WEBVTT - Cruises Are So Back — And Straining Port Cities

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. With fourth of July

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<v Speaker 1>around the corner, the summer travel season is well underway.

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<v Speaker 1>That usually brings a travel spike, but this year projections

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<v Speaker 1>are actually down in the US, with would be domestic

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<v Speaker 1>vacationers concerned about the state of the economy and international

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<v Speaker 1>tourists turning elsewhere in the midst of geopolitical tension and

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<v Speaker 1>economic uncertainty. But not all travel projections are down.

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<v Speaker 2>The Kruis in issues doing extremely well. Every single company

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<v Speaker 2>is doing great. All the public companies that it is

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<v Speaker 2>all hitting kind of record revenue, record earnings.

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

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<v Speaker 1>but he does cover the industry for Bloomberg.

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<v Speaker 2>You speak to anybody who cruises, they'll defend it to

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<v Speaker 2>their death. They love it. They think it's the best

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<v Speaker 2>way to travel.

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<v Speaker 1>That passion for cruising is part of the reason why

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<v Speaker 1>companies like Carnival and Royal Caribbean are expecting strong demand

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<v Speaker 1>this year, and to keep up with that demand, they've

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<v Speaker 1>descended on Galveston, Texas, an island city of about fifty

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<v Speaker 1>thousand people that will host nearly two million cruisers this year.

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<v Speaker 2>It's a beach town first and foremost, so therefore it's

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<v Speaker 2>a tourist town. So you'll have a lot of these

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<v Speaker 2>shops selling t shirts, hermit crabs, things like that. But

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<v Speaker 2>at the same time they're selling all those things out

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<v Speaker 2>of a two hundred year old building that might have

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<v Speaker 2>a Civil War era cannonball lodged into it as well,

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<v Speaker 2>you know, you still have cobblestone streets, and then you

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<v Speaker 2>also have state of the art cruise ships right next

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<v Speaker 2>to it. So it's a fascinating place that happens to

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<v Speaker 2>kind of find itself at the center of the cruise universe.

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<v Speaker 1>What makes Galveston is such a good place for cruise tourism.

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<v Speaker 2>It's so attracted to the cruise companies because it does

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<v Speaker 2>have such great access to the Western Caribbean, and also,

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<v Speaker 2>if you think about the population centers that are around Galveston,

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<v Speaker 2>it has three of the fastest growing cities in the

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<v Speaker 2>in San Antonio, Houston, and Dallas within a five hour drive,

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<v Speaker 2>so that just unlocked this incredible. They call it the

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<v Speaker 2>drive in market for the cruise industry.

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<v Speaker 1>But not everyone in Galveston is happy about its status

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<v Speaker 1>as the fastest growing cruise port in the country because

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<v Speaker 1>the cruise industry's love affair with this small Texas city

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<v Speaker 1>has come with trade offs, and the debate that's playing

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<v Speaker 1>out there and in port cities around the world shows

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<v Speaker 1>the big challenges that will come with the global cruise

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<v Speaker 1>industry's ambitious expansion plans. This is the big take from

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<v Speaker 1>Bloomberg News. I'm Sarah Holder today on the show the

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<v Speaker 1>seemingly unstoppable rise of cruise tourism and how it's transforming

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<v Speaker 1>the port cities the industry relies on most. The cruise

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<v Speaker 1>industry's recent turnaround has been pretty remarkable, especially when you

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<v Speaker 1>think back just a few years to the start of

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<v Speaker 1>the pandemic.

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<v Speaker 2>The story kind of did start a cruse. I think

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<v Speaker 2>that's when it got real for a lot of people.

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<v Speaker 1>I remember living in San Francisco and hearing about the

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<v Speaker 1>cruise ship kind of parked in the San Francisco Bay

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<v Speaker 1>and not being such an early warning sign.

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<v Speaker 3>Karen Dever from New Jersey got on the ship with

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<v Speaker 3>her husband for US celebratory cruise. Now she wonders when

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<v Speaker 3>she will ever get off.

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<v Speaker 2>You heard these like horror stories of thousands of people

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<v Speaker 2>being trapped in close quarters with this unknown virus kind

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<v Speaker 2>of spreading through the ranks of people.

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<v Speaker 3>In the meantime, they've been air dropping supplies and coronavirus

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<v Speaker 3>test kits to the cruise ship.

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<v Speaker 2>The cruise industry it was hit really hard, right and

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<v Speaker 2>it kind of got slapped with a lot of skepticism

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<v Speaker 2>and a lot of bad stereotypes about how you know,

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<v Speaker 2>cruise ships are dirty and they're for older people and

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<v Speaker 2>things like that.

