Port of Galveston Approves a 2-Year Operating Agreement with Disney Cruise Line

The Port of Galveston held a special meeting on August 27, 2012 in part to discuss the feasibility of simultaneously docking 3 ships and an operating agreement with Disney Cruise Line.

Three’s a Crowd

Beginning November 2013, the port is expecting to host the [Disney_Magic], Crown Princess, and the Carnival Triumph together on 9 separate occasions.  As it stands now, the Port can just fit the 3 vessels with 60 feet of clearance.  As a result, the port is looking into options to expand to better accommodate the ships, as well as renovate the terminal space to handle the increase in passengers.  The port is looking for ways to pay for this expansion with long term leases from the cruise lines to justify the construction costs.

3 Ship Berthing - Port of Galveston

Operating Agreement

The Port and Disney Cruise Line have spent the past month negotiating an operating agreement for the upcoming sailings beginning September 22, 2012 on the [Disney_Magic].  One month is not bad; considering it took around 18 months of negotiations before Disney announced on April 6, 2011 that they would be sailing from Galveston.  The operating agreement defines who pays who and how much, which is then passed on to the passengers as port fees.

Minnie Mouse Visits Galveston, Texas

The operating agreement is for two-years with a one-year renewal option.  Disney is required to sail 20 cruises per contract year, but will surpass this requirement with 38 scheduled on the Magic between September 2012 and May 2013.  With the contract requiring a minimum 20 cruises per contract year, the sailings on the [Disney_Wonder] (beginning September 2013 – December 28, 2013) will more than likely continue to sail from Galveston in the first half of 2014 to fulfill the obligations of the operating agreement.

The port was hoping to secure Disney for a five-year term, but Disney did not feel comfortable committing to more than three-years (two-years plus one-year option). During Monday’s meeting, it was revealed that Disney Cruise Line is working on a similar termed operating agreement with the Port of Miami.  With the Magic & Wonder swapping ports in 2013, it only makes sense to keep the contract durations between Miami and Galveston in sync.

During the discussions with the Port, Disney estimated about 2700 (earlier estimates were between 2500 and 2700) passengers per sailing.  The operating agreement places a fee of $24.96 per passenger.  The port will spend around $10 of this to pay for line handling, terminal security (which includes K9 patrol), and ship water.  These expenses are not a profit center for the port and are charged to Disney at a break-even price.  That leaves the Port with $14.52 per passenger, which will generate around $1.4 million the first year.

The question was posed during the meeting as to the expected parking revenue generated from the sailings.  The Port is unsure whether passengers will drive and park at the port or fly, so there is no clear estimate until the first guests arrive at the end of next month.

Roland Bassett, Chairman of the Board, mentioned during the meeting that the Disney bookings looked good, but criticized Disney for not doing more television advertising in the local market.  Bookings are likely to pick up when the revised Galveston itineraries are available to the general public on September 5, 2012.

2014 Speculation

Looking at the terms of the operating agreement, Disney must sail at least 6 more cruises out of Galveston in 2014.  I think the Wonder will continue to sail out of Galveston at least through May 2014, and, if my hunch is right, with possible stops in Jamaica.  Then… well who knows besides Disney, but the [Disney_Wonder] could head to Europe in place of the Magic in order to get an overhaul in dry dock in the fall of 2014. 

Again, this is just my speculation, but it sounds good! Right?

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