Port Canaveral expects record revenue, strong profits for next budget year

Port Canaveral is projecting a record-shattering $153.96 million in operating revenue for the budget year that begins Oct. 1, boosted largely by an increase in cruise ship calls, having larger ships based there, and the debut of a sixth cruise line — Marella — in 2023.

The port also projects a total of $76.76 million in combined profits and government capital grants for the coming year, which will be used by the port for a range of capital projects — from upgrades to cruise and cargo berths to improvements to campground and fishing facilities.

Port Canaveral Chief Financial Officer Michael Poole detailed the port's proposed 2022-23 budget to Canaveral Port Authority commissioners this week, and the reaction was positive among commissioners.

Port Commissioner Wayne Justice said he is "very excited about the fiscal year 2023 proposed budget," as the port prepares to close its current budget year with "the most revenues in our history."

"This should allow us to invest as much as $76 million next year in our infrastructure and, thus, in our community," Justice said.

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Port Authority Secretary/Treasurer Robyn Hattaway compliment port officials for "the fiscal conservative management we've had," including initiatives to "aggressively pay down debt" from past projects.

In addition to the gains in cruise operations, some of projected revenue for 2022-23 is the result of $18.29 million in federal American Rescue Plan Act grant money. The port also will receive $22.31 million in federal and state grants for capital projects at the port in the 2022-23 budget year, primarily designated for North Cargo Berth 3.

The overall projected operating revenue of $153.96 million for next budget year compares with estimated $122.31 million for the current budget year that ends Sept. 30, which would be the highest to date for the port. Next year's revenue would be a 25.9% increase from this year.

Jump in cruise operations

Cruise revenue — including from cruise ships and cruise-related parking — is estimated to be $124.48 million for 2022-23, up 32.1% from $94.25 million in the current budget year.

The 2022-23 revenue is based on 909 calls by multiday cruise ships, including 810 home-port calls and 99 port-of-call stops by ships based at other ports. There will be an increase of 112 home-port calls in 2022-23, compared with the current 2021-22 budget year.

Port Canaveral Chief Executive Officer John Murray said the port will have a record of 13 home-ported cruise ships in the coming winter.

This is the breakdown of ship visits by cruise line:

• Carnival: 264 home-port calls, with year-round service for the Liberty, Freedom and Mardi Gras, plus seasonal service with the Magic.  
• Disney: 157 home-port calls, with year-round service for the Wish and Fantasy.
• Marella: 22 home-port calls, with seasonal service for the Discovery. Marella will debut at Port Canaveral next April. Initially, Marella's weeklong cruises will be open only to travelers who fly to Melbourne from Europe on flights by TUI Airways, an affiliate company.
• MSC: 73 home-port calls, with year-round service for the Meraviglia (then replaced during the year by the Seaside). MSC also plans to have 15 port-of-call stops.
• Norwegian: 63 home-port calls, with seasonal service for the Getaway, Escape and Prima. Norwegian also plans to have 11 port-of-call stops.
• Royal Caribbean: 231 home-port calls, with year-round service for the Independence of the Seas, Mariner of the Seas and Harmony of the Seas (then replaced during the year by the Wonder of the Seas, the world's largest cruise ship), plus seasonal service with the Jewel of the Seas. Royal Caribbean also plans to have 58 port-of-call stops.

"It's an exciting lineup" of cruise ships, Murray said, including four of the world's newest cruise ships — Carnival's Mardi Gras, Disney's Wish, Norwegian's Prima and Royal Caribbean's Wonder of the Seas.

"The numbers do look good for next fiscal year, but it didn't just happen," Murray said. "During the pandemic, we spent a lot of time with our cruise line partners, looking at opportunities for the future. We have more ships, larger ships, and that's all starting to show in our performance data."

Murray said the total number of cabins on Port Canaveral-based ships is up 32% from 2019.

Murray said the port's cruise ships generally now are operating at an average of 100% of their double-occupancy capacity, and that's what the port is using to arrive at its 2022-23 budget numbers.

"The ships are packed, because people want to get out" on vacation, Murray said. "It's still one of the most economical forms of vacation that somebody can take. It's strong demand. Once you're on the ship, you're on the ship, and you don't have to worry about anything else. You're on vacation."

Murray also noted that there is pent-up demand from frequent cruisers who had no sailings out of Port Canaveral from mid-March 2020 to the end of July 2021 because of the COVID-19 pandemic.

