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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. With fourth of July

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Speaker 1: around the corner, the summer travel season is well underway.

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Speaker 1: That usually brings a travel spike, but this year projections

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Speaker 1: are actually down in the US, with would be domestic

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Speaker 1: vacationers concerned about the state of the economy and international

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Speaker 1: tourists turning elsewhere in the midst of geopolitical tension and

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Speaker 1: economic uncertainty. But not all travel projections are down.

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Speaker 2: The Kruis in issues doing extremely well. Every single company

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Speaker 2: is doing great. All the public companies that it is

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Speaker 2: all hitting kind of record revenue, record earnings.

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Speaker 1: That's Red Brown. He's not a big cruise guy himself,

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Speaker 1: but he does cover the industry for Bloomberg.

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Speaker 2: You speak to anybody who cruises, they'll defend it to

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Speaker 2: their death. They love it. They think it's the best

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Speaker 2: way to travel.

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Speaker 1: That passion for cruising is part of the reason why

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Speaker 1: companies like Carnival and Royal Caribbean are expecting strong demand

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Speaker 1: this year, and to keep up with that demand, they've

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Speaker 1: descended on Galveston, Texas, an island city of about fifty

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Speaker 1: thousand people that will host nearly two million cruisers this year.

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Speaker 2: It's a beach town first and foremost, so therefore it's

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Speaker 2: a tourist town. So you'll have a lot of these

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Speaker 2: shops selling t shirts, hermit crabs, things like that. But

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Speaker 2: at the same time they're selling all those things out

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Speaker 2: of a two hundred year old building that might have

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Speaker 2: a Civil War era cannonball lodged into it as well,

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Speaker 2: you know, you still have cobblestone streets, and then you

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Speaker 2: also have state of the art cruise ships right next

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Speaker 2: to it. So it's a fascinating place that happens to

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Speaker 2: kind of find itself at the center of the cruise universe.

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Speaker 1: What makes Galveston is such a good place for cruise tourism.

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Speaker 2: It's so attracted to the cruise companies because it does

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Speaker 2: have such great access to the Western Caribbean, and also,

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Speaker 2: if you think about the population centers that are around Galveston,

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Speaker 2: it has three of the fastest growing cities in the

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Speaker 2: in San Antonio, Houston, and Dallas within a five hour drive,

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Speaker 2: so that just unlocked this incredible. They call it the

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Speaker 2: drive in market for the cruise industry.

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Speaker 1: But not everyone in Galveston is happy about its status

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Speaker 1: as the fastest growing cruise port in the country because

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Speaker 1: the cruise industry's love affair with this small Texas city

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Speaker 1: has come with trade offs, and the debate that's playing

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Speaker 1: out there and in port cities around the world shows

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Speaker 1: the big challenges that will come with the global cruise

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Speaker 1: industry's ambitious expansion plans. This is the big take from

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Speaker 1: Bloomberg News. I'm Sarah Holder today on the show the

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Speaker 1: seemingly unstoppable rise of cruise tourism and how it's transforming

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Speaker 1: the port cities the industry relies on most. The cruise

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Speaker 1: industry's recent turnaround has been pretty remarkable, especially when you

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Speaker 1: think back just a few years to the start of

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Speaker 1: the pandemic.

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Speaker 2: The story kind of did start a cruse. I think

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Speaker 2: that's when it got real for a lot of people.

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Speaker 1: I remember living in San Francisco and hearing about the

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Speaker 1: cruise ship kind of parked in the San Francisco Bay

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Speaker 1: and not being such an early warning sign.

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Speaker 3: Karen Dever from New Jersey got on the ship with

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Speaker 3: her husband for US celebratory cruise. Now she wonders when

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Speaker 3: she will ever get off.

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Speaker 2: You heard these like horror stories of thousands of people

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Speaker 2: being trapped in close quarters with this unknown virus kind

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Speaker 2: of spreading through the ranks of people.

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Speaker 3: In the meantime, they've been air dropping supplies and coronavirus

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Speaker 3: test kits to the cruise ship.

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Speaker 2: The cruise industry it was hit really hard, right and

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Speaker 2: it kind of got slapped with a lot of skepticism

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Speaker 2: and a lot of bad stereotypes about how you know,

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Speaker 2: cruise ships are dirty and they're for older people and

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Speaker 2: things like that.

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Speaker 1: It wasn't just stigma. In March twenty twenty, the industry

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Speaker 1: was hit with a no sale order. The government mandated

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Speaker 1: that cruise companies cease operations for over six months, but

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Speaker 1: by late October ships were allowed to get back out

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Speaker 1: there and passengers were just as eager.

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Speaker 2: It really did turn around almost immediately after they were

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Speaker 2: able to start sailing again.

