STATEMENT OF JOHN S. ROGERS, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER, WORLD CITY CORPORATION, BEFORE THE HOUSE SUBCOMMITTEE ON MERCHANT MARINE, U.S.-FLAG CRUISE SHIP SAFETY AND COMPETITIVENESS ACT OF 1990. October 3, 1990 Mr. Chairman, Honorable Members of the Subcommittee: My name is John S. Rogers. I am Vice Chairman and Chief Executive Officer of World City Corporation. Thank you for the opportunity to testify today in support of H.R. 5534. World City Corporation is engaged in the development and construction of PHOENIX WORLD CITY, to be the largest and most revolutionary passenger cruise ship ever built. Literally, a "floating city". In June of this year World City Corporation contracted with a United States shipyard, Avondale Industries of New Orleans, to prepare the final technical bid package for the ship and submit a firm offer for her construction in the U.S. If an acceptable offer is submitted by Avondale, it is the intention of World City Corporation to construct PHOENIX WORLD CITY in the United States and to operate her under U.S. registry. As such, PHOENIX WORLD CITY would be the first major passenger vessel built in U.S. shipyards in more than 30 years and the first U.S.-flag vessel to compete in the international cruise market. I wish to make two basic points in my testimony today: First: that the PHOENIX WORLD CITY project and renewed competitiveness of The international cruise market, with annual revenues approaching $5-billion, is one of the fastest growing segments of the leisure travel industry and to date has been the exclusive preserve of foreign registered ships. No U.S.-flag vessels share in that business. At the same time, revenues earned by the foreign ships are derived principally from American passengers, and the majority of these ships sail from U.S. ports. With the increasing competitiveness of U.S. shipbuilders (a subject to be addressed today by Mr. McAlear from Avondale Industries), it appears that ships can now be constructed in this country to compete for a share of the cruise market. However, for that to happen, the United States must fine tune its laws to remove obstacles which impede the ability of U.S.-flag ships to compete effectively with foreign-flag cruise ships. One of these obstacles to competitiveness of any U.S.-flag cruise ship in the international cruise market is the existing prohibition of gambling on U.S.-flag vessels. Repeal of that restriction, as contemplated by H.R. 5534, is vitally important to the objective of securing a portion of the international cruise market for U.S.-built and registered passenger cruise ships. -2 PHOENIX WORLD CITY, which is fully designed and approaching the final bidding process at Avondale, offers a clear and present opportunity to realize the potential for American cruise ships in the international cruise market, and an immediate tangible reason for enactment of H.R. 5534. PHOENIX WORLD CITY Conceived by cruise industry pioneer Knut Utstein Kloster, Chairman of World City Corporation, and fully designed by one of the world's leading ship's architects, Tage Wandborg of Copenhagen, Denmark, the concept for the ship was the next logical step following Mr. Kloster's transformation of the S.S. FRANCE into the S.S. NORWAY and the innovation of the increasingly popular concept of ship as destination. Over five years in development, the capacity of PHOENIX WORLD CITY measures 250,000 gross registered tons and permits a capacity of 6,200 passengers and a staff of 1,800 officers, crew, and staff. Nearly a quarter mile long and almost a hundred yards wide at her main decks, this floating city features streets, avenues, and village squares lined with numerous shops and restaurants, a 2,000-seat theater, library, museum, house of worship, an international television production and broadcast center, and many other entertainment, sporting, health, and educational facilities. Three hotel towers feature balconied guest suites overlooking the ship and the sea. Four 400-passenger high-speed daycruisers are moored in an internal marina in the hull of the ship and will transport passengers to and from numerous ports and destinations along the ship's route. When she begins operation in 1994, the ship is expected to have a Caribbean itinerary. Port Canaveral, Florida, was selected as her future homeport earlier this year. PHOENIX WORLD CITY will have extensive meeting, convention and exhibition spaces, totalling some 92,000 square feet -- facilities that will not only far exceed anything afloat, but will rival many land-based convention hotels. PHOENIX WORLD CITY will thus be uniquely positioned to compete both in the cruise market and in the ten-times larger, $50-billion a year meeting and convention market. Estimates of project cost for this floating city, secured from foreign yards, ranged from $800-million to over $1-billion. Since PHOENIX WORLD CITY is designed and intended to compete in the international cruise market, her design also includes an onboard casino. [I am attaching to this statement two brochures: one on PHOENIX WORLD CITY and one on a proposed "BUILD AMERICA" campaign related to construction of the ship in the United States.] THE INTERNATIONAL CRUISE MARKET: A FOREIGN PRESERVE Historically, because of higher construction and operating costs of U.S.-flag ships relative to foreign ships, U.S.-flag ships have had no participation whatever in the fast-growing international cruise industry, and this notwithstanding that the great majority of cruise passengers are Americans and the major part of the foreign fleet sails regularly from U.S. ports. The international oceangoing cruise industry (i.e. excluding the protected Hawaiian trade) serving the U.S. leisure market and carrying predominantly American passengers consists of 73 ships of over 10,000 gross tons each, of which 40 can be said to trade exclusively from U.S. ports and 33 call at U.S. ports on a regular basis. All 73 of these ships are of foreign registry, foreign ownership, and are manned by foreign nationals. -3 (The only U.S.-flag cruise vessels over 10,000 gross tons, the 39-year-old CONSTITUTION and INDEPENDENCE, serve the domestic U.S. cruise market in the protected Hawaiian inter-island trade and are not included in consideration of the international cruise market.) The U.S.