader Danish Center for Coastal Tourism; Lykke Nielsen, director of Destination Hvide Sande; Asker Geyti, project manager of Destination Hvide Sande; Lisbeth Jensen, intern at Destination Hvide Sande; Steen Davidsen, port manager and Michael Lund, project manager. In addition Consult DC reached out to port agents, tour operators, cruise line executives, cruise associations, port development companies and other relevant personnel in order to collect data and feedback to complete this study. The interviewed names and companies are kept confidential but their feedback is incorporated in this report. Consult DC recognizes positively the initiative of the Danish Center for Coastal Tourism and Hvide Sande Port in conducting this study, as we have witnessed in the past many ports and destinations engaging in cruise initiatives without having done proper homework and that did not always contribute to achieving the best results. Our goal with this study is to offer a realistic and well documented cruise evaluation that will assist both the Hvide Sande stakeholders, as well as stakeholders in other similar small Danish ports, in making sound decisions regarding their possible future in the cruise business. This report includes technical terms and references that relate specifically to the cruise industry. We have prepared a separate document with references and glossary for better clarification and definition of these terms that is available in Annex 1. Cruise Feasibility Report for Hvide Sande PG. 6

7 2. Summary of Analysis and Recommendations The port and city of Hvide Sande Hvide Sande is a picturesque port town located on the West Coast of Denmark. Originating from 1931, Hvide Sande is Denmark s newest town. The town has approximately 3,500 inhabitants and the port is the 5 th largest fishing port in Denmark. The access to the port by sea is mainly done through a water channel 6 meter deep up to the extremity of the West Harbor and from then the depth decreases to a low 3.5 meters. This limits the number of ships that are able to enter the port to a safe draft of 4.5 to 5 meters given that the port experiences a tide variation of approximately 70/80 cm. The port is currently working on redeveloping the West Harbor, which will offer a berth of 150 meter LOA, 6.5-meter draft, and a 30-meter apron area with 50-ton bollards at 21-meter distance from each other. The port recommends that the maximum length of the cruise vessels berthing should not exceed 140 meter LOA and 5-meter draft. The currents oscillate between 1 to 3 meters in variation and the wind is predominantly SW to NW with 10m/s speed. If the ship anchors at 3km distance the tender ride is estimated to last between 20 to 25 minutes (one way) depending on the ship s tender characteristics. As main attractions in the region within 1 hour drive we must single out: Ringkøbing old town and museums, the unique West Coast nature landscapes around the Fjord, Lyngvig light tower, WWII bunkers, the gourmet stops and some of Denmark s best water sports facilities. But nature remains the main attraction. Analysis It is difficult to make projections for possible cruise calls in Hvide Sande at this stage, but given all the data analyzed and taking into consideration: The current port limitations, The reduced amount of ships that can actually fit the pier, The anchoring conditions and tendering time; The tendency for cruise lines to build larger ships, The lack of major attractions in the region, and The location of the destination not being favored and featured regularly in cruise line itineraries, We estimate that it will be difficult for the port to attract any cruise business at all given the current situation. Cruise Feasibility Report for Hvide Sande PG. 7

8 Probably the most important challenge to mention is the access to the port. With the current facilities, Hvide Sande is very limited in terms of cruise ships that it can accommodate at the pier while the anchoring / tendering process could be deemed unsafe by the cruise lines given the rough sea and strong winds experienced in the region. While several options to improve the reception facilities can be considered, the port would eventually need to invest in port development to accommodate larger vessels or guarantee safer anchoring / tendering operations. If the port would extend its pier to 225 meters and dredge its depth to 8 meters, we calculated that out of the worldwide fleet of 340 vessels, the port could accommodate 122 vessels with a maximum LOA of 200 meters and 7 meters draft. Of these 122 ships, only 30 ships are actually operating in the region (25%), and only 15 ships are actually bypassing Hvide Sande, carrying a total of 8,655 passengers. However, in terms of navigation, the port would still face challenges, as the turning basin is only 150 meters, meaning that most ships would have to back down from the entrance of the port to the berth. Given the strong winds many captains could say no to this operation. The statistics for smaller destinations (with similar characteristics as Hvide Sande) that have pursued cruise business for the last 7 years do not show any major increases and this also means that the contributions to the local economies have not been significant. In summary, Hvide Sande needs to evaluate these statistics carefully before making any decisions, as the ROI need to be properly calculated. Conclusion Given the current conditions, it is very unlikely for Hvide Sande to have any chances of attracting cruise ships at this stage - the challenges outweighing the opportunities by great length. On a workshop that took place in Hvide Sande on May 15 th 2013, the local stakeholders decided not to pursue the cruise business. We find the local stakeholder s decision wise, as we cannot predict any proper return on investment or any significant economic impacts to the local economy at this stage. Recommendations While the study clearly concludes that Hvide Sande s prospects of developing cruise tourism are very slim given the current technical port conditions and limitations of the product offer, the challenges Cruise Feasibility Report for Hvide Sande PG. 8

9 by far outweighing the opportunities, we offer some general and specific recommendations in case Hvide Sande or other similar smaller Danish ports still wants to pursue the cruise business. This would require the engagement in more detailed assessments and studies to determine the investment needed, especially at the port level. Destination challenges are often cruise line needs. If any given port wants to attract or increase its number of cruise passenger visits, its needs to provide adequate facilities in order to accommodate the larger vessels that are being built and provide profitable tour offers. In addition, the port and destination need to agree on a long-term cruise business strategy for the region focusing on passenger satisfaction, cost control and revenue opportunities. The cruise business is a long-term business and requires vision, development and investment in order to be successful. Hvide Sande, or other similar port destinations, should not contact a cruise line if not 100% certain to provide all the services required for that specific cruise line and be able to meet or exceed their expectations. If Hvide Sande wishes to pursue cruise tourism, it could be wise to approach Esbjerg, Rømø and maybe some of the smaller German islands in the region, or even Hirtshals to discuss a possible collaboration and agree on a strategy to attract cruise lines to the region. Other coastal destinations in North Europe have successfully engaged in joint promotional and marketing initiatives including Cruise Atlantic Alliance and Cruise Atlantic Europe. But again, this will need the development of a well-structured cruise business strategy. General guidelines for ports to engage in cruise business While each region and destination is different and unique in respect of landscapes, cultural characteristics, attractions and port facilities, the following factors that determine why cruise lines visit a destination remain the same: 1. Consumer demand passengers tell the cruise lines and travel agents which regions and destinations they want to visit, and cruise lines plan their itineraries accordingly; 2. Revenue opportunities cruise lines analyse the choice of shore side programs and tour options to be offered to their guests and how much revenue it can produce on each specific destination; 3. ROI Return on investments Cruise lines look at the costs of operating a vessel when visiting a destination / region and compare it to the revenue that they are able to create. At the end Cruise Feasibility Report for Hvide Sande PG. 9

10 of the day, a cruise line wants to make sure that they actually make a profit when visiting a destination; 4. Visitor satisfaction levels if cruise passengers are happy, they will rate the destination high and the cruise lines will most likely visit again. If the ratings are low, they will probably not return; 5. Safety and security Operations (either at berth or anchor) need to be conducted safely, the port needs to be ISPS certified, there need to be a safety plan for the port area, and the city and port need to provide a safe environment for the cruise passengers; 6. Fit in greater itinerary a destination does not exist on its own in the itinerary. Cruise lines look for destinations that complement each other in an itinerary and that are able to sell well to the consumer. Based on the above and on our discussions with cruise line executives, we have prepared a list of key items that need to be in place for a destination to pursue cruise: Adequate port infrastructures to receive cruise ships given the current and future construction trends; Ample variety of tour programs for different cruise lines to chose from; It is an advantage for the destination to have a famous attraction that is already recognized internationally. This could apply to the city and its brand name; Venues and attractions located in proximity of the port and not further than 1 hour drive; A good number of professional guides in several languages (depending on the markets to attract); Good quantity and quality of transportation offers, ranging from big buses to mini buses and vans, private vehicles and taxis; Preferably your destination should be located in a region neighboring other cruise destinations or with easy navigation access to assure better positioning on possible cruise itineraries; Options in the city and the region for independent guests that can include shopping, food & beverages, museums, historical sites, shows and festivals and other options; Cruise Feasibility Report for Hvide Sande PG. 10

11 Good cooperation between the port, local politicians, tourism organizations, chambers of commerce and local stakeholders; and The acceptance of cruise tourism by the city inhabitants. If a pre-feasibility study like the present study for Hvide Sande as a case proves that there is scope for cruise tourism, one of the most important steps that an aspiring cruise destination should do first is to conduct a more specific market study to determine its real chances of becoming a cruise destination. This is also the basis for a cruise business strategy agreed by all the local stakeholders that needs to be in place for any destination to have better chances to be successful. Cruise Feasibility Report for Hvide Sande PG. 11

12 3. Worldwide Cruise Industry 3.1. Cruise vessel trends and new-build program Cruise operators have been highly successful in introducing new vessel inventory and developing onboard products that generate sustained interest in cruising. Cruise brands continuously work to improve the quality and quantity of on-board experiences with more diverse food and beverage venues, entertainment and deck activities, meeting and conference facilities and recreation areas. Among the largest of their efforts is the creation of larger and more lavish vessels furnished with veranda-style outside cabins, grand central atriums, health spas and other amenities found in the best land-based resorts. This trend became the norm in the mid-1990s and has continued as cruise brands introduce innovative products and services on the newest vessels to further differentiate themselves from the competition and generate renewed public interest in cruising. Consumers generally meet each new vessel launch with enthusiasm, and ultimately, increased passenger bookings. To forecast future regional facility requirements and passenger throughput to individual ports, it is important to take the anticipated trends in ship construction and deployment into account. Since November 2009, Royal Caribbean International delivered the first new-build of the next generation of cruise vessel the Oasis of the Seas, followed by the Allure of the Seas in fall 2010, both with passenger loads exceeding 5,400. Norwegian Cruise Line delivered the 150,000-GT, 325-meter LOA Norwegian Epic, capable of accommodating more than 4,200 passengers and crew in the summer of Additional vessels are now on order for both brands with capacities exceeding 4,000 passengers and more than 150,000 GT (RCI Quantum of the Seas). As of April 2013, there are 21 new cruise vessels on order with a total berth capacity of 61,139 are scheduled for delivery over the next four years (2013 through 2016). For comparison purposes, in spring 2006, the forward cruise vessel order book contained 29 vessels with a berth capacity of approximately 85,000. For any cruise port to be truly competitive in the cruise marketplace and be able to fully accommodate the future generation of cruise vessels, it will need to improve the current and future berth, terminal facilities and upland support areas in order to accommodate these larger cruise vessels. The review of future vessel deliveries, as shown in Annex 2, remains the primary tool used to project future industry passenger growth. Responding to cruise passenger demand, cruise operators continue to order new vessels, although at a more restrained pace than observed at the peak of vessel orders in the late 1990s through the mid-2000s. The last of the larger 120,000-GT + vessels for delivery into the worldwide cruise fleet is Cruise Feasibility Report for Hvide Sande PG. 12

13 Passengers ('000) far from over. More than 70% of the vessels delivered or on order since 2009 exceed the 120,000-GT mark, with this number increasing annually. Additionally, the Length Overall of the new build vessels is also increasing as shown in Annex, 2 and later in this report. Even if smaller ports do not intend to capture bigger vessels, they should still be aware of the industry trends to build larger vessels. Figure 1 illustrates the growth of the cruise line industry from 1995 through As shown, the North American market continues to be the main consumer generating market. However, there has been significant growth in the European market over the past ten years. Asia has maintained a relatively flat growth over this period, but has an inexhaustible growth potential due the large population base with fast-growing income streams and the desire to travel abroad and within the vast Asian region. Figure 1: Conventional cruise worldwide and regional expansion, '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Asia Europe North America Source: CLIA Europe and North America have very similar population overlays and demographics which allow for an easy growth comparison. Additionally, dedicated cruise lines such as Pullmantur (RCCL Spanish brand), AIDA (Carnival Corp. German brand), TUI Cruises (RCCL German brand), Thomson Cruises (UK brand), Crosiers de France (RCCL French brand) and many other smaller lines specifically target national markets to further drive growth in the larger regional market. Cruise Feasibility Report for Hvide Sande PG. 13

14 As shown, in 2012 the Caribbean region was the number one cruise destination by way of passenger beddays (a formula based upon lower cabin berths x cruise length x sailings) with the Mediterranean ranking second and Northern Europe third overall. The Alaska and Mexico West regions round out the top 5 destinations. However, Mexico West has lost significant capacity in the past two years and will drop lower according to the outcome of a 2013 statistical analysis. Furthermore, there are signs that the Mediterranean region, from a North American industry perspective, is saturated. This will likely motivate brands to further expand their deployments to the Black Sea region and northern climates during the peak summer seasonal months if the costs associated with ECA s and Marpol waste regulations can work in their revenue model. Figure 2 below shows the deliveries of new-build cruise vessels from 1990 through This supply propels the industry forward. As noted, there are established trends within the delivery pattern that coincide with the industry utilizing deliveries as a tool to adjust demand and pricing. They are also affected by exchange rates and slot availability in the limited number of yards that build these high quality vessels. The potential development of shipyards with the technical capabilities to build and deliver cruise vessels in China and Asia would provide for added capacities in a relatively short timeframe once the industry accepts the standards of the vessels. Figure 2: Conventional cruise vessel deliveries and on order, Source: Cruise Community Figure 3 further defines the link between the number of new cruise vessel deliveries and the vessel passenger loads that have increased over the past 9 and next 4 years. The capacities of vessels are Cruise Feasibility Report for Hvide Sande PG. 14

