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The Honolulu Advertiser
Posted on: Thursday, September 26, 2002

Norwegian planning to base second ship here

By Kelly Yamanouchi
Advertiser Staff Writer

Norwegian Cruise Line said it plans to base a second ship in Hawai'i for year-round cruises within the next two years in what would be a significant boost for the Islands' burgeoning cruise industry.

Sen. Dan Inouye's office also said yesterday that it has made progress in discussions with Norwegian that would allow the company to operate interisland cruises without making the federally required foreign port stop.

Norwegian chief executive Colin Veitch said consumer demand since it began operating its Norwegian Star in Hawai'i last December has prompted the latest move.

"We're encouraged by this first year of operation," Veitch said. This week the company also starts a seven-month run of 10- and 11-day cruises in the Islands with its Norwegian Wind.

Veitch said yesterday that Norwegian does not yet have the next ship that it will base in Hawai'i, but said it may be one of those that had been under construction for American Classic Voyages before it filed for bankruptcy late last year. Norwegian said last month it was buying the hulls and would complete construction of the ships in Europe.

Veitch also said there is a possibility that both of the ships that had been under construction for American Classic could be used for cruises in Hawai'i.

"It really depends on how the market develops," he said. "Our ambition as a cruise company is to build as many ships as the market can support. If the Hawai'i market continues to grow at a fast pace, we will continue to keep up at the fast pace."

As part of its efforts in Hawai'i, Inouye's office has said Norwegian also has been in discussions with the senator about the possibility of being the exclusive cruise carrier in the Islands.

Yesterday, Inouye's office said that as part of discussions, Norwegian has committed to using a U.S. crew and establishing a U.S. subsidiary that would comply with federal requirements and allow it to run interisland cruises.

Inouye's chief of staff, Jennifer Goto Sabas, said discussions are ongoing with Norwegian about the American Classic hulls and the Passenger Services Act, which requires that foreign-flagged, foreign-built cruise ships with foreign crews make a stop at a foreign port.

Norwegian complies with that requirement by making a run to Fanning Island, about 1,200 miles south of Hawai'i.

"We have been pleased with their commitment to date on a U.S. crew and compliance with U.S. law because it clearly means jobs and support for our tourism industry," Goto Sabas said. "In our discussions to date they have been willing to comply with those requirements. The third requirement would be a U.S.-built ship and that's what would require a waiver."

Veitch said yesterday, however, that he does not believe the Passenger Services Act is likely to change. He said Norwegian made a "relatively low-key inquiry" to Inouye's office and that the discussions are private.

"We're able to live within the law," Veitch said.

The developments come as many in the state have been hoping for an expansion in cruises to help boost the Islands' struggling tourism industry. Cruise passengers account for less than 1 percent of total arrivals, but forecasts are for rapid growth in the next several years and thousands of additional visitors and business for hotels, tour companies, airlines, retailers and restaurants.

B.J. Wie, professor of transportation at the University of Hawai'i's School of Travel Industry Management, said Norwegian is driven to expand because the Caribbean cruise market is becoming saturated, driving down prices.

He said Norwegian's expansion could attract competitors including Royal Caribbean, Princess and Carnival cruise lines, which are watching to see how Norwegian fares in Hawai'i.

"The Hawai'i market is perceived as a safer place for Americans," Wie said. But, he said, there is hesitation because the Passenger Services Act requires not only that a U.S. crew be used on a U.S.-built ship, but that cruise companies follow U.S. Coast Guard regulations, pay federal income tax, and offer employees pension and Social Security benefits.

Many in the state's tourism industry said that any additional cruise ships in the Islands, whether they make a foreign port stop or not, will boost the economy by bringing in more tourist dollars. Cruise passengers typically spend less per day on land than other visitors — an average of $90 a day per passenger, according to the state Department of Business, Economic Development and Tourism — but they also are visitors that might not have otherwise come to Hawai'i.

Some note concerns about rapid expansion, however. Carl Bonham, executive director at the University of Hawai'i Economic Research Organization, said that if the industry were to expand dramatically to 10 times its current size, it may require additional harbor infrastructure, hotel rooms and airline capacity.

"There are always issues if you have a fast-growing sector. It can create problems, but those should all be problems that we should be somewhat happy to have and that we can deal with," Bonham said.

Veitch said that he thinks changes in travel patterns following the Sept. 11 terrorist attacks will lead to long-term changes in the cruise industry as more people forgo flying. He also said he does not plan to use the Norwegian Wind for cruises in Asia, as the company had planned before the attacks.

"We're very much focused right now on what we call homeland cruising to capitalize on the changing patterns," Veitch said.

Veitch said he does not plan to offer cruises to Hawai'i from such locations as Los Angeles or San Diego, noting that Norwegian is committed to being based in Hawai'i for cruises through the Islands.

"The welcome we've had in Hawai'i, it's the warmest welcome we've ever had," Veitch said. "From the moment we get off the plane and flowers are put around our neck, to the meetings we've had in government offices, the Chamber of Commerce, the visitors bureaus."

Reach Kelly Yamanouchi at 535-2470 or kyamanouchi@honoluluadvertiser.com.