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Speaker 1: Almost forty million people will take a cruise this year.

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Speaker 1: That's according to an industry trade group called Cruise Lines

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Speaker 1: International Association, and RED says it's not a coincidence that

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Speaker 1: cruises are seeing record demand right now amid economic uncertainty.

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Speaker 2: Cruises are cheap. They always kind of cite different numbers

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Speaker 2: between like thirty and forty percent discount between a land

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Speaker 2: based alternative and a cruise vacation. So if you think

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Speaker 2: if you want to go to the Bahamas and maybe

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Speaker 2: visit a Central American country as well in a week,

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Speaker 2: there's really no cheaper way to do it than on

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Speaker 2: a cruise. It's one ticket that you pay for most times,

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Speaker 2: it's pretty all inclusive, so it's a very economical way

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Speaker 2: for people, especially families, to travel.

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Speaker 1: But the post pandemic boom and cruises has started to

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Speaker 1: strain ports around the world. For cities that are popular

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Speaker 1: cruise ship destinations, places.

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Speaker 2: Like Barcelona or Venice, the Greek Islands, things like that,

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Speaker 2: the limitations really come down to, like the capacity for

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Speaker 2: locals to continue to host and be happy with tourists.

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Speaker 2: It's you know, we've saw all the stories out of Barcelona,

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Speaker 2: especially last year.

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Speaker 1: In Barcelona, locals protested over tourism last summer, chanting tourists

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Speaker 1: go home and even squirting some travelers with water guns.

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Speaker 1: The city has put caps on cruise ships, so his Santorini,

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Speaker 1: Amsterdam is trying to phase out cruise ships to curb

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Speaker 1: tourism and pollution.

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Speaker 2: And again, cruises don't bring as many people to those

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Speaker 2: cities as airlines do and hotels do. But cruises are

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Speaker 2: a very visible part of that problem. Right. You see

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Speaker 2: these ships that are city blocks long and they're bright white,

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Speaker 2: So I think that does kind of get an outsized attention,

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Speaker 2: but really that is the stress when it comes to

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Speaker 2: those ports of destination. You have five thousand people that

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Speaker 2: just kind of descend on a city and then they

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Speaker 2: are gone by the end of the evening, and you

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Speaker 2: know that can kind of irritate a lot of locals.

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Speaker 1: These destination ports have also seen increased demand because of

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Speaker 1: regional conflicts that have reduced the options for seafaring travelers.

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Speaker 2: Very popular destinations in Israel and Russia are also closed

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Speaker 2: at the moment because of the geopolitical issues in both areas.

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Speaker 1: All this has meant there are more passengers moving through

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Speaker 1: a dwindling number of port cities, so cruise companies want

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Speaker 1: to steer more of them away from the Eastern Caribbean

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Speaker 1: and Europe towards destinations like Belize, Honduras, and Mexico. And

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Speaker 1: that's what makes Galveston, Texas an appealing departure port. It

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Speaker 1: gives access to the waterways that connects the US to

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Speaker 1: those places. But departure ports like Galveston or like Port

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Speaker 1: Canaveral in Florida, are also facing their own challenges. People

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Speaker 1: travel there to bord a cruise ship bound for another

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Speaker 1: exciting destination, But even though tourists aren't trying to stay there,

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Speaker 1: these port cities have thousands of people flooding through them too,

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Speaker 1: which can be a big strain on local resources.

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Speaker 2: Port Canaval actually just failed in its latest attempt to

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Speaker 2: add a new cruise terminal where they wanted to go

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Speaker 2: from seven to eight, which doesn't sound like much, but

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Speaker 2: seven cruise terminals is a lot of business, and local

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Speaker 2: politicians are starting to think is maybe we should start

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Speaker 2: to shift our attention our capital elsewhere.

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Speaker 1: And those limits on expansion in Port Canaveral are putting

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Speaker 1: new pressures on Galveston, a historically smaller departure port about

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Speaker 1: one thousand miles away, that's after the break. If you

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Speaker 1: compare Galveston's cruise traffic to that of other major hubs,

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Speaker 1: it may seem like a drop in the ocean. But

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Speaker 1: Bloomberg's cruise reporter Red Brown told me, you have to

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Speaker 1: put it in perspective.

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Speaker 2: Between the three biggest Florida cruz towns, Miami, Port Canaveral,

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Speaker 2: and the Everglades. They do over three thousand cruises a

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Speaker 2: year from those three cities. Right. Galv Soon we'll do

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Speaker 2: around four hundred this year. But it's incredible when you

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Speaker 2: think it's a town of fifty thousand people. Right. I

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Speaker 2: drove it in a day. I walked most of it

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Speaker 2: in three days, and it's more or less doubled to

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Speaker 2: the amount of cruises they're doing.