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<v Speaker 1>It wasn't just stigma. In March twenty twenty, the industry

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<v Speaker 1>was hit with a no sale order. The government mandated

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<v Speaker 1>that cruise companies cease operations for over six months, but

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<v Speaker 1>by late October ships were allowed to get back out

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<v Speaker 1>there and passengers were just as eager.

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<v Speaker 2>It really did turn around almost immediately after they were

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<v Speaker 2>able to start sailing again.

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<v Speaker 1>Almost forty million people will take a cruise this year.

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<v Speaker 1>That's according to an industry trade group called Cruise Lines

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<v Speaker 1>International Association, and RED says it's not a coincidence that

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<v Speaker 1>cruises are seeing record demand right now amid economic uncertainty.

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<v Speaker 2>Cruises are cheap. They always kind of cite different numbers

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<v Speaker 2>between like thirty and forty percent discount between a land

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<v Speaker 2>based alternative and a cruise vacation. So if you think

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<v Speaker 2>if you want to go to the Bahamas and maybe

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<v Speaker 2>visit a Central American country as well in a week,

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<v Speaker 2>there's really no cheaper way to do it than on

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

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<v Speaker 2>it's pretty all inclusive, so it's a very economical way

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<v Speaker 2>for people, especially families, to travel.

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<v Speaker 1>But the post pandemic boom and cruises has started to

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<v Speaker 1>strain ports around the world. For cities that are popular

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<v Speaker 1>cruise ship destinations, places.

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<v Speaker 2>Like Barcelona or Venice, the Greek Islands, things like that,

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<v Speaker 2>the limitations really come down to, like the capacity for

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<v Speaker 2>locals to continue to host and be happy with tourists.

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

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<v Speaker 2>especially last year.

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<v Speaker 1>In Barcelona, locals protested over tourism last summer, chanting tourists

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<v Speaker 1>go home and even squirting some travelers with water guns.

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<v Speaker 1>The city has put caps on cruise ships, so his Santorini,

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<v Speaker 1>Amsterdam is trying to phase out cruise ships to curb

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<v Speaker 1>tourism and pollution.

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<v Speaker 2>And again, cruises don't bring as many people to those

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<v Speaker 2>cities as airlines do and hotels do. But cruises are

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<v Speaker 2>a very visible part of that problem. Right. You see

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

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<v Speaker 2>So I think that does kind of get an outsized attention,

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<v Speaker 2>but really that is the stress when it comes to

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<v Speaker 2>those ports of destination. You have five thousand people that

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<v Speaker 2>just kind of descend on a city and then they

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<v Speaker 2>are gone by the end of the evening, and you

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<v Speaker 2>know that can kind of irritate a lot of locals.

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<v Speaker 1>These destination ports have also seen increased demand because of

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<v Speaker 1>regional conflicts that have reduced the options for seafaring travelers.

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<v Speaker 2>Very popular destinations in Israel and Russia are also closed

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<v Speaker 2>at the moment because of the geopolitical issues in both areas.

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<v Speaker 1>All this has meant there are more passengers moving through

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<v Speaker 1>a dwindling number of port cities, so cruise companies want

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<v Speaker 1>to steer more of them away from the Eastern Caribbean

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<v Speaker 1>and Europe towards destinations like Belize, Honduras, and Mexico. And

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

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<v Speaker 1>gives access to the waterways that connects the US to

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<v Speaker 1>those places. But departure ports like Galveston or like Port

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<v Speaker 1>Canaveral in Florida, are also facing their own challenges. People

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<v Speaker 1>travel there to bord a cruise ship bound for another

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

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<v Speaker 1>these port cities have thousands of people flooding through them too,

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<v Speaker 1>which can be a big strain on local resources.

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<v Speaker 2>Port Canaval actually just failed in its latest attempt to

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<v Speaker 2>add a new cruise terminal where they wanted to go

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<v Speaker 2>from seven to eight, which doesn't sound like much, but

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<v Speaker 2>seven cruise terminals is a lot of business, and local

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<v Speaker 2>politicians are starting to think is maybe we should start

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<v Speaker 2>to shift our attention our capital elsewhere.

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<v Speaker 1>And those limits on expansion in Port Canaveral are putting

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<v Speaker 1>new pressures on Galveston, a historically smaller departure port about

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

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<v Speaker 1>compare Galveston's cruise traffic to that of other major hubs,

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<v Speaker 1>it may seem like a drop in the ocean. But

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<v Speaker 1>Bloomberg's cruise reporter Red Brown told me, you have to

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<v Speaker 1>put it in perspective.