15 increasing over this period, thus it does not take as many ships being built each year to move growth forward in the cruise industry. Figure 3: Conventional cruise vessel deliveries and on order, Vessels Passengers Source: Cruise Community Based upon the additional market supply and factoring a minimal withdrawal factor 1 of 5% to 10%, Figure 4 shows the potential worldwide passenger growth through 2033 estimated to be between 41 and 53million passengers. This is a growth factor of approximately 5.6% to 8.2% per annum. 1 This is the amount of cruise vessels that leave the worldwide fleet each year due to being scrapped, sunk, sold or used in secondary markets. Cruise Feasibility Report for Hvide Sande PG. 15

16 Figure 4: Conventional cruise worldwide growth projections, Low Medium High Source: Bermello, Ajamil and partners (B&A) 3.2. Cruise industry success factors The industry is constrained by ships (supply), not passengers (demand). The delivery of new large capacity vessels with an extended life cycle provides for a compelling growth strategy; There is a high level of repeat clientele demand due to satisfaction and the demand for new and different passenger experiences; The industry is rapidly expanding in several cruise regions worldwide due to passenger demand and the quest for increased revenue opportunities and lower costs; Major deployment factors include: o Passenger demand cruise lines use survey tools, travel agents and passenger feedback as key indicators for future deployment; and, o Yields cruise lines place vessels into itinerary patterns with high demand and lower operating costs to maximize passenger spending per day. There are opportunities for ports worldwide to become part of the cruise business. However, there is a cost in the development of infrastructure and support of tourism businesses that must be addressed. Return on investment parameters and the ability of ports and cities to provide Cruise Feasibility Report for Hvide Sande PG. 16

17 platforms for a variety of social and economic impacts on the community must be addressed as part of any development opportunity; Some cruise brands and consumers see a saturation of traditional ports and regions, which allows for new port opportunities on a worldwide basis. This is further exacerbated by the implementation of costly regulatory and operational costs in some regions; The industry is controlled by a handful of US based profitable cruise operators that has become a global industry with key players in Europe and Asia; Currency exchange rates play a major role in shipbuilding and deployment patterns that define the timing and deployment patterns of cruise brands; Weather patterns, consumer demand and cruise line operations have influenced deployments in many regions extending or moving seasonality into non-traditional time slots. This includes new cruise sailings that now include Christmas and holiday sailings in traditionally summer cruise regions, such as the Baltic, as well as year round cruises from New York that depart in the winter for the Bahamas and Caribbean; and, The industry has proved itself to generally be recession resistant by controlling and reducing costs. Furthermore, it has shown flexibility when it comes to shifting capacity between longer and shorter cruises, but also innovative thinking, with the development of vessels with more outside cabins, on-board amenities, the re-fitting of vessels for all year around cruising in specific regions and allowing for discounting on cabin fares to pick up the potential for on-board revenue spending in order to stay profitable European consumer demand The European cruise interest is rapidly increasing with the German, English and Italian markets booming over the past two years, while the Spanish passenger market yields are down (primarily due to a more than 20% unemployment rate). The European market has seen passenger growth of more than 25% over the past five years. There is a very similar population and income level demographic as that of North America that can be used for comparative purposes. Tailored cruise products to meet consumer needs including homeport options, vessels, on-board services and new cruise line products are propelling the European markets forward. In addition, small lines are also moving in and out of the marketplace. Table 1 illustrates the cruise line penetration of the major markets based upon a recent study by the European Cruise Council. As shown, while the cruise brands have fared well in the primary European consumer markets, there are still significant gains that can be made. By comparison, passenger market penetration is still just 1.55%, which is 41% of the penetration of today s North American market. Both are anticipated to grow in the coming years as cruising becomes a more familiar and popular vacation activity. Cruise Feasibility Report for Hvide Sande PG. 17

18 Table 1: Worldwide cruises market penetration, 2012 est. Source: Clia Europe 3.4. Cruise line business model There are four major cruise corporations that control the majority of the worldwide cruise capacity. See Figure 5 below: Carnival Corporation is the largest with more than 10 cruise brands ranging from luxury (Cunard and Seabourn) to mass market (Carnival Cruise Lines) with a fleet of over 100 cruise vessels sailing worldwide RCCL is half the size of Carnival Corporation in terms of passenger capacity and a fleet of 42 cruise vessels, followed by the fleets of: MSC Cruises and NCL (Apollo Management) Cruise Feasibility Report for Hvide Sande PG. 18

19 Figure 5: Major worldwide cruise corporations passenger capacity, 2012 Carnival Corp; 47% Others; 14% RCCL; 24% MSC; 8% NCL; 7% Source: Cruise Community Key European cruise corporations, Distribution of Fleet 2012 Although there are significant numbers of cruise vessels in Europe serving numerous consumer groups, there are five key brand operators with some 65 ships and a bed capacity of 120,316 that accounts for 74.9% of the European market bed capacity. These five brands (further broken down into 7 major cruise lines) are shown in Figure 6. The operators are as follows: Carnival Corporation (headquartered in North America) with 6 European brands serving consumer markets in Spain, U.K., Germany, France and Italy. They include the following brands with a total of 37 ships: o Costa; o AIDA; o P&O Cruises; o Cunard Line; o Iberocruceros; and, o Ocean Village. RCCL (headquartered in North America) with three brands dedicated to the European marketplace (specifically the Spanish, German and French markets). RCCL utilizes its Royal Caribbean International brand to tap into the lucrative U.K. and Italian markets, amongst others. Their European brands with 8 ships are as follows: o Pullmantur; o TUI; and, Cruise Feasibility Report for Hvide Sande PG. 19

20 o CDF. MSC is a singular brand with many newer cruise vessels (12 in total and 1 under construction); Thomson is primarily a UK cruise provider tapping into a regional market (4 vessels); and, Louis Cruises is primarily a Greek Isles and Mediterranean deployed operator with a variety of older vessels (7 ships). Figure 6: Major European cruise operators passenger capacity, 2012 P&O; 7,0% Pullmantur; 5,6% Thomson; Louis; 2,8% 5,2% Costa; 24,6% AIDA; 10,1% MSC; 19,6% Source: Cruise Community 3.5. European growth factors Based upon cruise line input there are some key growth factors that must be considered and resolved to allow for more growth in the region over the mid- to long-term. They include: Cruise infrastructure capable of supporting larger cruise vessels and passenger loads throughout the region. The Northern European region requires more port options to reach key demographic areas and provide a cruise product within a short fly or drive area; Environmental zoning and fuel issues that impact speed & distance in itinerary planning exercises which may limit the number of ports offered or impact the amount of time spent in each port will be an on-going challenge that ports must consider and work to accommodate cruise lines in this regard. Secondly, with the ever increasing pressure on the industry to continue its efforts to reduce emissions, the environmental control zone of the Mediterranean and Baltic regions will Cruise Feasibility Report for Hvide Sande PG. 20

21 affect the ability of the cruise brands to deliver key products due to high fuel costs and supply of low sulphur fuels in these regions; and, Continuous development of distribution channels throughout Europe and emerging former Soviet bloc countries will provide an expanding consumer market eager to cruise in the adjacent areas Destination challenges: Cruise line needs Table 2 outlines a number of cruise line needs that in many cases become challenges for destinations on a regional or port basis. These are separated into four distinct areas. Each one is important, but it is necessary to address each of these key components in order to meet the needs and expectations of the cruise industry over the long-term. Marketing and Sales is the key deployment driver based upon consumer awareness and demand. Marine operations also play a key role in ensuring the itinerary pattern routing and ports provide a safe and secure environment for the cruise vessel and passengers. All of these areas work together on the formulation of final itineraries. Table 2: Destination challenges and cruise line needs It is important for any cruise port to assess all of the cruise line issues above and determine how they can best work with the operators to meet their individual needs Design Vessels Based on cruise line interviews and an understanding of the cruise line market, the next generation vessels (more than 320 to 350 metres) will initially be deployed to the primary cruise regions of the Mediterranean and Caribbean regions. However, it is likely that these vessels will be deployed to Cruise Feasibility Report for Hvide Sande PG. 21

22 new destinations worldwide over time inclusive of Northern Europe. See Figure 7 for data on the continued growth of the passenger capacity per vessel. New build vessels are increasing in size and the trend is continuing. Figure 7: Average passengers per ship by year of construction, Source: Cruise Community Figure 8 illustrates the projected number of passengers per ship in the fleet through Figure 8: Projected percentage of passengers per ship, % 60% 40% 20% 0% >2500 passengers >3000 passengers >4000 passengers Source: B&A Cruise Feasibility Report for Hvide Sande PG. 22

23 Average Length (metres) The choice of design vessel(s) provide the criteria for berth requirements, apron, fenders & mooring structures, gangways in terms of quantity and capacity, terminal space allocation, size of the ground transportation area for coach, taxi, private vehicle and mini-bus quantities and parking space needs. Future vessel sizes are driven by the need to optimize capacity providing for more space to increase revenue options and spread the cost structure over a greater area in terms of passenger load. Thus, this larger vessel format provides for more passenger amenities and better sales yields through the use of outside cabins on the larger perimeter hulls with more balconies. There are also grander atriums for better space allocation allowing for better flow and logistics related to the distribution of passengers, boarding and disembarking. The economics of the vessels are also better in terms of crew to passenger ratios and power / fuel consumption. Figure 9: Average length overall (LOA) of ships by year of construction, Source: Cruise Community The lengths and beams of cruise vessels are also increasing over time to accommodate the increased passenger capacity, cabin configuration and on-board revenue source accommodations. 2 Figure 9 above shows the length of vessels in metres by year of construction hovering at more than 300-metres. 2 On-board Revenue Source Accommodations are spaces built into the vessels whereby revenues can be generated inclusive of bars, casino, retail outlets, spa facilities, specialty restaurants, etc. Larger vessels have more spaces for these types of revenue producing amenities. Cruise Feasibility Report for Hvide Sande PG. 23

24 4. Northern European Region The Northern European cruise region is comprised of a variety of cruise itinerary patterns taking advantage of a wide variety of natural areas, marquee ports and smaller destinations throughout the region. There is a wide variety of cultural, historical and varied natural resources within the regional zone that provide for a variety of cruise pattern options as shown. Cruise consumers from a diverse array of countries are lured by the offerings with the Scandinavia & Russia destinations as the core itinerary offering. Cruise offerings include complete variety of cruise line brands and demographics from North American to European brands and from budget to all inclusive brands. The region competes with the Mediterranean region for core summer traffic. The primary feeder homeports for the Northern European itineraries are typically inclusive of Harwich, Southampton, Copenhagen and Hamburg as the primary ports. However, dependent upon the brand, such as AIDA or TUI, they may also sail from homeports such as Lubeck / Travemunde, Kiel, Rostock / Warnemunde and Amsterdam. The selection of the homeport is often dependent upon the cruise brands, primary passenger demographic and itinerary pattern offered. These homeports in proximity to key itinerary regions and ports of call allow for multiple itinerary offerings throughout the region. Combined, Northern Europe is the 3rd largest cruise deployment region worldwide, behind the Caribbean and Mediterranean. Northern Europe is a traditionally summer seasonal market that is slowly moving toward more year round cruise options as consumer appeal for a broader array of itineraries evolves. These are typically 7 to 14-day cruise patterns that combine excellent ports with historical, cultural and natural influences. However, there appears to be a push toward shorter holiday sailings by European lines into the region off-season. This will play out more fully over the next two years as the Emission Control Area (ECA) and the International Convention for the Prevention of Pollution from Ships (Marpol) waste regulations come into effect and cost implications are realized. Figure 10 provides an overview of the historical and potential growth opportunities envisioned for the region based upon anticipated deployment patterns. The key deployments shown are those in the Northern / Western areas (such as Baltic, Coastal and Norwegian Fjords sailings) that provide the vast majority of passenger capacity for the region and Transatlantic and World cruise patterns that effectively provide a transitional baseline for the region. These sectors combined may provide the region with an effective growth from 1.5-million to more than 4-million passengers by This projection of 7.7% annual growth over the 20-year period is robust, but due to the cruise opportunities and continued growth of the regional European cruise market passenger this appears to be a strong option. Cruise Feasibility Report for Hvide Sande PG. 24

