One year in, cruise ship terminal is a beacon for Norfolk

NORFOLK

Just before 9 a.m. on April 23, the Seven Seas Mariner glided up to the city's year-old cruise terminal for a daylong visit.

The ship's 549 passengers crossed over the Half Moone Cruise and Celebration Center's gangway ready to see what Hampton Roads had to offer.

Some hopped on tour buses for either Williamsburg, Jamestown or a loop through Norfolk and the naval base. Others ventured on their own to explore downtown, stopping at the MacArthur Center mall or the Waterside complex.

Later that afternoon, the passengers - joined by some crew members - returned to the Half Moone with smiles on their faces and their arms loaded with shopping bags from Dillard's, H&M and Abercrombie & Fitch.

"I'm very impressed," said passenger Jerry Robinson, 64, of Marina del Rey, Calif. "The city is so very clean, the people are so friendly. I'd come back here in a heartbeat."

Since opening about a year ago, by most accounts the $36 million terminal has been successful in every category but one - paying for itself.

It has vastly improved the embarking and debarking of cruise passengers compared with the previous temporary terminal, making the experience more pleasant. It has created jobs and distributed money through the region: Passengers and crews are expected to pump $12.1 million into the local economy this year by spending at hotels, restaurants and shops, according to the city.

And with its panoramic views of the Elizabeth River and distinctive architecture, it has also become a popular spot for holding gatherings such as corporate dinners and wedding receptions. The center has played host to events involving Prince Philip of England; U.S. Sen. John McCain, the presumptive Republican nominee for president; and Gov. Timothy M. Kaine.

"It has been a fantastic year for us," said Stephen Kirkland, the city's cruise operations and marketing manager. "We're proud."

Still, while the Half Moone produces enough revenue to offset its operating expenses, it is falling short of covering its annual construction debt payment, according to financial information provided by the city. At the facility's launch in April 2007, Mayor Paul Fraim said it was designed to pay for itself.

The two cruise lines that regularly sail from Norfolk - Royal Caribbean and Carnival - have been "blown away" by the facility, Kirkland said. Last year, Royal Caribbean gave the terminal its Best Debut Performance award for how the line's inaugural season from Norfolk was handled, he said.

"The new terminal is outstanding," Carnival spokeswoman Jennifer de la Cruz wrote in an e-mail. "The facility itself is very user-friendly and conducive to our operational needs, in addition to being quite attractive from a visual standpoint. The consensus at Carnival is that the folks responsible for creating the new terminal did a terrific job."

As in past years, Carnival is bringing its 2,758-passenger Carnival Victory to Norfolk this year for five cruises. Royal Caribbean's 1,950-passenger Grandeur of the Seas will make 13 sailings from Norfolk this year. Those trips, combined with five mostly daylong stopovers, including the Seven Seas Mariner, are projected to generate 100,000 passengers - accounting for those coming and going.

However, having the new terminal was not enough to prevent Royal Caribbean from cutting its Norfolk schedule to seven sailings for 2009. In March, Royal Caribbean said its local voyages were not making as much money as anticipated because fewer families with children were traveling.

Kirkland said he and Royal Caribbean are stepping up marketing efforts to attract more cruise business. He's optimistic about the future of Norfolk's cruise efforts with an "unprecedented" 43 new cruise ships being built globally over the next four years. Those ships have to go somewhere, he said, and Norfolk is a likely beneficiary.

"The overall success of this program will be determined in 10, 20 years," he said. "I really believe this is a long-term investment that will for years and years pay dividends to Norfolk."

What's been most surprising about the terminal's first year has been how many organizations have booked the center for special events, Kirkland said. Last year, 84 events were held, and so far 62 are booked for 2008.

The 80,000-square-foot facility, about half of which is typically available for events, is one of the region's largest venues. It can handle as many as 900 people for sit-down dinners and as many as 3,500 for stand-up affairs. It rents for between $750 and $6,000.

The American Bus Association brought 1,700 people to the terminal in February for a reception during its six-day convention in Hampton Roads. The event featured a jazz band in the rotunda and dueling pianos in the main hall.

"The cruise terminal was phenomenal," said Lynn Brewer, the Washington-based group's senior vice president in charge of meetings. "People were surprised at how nice it was. When you think of a terminal, you just don't think of a terminal being that nice."

To accommodate the increased event business, plans are being drawn up to add a service elevator for moving food carts and to convert two storage areas into catering kitchens with sinks, ovens and refrigerators. The $270,000 cost is being covered by leftover construction funds, Kirkland said.

Before the Half Moone opened, officials with local hotels and other party venues were uncertain how the new venue would affect their event business. A year later, several said the cruise terminal complements their operations.

The Norfolk Waterside Marriott has lost some business to the cruise terminal, said Cathy Grieve, the hotel's sales and marketing director. "Everybody wants to be right on the water and at the new place," she said.

However, the Half Moone has helped bring some conventions to Norfolk: The Half Moone hosts some events, Grieve said, and guests stay at the Marriott. "At the end of the day, I guess our take is, it evens out," she said.

Said Kay Barbini, special events director at the Chrysler Museum of Art: "I think that truly there is enough business to keep all of our spaces occupied."

This year, events are expected to deliver about 22 percent, or $275,000, of the $1.3 million in revenue the terminal is projected to generate, according to terminal budget information. The remaining $980,000 will come from cruise-related sources, such as the passenger head tax, dockage charges, parking fees, and water sold to the ships.

The $1.3 million will cover all of the facility's operating expenses, plus it should generate a surplus of roughly between $405,000 and $455,000 to pay down its construction cost, according to the city's information.

"Not only is it a beautiful civic facility, but for the most part it has paid for itself," Fraim said last month.

However, the projected surplus of up to $455,000 would fall short of the terminal's expected $1.1 million debt payment this year, according to financial information provided by the city. The debt payment should be between $1.7 million and $2.2 million next year, said Steve de Mik, the city's finance director.

Norfolk is subsidizing the difference. Outside of a $5 million contribution from the Virginia Port Authority, the city issued bonds to finance the terminal. The bonds will be paid off in 2037, de Mik said.

Kirkland has not set a timeline for when the Half Moone's revenues might cover its entire debt payment. It would be "myopic" to "judge the overall success of this facility without taking into account the overall economic impact," he said. Kirkland said he expects the terminal to pay a larger piece of its construction debt in coming years as it attracts more cruise ships and events.

City Councilman W. Randy Wright, who once criticized plans to build a new terminal, said the Half Moone has been a "home run" for Norfolk.

"It's been very successful from every evaluation you can apply to it, with the exception of how much money it actually has generated for the city at this juncture," Wright said. "It's going to take a few years to really reach the peak of its revenue ability."

"Shucks, it's a winner and it's going to be a bigger winner."

Gregory Richards, (757) 446-2599, gregory.richards@pilotonline.com