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Speaker 1: That since twenty eighteen, when the Galveston Port got a

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Speaker 1: new CEO named Roger Reese. Reese moved to Galveston after

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Speaker 1: a five year stint at Port Canaveral.

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Speaker 2: He's a self proclaimed cruise guy.

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Speaker 1: He worked with the cruise companies throughout the pandemic, even

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Speaker 1: letting their crew workers disembark on the island, and as.

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Speaker 4: Soon as they lifted the no sale order, Carnival said

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Speaker 4: they're ready to go. They brought their ship in here.

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Speaker 1: And Carnival's first post COVID trip left from Galveston. Red

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Speaker 1: met with Reese during his trip to Galveston, and Reese

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Speaker 1: told him since the pandemic, cruise tourism in the city

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Speaker 1: has only grown. Passengers came and went through Galveston's port

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Speaker 1: almost three and a half million times in twenty twenty four,

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Speaker 1: up from two point two million in twenty nineteen. There

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Speaker 1: are three terminals at the port right now, with a

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Speaker 1: fourth set to open in November.

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Speaker 4: We have fifty million people that live within twelve hours

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Speaker 4: a year, and so I think after COVID people said, Hey,

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Speaker 4: I'm not going to get on a plane, I'll strive.

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Speaker 4: We can get to Galveston, drive there in a day

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Speaker 4: and get them a cruise ship.

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Speaker 1: Reese says cruise ships were responsible for about sixty five

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Speaker 1: percent of the port's revenue last year. The rest comes

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Speaker 1: from cargo shipping and related activities. The port charges the

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Speaker 1: ships for passenger parking, plus it collects a tariff on

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Speaker 1: each passenger and rent from the company's leasing land for

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Speaker 1: the terminals. According to a study commissioned by the port,

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Speaker 1: cruise related activities bring in almost nine hundred million dollars

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Speaker 1: each year to the local economy. Divide that by the

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Speaker 1: number of ships we have.

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Speaker 4: Today, every ship brings it two point one million dollars

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Speaker 4: of revenues to the state and the local government's sales

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Speaker 4: tax payroll, all that kind of stuff. And so while

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Speaker 4: if you want to.

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Speaker 2: Stop that, they really don't have a lot going on

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Speaker 2: outside of tourism. They also have a hospital there that

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Speaker 2: is a bit of an economic engine as well. But

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Speaker 2: you know, an extra billion dollars for fifty thousand people,

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Speaker 2: you can do the math is really nice.

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Speaker 1: But there are other people in the city who see

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Speaker 1: things differently, like the city's former mayor, Jim Yarborough.

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Speaker 4: I don't want to hear five or six seven termble Damn.

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Speaker 4: I don't want to be overloaded. We can't handle so

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Speaker 4: many people.

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Speaker 1: I don't want to be overloaded, Yarbro says, we can

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Speaker 1: only handle so many people.

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Speaker 2: He is also a member of the board that governs

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Speaker 2: the port, so earlier this year him and another council

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Speaker 2: member actually proposed pausing the cruise development after the fourth

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Speaker 2: cruise terminal, which is suppouted to open in November, does

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Speaker 2: so and reevaluating is kind of the stance that they took. Lea,

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Speaker 2: why don't we pause after that November opening, Let's reassess

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Speaker 2: and see whether or not we want to continue to

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Speaker 2: go down more and more cruizes.

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Speaker 1: Right when that fourth cruise terminal opens and it's set

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Speaker 1: to host a ship called the MSc Sescape four times

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Speaker 1: that month, bringing nearly ten thousand people through Galveston each

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Speaker 1: time it docks and departs. But Yarborough thinks it would

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Speaker 1: be smart to invest more in cargo shipping and less

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Speaker 1: in cruises. While the cargo business doesn't bring in as

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Speaker 1: much revenue for the port, it does employ more local

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Speaker 1: workers and helps diversify the city's economy.

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Speaker 4: You started looking at the job that creates on the

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Speaker 4: economic gripple to create cargo. The last past cruised all

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Speaker 4: the time.

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Speaker 2: This is the thing that really kind of got me

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Speaker 2: interested in this story was when we found out, you know,

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Speaker 2: everything you're hearing out from the cruise companies is more cruising.

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Speaker 2: Galveson's great. We love Galveston, but there are some local

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Speaker 2: politicians that are beginning to raise the issue of whether

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Speaker 2: or not Galveson wants to continue to tie its future

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Speaker 2: to cruising.

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Speaker 1: When Yarbro and the other board member proposed that pause,

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Speaker 1: it ruffled some feathers.

