How Carnival’s return gives Mobile hope for cruise terminal payoff

Twelve years ago, the Carnival Elation set sail out of the Alabama Cruise Terminal for the last time leaving city leaders perplexed and holding the bag on what was quickly shaping up to be a massive waterfront boondoggle.

It would be another five years before the cruise line returned with another cruise ship.

Fast forward to this month, and a light is shining on the finality of the cruise terminal’s debt ahead of Friday’s arrival of the Carnival Spirit. If all things go according to plan for Mobile, the revenue streams during the duration of the Spirit’s stay in Mobile could come close to covering the remainder of the terminal’s debt.

It’s a rapid reversal of fortune for a city that, not too long ago, wondered if it was ever getting a cruise ship back to raise the revenues needed to offset the taxpayer’s obligations on the terminal’s annual bond note of $1.4 million to $1.8 million.

“It’s important to have a ship there,” said Councilman Joel Daves, who chairs the council’s finance committee. “If we don’t have one there, it doesn’t service the debt. And we just have to pay for it.”

Revenue potentials

Under a five-year agreement with Carnival Cruise Line to bring the Spirit to Mobile, the city anticipates receiving a rough estimate of $3 million each year from a combination of wharfage, parking fees, and other income the cruise terminal brings in from hosting events and conferences during the off-season. Wharfage is the fee charged to dock the cruise ship at the Alabama Cruise Terminal.

The Carnival Spirit is set to operate for only six months – October to May – after which point it will be repositioned during the summer months for sailings in Alaska. The excursions from Mobile include five, six, eight, and 12-day trips. Destinations include sailings around the Caribbean Sea to such destinations as Key West, Fla.; Half Moon Cay and Nassau in the Bahamas; Grand Turk in the Turks and Caicos and Grand Cayman in the Cayman Islands.

The terminal’s debt is expected to expire in 2030, which is the same year Mobile Mayor Sandy Stimpson’s administration is eying the entire city being “debt free.” Around $11 million remains to be paid off on the original note to build the facility in 2004. The terminal’s debt is included in an overall bond package that the city believes will be paid off within seven years, saving about $50 million a year.

The agreement with Carnival Cruise Line could last to 2029, or almost up to the time that the terminal’s debt is paid off. The five-year agreement for the Carnival Spirit is a first in the 20-year relationship between Mobile and the Miami-based cruise giant. The agreement includes two one-year renewals with the company.

Joe Snowden, executive director of administrative services with the City of Mobile, said the amount Carnival pays in wharfage is set to increase by 3 percent over the life of the five-year agreement, which means that even more revenues will come back into the city over the coming years.

But city officials also say they want to secure a year-round agreement with Carnival Cruise Line that will allow for more cruise ships and more revenues.

Operational costs remain a factor and estimates from recent years show that a six-month cruise ship would have a hard time breaking even. During fiscal year 2020, the terminal’s operating expenses were $2.1 million, which left around $1.1 million in gross revenues during a year in which cruising was halted during the onset of the pandemic. That amount was not enough to handle the entirety of the annual bond payment.

Before the pandemic, the city was getting around $6 million a year in annual gross revenues from wharfage and parking fees alone. That was reflected in having the Carnival Fantasy operating for 12 months out of the cruise terminal. The Fantasy operated out of Mobile from 2016-2020, ending its run amid the onset of the pandemic. Most of those excursions out of Mobile were to Cozumel and Progreso, Yucatan.

“I think we can support year-round (cruising),” Snowden said. “I’m continuing to engage with Carnival. We’ve approached Carnival to let them know that we can fill this ship.”

David Cark, president & CEO with Visit Mobile – the convention and visitors bureau for the city – said the city will have to “stay on its toes” to ensure Carnival is making a profit by having the Spirit sail from Mobile. He said that even with a five-year agreement, there is no guarantee that Carnival would not remove the ship and have it sail elsewhere if Mobile is not maintaining its competitive edge.

“They could give a 100-day notice if we are not showing demand and they have that right,” Clark said. “We need this thing for a long time.”

Developing relationships

Clark and his staff are focused on marketing and are making digital awareness and Google Analytics a key strategy in attracting people online to Mobile and a vacation aboard the Carnival Spirit.

“We are able to track impressions, click-throughs and are seeing if (online searches) are females or males or what their income demographics are,” Clark said. “Those are the things we are doing at a minimum every other week. It’s to make sure we are maximizing visibility in search engine marketing and brand awareness.”

In addition, Clark and his team are meeting “at least once a year” with Carnival staff. They are routinely attending trade shows and meeting with travel agents and stay in contact with industry insiders.

“Cruising from Mobile is not just waving a wand and people show up,” he said. “We know demand is extremely strong for the Spirit. It’s the best ship we’ve had, and it has the best itineraries. We had talked before to Carnival about wanting to have a ship with new itineraries (than the Carnival Fantasy, which left last fall) and that cruising is strong in Mobile, and demand is there. So far, so good in that theory.”

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Mobile’s interest in generating more cruising business is getting noticed, industrywide.

Longtime cruise industry analyst Stewart Chiron, known as the “Cruise Guy” who has been critical in the past about Mobile’s stature as a cruise city, said the city’s leaders should be proud about their efforts in keeping Carnival engaged and by securing a larger ship with longer itineraries than before.

“The proof is in the pudding,” Chiron said. “There is a newer and larger ship coming in and it’s booking at higher prices. The booking volumes are higher out of Mobile and the fact that Carnival came in with a newer, and larger ship than ever before has been based on the fact that they got them to sign onto a five-year deal instead of one-year renewal options.”

He said, “Those are tangible results. And (Mobile leaders) have worked very hard at trying to secure Carnival. They got devastated when Carnival pulled out of the city, and you can see the result of their efforts of not giving up and their perseverance is the fact that Carnival is pulling in and sailing on October 6 with the best and largest ship Mobile has ever had.”