1. BREA Market Potential Cruise Operations Port of Jacksonville Presented by Andrew J. Moody, Ph.D. January 26, 2009 Presented to Board of Commissioners Jacksonville Port Authority

2. BREA www.breanet.com Slide 2 Presentation Overview Scope of Work Scope of Work Background Background Market Analysis Market Analysis Growth Analysis Growth Analysis

3. BREA www.breanet.com Slide 3 Scope of Work Objective: Assess the potential deployment opportunities at the Port of Jacksonville Objective: Assess the potential deployment opportunities at the Port of Jacksonville Key factors affecting deployment opportunities Key factors affecting deployment opportunities –Relocation and construction of new terminal –Expansion of the North American fleet and its destination deployment –Source market for cruise passengers –Cruise executives’ perceptions of ports –Competition among similarly sized ports –Growth and deployment strategies of individual cruise lines

4. BREA www.breanet.com Slide 4 Background Port is currently a single ship port offering year-round 4- and 5-day cruises to the Bahamas on the Fascination. Port is currently a single ship port offering year-round 4- and 5-day cruises to the Bahamas on the Fascination. Approximately 80% of passengers arrive by ground transportation and 20% by air. Approximately 80% of passengers arrive by ground transportation and 20% by air. –More than 50% of all passengers and 75% of drive-to passengers reside in 5 states (FL, GA, NC, AL, SC) Current cruise potential is limited due to size of terminal facilities and air draft constraint. Current cruise potential is limited due to size of terminal facilities and air draft constraint. Relocation and expansion of the cruise facilities at Mayport will allow the port to support larger cruise ships. Relocation and expansion of the cruise facilities at Mayport will allow the port to support larger cruise ships. Fascination and Celebration, before it, have been sailing at over 100% capacity. Fascination and Celebration, before it, have been sailing at over 100% capacity.

5. BREA www.breanet.com Slide 5 Historical Cruise Performance Cruise Sailings and Passengers Cruise Revenues * Estimated from year-to-date sailings and occupancy

6. BREA www.breanet.com Slide 6 Summary of Cruise Operations When operating on a full–year schedule the Fascination will generate: When operating on a full–year schedule the Fascination will generate: –78 sailings –Nearly 180,000 passenger embarkations –$3.9 million in cruise revenues an average of $21.80 per passenger an average of $21.80 per passenger or nearly $50,000 per sailing or nearly $50,000 per sailing –On average the Fascination has been sailing at 110% of capacity

7. BREA www.breanet.com Slide 7 Market Analysis – Key Components North American Fleet: Supply & Deployment North American Fleet: Supply & Deployment Demand: Primary Source Market Demand: Primary Source Market Competitive Environment Among Tier 3 Ports Competitive Environment Among Tier 3 Ports Potential Caribbean Itineraries from Jacksonville Potential Caribbean Itineraries from Jacksonville

8. BREA www.breanet.com Slide 8 Overview of N.A. Cruise Industry Industry is entering a reduced growth phase brought about by the global economic recession. Industry is entering a reduced growth phase brought about by the global economic recession. –Newbuilds will remain reasonably strong through 2010 and then decelerate through 2013 following a pattern similar to that after 9/11. Declining yields will drive down construction with a lag. Declining yields will drive down construction with a lag. Some planned and committed projects have been cancelled Some planned and committed projects have been cancelled Others are being re-negotiated. Others are being re-negotiated. –European deployments are being re-evaluated with several ships being redeployed to North America.

9. BREA www.breanet.com Slide 9 Overview of N.A. Cruise Industry Annual New Vessel Introductions, 2000 - 2018 North American Fleet by Segment – 2000-2018 Cyclical downturn in newbuilds re-emerges Cyclical downturn in newbuilds re-emerges Downward trend in newbuilds continues Downward trend in newbuilds continues Average size of cruise ships continues to increase Average size of cruise ships continues to increase

10. BREA www.breanet.com Slide 10 Deployment of N.A. Fleet With more and larger cruise ships joining the N.A. fleet, bed day deployment in all destination markets will increase. With more and larger cruise ships joining the N.A. fleet, bed day deployment in all destination markets will increase. –Overall the Caribbean will remain the largest destination market. Eastern & Southern Caribbean will be a growth leader. Eastern & Southern Caribbean will be a growth leader. Western Caribbean and the Bahamas will experience a slight decline in market share. Western Caribbean and the Bahamas will experience a slight decline in market share. –European share of deployed capacity will fall in the short-term.

