John Stansfield November 16, 2022 , Cruise Industry
In one of the biggest deals for “the cruise capital of the world,” Miami-Dade Commissioners approved a development and lease agreement with RCI-Royal Caribbean International that over half a century will net the county an estimated US$2.8 billion.
The deal, sponsored by Rebeca Sosa, was approved by the commissioners without discussion on Tuesday, November 15. The arrangement includes the construction of a new Terminal G for exclusive use by Royal Caribbean International and its subsidiary companies, including Celebrity Cruises, as well as its lease there for 36 years.
It involves the continued redevelopment of Royal Caribbean’s headquarters at the seaport that commenced before the COVID crisis and an extension to its lease through at least 2072.
The terminal lease includes 3x seven-year renewal options, while the headquarters lease has 2x five-year renewal options.
The deal also provides for the cruise company’s shared use of another terminal at the port scheduled for completion in October 2028 named Berth 10. Its partner there is MSC Cruises.
The agreement, which replaces one between the county and the cruise company set to expire in 2033, is due to generate an additional US$2.5 billion from Terminal G usage and US$260 million from the headquarters lease.
It will create 12,000 permanent, cruise-related jobs, including ~1,000 additional positions with Royal Caribbean which is a 50% increase over the current staff count there.
Royal Caribbean said the jobs will pay average salaries of over US$100,000. It anticipates needing 9634 construction jobs for the project.
While talks around the Terminal G deal started around a year ago in anticipation of Royal Caribbean ships being built, the headquarters redevelopment portion updated an earlier arrangement between the cruise company and the county.
By May 2020, Royal Caribbean had spent US$70 million to upgrade its PortMiami headquarters prior to halting construction to mitigate financial shortfalls during the COVID crisis.
In January 2022, the company sought an extension to the project deadline from Miami-Dade. The deal Commissioners approved on Tuesday amends Royal Caribbean’s development and lease agreements while transferring the burden of the remaining costs to the county.
Miami-Dade will now finance the completion of Royal Caribbean’s headquarters and the construction of Terminal G. RCI, in turn, has agreed to a MAG-minimum annual guarantee ranging from ~600,000 annual passenger movements during the reconstruction of Terminal G to 1.5M yearly passenger movements once it reaches “substantial completion,” that is estimated to be in 2027.
From Year 11 to Year 36 of the deal, Royal Caribbean has committed to a MAG of 2.1M annual passenger movements. The rate, which will go unchanged unless renegotiated, along with the company’s 1.55M annual passenger movements at PortMiami’s Terminal A is due to result in a 22% increase in yearly passenger movements over the Port’s record in pre-COVID 2019.
Royal Caribbean agreed to repay the cost of finishing the development of its headquarters via increased rent and pay the county back up to 53% (US$172.5 million) of Terminal G redevelopment costs.
Miami-Dade will continue to provide the cruise company with parking revenues. They will start at ~US$1.4 million per year at the beginning of the deal and end at US$4.9 million. An annual marketing incentive starting at US$2.9 million is expected to rise to US$6.4 million per year.
For the deal's first 5 years, Royal Caribbean has agreed the proposed arrangement with the Port will be the largest revenue deal it has with any Caribbean cruise port.
RCI also agreed to use shore power, hooking up to PortMiami’s electricity (rather than burning fuel while the ships are berthed), as well as reimburse the county for all related expenses.
The world's second-largest cruise shipowner (after Carnival Corporaion), with ~24% market share and a combined fleet of 64 vessels, RCG-Royal Caribbean Group has homeported in Miami-Dade for 50+ years.