-revenue-dependent segment of the international cruise industry earns total revenues (both tickets and onboard revenues) of about $4.5-billion per year (1989 estimate), of which an estimated 51%, or over $2.25-billion a year, goes abroad as non-U.S. operating costs (including wages to crew), debt service, and profits to foreign owners. Similarly, all of the benefits from construction of this fleet have heretofore gone to foreign shipyards. Every ship serving the international cruise market and built within the past 30 years has been constructed in a foreign shipyard. The current market value of the entire international cruise fleet is estimated at $4.1-billion. The value of the 20 ships built and delivered within the past five years, plus those currently on order, totals $7.7-billion, and it is safe to assume that at least $1-billion in foreign government construction subsidies also supports that fleet. GAMBLING AS A CRUISE RECREATIONAL ACTIVITY It is an accepted fact in the industry that any cruise ship intending to compete in the international cruise market must offer its passengers casino or other gambling activity as one of the onboard recreational activities. Of the above-mentioned 73 ships competing for U.S. passengers and dollars in this market, every one of them offers casino and/or other form of gambling as an amenity. (Attached to this statement as Exhibit I is a list of 27 cruise lines serving the U.S. market, and 99 of their cruise ships [including a number under 10,000 gross tons], all of which offer casino and/or other gambling facilities.) Temple, Barker & Sloane of Lexington, Massachusetts, a leading analyst of the cruise and leisure travel industry, has studied the shipboard gambling component for five years and evaluated its significance in terms of market demand for cruise products. It is their opinion that it is highly desirable, if not essential, for a U.S.-flag cruise ship to offer casino gambling as an onboard entertainment feature if it is to compete for American passengers with foreign-flag ships operating out of U.S. ports. It should be noted that gambling on cruise ships in the international market does not represent a dominant activity on the ship, and it is not the amount of revenue generated by onboard gambling which is the crucial consideration. Temple, Barker & Sloane estimate that onboard gambling on foreign-flag cruise ships generates revenues for the owner of only about $4 per passenger per day on cruises averaging 7 days in length. The key competitive factor is the fact that passengers have come to expect casino gambling as one of the onboard entertainment activities included in their overall cruise experience. BENEFITS OF AN AMERICAN-FLAG PHOENIX WORLD CITY If PHOENIX WORLD CITY is to be constructed, manned and operated as an American flag ship -- and, indeed, as an American "flagship" displaying the best of American products and technology on the world's most revolutionary cruise ship -- passage of H.R. 5534 will be a vitally important part of that process. In considering this important enabling legislation, I would therefore also urge you to consider the many respects in which a U.S.-built and U.S.-flagged PHOENIX WORLD CITY will benefit the United States: Shipbuilding This ship alone would represent a breakthrough for this industry, revenues in the many hundreds of millions of dollars, tens of millions of work hours for the -4 shipbuilder and a broad array of suppliers and subcontractors across the country, and a competitive edge in securing contracts for subsequent ships of this class. Manning - The 1,800 officers, crew, and staff of PHOENIX WORLD CITY would be part of a maintained pool of over 2,000 personnel drawn from the ranks of U.S. maritime and service personnel. Maritime Education - Arrangements with Federal and State maritime academies, under plans already in discussion, will provide extensive onboard training opportunities for U.S. merchant marine midshipmen. Maintenance & Repair - In addition to the initial construction and outfitting of a U.S.-built PHOENIX WORLD CITY, there would follow 30 years of U.S.-source maintenance, repair, and provision of parts. - Balance of Trade - PHOENIX WORLD CITY will capture and retain in the United States in a taxpaying corporate entity a significant amount of the U.S. dollar revenues of the international cruise industry that are otherwise taken offshore, and she is expected to attract extensive foreign revenues as well. To the extent that she serves as a catalyst for expanded U.S.-flag cruise operations, and as the United States claims a greater share of the cruise industry, this positive effect will be compounded. Emergency and Defense - In addition to the beneficial impact of the construction and manning of PHOENIX WORLD CITY as a U.S.-registered ship on the ship construction industry and on U.S. maritime manning, training, and readiness, the ship herself will stand as a valuable national emergency and defense resource, and one which will have been financed on the basis of its commercial use. As detailed on Exhibit II annexed to this statement, PHOENIX WORLD CITY could serve as a fully-equipped troop carrier, capable of transporting a full division, or as a 9,000-bed hospital ship with extensive clinical and operating space. Energy Efficiency and Environmental Standards - This most revolutionary of cruise ships will set the standard for fuel efficiency and environmental responsibility. Economies of scale and technical advances will result in a fuel consumption per passenger on PHOENIX WORLD CITY which will be as much as 50% below the average for cruise ships operating today and about 30% lower than on the newer more fuel efficient ships. All combustible solid waste will be converted to electrical energy; other solid waste will be compacted for recycling; advanced water and exhaust treatment technologies will be utilized; and solar energy will be harnessed for appropriate practical and demonstration applications. CONCLUSION PHOENIX WORLD CITY will be the most advanced passenger ship in the world, the most efficient and cost effective, and, according to market evaluations and projections, highly profitable. Built in American shipyards, replete with American products and technology from across the country, manned by an American crew, flying the American flag and serving a variety of American interests, PHOENIX WORLD CITY will justifiably be the pride of the nation. Passage of H.R. 5534 now under consideration by this honorable Subcommittee is one of the important building blocks necessary to bring this prospect to realization. Thank you for the opportunity to present this testimony to assist you in your deliberations. |