25 Figure 10: Northern Europe regional growth Historical Anticpated Growth Source: B&A Macro Challenges for the region While the cruise industry is expanding and deploying more vessels to the region and increasing demand for berths, tourism venues and support infrastructure, the overall European land-based tourism market is also continuing to grow at a rate of 3.1% annually. Based upon a World Tourism Organization (WTO) study, as many as 717 million people will visit Europe by Thus, for future tourism development considerations, destinations must assess the impacts of the overall visitor arrival totals and experience in the decision-making process. Destination name brand recognition continues to drive consumer demand. However, new high value destinations can also sell cruises to a savvy consumer market. There are also fewer opportunities at key homeports to increase capacity limits based on port configurations, location and waterfront uses. Thus, for ports and cities with the ability to meet the needs and expectations of cruise lines for homeport and port-of-call infrastructure within key regional markets that is the potential for further operations development. Finally, the ECAs and Marpol waste provisions will have an impact on deployment throughout the European and North American cruise spheres. Coming 2015, all vessels sailing in the North Europe and Baltic Emission Control Areas will need to use fuel with 0,1% sulphur content, which is more expensive than the average fuel used at present. In addition, and under the revised Annex IV of the MARPOL Convention the Baltic Sea, I also designated a Special Area with respect to pollution by sewage, whereby any discharge of sewage into the sea from a passenger ship will be prohibited unless the ship uses an approved sewage treatment plant capable to reduce nutrients according to the established Cruise Feasibility Report for Hvide Sande PG. 25

26 concentrations. Alternatively, untreated sewage could be delivered to a port reception facility (PRF). Please find more details on these regulations in Annex 3. Cruise lines are currently assessing deployments to ensure that by 2015 and beyond their ships are positioned in regions that have the best opportunity to provide maximum revenue potential through consumer demand and the lowest overall expenses based upon fuel cost and availability amongst a variety of other considerations Northern Europe itinerary types Table 3: Northern Europe itinerary types, 2013 (not including West Europe and British Islands) Source: Consult DC As shown in Table 3 there are some 589 sailings in the region. A snapshot of the 2013 deployments for the Northern European region that specifically impact Hvide Sande and the surrounding ports are as follows: Total passengers 934,316 Number of sailings 589 Passengers per ship 1,594 Length of Season (days) 276 Number of Weeks 39 Number of Cruise Lines 40 Number of ships 82 Avg. LOA m. Cruise Feasibility Report for Hvide Sande PG. 26

27 Table 4: Hvide Sande fit in regional itinerary patterns Hvide Sande s geographical location favors the port for coastal cruises that explore the Northern Europe coast for its primary destinations. Historically, these types of cruises are either re/positioning cruises where ships move between their high yield sailing regions such as the Mediterranean, Baltic and British isles, or explore options that include destinations in the vicinity of the new and upcoming Northern Europe turnaround ports such as Hamburg, Bremerhaven, Ijmuiden, Amsterdam, Le Havre and Bilbao. Interporting is also becoming popular in the region using the proximity to the rising EU markets to attract and embark new passengers in several ports during a given cruise. But as per Table 3, the percentage of these cruises is quite small (3,8% on ships) compared to the percentages of other sailings and itineraries being the Baltic and Norwegian fjords the most popular, meaning that destinations that are positioned in these regions will have more possibilities to take advantage of this situation Position of Hvide Sande in relationship to the Northern Sea region Out of the 589 cruise itineraries scheduled to take place in the region in 2013 (excluding West Europe and most of the British Islands itineraries), 262 itineraries (44%) are crossing Hvide Sande either originating in the UK, Germany and Holland and sailing to Norway or the Baltic via Skagen. The remaining 55% of all the itineraries are either taking place in other areas in the region such as the Baltic and Norway or include ships that are actually accessing the Baltic via the Kiel Canal. While 1% of them are not disclosed as they are chartered. See Figure 11 below. Cruise Feasibility Report for Hvide Sande PG. 27

28 Figure 11: Number of itineraries in the region that cross Hvide Sande 589 Cruise I neraries in the Northern Sea region 4 1% % % Crossing Hvide Sande- 262 i neraries Not crossing Hvide Sande: 323 i neraries Not available: 4 i neraries I neraries in total: 589 Source: Consult DC Per Figure 12, the current cruise line fleet is comprised of a total of 340 active cruise ships of different sizes and characteristics sailing worldwide being able to carry a total capacity of 485,000 passengers and 188,000 crew members. Of those 340 vessels, 82 vessels are currently sailing in the Northern Sea region (excluding West Northern Europe and British Isles cruises) being able of carrying a total of 101,000 passengers and 60,000 crewmembers. One element to point out is that the average LOA of the 82 ships is 234,3 meters which exceeds the limitation of the Hvide Sande port (ref. section 5). Figure 12: Number of ships that sail in the Northern sea region Source: Consult DC Cruise Feasibility Report for Hvide Sande PG. 28

29 Out of the 340 vessels sailing worldwide, only 48 vessels (14,1 %) are limited to a LOA of 140 meters and a draft of 5m, being able to fit safely in the West Harbor of Hvide Sande. 292 ships, or 85,9% of the total cruise fleet do not fit the pier. See Figure 13 below. You will find a complete list of the 48 vessels that currently fit in Hvide Sande port in Annex 5. Figure 13: Number of ships worldwide that fit in the pier of Hvide Sande Source: Consult DC The combined average age of these 48 ships is 27 years. The average age of a cruise ship is 25 years. This means that in a few years most of these ships will not be around being either sold for scrap or moved to regions with less strenuous maritime and environment regulations. Most the above vessels are already operating in remote regions such as Africa, Asia and South America while others sail in the Caribbean or other exotic destinations as expedition ships. Also some of these older ships are equipped with older engines that tend to burn more fuel than newer ships. With the ECA s coming in place in 2015 requiring ships to use the more expensive 0.1% fuel sulphur fuel, many of the older ships will be moved to other regions. The tendency is to build bigger ships, as these are more profitable as operating costs can be easily mitigated and more revenue created if the cruise line can sell more berths on any given ship. But these ships will also require ports and destinations that can accommodate their vessels alongside and that can offer great shore side revenue opportunities. Cruise Feasibility Report for Hvide Sande PG. 29

30 Unfortunately, out of those 48 ships, there are only 4 ships currently operating in the Northern Sea region that could berth safely at Hvide Sande, which accounts for only 8% out of the 48 ships. See Figure 14 below. Figure 14: Number of ships worldwide that fit in the port of Hvide Sande Source: Consult DC That also means that from the total of 82 cruise vessels currently sailing in the region, only 4 can fit in port of Hvide Sande, as the remaining 78 are of bigger size and capacity. This brings the percentage down to 5%. See Figure 15 below. Figure 15: Number of ships sailing in the region that fit in the port of Hvide Sande Source: Consult DC Cruise Feasibility Report for Hvide Sande PG. 30

31 The names of the 4 ships are: Hanseatic, Island Sky, National Geographic Explorer and the Seabourn Pride and they have a total of 12 itineraries in the region with a total of 2116 passengers on board their ships. Compared to the total of 934,000 passengers sailing in the region that represents 0,3% of possible capture rate. But there is also another factor to take into consideration: most of the smaller ships that sail into the Baltic use the Kiel canal in order to save sailing time and fuel instead of sailing around the tip of Jylland. This means that out of these 4 ships, there is actually only one that crosses Hvide Sande at this stage: the Hanseatic which belongs to Hapag Lloyd, a cruise operator based in Hamburg, Germany, while the other vessels use the Kiel Canal. The Hanseatic has 1 cruise itinerary in the region carrying 184 passengers. Table 5: Ships that can fit in the pier and are operating in the region Source: Consult DC So in summary: from a total of 262 cruise itineraries that are crossing Hvide Sande in 2013, only 1 itinerary out of the possible 262 is conducted by a cruise ship that could potentially fit in the port of Hvide Sande given its current characteristics the Hanseatic. The percentage for a possible capture of vessels is 0,4%. See Figure 16 Cruise Feasibility Report for Hvide Sande PG. 31

32 Figure 16: Cruise itineraries crossing Hvide Sande with ships that fit in the port Cruise i neraries crossing Hvide Sande with ships that fit in the port I neraries that do NOT fit: 261 I neraries that fit: 1 1 0,4% ,6% Source: Consult DC Please note that for the above calculations we only took in consideration the ability of the port to attract and accommodate safely ships at berth. The anchoring and tender option has not been fully explored, but of course any cruise ship sailing in the region will be a potential target for this option and this means that the 934,000 passengers that are cruising in the region are effectively the potential catch basin of future traffic as they move to the Baltic, Norwegian Fjords, British Isles, Coastal and other itinerary patterns offered to their passengers. Nevertheless we have been able to collect some feedback from selected cruise line executives and maritime professionals; the prospects of anchoring at 3km distance and operating a 20 to 25 minute tender ride with possible rough sea conditions normally experienced in the West Coast does not appeal immediately to a cruise line taking into consideration the safety and cost aspect of the operation and also the possible return on investment (ROI). We will tackle this topic later in the report But what we can already deduct at this stage is that improving the port facilities will probably be a key factor for Hvide Sande to have a good shot at attracting and accommodating larger ships Baltic Sea Region The Baltic Sea cruise region forms part of the Northern Region and is comprised of a variety of cruise itinerary patterns taking advantage of a wide variety of marquee ports and smaller destinations throughout the region offering an abundant choice of nature, history, culture and sightseeing options. Cruise Feasibility Report for Hvide Sande PG. 32

33 The most recognized ports in the Baltic are Copenhagen, St. Petersburg, Helsinki, Stockholm and Tallinn (the big 5), which are considered x-large ports accommodating more than 200 calls and over 400,000 passengers per year. These are also one of the main reasons for cruise lines to cruise in the Baltic, especially St. Petersburg. Figure 17: The Baltic Sea Region Table 6 below shows how the Baltic ports are divided in categories according to the number of cruise ship calls. Please note that the numbers in Table 6 reflect the statistics for Table 6: Categories of ports in the Baltic Sea Region Small (0-24 calls) Kalmar, Kotka, Karlskrona, Malmö, Sassnitz, Kemi, Elsinore, Turku, Saaremaa, Helsingborg, Mariehamn, Aarhus, Gdansk Medium (25-49 calls) Large ( calls) X-Large (200+ calls) Rønne, Kristiansand, Klaipeda Göteborg, Visby, Gdynia, Riga, Kiel, Rostock, Oslo Helsinki, Stockholm, Tallinn, St. Petersburg, Copenhagen Cruise Feasibility Report for Hvide Sande PG. 33

34 Source: Cruise Baltic For a complete Baltic Sea Region port statistical table including expectations for 2013 please see the tables in Annex 4, showing the numbers of cruise ship calls and numbers of passengers since Please note that these figures are taking into account how many passengers visit each port and the total is the sum of all ports. That means that one cruise passenger can visit 4 or 5 ports and the total number for the statistics will be the number of Cruise Baltic port that he visited. Cruise Baltic is a network of cruise destinations in the Baltic Sea offering easy access to 10 countries on a string with an ocean of adventures. The association - started in 2004 with 12 destinations has now grown to 27 destinations The Baltic Sea region reports positive growth and the results of Cruise Baltic market review 2013 announced at The Cruise Shipping Miami shows that from , the number of passengers to the region has increased by an average annual rate of 11.6% - from 1.1 million in 2000 to 4.2 million in Looking ahead to 2013, it is anticipated that the number of passengers will increase at a growth rate of 4.7%, representing an estimated increase of approximately 196,000 passengers, to more than 4.3million. While the number of passengers and volume of calls has been increasing in general, we can observe that the increases are mainly in the medium to large port segments basically ports that are able to accommodate larger vessels and that are engaging in port development initiatives. There are still ports that have not been able to register any significant increase in their numbers throughout the years. These include mostly the smaller destinations that can accommodate ships at berth and tender, but also others that are similar to Hvide Sande in terms of port characteristics and pier limitations such as Elsinore and Karlskrona, where most ships have to tender, although they have a solid tour and attraction offer. But still their numbers remain low, as cruise lines seem to prefer ports where they are able to dock to avoid safety and security hazards and also tend to chose more recognized and well branded ports that help to sell better their itineraries. Analyzing the statistics above, we can also deduct that the ports that offer larger piers and more adequate facilities to accommodate larger vessels are also the ports that are currently able to receive the most number of calls and passenger visits. And these are also the ports that are able to secure greater economic benefits to the local economy Danish Ports Copenhagen is still the main cruise port in Denmark with 372 calls and 840,000 passengers in Most of the other ports have relatively small figures and were not able to increase their numbers significantly over the last 7 years, while other smaller harbors that have similar port limitations as Hvide Sande have not Cruise Feasibility Report for Hvide Sande PG. 34