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<v Speaker 2>Between the three biggest Florida cruz towns, Miami, Port Canaveral,

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<v Speaker 2>and the Everglades. They do over three thousand cruises a

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<v Speaker 2>year from those three cities. Right. Galv Soon we'll do

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<v Speaker 2>around four hundred this year. But it's incredible when you

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<v Speaker 2>think it's a town of fifty thousand people. Right. I

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<v Speaker 2>drove it in a day. I walked most of it

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<v Speaker 2>in three days, and it's more or less doubled to

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<v Speaker 2>the amount of cruises they're doing.

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<v Speaker 1>That since twenty eighteen, when the Galveston Port got a

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<v Speaker 1>new CEO named Roger Reese. Reese moved to Galveston after

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<v Speaker 1>a five year stint at Port Canaveral.

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<v Speaker 2>He's a self proclaimed cruise guy.

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<v Speaker 1>He worked with the cruise companies throughout the pandemic, even

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<v Speaker 1>letting their crew workers disembark on the island, and as.

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<v Speaker 4>Soon as they lifted the no sale order, Carnival said

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<v Speaker 4>they're ready to go. They brought their ship in here.

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<v Speaker 1>And Carnival's first post COVID trip left from Galveston. Red

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<v Speaker 1>met with Reese during his trip to Galveston, and Reese

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<v Speaker 1>told him since the pandemic, cruise tourism in the city

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<v Speaker 1>has only grown. Passengers came and went through Galveston's port

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<v Speaker 1>almost three and a half million times in twenty twenty four,

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<v Speaker 1>up from two point two million in twenty nineteen. There

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<v Speaker 1>are three terminals at the port right now, with a

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<v Speaker 1>fourth set to open in November.

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<v Speaker 4>We have fifty million people that live within twelve hours

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<v Speaker 4>a year, and so I think after COVID people said, Hey,

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

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<v Speaker 4>We can get to Galveston, drive there in a day

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<v Speaker 4>and get them a cruise ship.

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<v Speaker 1>Reese says cruise ships were responsible for about sixty five

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<v Speaker 1>percent of the port's revenue last year. The rest comes

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<v Speaker 1>from cargo shipping and related activities. The port charges the

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<v Speaker 1>ships for passenger parking, plus it collects a tariff on

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<v Speaker 1>each passenger and rent from the company's leasing land for

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<v Speaker 1>the terminals. According to a study commissioned by the port,

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<v Speaker 1>cruise related activities bring in almost nine hundred million dollars

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<v Speaker 1>each year to the local economy. Divide that by the

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<v Speaker 1>number of ships we have.

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<v Speaker 4>Today, every ship brings it two point one million dollars

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<v Speaker 4>of revenues to the state and the local government's sales

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<v Speaker 4>tax payroll, all that kind of stuff. And so while

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<v Speaker 4>if you want to.

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<v Speaker 2>Stop that, they really don't have a lot going on

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<v Speaker 2>outside of tourism. They also have a hospital there that

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<v Speaker 2>is a bit of an economic engine as well. But

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<v Speaker 2>you know, an extra billion dollars for fifty thousand people,

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<v Speaker 2>you can do the math is really nice.

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<v Speaker 1>But there are other people in the city who see

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<v Speaker 1>things differently, like the city's former mayor, Jim Yarborough.

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

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<v Speaker 4>I don't want to be overloaded. We can't handle so

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<v Speaker 4>many people.

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<v Speaker 1>I don't want to be overloaded, Yarbro says, we can

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<v Speaker 1>only handle so many people.

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<v Speaker 2>He is also a member of the board that governs

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<v Speaker 2>the port, so earlier this year him and another council

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<v Speaker 2>member actually proposed pausing the cruise development after the fourth

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<v Speaker 2>cruise terminal, which is suppouted to open in November, does

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

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

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<v Speaker 2>and see whether or not we want to continue to

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<v Speaker 2>go down more and more cruizes.

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<v Speaker 1>Right when that fourth cruise terminal opens and it's set

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<v Speaker 1>to host a ship called the MSc Sescape four times

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<v Speaker 1>that month, bringing nearly ten thousand people through Galveston each

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<v Speaker 1>time it docks and departs. But Yarborough thinks it would

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<v Speaker 1>be smart to invest more in cargo shipping and less

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<v Speaker 1>in cruises. While the cargo business doesn't bring in as

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<v Speaker 1>much revenue for the port, it does employ more local

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<v Speaker 1>workers and helps diversify the city's economy.

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<v Speaker 4>You started looking at the job that creates on the

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<v Speaker 4>economic gripple to create cargo. The last past cruised all

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<v Speaker 4>the time.