The port had been budgeting the ships to operate at 50% of double-occupancy capacity for October through December 2021, then at 75% for January through September 2022.

Pre-pandemic, ships routinely were exceeding 100% double-occupancy capacity because many cabins were occupied by three or four passengers, particularly on cruises that have a large number of families with children sailing.

So Poole said budgeting at 100% capacity for 2022-23 is a conservative estimate for the port. 

Victory Casino Cruises' gambling ship, the Victory 1, also offers twice-daily excursions from Port Canaveral, Wednesdays through Sundays.

During public comment at Wednesday's Port Authority meeting, Victory CEO Lester Bullock applauded the port for its financial outlook, saying: "I love the numbers. That's really great."

Other major business sectors 

Other major business lines contributing to the port's operating revenue include:

• Cargo: Projected revenue of $18.57 million in 2022-23, up from $17.73 million in 2021-22. This includes $14.05 million in port fees and $4.52 million in rent paid by cargo-related tenants. Major cargo commodities at the port include petroleum, lumber, slag, limestone, granite, salt, space-related cargo, fertilizer, juice and frozen foods.
• Non-cargo leases: Projected revenue of $4.50 million in 2022-23, up from $4.35 million in 2021-22. 
• Parks and recreation: Projected revenue of $4.25 million in 2022-23, up from $4.09 million in 2021-22, with most of the revenue coming from the port's Jetty Park. 

Despite revenue increases in all four major businesses lines for 2022-23, Port Canaveral is projected to fall just short of the combined profits and government capital grants figure it expects in the current 2021-22 budget year of $77.05 million. The port calls this figure the "change in net position."

That's largely because the port received more American Rescue Plan Act money in the 2021-22 budget year ($38.60 million) than it will receive in the 2022-23 budget year ($18.29 million).

The money — part of a total $72.21 million ARPA allocation to Port Canaveral — is distributed monthly through the Florida Department of Transportation. The distribution began in the 2020-21 budget year and ends during the 2022-23 budget.

Port expenses to increase to more than $108 million

Poole said expenses at the port will increase from $97.12 million in the current budget year to $108.59 million in the budget year that begins Oct. 1.

He said that reflects "the full resumption of cruise operations" following the halt of cruises during the height of the pandemic, as well as rising prices.

Poole cited increased costs for materials, supplies, fuel, professional services, custodial services, and maintenance of facilities and equipment.

"There are increases to service contracts, personnel costs, promotions, public safety, insurance and utilities," Poole said.

Surpassing projections

For the current budget year that ends Sept. 30, the numbers are better than expected, based on the port's projections before the budget year began.

• Operating revenue: $122.31 million vs. $109.15 million initially projected.
• Operating expenses: $97.12 million vs. $97.44 million initially projected.
• Change in net position: $77.05 million vs. $68.46 million initially projected. These figures include nonoperating revenue from ARPA grants, as well as other federal and state grants.

Capital projects

Poole said the port plans to spend $76.20 million in the 2022-23 budget year on capital projects, with about $53 million of that coming from cash generated by port operations, $17 million from state grants and $6 million from federal grants.

Major capital expenditures include completion of North Cargo Berth 3; road, parking and park improvements; and purchase of a new mobile harbor crane for cargo operations.

By category of capital projects, the port will spend:

• $33.9 million on cargo operations.
• $15.9 million on general infrastructure.
• $14.7 million on cruise operations.
• $9.9 million on parks and recreation, with projects at Jetty Park and Ketchum Park.
• $1.2 million on real estate, such as heating/ventilation/air-conditioning systems and roof projects.

The port's five-year plan includes a total of $337.27 million in projects through the 2026-27 budget year. The biggest expenses in the plan are related to cruise terminals and a new North Cargo Berth 4.

Increased fees, parking costs

Port Canaveral is proposing 3% increases in what it charges ship companies for wharfage, dockage and line-handling fees.

It also is proposing having cruise passengers pay the 7% sales tax on parking fees, rather than the current practice of the port picking up the sales tax costs.

The port charges $17 for every day a cruise passenger parks at Port Canaveral, so the new cost will be $18.19 a day, when tax is included.

Port commissioners will vote on those proposals and the overall port budget at the commission's Sept. 28 meeting.

Dave Berman is business editor at FLORIDA TODAY. Contact Berman at dberman@floridatoday.com. Twitter: @bydaveberman.

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