35 been able to make any significant impact in terms of growth either. And these are destinations that are able to deliver a good and solid tour and attraction offer. Please find in Annex 6 a full table of statistics for Danish cruise destinations. In summary, there has been little growth regarding the number of passengers and cruise ship calls in all small and medium ports and the numbers are very inconsistent overall. But we would like to point out that in some cases like Ronne, even if the port seems to be loosing on the number of calls (from 2012 to 2013), the passenger numbers are still increasing. This is due to the fact that cruise ships are getting bigger. And this brings an added pressure for ports in general to eventually engage in port development to safely accommodate larger vessels. We also want to point out that there has been a solid interest from cruise lines in Danish destinations given the work of Cruise Copenhagen Network in promoting Denmark to the international markets, but the tendencies in the future given the ECA s and rise in fuel prices will be for itineraries with fewer ports, shorter stays in port and slower steaming speeds. This means that there will be winners and losers, and the smallest destinations or most out of the way destinations could be the ones that suffer the most. The destinations that are most likely to succeed will be destinations that are able to position themselves as: Fitting in an itinerary (basically being on the way between some of the most important and well known ports); That can accommodate larger vessels; That can guarantee low port costs; and That can provide a good shore excursion offer and help the cruise lines to increase their tour revenue and guest satisfaction ratings. And this applies to other regions as well. Based upon cruise line input, there are some key growth factors that must be considered and resolved to allow for more growth in Denmark, Baltic and in the Northern Sea Region over the mid- to long-term. They include: Additional cruise infrastructure capable of supporting larger cruise vessels and passenger loads throughout the region. The region continues to require more port options to reach key demographic areas and provide for the cruise product within a short fly or drive area; Environmental zoning and fuel issues that impact speed & distance in itinerary planning exercises which may limit the number of ports offered or impact the amount of time spent in each port will be an ongoing challenge that ports must consider and work to accommodate cruise lines in this regard. With the ever increasing pressure on the industry to continue its efforts to reduce emissions, the environmental control zone of the Mediterranean and Baltic regions will affect the ability of the cruise brands to deliver key products due to high fuel costs and supply of low sulfur fuels in these regions; and, Cruise Feasibility Report for Hvide Sande PG. 35

36 Continuous development of key distribution channels throughout Europe will provide for a newer expanding consumer market eager to cruise in the adjacent areas Economic Impacts The cruise industry provides a wide variety of direct and indirect economic impacts to the communities they visit based upon passenger and crew spending; provisions required by the vessels including food & beverage, fuel and other supplies; tourism venues, guides, coach companies and other transportation providers; port and operational charges; air and hotel for homeport operations; and a myriad of secondary impacts based upon trickle down spending. The development of new cruise facilities also provide for cruise impacts with the development of the project, construction and employment of personnel to operate the facility. Based upon current European Cruise Commission Economic Impact Assessment data on average passengers visiting a port of call spent an average of 62 per call. Including embarkation port and ports of call, each passenger that visits a European port generated an average total expenditure of nearly 100. Crewmembers spent an average of 21 per visit to a port in Europe. Danish port economic impacts Until now, only the port of Copenhagen and the port of Aarhus have engaged on cruise economic impact studies. Cruise Copenhagen Network attempted a similar exercise but the number of participants was too low to guarantee a proper evaluation of a few selected destinations, so we will not use those figures. Copenhagen - In 2011 the total expenditures by transit passengers, including tours, averaged per passenger. This is 25% higher than the European average of 62. Crew visiting Copenhagen reported spending an average of while ashore. This is 95% above the European average. In total, the port and city of Copenhagen report an overall contribution of 71.8 million in passenger and crew spending that generated an estimated 975 direct jobs and 24.1 million in compensation in Copenhagen and the surrounding region. Source: Copenhagen Malmo port. Aarhus In 2011 the total expenditures by transit passengers, including tours, averaged per passenger. This is 24% higher than the European average of 62. Crew visiting Arhus reported spending an average of while ashore. This is 40% below the European average. The fact that passengers currently spend in average more in Danish destinations than in Europe is a very good sign, but it is not a given one. A destination that wishes to take advantage of these possible economic impacts needs to improve their offering and options for cruise passengers and crewmembers when they go ashore. Cruise Feasibility Report for Hvide Sande PG. 36

37 Figure 18: Economic benefits comparison table ,00 120,00 100,00 43,89 80,00 60, ,44 40,00 20, ,59 79,01 0,00 Europe Copenhagen Aarhus Passenger Spend Avg. Crew Spend Avg. Source: CMP, port of Aarhus, CLIA Europe In order to better analyze the passenger and crew expenditure ashore and offer a detailed breakdown we will use the example of Copenhagen and concentrate on the average of transit passengers and crew numbers in Table 7 below. Table 7: Breakdown of expenditure by cruise passenger and crew in Copenhagen Source: CMP Average Expenditure per Passenger/Crew Category Turnaround Transit Crew F&B & Entertainment Tours & Ground Transportation Retail Goods Other Purchases Accommodations Total We find that transit passengers spend most money on tours, followed by shopping and food & beverage, while the crewmembers spend most on shopping followed by food & beverage. We should bear in mind that every destination is different and also the fact that Copenhagen is a major cruise destination offering a wide variety of attractions and shopping opportunities. Nevertheless, these expenditure breakdowns are actually consistent with other port statistics including smaller destinations. Cruise Feasibility Report for Hvide Sande PG. 37

38 This should give us an indication on what sort of income should be expected from the cruise business and also which areas a destination should focus on developing in order to maximize their potential sources of revenue. Still we need to take into consideration that the ultimate economic impact on the destinations varies depending on the ship being berthed or anchored. The figures above were captured when ships were at berth. In average, the number of passengers coming ashore varies between 65% to 85% depending on the nature of the destination. Crew numbers vary from 20% to 40%. When a ship anchors, the number of passengers and crewmembers coming ashore decreases to 40% to 65% for passengers and 15% to 30% for crewmembers. Cruise Feasibility Report for Hvide Sande PG. 38

39 5. The port of Hvide Sande Hvide Sande is a picturesque port town located on the West Coast of Denmark. Originating from 1931, Hvide Sande is Denmark s newest town. The town has approximately 3,500 inhabitants and the port is the 5 th largest fishing port in Denmark. The main sources of income for the city derive from fishing and land-based tourism originating mainly from Germany. Hvide Sande has never received a cruise call and in actual fact the whole West Coast of Jutland and Germany is still pretty much virgin lands when it comes to cruise business. The region is experiencing a few visits from smaller cruise lines coming from Germany or Holland on mini cruises, coastal cruises or in the way to the Norwegian fjords. The port is 100% a fishing port but the management is looking into other business areas such as servicing of sea-based windmill parks and possible cruise tourism. The access to the port by sea is mainly done through a water channel 6 meter deep up to the extremity of the West Harbor and from then the depth decreases to a low 3,5 meters. This limits the number of ships that are able to enter the port to a safe draft of 4,5 to 5 meters given that the port experiences a tide variation of approximately 70/80 cm. Figure 19: Port of Hvide Sande The port is currently working on redeveloping the West Harbor which will offer a berth of 150 meter LOA, 6,5 meter draft, a 30 meter apron area with 50 ton bollards at 21 meter distance from each other. Cruise Feasibility Report for Hvide Sande PG. 39

40 This will be the most suitable pier to berth cruise ships and the port recommends that the maximum length of the cruise vessels berthing should not exceed 140 meter LOA and 5 meter draft. The ships might need the assistance of a tugboat, which is readily available at the port. If the ships are bigger, then the other solution is to anchor outside the port at open sea. Safe distances to anchor vary depending on the size and draft of the vessels but according to the port the safest distance to anchor large ships could be at 3km distance where the water depth is 16 meters. Up to this point the depth oscillates between 7 and 9 meters in relationship to the port entrance. The currents oscillate between 1 to 3 meters in variation and the wind is predominantly SW to NW with 10m/s speed. If the ship anchors at 3km distance the tender ride is estimated to last between 20 to 25 minutes (one way) depending on the ship s tender characteristics. If ships use the West Harbor we certainly recommend using a shuttle bus to transfer any passengers that do not participate on organized tours to the center of town. If tendering the most suitable pier to operate the tender operations is the furthest pier at the South Harbor (see Figure 20) where there is space to operate two tenders simultaneously. The adjacent ground area is ample in space and can easily accommodate 10 buses and additional vehicles, a tourism information booth and welcoming set-up. A public toilette is also available. The walking distance to the center is about 300 meters over the bridge. Figure 20: Possible tender pier 5.1. Attractions - Hvide Sande and surroundings Cruise Feasibility Report for Hvide Sande PG. 40

41 The town of Hvide Sande is small and picturesque and it comes to life in the summer when visitors flood the streets, shops and the few restaurants. The cruise tourist will be able to find some souvenirs and good quality articles including gourmet choices in the local shops. As main attractions in the region within 1 hour drive we must single out: Ringkøbing old town and museums, the unique West Coast nature landscapes around the Fjord, Nr. Lyngvig light tower, WWII bunkers, several historic and nature-based museums, aerial flights from Stauning Airfield, the gourmet stops (Stauning Whisky Distillery, a number of farm shops, smoked fish and other delicacies), some of Denmark s best water sports facilities including three wind and kite surf schools, the longest cable park in the country and the story telling about the region s history of being located on the edge of nature. But nature remains the main attraction. This is probably the main reason for visitors to come to Hvide Sande the beaches, wild nature, the Fjord and all the outdoor activities associated with the region. The region has approximately 5 million visitor nights including day visits a year bringing an average of 2,1 billion dkk in contributions to the local economy. 83% of these visitors are foreigners mainly from Germany. It has been understood that one of the main objectives of the Destination Hvide Sande is to improve the quality of tourism and offer to attract even more tourists, and to use Hvide Sande as a recognized brand name. This is part of the new strategy and identity for the region and the new website already reflects this upgrade. Hvide Sande Service Group is an established network of business operators with the main strategic aim of providing services to the coming offshore windmill business as well as to the growing tourism industry. As part of this research Consult DC requested from the local tourism professionals a list of possible shore excursion options that could be offered to cruise lines. This was an exercise that allowed us to evaluate the ability of the local stakeholders to create possible programs for cruise, and also to obtain a more detailed and tailor-made data base to be used when surveying cruise lines and service providers. Consult DC is fully aware that this is the first time that the local stakeholders have prepared such programs and we congratulate you on your efforts. We have registered 6 half-day tours, 1 full day tour, and other additional activities such as 12 active options (water and other sports and adventure activities), 2 special programs and 1 option for children. Out of these, and from our experience, we estimate that cruise lines would probably select 2, maximum 3 tour options and offer the additional activities for independents guests. While some cruise lines offered their feedback regarding the initial tour options for Hvide Sande, we would like to point out the example of a destination that offers 23 possible tours on their website, Cruise Feasibility Report for Hvide Sande PG. 41

42 which we could consider above average. But still, the cruise lines do not choose all tours to be offered on board. For example a premium / luxury cruise line is offering 5 out of these possible 23 excursions with a percentage of 43% participation of passengers. In fact these numbers are not bad considering that the ship was tendering. Another company catering for the mass market is only offering 3 tours in the same destination with a participation of 24% and one tour was canceled due to low participation. The ship was also tendering and the average age of the passengers was 65. Next year they will only operate 2 tours. These statistics tell us two things: Cruise lines do not sell all tours offered by the destination. What they do is evaluate which tours are more profitable and with less costs involved and more appealing to their clientele s profile. Each company and clientele varies in class, nationality and age of passengers and cruise lines put all these factors together when selecting tours. But still they like to have 23 choices so that they can evaluate all options; The second factor is that when a cruise ship anchors and tenders its passengers ashore, it is harder to sell tours as the older the guests are they tend to stay on board and not go ashore, especially if the tender ride is long. In many cases when a ship tenders, 50% of the passengers remain on board, 30% go on tour and 20% explore the destination on their own. Taking the above into consideration, we deduct that the offer lacks in content and quantity and a more tailor made product development is required. For the record, we have excluded attractions and venues that are located further than one hour driving distance from Hvide Sande. This includes for example: Legoland, Givskud Zoo and Ribe. There is also a limitation in terms of transportation and guide availability. Most vehicles (including taxis) will need to come from Ringkøbing and this will add an extra cost on any programs and there are no active cruise guides in the region at this stage, meaning that training would need to take place. Cruise Feasibility Report for Hvide Sande PG. 42

43 6. Interviews and SWOT Analysis In this chapter we include feedback from selected cruise lines, service providers and other cruise related personnel that Consult DC felt that their contribution would be meaningful to include on this report. The responses were kept confidential as per agreement with the survey participants. This also allowed us to obtain more detailed and less holding back feedback that was vital to complete this report Summary of interview responses The region in general lacks the infrastructure (soft and hard) to accommodate cruises at this stage; At the moment we are visiting some destinations in the West Coast of Denmark and Germany just to fill in the itineraries; As things stand (lack of suitable berth and a long tender run) there's no possibility of us considering the port. The second big concern would be the cost of the land program as guides and transportation would probably need to be transported from other regions. With the right investment in port infrastructure that could change, as the North Sea Coast of Denmark would be very well placed strategically to attract cruises given the lower speeds we'll be operating to in the future; Hvide Sande and the area is lacking a big draw, and we would not expect to see a high take up of shore excursions were we to call, particularly if the destination was placed at the end of a Baltic or Norwegian itinerary. What we would need to see is a very attractive port tariff to offset this. That said, given the age of our passengers tender ports are only considered as a last resort; Were the port to build a suitable berth to accommodate large vessels, we could consider it for the future - it is well placed geographically and the North Sea coast needs something! We visited Esbjerg way back but the UK market still sees it as a ferry port and it would need to do some serious marketing to change that perception; We are visiting some of the German islands in the region to offer our guests a more authentic and nature driven and up close experience to our guests. Norway is becoming crowded and we are interested in more exotic and off the beaten track to provide intimate experiences; But if tendering we cannot offer a tender ride longer than 10 minutes as our guests get bored and feel cheated. We prefer anchoring in front of the destinations to offer great views and motivate the passengers to go ashore; Cruise Feasibility Report for Hvide Sande PG. 43

