The $100 million construction of a third cruise terminal would be a game-changer that solidified a vision among local leaders of a revitalized Port of Galveston, officials said Wednesday.
The port and Royal Caribbean Cruise Lines on Wednesday morning officially signed a memorandum of understanding that — barring any unforeseen developments — will lead to the construction of a 200,000-square-foot cruise terminal at Pier 10.
The cruise company will pay about $100 million to build the terminal and hold a 20-year lease on the property, with four 10-year renewal options, officials said. Port officials in an early announcement had estimated the cost at about $85 million, but cruise-line officials Wednesday said the number was closer to $100 million.
The Wharves Board of Trustees, which governs the port, is expected to vote on a final agreement in January, after the port and the cruise company finalize details of the long-term lease agreement.
The new terminal might be completed by the fall of 2021, officials said.
Galveston Mayor Jim Yarbrough called the announcement a “game changer” that solidifies the purpose of the east end of the port.
The third terminal is the culmination of years of discussion about increasing the port’s capacity for cruise ships.
Galveston is already the fourth busiest cruise port in the nation, and the busiest in Texas. In 2017, about 934,000 people sailed from the island on cruise ships, according to the Galveston Island Park Board of Trustees.
The port is home to three year-round Carnival Cruise Line ships, one year-round Royal Caribbean ship, one seasonal Royal Caribbean ship and a seasonal Disney Cruise Lines ship. The cruise ships berth at piers 25 and 27.
The new terminal will be used almost exclusively by Royal Caribbean.
Cruise activity generated $60.8 million of spending on the island in 2017, according to the park board.
For islanders, the new terminal will bring jobs and more spending in the local economy, port officials said.
The port is not funded by tax dollars, and an additional cruise ship helps the port become more self-sufficient, said Mayor Pro Tem Craig Brown, who attended Wednesday’s event.
The island benefits from the parade of cruise passengers because they stay at hotels, spend money with other island businesses and often return to the island for future vacations, Brown said.
“It’s an economic engine not only for the port, but for the entire city,” Brown said. “This is a commitment that the city and the port is making, and that’s the way it should be if we really want to expand this business and develop the income flow that it can bring.
The announcement would open the door to a series of new developments at the port, wharves board Chairman Ted O’Rourke said.
“We’re working toward a master plan,” O’Rourke said. “This is a big piece of that.”
O’Rourke hoped the new terminal will lead to more commercial use and green space development on the east side of the port. Simultaneously, the port is working to move cargo operations farther west, he said.
Wednesday’s announcement might also lead to development of a fourth cruise terminal, he said.
That’s a real possibility, port officials said.
“This industry almost has an infinite ability to grow,” port Director Rodger Rees said. “I think that Galveston will participate in that.”
The deal gives Royal Caribbean a foothold in a growing market for cruises in the western Gulf of Mexico, said Michael Bayley, the president and CEO of Royal Caribbean International.
“We see it as a growth opportunity for our business,” Bayley said. “Galveston, as a homeport is easy to access. People like getting here. It avoids a lot of our guests having to fly to different homeports to do Caribbean cruising. It just makes sense from a convenience perspective.”
The company also is investing in its port facilities in Mexico and ports in the Caribbean. The new facilities could bring Royal Caribbean’s Oasis-class mega cruise ships to the area in the future, Bayley said.
The new terminal is not expected to come without headaches for islanders. Sending cruise visitors farther east on Harborside Drive could lead to more traffic in residential neighborhoods, officials acknowledged.
The shift of cruise business east in the port goes hand-in-hand with moving industrial operations farther west, Yarbrough said. To accommodate the new terminal, the port will move some of the operations for Wallenius Wilhelmsen Logistics, which uses Pier 10, farther west, officials said.
That movement, along with planned traffic improvements the city has outlined for the next 10 years, including the construction of a group of downtown parking garages near the port, should alleviate some of those concerns in the long run, Yarbrough said.
The Port of Galveston, publicly owned but not supported by taxes, is a landlord port and generates much of its income from lease agreements with maritime tenants.
It derives about 55 percent of its annual revenue from cruise-related activities.
The port predicted it would earn about $37.4 million in total revenue in 2018.