11. BREA www.breanet.com Slide 11 Overview of N.A. Cruise Industry Destination Deployment Bed- Days Broader Caribbean market still accounts for 40% of the industry’s global bed day capacity. Broader Caribbean market still accounts for 40% of the industry’s global bed day capacity.

12. BREA www.breanet.com Slide 12 Implications for Jacksonville The North American fleet will continue to expand, albeit at a slower pace, providing more opportunities for smaller ports, like Jacksonville, to homeport ships displaced from larger ports. The North American fleet will continue to expand, albeit at a slower pace, providing more opportunities for smaller ports, like Jacksonville, to homeport ships displaced from larger ports. Jacksonville is in a geographical location that will support cruise development in the expanding Eastern and Southern Caribbean. Jacksonville is in a geographical location that will support cruise development in the expanding Eastern and Southern Caribbean.

13. BREA www.breanet.com Slide 13 The Caribbean and the Southeast Ports Approximately 6.8 million passengers on more than 3,850 cruises visit the Caribbean annually. Approximately 6.8 million passengers on more than 3,850 cruises visit the Caribbean annually. –The Eastern & Southern Caribbean has been gaining market share primarily at the expense of the Western Caribbean. The ports of the Southeast account for about 75% of the cruises and passengers destined for the Caribbean. The ports of the Southeast account for about 75% of the cruises and passengers destined for the Caribbean. –The “Tier 1 and Tier 2” ports of South Florida account for about 94% of the passenger volume.

14. BREA www.breanet.com Slide 14 The “Tier 3” Ports of the Southeast Cruises and Passengers by Port of Embarkation Jacksonville and Mobile are the dominant “Tier 3” ports in the region Jacksonville and Mobile are the dominant “Tier 3” ports in the region –Both are year-round and single-ship ports serving a single destination market Charleston and Norfolk are seasonal ports Charleston and Norfolk are seasonal ports

15. BREA www.breanet.com Slide 15 The “Tier 3” Ports of the Southeast Cruise Itineraries of the Tier 3 Southeast Ports Charleston and Jacksonville offer cruises to the Bahamas Charleston and Jacksonville offer cruises to the Bahamas Mobile cruises are destined for Mexico Mobile cruises are destined for Mexico Cruises from Norfolk sail to Bermuda and the Caribbean Cruises from Norfolk sail to Bermuda and the Caribbean Charleston and Norfolk ships are being redeployed in 2010 Charleston and Norfolk ships are being redeployed in 2010 –Celebrity adding 5 calls in Charleston in 2010 –Carnival adding 4 calls in Norfolk and 2 in Charleston in 2010

16. BREA www.breanet.com Slide 16 The Cruise Port Evaluations

17. BREA www.breanet.com Slide 17 The Jacksonville Source Market Source market defined by 2-, 4- and 6-hour drive times Source market defined by 2-, 4- and 6-hour drive times –Constrained to the south by Tampa and Port Canaveral –Constrained to the west by Mobile Core target market consists of individuals between the age of 25 and 80 with a household income over $40,000 Core target market consists of individuals between the age of 25 and 80 with a household income over $40,000

18. BREA www.breanet.com Slide 18 The Jacksonville Source Market 1.44 million potential Caribbean cruise passengers 1.44 million potential Caribbean cruise passengers Target Market Size 1.50 Million Households  3.90 Million Individuals  Vacationers  (61%) 2.38 Million Individuals Non-Vacationers  (39%) 1.52 Million Individuals Past Cruisers  (45%) 1.07 Million Individuals Cruise Prospects  (55%) 1.31 Million Individuals Potential Caribbean Cruisers  (61%) 0.65 Million Individuals Non-Caribbean Cruisers  (39%) 0.42 Million Individuals Potential Caribbean Cruisers  (60%) 0.79 Million Individuals Target Caribbean Cruisers 1.44 Million Individuals Non-Caribbean Cruisers  (40%) 0.52 Million Individuals