44 Hvide Sande and the region do not offer a big highlight, the tours are not appealing. Nature is the biggest draw which is hard to sell; Cruise lines are very aware of pricing and ask us to cut down on add-ons on most of the tours to minimize the rates, so destinations need to do that in consideration especially of planning full day tours (which are harder to sell). Venues need to consider what to charge; The destination is very limited in the number of ships that can attract; The locals at many destinations have this idea that cruise business is a gold mine and many times get disappointed when passengers do not spend money ashore. People need to be prepared for this; On the other hand the destination needs to work constantly to create innovative opportunities for passengers and crew to spend money in their destinations; Anchoring at the very often windy and rough west coast would be a big challenge. Many captains would decide to jump the port and continue to the next one as a tender ride would really challenge the guests; It will be hard to sell the destination tour wise, as venues are somehow specialized. An option could be to offer theme cruises to smaller ships like Star Clipper and similar; We draw a straight line from our UK embarkation ports straight line to Skagen when sailing to the Baltic. It would be a big deviation to sail to Hvide Sande regarding costs of fuel; What could we do with 1000 or even 2500 people in Hvide Sande? Smaller cruise ships use the Kiel Canal to access the Baltic to save time and fuel. Hvide Sande and the region are out of the picture; The coast of West Jylland is well positioned for slower speeds itineraries that cruise lines are adopting more and more, but the infrastructure needs to improve; Ships are getting bigger and the maritime legislations do not favor older ships especially with the implementation of the ECA s and waste discharge regulations; There is a great competition between ports to attract cruise line calls and the smaller and more restricted ports in terms of access will have great difficulties in the future; Cruise Feasibility Report for Hvide Sande PG. 44

45 There is no shelter if anchoring; Could be an option for explorer or expedition type of cruise lines; It is important that a cruise destination delivers good quality services (enough guides, buses, attractions) that are well recognized by the cruise lines. It does not only contribute to the growth of the destination but also to the general impression of the country and all the other Danish ports SWOT Analysis We have compiled the below SWOT analysis extrapolating information collected on our surveys and interviews, and also included findings from earlier research. The results were used on our presentation / workshop with the local stakeholders on May 15 th 2013 in order to better illustrate Hvide Sande s position relating to potential cruise tourism. We are also using this SWOT exercise on our further analysis and conclusions below Table 8: SWOT exercise Strengths Weakness New destination Unique settings potential to become a niche destination The city is used to handle tourism Local support - city willing to have cruise business Shops are well prepared to take credit cards and speak English, German and Nordic languages Attractive port fees Ample space at port and at tender area to handle cruise operations Weak marquee value and brand recognition Limited port facilities Only 4 cruise ships sailing in the region can berth Long tender ride if anchoring Coastal cruises are only 3,8% of total cruises in the region Lack of shore excursion options reduced revenue options Lack of recognized attractions Cruise lines are generally not familiar with Hvide Sande and the West Coast of Jylland Tour operators and handlers based in Copenhagen. Many port agents and operators do like to operate smaller destinations given the costs of moving ops from CPH Inside ECA zone. Some cruise lines may reduce their presence in the region by 40% Guide limitations Limitation on transportation (especially mini vans, privates, taxis) Cruise Feasibility Report for Hvide Sande PG. 45

46 Destination still relatively unknown can create its own space Product development can improve Hvide Sande is already very popular with German tourists Local shop owners and businessmen to expand options and offers for cruise tourists Cooperation with other Jylland destinations such as Aalborg, Skagen and Arhus to train guides for cruise Possible inclusion on short itineraries from German cruise lines in the region Sell it as a relaxed destination to break off busy ports of call in the Baltic and Norway Expedition cruise lines West Coast of Denmark is relatively unknown by cruise lines Possible cooperation with other destinations in the region Opportunities How ECA will affect the region City center location from West Harbor pier location (shuttle / walk?) Marpol rules to handle waste management can affect the whole region Hvide Sande has a busy summer season possible tourism pollution if having many cruise passengers in town at the same time Not enough guides (quantity and languages) for official and independent operators Threats Destination not able to fulfill guest and cruise line expectations Cruise lines might not see it as a regular port of call in their itineraries, but only from time to time Esbjerg to get serious about cruise Bigger ships being built Cruise itineraries being reduced and port eliminated due to high fuel costs Source: Consult DC 6.3. Average cruise budget for a small destination Below, we offer an average cruise budget for a small destinations covering marketing and promotion initiatives and materials; international events such as Cruise Shipping Miami, Seatrade Med, Seatrade Europe and others; cruise network affiliations such as Cruise Baltic, Cruise Europe, Cruise Copenhagen Network; cruise line visits; site inspections; welcoming at the pier and operational costs, and other cruise related expenses. The average spending for a small destination is approximately 1 million kroner per year. Medium and large destinations and even smaller destinations with great ambitions can spend up to 2.5 to 3 million kroner a year. The above-mentioned costs are normally, (but not always) shared by the port, the local tourism organization and other local stakeholders. The costs constitute a long term investment and historical facts and experience show that on average, only after 3 to 4 years the ports will start to experience some results in the form of cruise and passengers visits after initiating this work. Cruise Feasibility Report for Hvide Sande PG. 46

47 For most of the destinations, it is hard to quantify and measure the return on investment. While the port revenue based on port and passenger fees constitute a very small fraction of income to the port (compared to other port business sectors), most of the economic contributions actually go to the city (shops, restaurants, etc.) and service providers (tours, buses, guides). Table 9: Estimated yearly cruise budget for a small destination Estimated yearly cruise budget for a small destination International fairs - Seatrade Convention, Miami (inc stand, travel, reception, etc.) 70,000 - Seatrade Convention, Hamburg 12,000 Visits to cruise line offices - USA UK Germany Marketing - Newsletter / mailing postcards 4 pcs / year (including production) 50,000 - Brochures 50,000 - Website (maintain and update) 50,000 Others - Site inspections 20,000 - Participation additional seminars / conferences 20,000 - Give aways Shipping Dispatch Miscelaneous Estimated total cost marketing 402,000 dkk Cruise association s membership Membership for Cruise Baltic (small port) 75,000 Membership for Cruise Copenhagen 27,500 Travel costs to attend related meeting and events 10,000 Estimated total costs for cruise association participation, networking, learning experience 112,500 dkk Operational costs associated with ship at dock - Setting up tourism information - Signs - Replacement staff - Music on the dock - Small gifts to passengers on arrival - Representation during the visit of representatives from the cruise lines - Ship visits Estimated total operations cost dkk Working hours by port and city personnel or dedicated cruise coordinator 400,000 dkk Estimated Total 1,014,500 dkk Source: Consult DC Cruise Feasibility Report for Hvide Sande PG. 47

48 6.4. Overall analysis of the case of Hvide Sande as a cruise destination One executive from Carnival Corporation recently mentioned that it takes 4 years for cruise lines to deliver a cruise ship and 40 years to deliver a suitable port and destination for cruise. While this does not apply in general the comment still hits a note: it takes time to prepare and deliver a cruise destination. It does not happen overnight. There is much work to be done and planning to take place. As per our SWOT analysis, we can identify several areas that need improvement, and probably the most important factor to mention at this stage is the access to the port. With the current facilities, Hvide Sande is very limited in terms of cruise ships that it can accommodate at the pier being the maximum 140-meter of LOA and 5 meter of draft. In actual fact, there are only 4 ships out of the 82 ships sailing in the region that can actually fit the pier. And out of those 4, there is only one ship carrying 184 passengers that is actually crossing Hvide Sande while the others use the Kiel Canal to access the Baltic. The options of the remaining 48 ships to come in the region are very slim as these ships are mainly chartered to sail in more profitable and exotic regions. And since most of these are older ships they will probably vanish with time and the new and bigger ships will not be able to fit in the port. So any calculations and plans to attract cruise ships cannot be based on these existing smaller vessels. It is difficult to make projections for possible cruise calls at this stage, but given all the data analyzed above and taking into consideration: The current port limitations, The reduced amount of ships that can actually fit the pier, The anchoring conditions and tendering time, The tendency for cruise lines to build larger ships, The lack of major attractions in the region, and The location of the destination not being favored and featured regularly in cruise line itineraries, We estimate that it will be difficult for the port to attract any cruise business at all given the current situation. Perhaps the port will get a cruise call here and there from a smaller ship at berth or at anchor (if not too far from dock), but this will depend also on the promotion and product development done by the destination and its stakeholders. Money and time will need to be invested for this to happen. Cruise Feasibility Report for Hvide Sande PG. 48

49 As per our research and statistics above, the trend is that ships are getting bigger and ports need to adjust their facilities accordingly. This amounts to great pressure on new destinations that dream of pursuing cruise business and substantial investments need to take place and of course the best options need to be planned that are suitable to the port and city. An option discussed, was to build a dedicated cruise pier structure (sort of a finger pier) directly opposed to the West harbor on the East side of the channel, but the port will still be limited to a 6 meter draft and a turning basin of 150 meters. In addition, the length of the ships could block the navigation channel. A second option could be to use floating buoys strong enough to secure larger vessels inside the breakwater, but again the draft of 6 meters is a limitation and the ships could also block the entrance of the port. A third option could be to rent a smaller and faster ship that could transport an average of guests from the cruise ship at anchor to Hvide Sande, instead of using the cruise ship s tenders. This option would also need to be properly evaluated and cruise line marine departments consulted for feedback on safety and security. Of course if pursuing any alternative or option the port need to do a proper cost evaluation and the pros and contras taken in consideration, but most important is to quantify the ROI (return on investment). If the port decides to invest in facilities to accommodate larger vessels or to safely anchor vessels closer to the port, it would change the situation, but still the lack of recognized attractions and tour offer limitation will remain a challenge. As requested by the stakeholders, we did a further analysis by taking into account a possible extension of the West Harbor to a LOA of 225 meters and the depth to 8 meters. In this case, we would be using as search criteria ships of LOA 200 meters and 7 meters draft. Of the 340 existing cruise ships, 122 ships or 36% of the worldwide fleet could fit these improved port specifications, compared to 82 ships fitting the existing conditions (see Figure 21 below). The complete list of the 122 ships is found in Annex 7. Cruise Feasibility Report for Hvide Sande PG. 49

50 Figure 21: Number of ships worldwide that could fit in an expanded pier of 8m draft and 200m length Number of ships worldwide that could fit in an expanded pier of 8m draft and 200m length % % Number of ships that fit: 122 Number of ships that do NOT fit: 218 Total number of ships worldwide: Source: Consult DC Of these 122 ships, there are actually 30 ships (25%) that could fit in the West harbor if the port would extend their facilities. See Figure 22 below: Figure 22: Number of ships worldwide that could fit in the expanded port of Hvide Sande Number of ships worldwide that could fit in the expanded port of Hvide Sande 92 75% 30 25% Number of ships in the region that fit in the expanded port: 30 Number of ships worldwide that fit in the port but are not operating in the region: 92 Total number of ships worldwide that could fit: 122 Source: Consult DC We break this down further by calculating that out of the total 82 ships that are currently sailing in the region there are currently 30 cruise ships (37%) that would be able to fit in the port of Hvide Sande as per Figure 23 below. The 30 ships carry a maximum of about 15,000 passengers. Cruise Feasibility Report for Hvide Sande PG. 50

51 Figure 23: Number of ships sailing in the region that could fit in the expanded pier of Hvide Sande Number of ships sailing in the region that could fit in the expanded pier of Hvide Sande 52 63% 30 37% Ships that could fit: 30 Total number of ships operating in the region: 82 Source: Consult DC Finally, of the 30 cruise ships (carrying about 15,000 passengers) that operate in the Northern Sea region and would be able to fit in a potential 8m deep, 200m long pier of Hvide Sande, only 15 ships (50%) are actually crossing Hvide Sande while conducting their itineraries in the region in A significant percentage of the ships (37%) choose to cross Kiel Canal 11 ships, while 4 ships (13%) are sailing in the area but further from Hvide Sande in itineraries connecting England and the Norwegian Fjords. See Figure 24 below. A list with a breakdown of these ships by sailing area is available on Annex 8. Figure 24: Number of ships that fit in the expanded pier of Hvide Sande and cross Hvide Sande Number of ships that can fit in the expanded pier of Hvide Sande and cross Hvide Sande 4 13% 11 37% 15 50% Ships that cross Hvide Sande: 15 Ships that cross Kiel Canal: 11 Ships that cross a wider geographic area: 4 Total number of ships: 30 Source: Consult DC Cruise Feasibility Report for Hvide Sande PG. 51