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<v Speaker 2>This is the thing that really kind of got me

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<v Speaker 2>interested in this story was when we found out, you know,

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

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

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<v Speaker 2>politicians that are beginning to raise the issue of whether

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<v Speaker 2>or not Galveson wants to continue to tie its future

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<v Speaker 2>to cruising.

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<v Speaker 1>When Yarbro and the other board member proposed that pause,

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<v Speaker 1>it ruffled some feathers.

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<v Speaker 2>It made people, especially at the port, quite worried that

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<v Speaker 2>that was going to send a bad signal to the

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<v Speaker 2>rest of the industry that Galveston's kind of closing up

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<v Speaker 2>his doors. It doesn't want any more cruising.

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<v Speaker 1>Red says there are two main factions in the city.

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<v Speaker 1>And it's not as simple as pro cruise and anti cruise.

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<v Speaker 2>There's these two different terms that people use in Galveston.

0:12:14.480 --> 0:12:17.240
<v Speaker 2>They call them bois. It stands they're born on island

0:12:17.600 --> 0:12:21.360
<v Speaker 2>and IBC's island by choice. So Jimmy Arbaugh and the

0:12:21.400 --> 0:12:24.520
<v Speaker 2>people kind of in his corner are bois. They're all

0:12:24.520 --> 0:12:26.760
<v Speaker 2>born on the island. They love Galveston. They have this

0:12:26.840 --> 0:12:29.040
<v Speaker 2>sense of kind of like, we want Galveston to be great,

0:12:29.400 --> 0:12:31.760
<v Speaker 2>but we kind of still want it for ourselves, right,

0:12:31.800 --> 0:12:34.120
<v Speaker 2>Like they don't want to just sacrifice everything and just

0:12:34.200 --> 0:12:34.839
<v Speaker 2>let it be for the.

0:12:34.760 --> 0:12:40.680
<v Speaker 1>Taurus tourists who bring traffic and noise. Plus, they say

0:12:40.720 --> 0:12:43.320
<v Speaker 1>it's not clear that travelers passing through the city to

0:12:43.360 --> 0:12:46.400
<v Speaker 1>get on their ships are spending all that much money locally.

0:12:46.920 --> 0:12:49.120
<v Speaker 1>About a third of tourists spend a night or two

0:12:49.160 --> 0:12:52.800
<v Speaker 1>in Galveston before or after their cruises, but most don't

0:12:52.800 --> 0:12:56.120
<v Speaker 1>stay long. Then you have the island by choice. People

0:12:56.320 --> 0:12:59.800
<v Speaker 1>like Roger Reeese, the port CEO. He and others who

0:13:00.240 --> 0:13:03.520
<v Speaker 1>his view think that cruising is key to economic development

0:13:03.520 --> 0:13:06.640
<v Speaker 1>in the area because the cruise industry brings jobs and

0:13:06.720 --> 0:13:09.800
<v Speaker 1>money to the city. They're trying to get tourists to

0:13:09.840 --> 0:13:12.840
<v Speaker 1>stay a little longer, spend more while they're in town.

0:13:13.240 --> 0:13:16.600
<v Speaker 1>But Reese also stresses that courting tourists isn't the only

0:13:16.640 --> 0:13:19.920
<v Speaker 1>thing the port is doing. It's invested heavily in revamping

0:13:19.960 --> 0:13:21.200
<v Speaker 1>the cargo industry too.

0:13:22.000 --> 0:13:24.920
<v Speaker 2>They all kind of want the same things, but there's

0:13:24.920 --> 0:13:26.720
<v Speaker 2>a rift in how they get there.

0:13:26.880 --> 0:13:29.280
<v Speaker 1>Yeah, they want their city to succeed, and they have

0:13:29.280 --> 0:13:31.760
<v Speaker 1>different visions of what success looks like.

0:13:32.040 --> 0:13:35.120
<v Speaker 2>Yeah, exactly, And it's become very, very hotly debated.

0:13:35.520 --> 0:13:38.840
<v Speaker 1>That proposal to pause cruise development in the fall for

0:13:38.880 --> 0:13:42.320
<v Speaker 1>a period of assessment. It failed in a council vote,

0:13:42.840 --> 0:13:46.160
<v Speaker 1>but people like Yarborough aren't backing down without a fight.

0:13:47.080 --> 0:13:50.160
<v Speaker 1>What it comes down to is this, not everyone in

0:13:50.200 --> 0:13:53.480
<v Speaker 1>Galveston wants their city to become the next Barcelona.