19. BREA www.breanet.com Slide 19 The Jacksonville Source Market High growth market with region’s largest population center High growth market with region’s largest population center Nearly 50% of the target cruise market resides within a 2-hour drive of Jacksonville Nearly 50% of the target cruise market resides within a 2-hour drive of Jacksonville Penetration rates of projected drive-to cruise volume at Jacksonville for 2009 Penetration rates of projected drive-to cruise volume at Jacksonville for 2009 –10% of potential Caribbean cruisers –6% of all potential cruisers –3.7% of all total “core” target market

20. BREA www.breanet.com Slide 20 Implications for Jacksonville Proposed relocation and construction of new terminal facilities enhances the port’s image and operating characteristics. Proposed relocation and construction of new terminal facilities enhances the port’s image and operating characteristics. Charleston, Jacksonville’s nearest Tier 3 competitor, is considered to be the least attractive port. Charleston, Jacksonville’s nearest Tier 3 competitor, is considered to be the least attractive port. Jacksonville is considered to have adequate drive-to capacity. Jacksonville is considered to have adequate drive-to capacity. With adequate fly-to capacity, Jacksonville can also attract passengers for longer cruise itineraries. With adequate fly-to capacity, Jacksonville can also attract passengers for longer cruise itineraries.

21. BREA www.breanet.com Slide 21 Destinations in the Bahamas The Bahamas is capable of supporting multiple cruise itineraries. The Bahamas is capable of supporting multiple cruise itineraries.

22. BREA www.breanet.com Slide 22 Existing Itineraries from Florida Ports Canaveral to the Eastern Caribbean – Disney Magic Canaveral to the Eastern Caribbean – Disney Magic –Similar cruises can be easily originated in Jacksonville.

23. BREA www.breanet.com Slide 23 Existing Itineraries from Florida Ports Canaveral to the Eastern Caribbean – Freedom of the Seas Canaveral to the Eastern Caribbean – Freedom of the Seas –A similar cruise could be offered from Jacksonville with ship with sufficient speed and range.

24. BREA www.breanet.com Slide 24 Existing Itineraries from Florida Ports Miami to the Eastern Caribbean – Carnival Triumph Miami to the Eastern Caribbean – Carnival Triumph –Also possible from Jacksonville.

25. BREA www.breanet.com Slide 25 Implications for Jacksonville 7-day or longer itineraries to the Eastern Caribbean are certainly feasible from the Port of Jacksonville. 7-day or longer itineraries to the Eastern Caribbean are certainly feasible from the Port of Jacksonville. Cruises to the Southern Caribbean while unlikely would have to include at least one call at a Eastern Caribbean port and be 10 days. Cruises to the Southern Caribbean while unlikely would have to include at least one call at a Eastern Caribbean port and be 10 days. 7-day cruises to the Western Caribbean are feasible with an initial call at Key West and two calls in the Western Caribbean. 7-day cruises to the Western Caribbean are feasible with an initial call at Key West and two calls in the Western Caribbean.

26. BREA www.breanet.com Slide 26 Summary of Market Analysis Increase in North American fleet will result in a trickle down of homeport deployment from the major to minor ports. Increase in North American fleet will result in a trickle down of homeport deployment from the major to minor ports. Caribbean deployment will continue to increase with the Eastern Caribbean increasing its market share. Caribbean deployment will continue to increase with the Eastern Caribbean increasing its market share. Jacksonville has only a small penetration into its drive-to market for potential Caribbean cruisers and should be able to attract more passengers from this market. Jacksonville has only a small penetration into its drive-to market for potential Caribbean cruisers and should be able to attract more passengers from this market.