52 Hypothetically, the port could be a potential choice for 15 ships and a total of 8,655 passengers if extending the port to 225 meters LOA and 8 meters of draft. But this is far from a given business. As mentioned above, a considerable amount of promotion would need to be done and adequate services guaranteed for any real business to materialize. But in terms of navigation, the port would still face challenges, as the turning basin is only 150 meters, meaning that most ships would have to back down from the entrance of the port to the berth. The diameter of the new entrance of the port (at breakwater) is 100 meters and the diameter of the old entrance of the port is 80 meters. While this would not be a major obstacle for navigation when adding the strong winds that frequently occur in Hvide Sande, most captains would not enjoy the idea of backing all the way to the pier. At this stage, therefore, it seems that the anchoring option is the best alternative but as we have established, cruise lines in general do not like to tender and if doing it, they prefer short tender rides. A 20 to 25 minute tender ride is simply too long and since the destination does not have any major attractions, cruise passengers will be reluctant to come ashore and cruise lines will not stop at Hvide Sande. It has been further investigated that ships could anchor with a draft of 10 meters at approximately 1.5 kilometers of the coast. This would probably reduce the tender ride by half, which is good news. The bad news is that even with relatively calmer winds between 6m/s and 7 m/s from S SW and a wave oscillation of 0.5 meters the sea is still rough for passenger tender navigation. In the afternoon of May 15 th 2013, we joined a small 2-hour trip aboard the sconner Maja and we experienced firsthand the conditions of the sea at 1.5 km, and even the Maja captain mentioned that these were relatively fair sea conditions. So the tender options are also becoming very limited unless the weather is fantastic, which is very hard to predict 2 years in advance the average time that it takes for a cruise line to plan the itineraries up to execution. While the port infrastructure is important, the actual destination experience and tour offer is equally important as a determinant factor for cruise lines to decide which port to visit. Cruise lines in general are looking for options to reduce costs and increase revenue. Given the increasing fuel prices many cruise lines are removing ports out of their existing itineraries or cutting down on time spent on the port to reduce speed on sailing and save on fuel costs. Smaller destinations out of the main itineraries will probably suffer the most. This puts more pressure on new destinations that want to break in to have any realistic chances. Destinations and itineraries are driven by consumer demand and at the moment, cruise passengers do not know Hvide Sande and in general are not familiar with the region. Much work would need to be done to promote the destination, but as per the budget in Table9, it would require considerable Cruise Feasibility Report for Hvide Sande PG. 52

53 investments from the local stakeholders and it would take some years until the destination sees any result. The itinerary planning process from planning up to brochure publishing, sales to public and execution takes an average of 2 years to be completed. Cruise lines at this stage are completing planning for 2015 season and also already working on the 2016 season. Destinations need to also plan their promotional activities well in advance. The statistics for smaller destinations (with similar characteristics as Hvide Sande) that have pursued cruise business for the last 10 years do not show any major increases and this also means that the contributions to the local economies have not been significant, unless (as in the case of Elsinore) the city and region receive visitors from cruise passengers originating from other neighboring ports such as Copenhagen and Helsingborg. So Hvide Sande needs to evaluate these statistics carefully before making any decisions, as the ROI need to be properly calculated. And one fact remains consistent: for a destination to increase its volume of cruise ships visits and passengers, it needs to engage in port and facilities development and improve its tour / attraction offer this combination is crucial. There are also limitations in terms of attractions, tours, venue capacities, transportation and guides that need to be evaluated and added to the equation. Much work will need to take place to overcome these challenges. As per our research, cruise lines do not accept all tour options and actually choose the ones where they can make more money and save more costs. A smart and successful destination is one that thinks and plans on how to better help cruise lines to increase their revenue shore side. Cruise Feasibility Report for Hvide Sande PG. 53

54 7. Regional neighboring ports In this section we will analyze ports in proximity to Hvide Sande that offer similar upland products and experience and provide for safe harbour can be seen as competitive. However, there are some ports that may also be complimentary in nature due to their draw and position within a certain itinerary pattern. The regional ports that are competitive / complementary in nature for Hvide Sande include the following: Skagen: Strategically located at the tip of Denmark Skagen has a major advantage as it can accommodate smaller vessels at berth 170 meter LOA and 8 meter draft and a more sheltered anchor point and shorter tender ride for larger vessels. In average the port welcomes 9 cruise ships a year and these numbers have not changed for the last 10 years, mainly due to the limitations of the port. The port is now planning the construction of a larger pier to accommodate vessels up to 340 meters and 11 meters draft to be ready in This will be a relevant development not only for Skagen for also for the region as most of the ships that enter the Baltic cross Skagen in their itineraries. So the number of passengers visiting Skagen could increase substantially. This can be positive for Hvide Sande, as more passengers visiting the region will draw more attention to other possible destinations in Jylland. Esbjerg: For the last few years the port has been welcoming an average of 3 cruise ships calls a year predominantly from German cruise lines such as Transocean, Peter Deilmann that originate their trips in Germany and Holland. Star Clippers has also called. Cruise lines associate the port mainly with cargo and ferry activities. The port has not been active in promoting itself as a cruise destination and so far they have been monitoring and evaluating the potential for cruise business. Englandkaj dock has LOA 310 mt and 7,6 mt draft but the port can accommodate even larger ships if necessary. Close proximity to Ribe, Kolding and Legoland are pluses. Rømø: Danish island that is very similar to Hvide Sande in terms of the charactetistics such as beach, weather, nature, etc. The new pier with LOA 410 mt and 7 mt draft can accommodate larger ships at berth. This is a huge advantage compared to Hvide Sande. Closer access to Ribe and other inland options is also relevant. The port has one call this year from Peter Deilmann. List / Sylt: This is a German island that shares the same characteristics as Hvide Sande in terms of climate, landscapes and overall offer. It has a few calls a year (average 2 or 3) mainly from smaller lines such as Peter Deilmann and Star Clipper which anchor at approximately 1 km distance from shore. Basically this island is used to fill in gaps in the itinerary and not for any special reason, as one cruise line pointed out. Passengers normally tender ashore as the port is limited. Cruise Feasibility Report for Hvide Sande PG. 54

55 Heligoland: small German island that again has similar characteritics shared by the other neighbouring destinations in the region, but has some special distinctions in terms of landscape. The island has 16 cruise calls this year from Star Clipper, Phoenix Seereisen, Saga, and MSC that anchor in front of the island. But apart from the tourism attarctions, one of the main reasons that cruise lines use this port is to get a tax exempt status as the island is part of the EU but exempt from the EU VAT area and customs union and consequently much of the economy is funded by the sales of alcohol, cigarettes, perfumes and other VAT exempt items sold to tourists. Cruise ships are also allowed to have their shops open during their stay in the island. Ships normally tender their passengers ashore as the port is limited in size. Copenhagen, Hamburg, Bremerhaven, Amsterdam, Ijmuiden: all these destinations have one thing in common: they are larger ports are frequently used as turnaround ports on itineraries that sail in close proximity to Hvide Sande. Therefore they will need to be taken in consideration for itinerary planning if Hvide Sande decides to go ahead and pursue the cruise business. Examples of itineraries in the region: Peter Deilmann, Deutschsland 5 day itinerary: Hamburg, List/Sylt, Rømø, Heligoland, Hamburg Peter Deilmann, Deutschsland 5 day itinerary: Hamburg, Esbjerg, At sea, Copenhagen, Kiel. Star Clipper, Star Flyer 7 day itinerary: Travemunde, Kalundborg, Marstrand, Skagen, sea, Sylt, Hamburg. Star Clipper, Star Flyer 4 day itinerary: Amsterdam, Holland ; Den Helder, Holland; Heligoland, Germany; Hamburg, Germany. Saga, Quest for Adventure: 13 day itinerary: Dover, Heligoland, Kiel canal, Rønne, Copenhagen, Helsingborg, Aalborg, Gothenburg, Oslo, Mandal, Stavanger, Dover Phoenix Seereisen, Amadea 10 day cruise: Hamburg, Vik, Flam, Bergen, Arendal, Heligoland, Hamburg. MSC Magnifica 11 day itinerary: Hamburg, Heligoland, Edinburgh, Newcastle, Le Havre, Zeebrugge, Amsterdam, Hamburg. In terms of competition, any of the above ports can be competitors at this stage as Hvide Sande has not yet a defined a position in the business. At the same time, any of the above ports can also be complimentary ports to alternate calls in the region and most importantly, can be used to open the appetite of cruise lines for new destinations options, and such a regional cooperation can facilitate the the promotion of the destination and the product development in the region. So Hvide Sande will benefit from monitoring further the cruise itinerary development in the region and the progress of the above ports to further evaluate its position in the future. Cruise Feasibility Report for Hvide Sande PG. 55

56 8. Conclusion Given the current conditions, it is very unlikely for Hvide Sande to have any chances of attracting cruise ships at this stage - the challenges outweigh the opportunities by great length. In our workshop in Hvide Sande on May 15 th 2013, we also understood that the primary local stakeholders do not want to pursue the cruise business given the findings of our study and the realization of the current destination limitations. For most smaller ports, cruise tourism comprise a very small business compared to the other sources of income for the port. Cruise tourism is more like the "umbrella on a cocktail glass" - it looks nice and the city inhabitants like it, but at the end of the day, someone needs to make solid investments for it to happen. Given the average budget needed to promote a new destination on an annual basis, in addition to the time and management organization immediately involved, we find the local stakeholder s decision wise, as we cannot predict any proper return on investment or any significant economic impacts to the local economy. Another element to consider is that Hvide Sande is located in the North Europe coast and from our research into the cruising regions, we have found that coastal cruises amount to a small 3.8% of overall cruises in the region leaving very slim chances for Hvide Sande to attract cruise lines. Consult DC will not be able to make any final decisions for the local stakeholders but we will be offering some recommendations on the next section that will hopefully help making the right decisions. Cruise Feasibility Report for Hvide Sande PG. 56

57 9. Recommendations While this study clearly concludes that Hvide Sande s prospects of developing cruise tourism is very slim given the current technical port conditions and limitations of the product offer, the challenges by far outweighing the opportunities, this section contains a series of general and specific recommendations in case Hvide Sande or similar smaller Danish ports should still want to pursue the cruise business. This would require the engagement in more detailed assessments and studies to determine the magnitude of investment needed, especially at the port level. The navigation and facilities are far from optimal to receive cruise ships at this stage. Destination challenges are often cruise line needs. If any given port wants to attract or increase its number of cruise passenger visits its needs to provide adequate facilities in order to accommodate the larger vessels that are being built according to the cruise business trends and a profitable tour offer. In addition, there is a need to agree on a long term cruise business strategy for the region that will need to be in place to tie all the knots together focusing on passenger satisfaction, cost control and revenue opportunities. The cruise business is a long-term business and requires vision, development and investment in order to be successful. As some of the cruise lines pointed out, there is a need for new port developments given the lack of suitable destinations in the region and the potential to provide new itinerary options. Smaller cruise lines that want to offer a more intimate and up and close destination experience and focus on nature can be swayed to visit the port, but homework will be needed to identify who the cruise line targets are in order to engage in promotion activities. In addition, and as per Table 7, passengers spend on average 42% of their money when going ashore on tours, and as we have identified, there are no major tour attractions or programs in the region that would bring this kind of participation and revenue. In actual fact, Hvide Sande seems to fall in the category of a nature destination that could appeal to low passenger spending expedition cruise ships. Cruise Feasibility Report for Hvide Sande PG. 57

58 Therefore, no cruise line should be contacted unless you are 100% certain that you will be able to provide all the services required for that specific cruise line and that you will be able to meet or exceed their expectations. Doing otherwise would set back any future opportunities. This will require time and any work done now will only bring results in 2 to 3 years when a cruise call may eventually materialize. Still, cruise tourism is not a static business and cruise lines have the ability to move their business around and move ships elsewhere if their yields are down in a specific region. Working and cooperating with the tour operators that are based in Copenhagen and that sell and operate the tours will be crucial in order to promote any small port destination in their meetings with cruise line tour executives. The same applies to the port agents (also based in Copenhagen) exploring their relationship with the cruise line marine executives. This is always a challenge as most of these professionals see smaller destinations as costly to operate. As we mentioned previously - while the numbers of passengers, sailings and ships being built continue to grow, many cruise regions are becoming saturated. Therefore, cruise lines will look more and more for new destinations and regions to explore and offer to their clientele. If Hvide Sande despite the findings of this study wishes to pursue cruise tourism, it would be wise to approach Esbjerg, Rømø and maybe some of the smaller German islands in the region, or even Hirtshals to get together and discuss a possible collaboration and agree on a strategy to attract cruise lines to the region. This would have to be a well-coordinated and planned project and the immediate focus could be on: 1. Identifying the potential destinations to take part in this initiative; 2. Identifying challenges and advantages of each destination focusing on: i. Port infrastructure ii. Attractions and tour options iii. Options for independent guests iv. Special and unique features v. Service quality and quantity (buses, guides, etc.); 3. Researching cruise lines that are either sailing in the region, are a possible fit in the region s ports (berth or tender) or that could be interested in exploring the region; 4. Agreeing on who does what in the network and explore the existing relationships with the local service providers normally associated with cruise; 5. Devising a long term cruise business strategy, promotional plan and cruise budget for the region; 6. Creating and proposing cruise itineraries that include the chosen destinations and that are tailormade for each of the cruise lines identified under 3; 7. Involving ports, cities, local stakeholders, and most importantly, port agents and tour operators that are regularly in touch with cruise lines and can be spokespersons for the region and, Cruise Feasibility Report for Hvide Sande PG. 58