0:13:53.960 --> 0:13:57.160
<v Speaker 2>People might not necessarily associate Barcelona and Galveston, right, but

0:13:57.440 --> 0:13:59.880
<v Speaker 2>people in Galveston, do you know, they look at bars

0:14:00.120 --> 0:14:01.840
<v Speaker 2>that I may, look at what's happening there and they say,

0:14:01.840 --> 0:14:03.800
<v Speaker 2>maybe that's not the future that we want. And not

0:14:03.880 --> 0:14:06.120
<v Speaker 2>to be melodramatic, but like the deal with the devil,

0:14:06.160 --> 0:14:07.880
<v Speaker 2>you make when you do say, like we want more

0:14:07.920 --> 0:14:11.480
<v Speaker 2>tourists right, Like, it's this immediate injection of cash that

0:14:11.520 --> 0:14:14.920
<v Speaker 2>becomes very difficult to distance yourself from. So I think

0:14:15.120 --> 0:14:18.760
<v Speaker 2>people like Jimmy Arbrow and some of the other council

0:14:18.760 --> 0:14:21.720
<v Speaker 2>members in the city are saying, this could be our

0:14:21.720 --> 0:14:25.440
<v Speaker 2>only opportunity to use the money that we're getting from

0:14:25.480 --> 0:14:28.600
<v Speaker 2>the cruise industry and then diversify right and set Galveson

0:14:28.720 --> 0:14:32.320
<v Speaker 2>up for a future that isn't just tourism, it isn't

0:14:32.360 --> 0:14:35.240
<v Speaker 2>just cruise ships. We could potentially bring industry back to

0:14:35.240 --> 0:14:37.440
<v Speaker 2>Galveston and set it off on a new future.

0:14:37.840 --> 0:14:41.080
<v Speaker 1>Is that a tens that the broader global cruise industry

0:14:41.120 --> 0:14:43.640
<v Speaker 1>is worried about right now as it continues to expand.

0:14:43.880 --> 0:14:45.440
<v Speaker 2>Yeah, I mean, the world's a big place, but there's

0:14:45.440 --> 0:14:47.920
<v Speaker 2>only so many places people really want to cruise and visit.

0:14:48.480 --> 0:14:51.440
<v Speaker 2>So it will continue to be a conversation, right But

0:14:51.600 --> 0:14:55.000
<v Speaker 2>the cruise industry, the cruise companies are extremely ambitious. I'm

0:14:55.000 --> 0:14:57.840
<v Speaker 2>thinking of like Royal Caribbean CEO Jason Liberty, who guys

0:14:57.840 --> 0:15:00.640
<v Speaker 2>it's kind of like us against the world mentality, So saying, like,

0:15:00.760 --> 0:15:03.080
<v Speaker 2>cruising industry is two percent of the travel industry right now,

0:15:03.120 --> 0:15:06.000
<v Speaker 2>they want a bigger chunk of that right, so they're

0:15:06.040 --> 0:15:07.840
<v Speaker 2>not stopping their expansion anytime soon.

0:15:08.320 --> 0:15:10.600
<v Speaker 1>What could be the next Galveston in the US.

0:15:10.880 --> 0:15:12.680
<v Speaker 2>I think Galveson is the next Galveson, to be honest

0:15:12.720 --> 0:15:15.520
<v Speaker 2>with you, just because the momentum is just so intense

0:15:15.600 --> 0:15:17.560
<v Speaker 2>and you can tell when you're there just how important

0:15:17.560 --> 0:15:20.640
<v Speaker 2>cruising is to the city and how important it is

0:15:20.640 --> 0:15:23.840
<v Speaker 2>to the industry. Galveston for them is kind of the

0:15:23.920 --> 0:15:27.680
<v Speaker 2>key that unlocks the Western Caribbean. So for the time being,

0:15:27.760 --> 0:15:29.480
<v Speaker 2>I think it's kind of like, yeah, foot on the

0:15:29.480 --> 0:15:33.240
<v Speaker 2>gas and Galveston for the industry.

0:15:36.280 --> 0:15:39.200
<v Speaker 1>This is the Big Take from Bloomberg News. I'm Sarah Holder.

0:15:39.480 --> 0:15:42.080
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0:15:42.120 --> 0:15:45.880
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0:15:45.920 --> 0:15:49.640
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0:15:49.800 --> 0:15:52.160
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0:15:52.200 --> 0:15:54.880
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0:15:55.440 --> 0:15:57.680
<v Speaker 1>Thanks for listening. We'll be back tomorrow

0:16:01.680 --> 0:16:02.120
<v Speaker 4>Anyw