Before 2019 comes to a close, Gov. Wanda Vázquez will reportedly meet with Royal Caribbean International (RCI) to discuss the information disclosed last week regarding the company’s possible cruise stop reductions and cancellations in Puerto Rico between 2020 and 2021.
The decision was revealed after conflicting information divulged in a joint statement—issued by the Public-Private Partnership Authority (P3), the Puerto Rico Ports Authority, the Puerto Rico Tourism Co. (PRTC) and the governor—and declarations from RCI.
In the joint statement, P3 Interim Executive Director Fermín Fontanés affirmed that his agency received a notification stating that RCI would cancel multiple sailings departing from San Juan between April 2020 and March 2021.
“Royal Caribbean and the P3 maintain certain contractual relationships regarding the framework for cancellation processes, the benefits that the government of Puerto Rico provides Royal Caribbean and the minimum volume that Royal Caribbean committed to bringing to Puerto Rico in exchange for said benefits, among others. Based on this notification, another communication will be sent to question the reason for these cancellations,” Fontanés wrote.
After this official joint statement was publicized in the news and social media, RCI released a statement to THE WEEKLY JOURNAL in which the cruise line denied what it dismissed as “rumors.”
Today, Royal Caribbean informed in an official statement that "the rumors regarding cancellations of sailings departing between April 2020 – March 2021 from San Juan are incorrect."
“We have not canceled any of our ships’ visits or home porting in San Juan. Though we have not yet announced our full 2021-2022 deployments, we do expect fewer calls from San Juan for the 2021-2022 season and we will be able to provide more details once we have announced our itineraries. No decisions regarding deployment beyond those dates have yet been made,” the public relations team commented.
In light of these seemingly contradictory accounts, social media has been ablaze with users demanding transparency from the government. However, the intricacies surrounding this issue appear to extend beyond a mere misinterpretation between the parties involved.
Context and Timeline Explained
To understand the situation it is necessary to put into context the precarious situation of the San Juan Port’s infrastructure. Given that the ports were designed decades ago and that cruise lines are investing in larger ships that would not have been able to be received, back in 2017 the government announced that RCI would invest $2.8 million on the Pan-American II Port in San Juan while the government invested $3.8 million.
Moreover, the historical relationship between Puerto Rico and RCI and Carnival Cruise Lines (CCL) indicates that these companies have preferential burden agreements with the Ports Authority, which is the public agency in charge of overseeing the space. In the case of RCI, for example, by investing in port repairs, they were assured preferential treatment, consisting of being able to select the port and dates before other cruise lines.
In a leaked letter that PRTC Executive Director Carla Campos addressed to the governor on Nov. 19, the official details that Puerto Rico’s relation with RCI and CCL has been “of vital importance” to the cruise industry’s growth on the island. However, she noted that other cruise lines—such as Norwegian Cruise Line (NCL), Disney Cruise Line and MSC Cruises (MSC)—who have less participation in the market presently, but have “the most aggressive sailings inventory in order,” placed them “in a privileged position to grow in the region soon.”
“MSC has 13 sailings on order while NCL has ordered 17. However, the infrastructure limitations and the preferential treatments with RCI and CCL pose a risk to the lines that bring that new capacity to Puerto Rico when planning,” Campos wrote.
In addition, the combined assignments between RCI and the government were only meant to be for miscellaneous or superficial improvements to the port. Various officials have observed that a full infrastructural makeover would require roughly between $15 million to $20 million in investments.
The Florida-Caribbean Cruise Association (FCCA) will hold its FCCA Cruise Conference & T…
Thus, the P3 issued a request for qualification (RFQ) so that a seasoned port developer and manager could take control of the ports’ operations while making the capital investment that is necessary to fix the outdated infrastructure. The company that will be in charge of this process will be Global Ports Holding (GPH), which has experience in other Caribbean islands.
The move has been scrutinized by some public officials, such as Rep. Ángel Matos and Sen. Juan Dalmau. After the news that RCI was reportedly going to cancel some sailings, Rep. Matos blamed the P3 that has not yet been formalized.
“All this is mainly the fault of the [P3]. The government proposes to privatize the operations of the ports of San Juan and Ponce, and knowing the opposition from the sailing industry, they still insist on granting it. Some important companies, like Carnival, have not issued statements yet, so the effect of these cancellations can be up to 500,000 passengers. The economic damage can exceed $100 million. I urge [Vázquez] to reconsider this privatization,” he said in a missive, a statement echoed by Dalmau via Twitter.
This is not the first issue that GPH has had with cruise lines. Last March, the government of Antigua and Barbuda made a concession agreement with the company that resulted in CLL dropping Antigua from its itinerary due to concerns over cost increases.
Meanwhile, RCI alleged in a separate missive that it has been unable to discuss its concerns with the Puerto Rican government.
“All of our multiple requests have been met with silence,” the company reportedly wrote on Dec. 2 on the Facebook group Cruceros Puerto Rico. In the letter, RCI denounced that GPH advised the cruise line that they would have to pay higher fees and lose “multiple rights and benefits.”
“We have significant concerns about the very high capital and loan costs of the privatization project and the subsequent costs being passed onto our customers, and the lack of engagement with Royal Caribbean in any dialogue,” the document reads.
However, a tweet published by Campos on Oct. 21 shows a photo of a meeting that the PRTC executive director—along with Vázquez, Fontanés, and then-Port Authority Executive Director Anthony Maceira—held with CCL Chairman Micky Arison, CCL President and CEO Arnold Donald, Holland America Line President Orlando Ashford, and RCL Vice-Chair Adam Goldstein.
Both RCI and CCL had reportedly participated in the RFQ for the P3 concerning the ports’ management but did not meet the requirements. As such, their concerns had to be channeled through the Florida-Caribbean Cruise Association (FCCA) in order to maintain transparency throughout the P3 process. Alas, in Campos’ letter to Vázquez, she informed that the FCCA had been unable to reach consensus between its members and that RCI and CCL would present their requests separately.
“To date, here in the PRTC we haven’t received any communication on behalf of the lines about that particular [issue],” the official wrote. A source told THE WEEKLY JOURNAL that after that letter was sent, the CCL reached out to the government, but RCI hadn’t, save for the missive divulged on social media last Monday.
After the October meeting government officials and spokespeople for the cruise lines, RCI’s port agent, Continental Shipping, sent an email to the Ports Authority indicating that certain stops would be canceled. The government did not immediately delve into details because the information had to be confirmed and it could affect negotiations between the parties.
It was then revealed that the supposed cancellations had already been documented and were the result of housekeeping activities. Regardless, the cruise line did state an intent to reduce the number of sailings, which have not yet been published but are essentially a negotiation tactic.
“Regarding our upcoming May 2021 through April 2022 season, we will be communicating our plans publicly in the coming weeks. Our plans do reflect a number of deployment changes and a significant drop of home port cruises of call in San Juan,” RCI wrote on the Dec. 2 missive, addressed to the then-interim executive director of the Ports Authority, José Roa.
One day later, it was revealed that Roa presented his resignation on Nov. 9 and it became official on Nov. 30. The former official will now resume his work in the private practice. In his place, the governor designated Joel Pizá, whose nomination will be under consideration before the public agency’s board of directors.
In order to quell these concerns, Vázquez affirmed that she would have a separate meeting with RCI before the end of this month.
Editor's note: This story was published on the December 4 print edition of The Weekly Journal.