27. BREA www.breanet.com Slide 27 Summary of Market Analysis Relocation and construction of the new cruise facility will enhance the port’s image and cruise operations. Relocation and construction of the new cruise facility will enhance the port’s image and cruise operations. There are numerous cruise itineraries throughout the Caribbean that can be offered from the Port of Jacksonville. There are numerous cruise itineraries throughout the Caribbean that can be offered from the Port of Jacksonville.

28. BREA www.breanet.com Slide 28 Growth Analysis – Key Components S.W.O.T. Analysis S.W.O.T. Analysis Target Cruise Lines Target Cruise Lines Summary of Potential Itineraries Summary of Potential Itineraries Tier 1 Ports: Capacity and Displacement Effects Tier 1 Ports: Capacity and Displacement Effects Potential New Deployments in Jacksonville Potential New Deployments in Jacksonville Estimates of Passenger and Revenue Growth Estimates of Passenger and Revenue Growth

29. BREA www.breanet.com Slide 29 S.W.O.T Analysis Port’s strengths outweigh its weaknesses and its opportunities overshadow the threats. Port’s strengths outweigh its weaknesses and its opportunities overshadow the threats.

30. BREA www.breanet.com Slide 30 Target Cruise Lines Carnival Carnival –Steady expansion and committed to the Caribbean –Will redeploy ships from Europe –Has been successful at Jacksonville –Has been willing to add capacity at the port Norwegian Norwegian –Has a strong focus on drive-to markets –Moving out of Charleston –Opportunity for redeployment from other East Coast ports –Overall operations under review

31. BREA www.breanet.com Slide 31 Target Cruise Lines Celebrity Celebrity –In the midst of a significant fleet expansion –Has a history with Jacksonville –New terminal should be beneficial –Market demographics must fit their passenger profile Royal Caribbean Royal Caribbean –Steady expansion and committed to the Caribbean –Expanding in the Eastern & Southern Caribbean –Opportunity for redeployment from other East Coast ports

32. BREA www.breanet.com Slide 32 Potential Itineraries Potential Eastern Caribbean cruise itineraries Potential Eastern Caribbean cruise itineraries –A mix of the Bahamas and the Eastern Caribbean

33. BREA www.breanet.com Slide 33 Potential Itineraries Potential Western Caribbean cruise itineraries Potential Western Caribbean cruise itineraries –A mix of the Bahamas and the Western Caribbean

34. BREA www.breanet.com Slide 34 Capacity Utilization at Tier 1 Ports Tier 1 ports in Florida are at or near capacity on prime weekend dates. Tier 1 ports in Florida are at or near capacity on prime weekend dates. Even if not at capacity congestion at Miami and Port Everglades is a growing problem. Even if not at capacity congestion at Miami and Port Everglades is a growing problem. Cruise ship sailings and passenger volumes will continue to increase at these ports through 2011. Cruise ship sailings and passenger volumes will continue to increase at these ports through 2011. Redeployments and displacements will continue. Redeployments and displacements will continue.

35. BREA www.breanet.com Slide 35 Port Canaveral Port Canaveral averages 8 weekly cruises in March 2009 which will grow to 9 in 2010 Port Canaveral averages 8 weekly cruises in March 2009 which will grow to 9 in 2010 –Deployment of Freedom of the Seas in 2010 reaches Sunday limit Peak Saturday Passengers: 2009 – 4,800+; 2010 – 5,400+ Peak Saturday Passengers: 2009 – 4,800+; 2010 – 5,400+ Peak Sunday Passengers: 2009 – 3,800+; 2010 – 7,400+ Peak Sunday Passengers: 2009 – 3,800+; 2010 – 7,400+ Available Berths: 3

36. BREA www.breanet.com Slide 36 Port Everglades Port Everglades averages 15 weekly cruises in March 2009 which will grow to 17 in 2010 Port Everglades averages 15 weekly cruises in March 2009 which will grow to 17 in 2010 –There is limited additional capacity and high passenger volumes on Saturdays and Sundays Peak Saturday Passengers: 2009 – 16,000+; 2010 – 24,000+ Peak Saturday Passengers: 2009 – 16,000+; 2010 – 24,000+ Peak Sunday Passengers: 2009 – 14,000+; 2010 – 16,000+ Peak Sunday Passengers: 2009 – 14,000+; 2010 – 16,000+