59 8. Creating a recognized brand and in the process make the region more attractive and known to the international markets. This would also help in reducing any promotion and marketing costs that would be shared by the participating destinations. Hvide Sande is a coastal destination. Coastal European destinations were in the past mainly considered as one-off port of call and included in re-positioning itineraries. During the last 5 years, this has changed and two examples of what destinations have done to change their fate are shown in Annex 9. In case Hvide Sande or any other similar small Danish port should decide to go ahead and pursue cruise tourism, it would make sense to consider initiating discussions with Cruise Copenhagen Network (a national association that promotes not only Copenhagen but an additional 9 Danish cruise destinations) and possibly take advantage of their great promotional and educational platform and initiatives. But Hvide Sande or other similar smaller ports will need to look at the map and see who the closest destinations are, and how a working relation can be established. This will be crucial to ensure success. A destination needs other destinations to create itineraries and cannot exist on its own. Cruise Feasibility Report for Hvide Sande PG. 59

60 10. General guidelines for ports to engage on cruise business While the numbers of passengers, sailings and ships being build continue to grow, many cruise regions are becoming saturated. Therefore, cruise lines will look more and more for new destinations and regions to explore and offer to their clientele. While each region and destination is different and unique in its landscapes, cultures, characteristics, attractions and port facilities, the following factors that determine why cruise lines visit a destination remain the same: 1. Consumer demand passengers tell the cruise lines and travel agents which regions and destinations they want to visit and cruise lines plan their itineraries accordingly; 2. Revenue opportunities cruise lines analyze the choice of shore side programs and tour options to be offered to their guests and how much revenue it can produce on each specific destination; 3. ROI - costs vs. revenue Cruise lines look at the costs of operating a vessel when visiting a destination and compare it to the revenue that they are able to create. At the end of the day, a cruise line wants to make sure that they actually make a profit when visiting a destination; 4. Visitor satisfaction levels if cruise passengers are happy they will rate the destination high and the cruise lines will most likely visit again. If the ratings are low, they will probably not return; 5. Safety and security Operations (either at berth or anchor) need to be conducted safely, the port needs to be ISPS certified, there needs to be a safety plan for the port area, the city and port need to provide a safe environment for the cruise passengers; 6. Fit in greater itinerary a destination does not exist on its own in the itinerary. Cruise lines look for destinations that complement each other in an itinerary and that are able to sell well to the consumer. Based on the above and discussions with cruise line executives, we have prepared a list of key items that need to be in place for a destination to pursue cruise tourism: Adequate port infrastructures to receive cruise ship vessels given the current and future construction trends; Ample variety of tour and program offers for cruise lines from different sectors to chose from; Cruise Feasibility Report for Hvide Sande PG. 60

61 It is an advantage for the destination to have a famous / well-known attraction that is already recognized internationally. This could apply to the city and its brand name; Venues and attractions located in proximity of the port and not further than 1 hour s drive away; A good number of professional guides conversed in several languages (depending on the markets to attract); Good quantity and quality of the transportation offer, ranging from big buses to mini vans, mini buses, private vehicles and taxis; Preferably the destination should be located in a region neighboring other cruise destinations or with easy navigation access to assure better positioning on possible cruise itineraries; Options in the city and the region for independent guests that can include shopping, food & beverages, museums, historical sites, shows and festivals and other options; Good cooperation between the port, the city politicians, tourism organizations, chamber of commerce and local stakeholders; and The acceptance of cruise tourism by the city inhabitants. Please note that the size of port infrastructures, the number of guides and transportation needed depends if the destination wants to pursue big ships, medium ships or smaller ships and also on the type of cruising: luxury, premium, standard or expedition. If a pre-feasibility study like the present study for Hvide Sande as a case proves that there is scope for cruise tourism, one of the most important steps that an aspiring cruise destination should do first is to conduct a more specific market study to determine its real chances of becoming a cruise destination and to base any future initiatives and investments on. This will also form the basis for a cruise business strategy to be agreed by all the local stakeholders that needs to be in place for any destination to have better chances to be successful. Cruise Feasibility Report for Hvide Sande PG. 61

62 Port and Destination Development Annex 1 References and glossary Several definitions, cruise industry terms and acronyms used throughout this report may not be familiar to the reader. We define several of these terms in the following section. 1 1) Anchorage. Location where a vessel may anchor. In destinations where docks are not present to accommodate vessel operations, anchorages are used and passengers are shuttled to/from the cruise vessel to a landside location using a small boat (tender). Anchorages are generally only used in ports- of- call. 2) Beam. The width of the cruise vessel at its widest part. Panamax Vessels refer to vessels with beams than can transit the Panama Canal (beam is equal to 36m or less). Post- Panamax Vessels and Super- post Panamax have beams that exceed the width of the Panama Canal, or greater than 36m. 3) Bed (berth)- nights. A typical cruise industry form of capacity measurement representing the number of lower berths (a bed on a cruise vessel, with the aggregate total generally determining the vessel s normal passenger capacity) times nights of operation in a region. 4) Berth. (1) A bed, generally attached to the deck and/or bulkhead onboard a vessel. (2) An anchorage or dock space for a vessel in port. 5) Bunkers. Marine fuel used for propulsion. 6) CLIA. Cruise Line International Association 7) Dockage. Fees levied by a port or destination for the right to dock a vessel. 8) Draft. The depth of water required by a vessel to float; the measurement in meters of the extent to which the vessel projects below the surface of the water. 9) ECA - Emission Control Area. The International Maritime Organization (IMO) has officially designated waters off the North American coasts as an ECA in following an agreement with the IMO and incorporation into European law. The Baltic Sea became the first fully implemented SOx Emission Control Area in August One year later, in August 2007 the North Sea and English Channel became the second SECA. In March 2010 IMO s Marine Environmental Protection Committee adopted a proposal from the USA and Canada for an ECA extending 200 nautical miles from both east and west coasts and around the islands of Hawaii. The ECA is not only for SOx emissions, but also particulate matter and NOx. It will become fully implemented on or after August In September 2010 another US proposal for an ECA around Puerto Rico and the US Virgin islands was Consult DC Gothersgade 11, 2tv 1123 Copenhagen K Denmark Tel: (+45) [email protected]

63 Port and Destination Development discussed at IMO and seems set to enter into force in Further ECAs seem likely to be proposed for Norway, Japan and the Mediterranean. 10) Ferry. Term usually applied to a vessel transporting passengers and vehicles from point to point. The key difference between these operations and conventional cruises is that ferry operations have as their primary business focus offering transportation services, not a travel and leisure experience. 11) Gross Tonnage (GT). A measure of a vessel s enclosed volume. This term has emerged as the standard measure of communicating a vessel s size. A Mega- vessel generally refers to a vessel of 70,000 GT or larger. 12) Independent guests. Guests not participating on ship excursions and going out of the ship on their own. 13) IMO. International Maritime Organization 14) Itinerary. Ports visited on a given cruise. Two itinerary types are generally observed. Open- jaw (OJ) itineraries refer to those deployments where the cruise begins at one homeport and end at another. Round Trip or Closed- jaw itineraries the more common type observed begins and end from the same homeport. 15) Length Overall (LOA). Total length of a cruise vessel, including any incidental structure that may extend this dimension. 16) Low Sulfur fuel. Ships use of low sulfur fuel, typically with a sulfur content of 1.5%, is the primary abatement approach considered by the current international and regional legislation. Fuel with sulfur content of 1.5% or lower is currently only 1% of all the fuel used by ships around the world. The availability and price of low sulfur fuel is a source of much debate and discussion in both the shipping and oil industries ahead of the implementation of the 2015 legislation. 17) Lower Berth Capacity. The number of beds of standard height on a cruise vessel. The number of lower berths determines the vessel s normal passenger capacity. Maximum Passenger Capacity refers to the total number of passengers that can be accommodated on the cruise vessel in lower berths and other flexible berths (also referred to as upper berths). 18) Marpol - International Convention for the Prevention of Pollution from Ships 19) Need. A condition or situation in which something is required or wanted. Necessity; obligation. To be necessary. 2 20) Operational costs. They are directly related to operating the vessel in the different ports. These can be port fees, fuel costs, ground handler and agent s fees, etc. Consult DC Gothersgade 11, 2tv 1123 Copenhagen K Denmark Tel: (+45) [email protected]

64 Port and Destination Development 21) Passenger Tax (also referred to as a head tax). Port charge assessed against each passenger aboard the vessel. Generally the principal income stream to ports and destinations for accommodating cruise activities. 22) Port- of- call (also referred to as a way- port). One of several destinations visited as part of the cruise itinerary. The focus of the port- of- call is on tourism activities adjacent to the cruise arrival area and the transportation of passengers to regional points of interest. 23) Revenue Passenger. This generally refers to a homeport passenger or in some very limited cases port- of- call passengers (Vancouver where all passengers are charged for on/off the vessel), whereby passenger counts reflects the Port s passenger wharfage or Tariff rate charging policy. For homeport calls the actual number of passengers is doubled to show that the cruise operator is charged by the port for the passenger boarding and disembarking the vessel at a set fee. 24) Transit Passengers. By literal definition, the status of cruise passengers at a port- of- call. 25) Travel Agent. Seller of tourism products (TA). 26) Tender. A large rescue boats on cruise ships that are also used to transport passengers between an anchored ship and a port with insufficient facilities to receive a cruise ship at the dock. 27) Turnaround. Disembarkation of passengers ending a cruise and embarkation of new passengers starting a cruise at a given port. Both operations are normally done on the same day. Consult DC Gothersgade 11, 2tv 1123 Copenhagen K Denmark Tel: (+45) [email protected]

65 Port and Destination Development Annex 2 Cruise vessels on order worldwide, as of April 2012 Cruise vessels on order worldwide, as of April 2012 Source: Cruise Community and B&A Cruise Operator Vessel Name Gross Tonnage Length Overall (M est.) Lower Capacity Berth Cost (US Millions) 2012 AIDA Cruises AIDAmar 71, $565 Carnival Cruises Carnival Breeze 130, $738 Celebrity Cruises Celebrity Reflection 122, $798 Costa Cruises Costa Fascinosa 114, $726 MSC Cruises MSC Divina 140, $742 Disney Cruise Line Disney Fantasy 124, $899 Oceania Cruises Riviera 65, $ AIDA Cruises (DEL.) AIDAstella 71, $417 NCL Nor. Breakaway 143, $840 Princess Cruises (DEL.) Royal Princess 141, $735 MSC Cruises MSC Preziosa 140, $742 Hapag- Lloyd Europa 2 39, $360 Compagnie du Ponant Le Soleal 10, $ Princess Cruises Regal Princess 141, $735 NCL Norwegian Getaway 143, $840 Costa Costa Diadema 132, $788 TUI Cruises Mein Schiff 3 97, $515 RCI Quantum of the Seas 167, $ Consult DC Gothersgade 11, 2tv 1123 Copenhagen K Denmark Tel: (+45) [email protected]

66 Port and Destination Development P&O Cruises unnamed 141, $804 AIDA Cruises unnamed 125, $650 RCI Anthem of the Seas 167, $1032 Viking Ocean Cruises unnamed 47, $308 HAL unnamed 99, ,660 $518 TUI Cruises Mein Schiff 4 99, ,500 $515 NCL Breakaway Plus 163, ,200 $ AIDA Cruises unnamed 125, $650 Viking Ocean Cruises unnamed 47, $308 Carnival Cruise Line unnamed 135, ,000 $708 RCI Oasis 3 225, ,400 $1300 Source: Seatrade Cruise Insider Consult DC Gothersgade 11, 2tv 1123 Copenhagen K Denmark Tel: (+45) [email protected]