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Speaker 2: It made people, especially at the port, quite worried that

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Speaker 2: that was going to send a bad signal to the

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Speaker 2: rest of the industry that Galveston's kind of closing up

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Speaker 2: his doors. It doesn't want any more cruising.

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Speaker 1: Red says there are two main factions in the city.

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Speaker 1: And it's not as simple as pro cruise and anti cruise.

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Speaker 2: There's these two different terms that people use in Galveston.

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Speaker 2: They call them bois. It stands they're born on island

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Speaker 2: and IBC's island by choice. So Jimmy Arbaugh and the

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Speaker 2: people kind of in his corner are bois. They're all

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Speaker 2: born on the island. They love Galveston. They have this

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Speaker 2: sense of kind of like, we want Galveston to be great,

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Speaker 2: but we kind of still want it for ourselves, right,

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Speaker 2: Like they don't want to just sacrifice everything and just

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Speaker 2: let it be for the.

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Speaker 1: Taurus tourists who bring traffic and noise. Plus, they say

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Speaker 1: it's not clear that travelers passing through the city to

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Speaker 1: get on their ships are spending all that much money locally.

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Speaker 1: About a third of tourists spend a night or two

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Speaker 1: in Galveston before or after their cruises, but most don't

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Speaker 1: stay long. Then you have the island by choice. People

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Speaker 1: like Roger Reeese, the port CEO. He and others who

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Speaker 1: his view think that cruising is key to economic development

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Speaker 1: in the area because the cruise industry brings jobs and

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Speaker 1: money to the city. They're trying to get tourists to

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Speaker 1: stay a little longer, spend more while they're in town.

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Speaker 1: But Reese also stresses that courting tourists isn't the only

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Speaker 1: thing the port is doing. It's invested heavily in revamping

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Speaker 1: the cargo industry too.

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Speaker 2: They all kind of want the same things, but there's

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Speaker 2: a rift in how they get there.

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Speaker 1: Yeah, they want their city to succeed, and they have

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Speaker 1: different visions of what success looks like.

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Speaker 2: Yeah, exactly, And it's become very, very hotly debated.

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Speaker 1: That proposal to pause cruise development in the fall for

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Speaker 1: a period of assessment. It failed in a council vote,

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Speaker 1: but people like Yarborough aren't backing down without a fight.

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Speaker 1: What it comes down to is this, not everyone in

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Speaker 1: Galveston wants their city to become the next Barcelona.

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Speaker 2: People might not necessarily associate Barcelona and Galveston, right, but

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Speaker 2: people in Galveston, do you know, they look at bars

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Speaker 2: that I may, look at what's happening there and they say,

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Speaker 2: maybe that's not the future that we want. And not

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Speaker 2: to be melodramatic, but like the deal with the devil,

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Speaker 2: you make when you do say, like we want more

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Speaker 2: tourists right, Like, it's this immediate injection of cash that

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Speaker 2: becomes very difficult to distance yourself from. So I think

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Speaker 2: people like Jimmy Arbrow and some of the other council

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Speaker 2: members in the city are saying, this could be our

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Speaker 2: only opportunity to use the money that we're getting from

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Speaker 2: the cruise industry and then diversify right and set Galveson

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Speaker 2: up for a future that isn't just tourism, it isn't

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Speaker 2: just cruise ships. We could potentially bring industry back to

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Speaker 2: Galveston and set it off on a new future.

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Speaker 1: Is that a tens that the broader global cruise industry

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Speaker 1: is worried about right now as it continues to expand.

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Speaker 2: Yeah, I mean, the world's a big place, but there's

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Speaker 2: only so many places people really want to cruise and visit.

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Speaker 2: So it will continue to be a conversation, right But

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Speaker 2: the cruise industry, the cruise companies are extremely ambitious. I'm

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Speaker 2: thinking of like Royal Caribbean CEO Jason Liberty, who guys

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Speaker 2: it's kind of like us against the world mentality, So saying, like,

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Speaker 2: cruising industry is two percent of the travel industry right now,

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Speaker 2: they want a bigger chunk of that right, so they're

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Speaker 2: not stopping their expansion anytime soon.

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Speaker 1: What could be the next Galveston in the US.

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Speaker 2: I think Galveson is the next Galveson, to be honest

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Speaker 2: with you, just because the momentum is just so intense

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Speaker 2: and you can tell when you're there just how important

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Speaker 2: cruising is to the city and how important it is

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Speaker 2: to the industry. Galveston for them is kind of the

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Speaker 2: key that unlocks the Western Caribbean. So for the time being,

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Speaker 2: I think it's kind of like, yeah, foot on the

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Speaker 2: gas and Galveston for the industry.

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Speaker 1: This is the Big Take from Bloomberg News. I'm Sarah Holder.

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Speaker 4: Anyw