37. BREA www.breanet.com Slide 37 Port of Miami Port of Miami averages 18 weekly cruises in March 2009 and 2010 Port of Miami averages 18 weekly cruises in March 2009 and 2010 –There is limited additional capacity and high passenger volumes on Sundays and Mondays Peak Sunday Passengers: 2009 – 14,000+; 2010 – 14,000+ Peak Sunday Passengers: 2009 – 14,000+; 2010 – 14,000+ Peak Monday Passengers: 2009 – 13,000+; 2010 – 13,000+ Peak Monday Passengers: 2009 – 13,000+; 2010 – 13,000+

38. BREA www.breanet.com Slide 38 Redeployment in Action Introduction of 3,652- passenger Carnival Dream Introduction of 3,652- passenger Carnival Dream –Displaces the 2,972-passenger Carnival Glory at Port Canaveral –Carnival Glory then displaces the 2,758-passenger Carnival Triumph in Miami –Carnival Triumph then displaces the 2,052-passenger Carnival Fantasy in New Orleans –Carnival Fantasy then displaces the 1,452-passenger Holiday in Mobile –Holiday is deployed outside North America Introduction of 5,400- passenger Oasis of the Seas Introduction of 5,400- passenger Oasis of the Seas –Displaces the 3,114- passenger Navigator of the Seas at Port Everglades –Navigator of the Seas then displaces the 3,634-passenger Freedom of the Seas in Miami –Freedom of the Seas is then deployed at Port Canaveral as a second RCCL ship –Exhausts available berths on Sundays

39. BREA www.breanet.com Slide 39 Attributes of Potential New Deployment Carnival is likely to continue to deploy larger ships at Jacksonville over time as full capacity is maintained. Carnival is likely to continue to deploy larger ships at Jacksonville over time as full capacity is maintained. –Fascination Triumph Class Conquest Class NCL will likely discontinue operations at Charleston and will deploy new F3 ship in Miami in 2010. NCL will likely discontinue operations at Charleston and will deploy new F3 ship in Miami in 2010. –A ship like the Norwegian Spirit could be deployed on alternative Bahamas or Eastern Caribbean itineraries. RCCL/Celebrity have reduced their presence in both Charleston and Norfolk in 2010 and will add numerous ships through 2011. RCCL/Celebrity have reduced their presence in both Charleston and Norfolk in 2010 and will add numerous ships through 2011. –RCCL will deploy the Allure of the Seas at Port Everglades in 2011 resulting in a chain of redeployments. –Celebrity will be adding another two ships by 2011 and may be interested in moving the Century from Miami.

40. BREA www.breanet.com Slide 40 Deployment Potential Expansion of cruise itineraries to the Eastern and Western Caribbean. Expansion of cruise itineraries to the Eastern and Western Caribbean. –More than a doubling of passengers and cruise revenues

41. BREA www.breanet.com Slide 41 Summary Expansion of the North American fleet with larger ships being deployed on Caribbean itineraries will continue. Expansion of the North American fleet with larger ships being deployed on Caribbean itineraries will continue. Movement of ships from Tier 1 to Tier 2 to Tier 3 ports will be necessary. Movement of ships from Tier 1 to Tier 2 to Tier 3 ports will be necessary. Jacksonville is located so as to be able to source passengers throughout the southeast and to also access destinations throughout most of the Caribbean. Jacksonville is located so as to be able to source passengers throughout the southeast and to also access destinations throughout most of the Caribbean. With the construction of a new terminal at Mayport, Jacksonville will be able to handle the largest cruise ships and have a competitive advantage over other Tier 3 ports. With the construction of a new terminal at Mayport, Jacksonville will be able to handle the largest cruise ships and have a competitive advantage over other Tier 3 ports. As a result Jacksonville has the potential to more than double current passenger volumes and revenues over the next decade. As a result Jacksonville has the potential to more than double current passenger volumes and revenues over the next decade.