67 Port and Destination Development Annex 3 Emission Control Area and Marpol waste regulations Emission Control Area The International Maritime Organization (IMO) officially designated waters in North American and Europe as Emission Control Areas. The agreements were struck by the IMO and incorporated into European and U.S. and Canadian law. The Baltic Sea became the first fully implemented SOx Emission Control Area (SECA) in August One year later, in August 2007 the North Sea and English Channel became the second SECA. In March 2010 IMO s Marine Environmental Protection Committee adopted a proposal from the USA and Canada for an ECA extending 200 nautical miles from both east and west coasts and around the islands of Hawaii. The ECA is not only for SOx emissions, but also particulate matter and NOx. It is fully implemented since August In September 2010 another US proposal for an ECA around Puerto Rico and the US Virgin islands was discussed at the IMO and will enter into force in Further ECAs seem likely to be proposed for Norway, Japan and the Mediterranean. When the revised MARPOL Annex VI entered into force in July 2010 it included a change to the name and definition of an emission control area from SECA to ECA an area where special mandatory measures are required to control NOx, or SOx and particulate matter (PM), or all three types of emissions from ships. In addition to the North Sea and Baltic ECAS, European regulation requires, with some exceptions, ships in an EU member state port, at berth or at anchor to use 0.1% sulphur fuel. Currently passenger vessels must also use a 1.5% sulphur fuel during regular service between member state ports and in EU waters. In 2015 a fuel sulphur standard of 0.1% fuel sulphur (1,000 ppm) is expected to reduce PM and SOx emissions by more than 85%. This fuel standard is expected to be met through fuel switching. In most cases, ships have the capability to store two or more fuels. To meet the 1,000 ppm fuel sulphur requirement, some vessels may need to be modified for additional distillate fuel storage capacity. As an alternative to using lower sulphur fuel, ship operators may choose to equip their vessels with exhaust gas cleaning devices ( scrubbers ). Vessels are required to burn LS 380 (1%) beginning in 2012 and MGO (0.5%) by 2015 within ECA. Outside of ECAS, the current global limit of 4.5% sulphur- in- fuel will be reduced to 3.5% in 2012, then 0.5% in 2020 or 2025 depending on a review in 2018 to determine the availability of fuel to enable Consult DC Gothersgade 11, 2tv 1123 Copenhagen K Denmark Tel: (+45) [email protected]

68 Port and Destination Development implementation of this standard. It is currently estimated that the USD cost is between $9 and $21 per passenger per day for fuel Based upon cruise line feedback and our assessment for the Northern European cruise region there will be the following impacts due to ECAS: Cruise lines may opt to remove one or more ports out of given itineraries and shorten the time spent on port in order to reduce the speed of sailing and fuel consumption; It will likely shorten the shoulder seasonality of the region and reduce any repositioning s within the ECA areas; and, UK based companies operating older vessels estimater a drop 0f 40% of sailings in the region; It may also drive some new itinerary developments with selections of cruises outside of the ECA when sailing from and to key regions. However, until the scope of the cost of fuel, compliance and the availability of fuel is fully known, the implications will not be fully understood. Marpol waste regulations On July 15, 2011 the IMO through the Marine Environment Protection Committee (MEPC) 62 nd session approved the new regulations under Annex IV of the MARPOL Convention and designated the Baltic Sea as a Special Area with respect to pollution by sewage, whereby any discharge of sewage into the sea from a passenger ship will be prohibited unless the ship uses an approved sewage treatment plant capable to reduce nutrients according to the established concentrations. Alternatively, untreated sewage could be delivered to a port reception facility (PRF). Helcom (Helsinki Commission Baltic Marine Environment Protection Commission) further states that since systems do not yet exist to treat sewage onboard to the standards required by the IMO it is highly uncertain if technology will be capable of operating to the required standard in a compliance regime in Until the 2014 review of available technology has been completed, ports should proceed on the basis that cruise ships would need to discharge all sewage ashore. According to CLIA Europe this implies that the port should provide a direct shore side connection and be able to provide at least 200 m3 per hour of discharge rate. Larger ships will require 280 to 300 m3. This will need to be available across all berths and 24/7. The port will also need to be able to receive 270 m3 of bio residuals per ships. These services will need to be provided under no- special- fee arrangements. At the time of this report, CLIA Europe and Helcom are still evaluating the possible scenarios to offer further recommendations to IMO regarding this important matter for the region, as it seems to be highly unlikely at this stage that cruise ships develop and implement suitable technology aboard all vessels sailing in the Baltic or that the ports are all able to deliver the facilities to accommodate the required services by Consult DC Gothersgade 11, 2tv 1123 Copenhagen K Denmark Tel: (+45) [email protected]

69 Port and Destination Development While this may or may not immediately affect the ports outside the Baltic Sea region such as Hvide Sande, the future consequences still need to be determined. As with The Eca s it seems that sooner or later more regions are adopting common maritime environmental protection regulations and common standards. Consult DC Gothersgade 11, 2tv 1123 Copenhagen K Denmark Tel: (+45) [email protected]

70 Baltic passenger numbers, 2012 and est Name of port est Arendal Copenhagen Elsinore Gdansk Gdynia Gothenburg Helsingborg Helsinki Kalmar Karlskrona Kemi Kiel Klaipeda Kotka Kristiansand Malmö Mariehamn Oslo Riga Rostock Rønne Saaremaa Sassnitz St. Petersburg Stockholm Tallinn Turku Visby Aalborg Århus Total Yearly Growth 10,6% -3,5% 42,0% 14,7% 22,8% 7,7% 0,7% 20,5% 13,2% -0,8% 13,1% 5,6% 4,7% Average Annual Growth Rate 00-12: (expected) Average Annual Growth Rate 00-13: 11,6% p.a. 11,1% p.a.

71 Baltic call numbers, 2012 and est Name of port est Arendal Copenhagen Elsinore Gdansk Gdynia Gothenburg Helsingborg Helsinki Kalmar Karlskrona Kemi Kiel Klaipeda Kotka Kristiansand Malmö Mariehamn Oslo Riga Rostock Rønne Saaremaa Sassnitz St. Petersburg Stockholm Tallinn Turku Visby Aalborg Århus Total Yearly Growth 4,6% -4,6% 28,0% 5,5% 16,9% -5,4% -3,5% 4,5% 3,3% -6,3% 6,2% 7,1% 1,6% Average Annual Growth Rate 00-12: (expected) Average Annual Growth Rate 00-13: 4,3% p.a. 4,1% p.a.

72 Baltic turnaround numbers, 2012 and est Name of port est Arendal Copenhagen Elsinore Gdansk Gdynia Gothenburg Helsingborg Helsinki Kalmar Karlskrona Kemi Kiel n/a n/a n/a n/a n/a n/a Klaipeda Kotka Kristiansand Malmö Mariehamn Oslo Riga Rostock Rønne Saaremaa Sassnitz St. Petersburg Stockholm Tallinn Turku Visby Aalborg Århus Total Yearly Growth -4,7% -10,9% 36,7% -9,8% 36,9% 29,6% 5,2% 14,6% -0,3% 3,5% 11,2% 10,4% -4,6% Average Annual Growth Rate 00-12: (expected) Average Annual Growth Rate 00-13: 9,4% p.a. 8,4% p.a.

73 Port and Destination Development Annex 5 List of worldwide cruise vessels that fit in the current harbor of Hvide Sande YoB Operator Name GT LOA Beam Dft Pax (LB) Crew 2001 Celebrity Xpeditions Celebrity Xpedition ,5 14,8 3, Clipper Cruise Line Clipper Odyssey ,9 15,4 4, Clipper Stad Amsterdam Stad Amsterdam ,2 10,52 4, Compagnie du Ponant Le Diamant ,7 16 4, Compagnie du Ponant Le Levant ,26 13,9 3, Compagnie du Ponant Le Ponant FTI Berlin FTI Berlin ,3 17,52 4, GAP Adventures Expedition ,2 18,9 4, Hapag-Lloyd Bremen ,5 16,98 4, Hapag-Lloyd Hanseatic ,83 17,98 4, Hebridean Island Cruises Hebridean Princess , Heritage Expeditions Akademik Shokalskiy ,6 4, Heritage Expeditions Spirit of Enderby ,6 12,8 4, Hurtigruten Fram Hurtigruten Nordstjernen ,77 12,5 4, Lindblad Expeditions National Geographic Explorer ,6 16,5 4, Murmansk Shipping Klaudiya Yelanskaya ,01 16,24 4, n.k Quest , , n.k Serenissima ,48 13,26 4, Noble Caledonia Caledonian Sky ,4 15,3 3, Noble Caledonia Island Sky ,4 15,3 3, Oceanwide Expeditions Aleksey Maryshev ,9 12,92 3, Oceanwide Expeditions Grigoriy Mikheev ,9 12,8 3, Oceanwide Expeditions Plancius , Oceanwide Expeditions Professor Molchanov ,6 12,8 4, Oceanwide Expeditions Professor Multanovskiy ,6 12,8 4, Oceanwide Expeditions Rembrandt van Rijn , Orion Expedition Cruises Orion ,72 14,25 3, Pearl Seas Cruises Pearl Mist ,5 17 3, plantours & partner Vistamar ,82 4, Quark Expeditions Clipper Adventurer ,01 16,3 4, Quark Expeditions Ocean Nova , Quark Expeditions Sarfak Ittuk , , Quark Expeditions Sea Spirit ,4 15,3 3, Seabourn Cruise Seabourn Pride ,8 19, Seabourn Cruise Seabourn Spirit ,8 19, SeaDream Yacht SeaDream I ,8 14, SeaDream Yacht SeaDream II ,8 14, Silversea Silver Explorer ,11 15,6 4, Star Cruises Megastar Aries ,2 14 3, Star Cruises Megastar Taurus ,2 14 3, Terra Magica Travel Monet ,01 9,14 3, Travel Dynamics International Corinthian II ,4 15,3 3, Travel Dynamics International Orion II ,2 15,3 3, Tropicana Cruises Adriana ,7 14 4, Windstar Cruises Wind Spirit ,2 15,8 4, Windstar Cruises Wind Star ,2 15,8 4, Zegrahm Expeditions Clipper Odyssey ,9 15,4 4, Source: Consult DC Consult DC Gothersgade 11, 2tv 1123 Copenhagen K Denmark Tel: (+45) [email protected]

74 Port Copenhagen - CMP Copenhagen Malmö Port Calls PAX max LOA unlimited Draft 9,7mt Aalborg - Port of Aalborg Calls PAX max LOA 250mt Draft 9mt Aarhus - Port of Aarhus Calls PAX max LOA 400mt Draft 13mt Elsinore - Port of Elsinore Calls PAX max LOA 150mt Draft 6,5mt Faaborg/Odense - Ports of H C Andersen Calls PAX max LOA 185mt Draft 6,2mt Skagen - Top Denmark Calls PAX max LOA 155mt Draft 9mt Korsoer - Port of Korsoer Calls PAX max LOA 210mt Draft 7mt Naksov - Port of Naksov Calls PAX max LOA 320mt Draft 7,5mt Rønne - Port of Rønne* Calls PAX max LOA 260mt Draft 8,5mt Source: Cruise Copenhagen Network *Tilmeldte skibe og fakkske anløb afviger med 4-9 pr. år pga. vejrliget.

75 Port and Destination Development Annex 7 List of 122 cruise vessels worldwide with maximum length of 200 meters and 7 meters draft Consult DC Gothersgade 11, 2tv 1123 Copenhagen K Denmark Tel: (+45) [email protected]

76 Port and Destination Development Consult DC Gothersgade 11, 2tv 1123 Copenhagen K Denmark Tel: (+45) [email protected]

77 Port and Destination Development Source: Consult DC Consult DC Gothersgade 11, 2tv 1123 Copenhagen K Denmark Tel: (+45) [email protected]

78 Port and Destination Development Annex 8 Breakdown of ships that could fit the expanded West Harbor pier with LOA 225 meters and 8 meters draft List of 15 cruise ships that cross Hvide Sande List of 11 cruise ships that sail through the Kiel Canal List of 4 cruise ships that cross Hvide Sande through a wider geographic area (England to Norway itineraries) Source: Consult DC Consult DC Gothersgade 11, 2tv 1123 Copenhagen K Denmark Tel: (+45) [email protected]

79 Port and Destination Development Annex 9 Two examples of regional cooperation which have changed the perception of cruise lines One of the cases involved destinations located in the north of France, Spain, Portugal and south of the UK that identified common challenges to attract cruise lines. They decided to join forces and together created the Cruise Atlantic Europe While the network was headed by more well known destinations such as Lisbon and Dover, it was the less know destinations such as Bilbao, A Coruna, Leixoes, St. Malo, Brest and Cork that actually gained more benefits from this initiative. They were able to showcase to the cruise lines that the region was more than just an option for cruise operators when ships are re- positioning to the Mediterranean, and were able to explore opportunities for short cruises in the region where cruise lines visiting this selection of ports can both save money in terms of fuel costs and lower port charges but also to increase revenue by promoting profitable shore excursions. With cruise visitors set to exceed 1.25 million in 2013, all the member ports of Cruise Atlantic Europe have experienced growth as cruise traffic in the region continues to increase. This was also prompted by investment of the smaller ports in their infrastructure and much needed product development. Secondly, there is the case of the Atlantic Alliance where 15 coastal destinations situated in countries ranging from Portugal, Spain, and France to the UK but also including closer destinations located in Belgium, Holland and Germany got together for similar objectives and gains. One of their main goals was to establish the Atlantic Alliance region as a destination in its own right, capable of competing fully with the Baltic, Mediterranean and Norwegian Fjords. They have since created interesting itineraries for the region and continue to improve the cruise statistics. They actually have one of the best websites of any cruise associations: This is just to offer some examples as we are aware that the above mentioned destinations are in general bigger and are also better known than Hvide Sande, but the fact of the matter is that they were able to change the perceptions of the cruise lines and in the process help big and small destinations. It had to start somewhere. Consult DC Gothersgade 11, 2tv 1123 Copenhagen K Denmark Tel: (+45) [email protected]