A wide berth: Will Kai Tak's little used cruise terminal catch on enough to justify HK$8 billion cost?

A year after opening, Kai Tak Cruise Terminal remains little used. While operators are upbeat, sceptics wonder if it will catch on enough to justify the investment, writes Darren Wee

PUBLISHED : Monday, 07 July, 2014, 6:37pm
UPDATED : Tuesday, 08 July, 2014, 9:28am

When Queen Mary 2, the world's largest ocean liner, called at the newly operational Kai Tak Cruise Terminal in April, more than 2,000 passengers disembarked. Dragging heavy suitcases through the empty, cavernous building, they headed to the taxi ranks outside to catch a ride to their hotels.

Most had to wait two hours for a cab at the end of the old airport runway, and the chaos prompted legislators to question the management of the terminal and its transport links.

Ships come in at 8 in the morning and sail at 8pm. The economic benefits are minimal

At the time, government officials declared it an isolated incident, insisting that the average waiting time for taxis was just between 15 and 30 minutes. But a similar scene unfolded 10 days later when the Celebrity Millennium dropped anchor at the terminal, says tour guide Wouter van Marle.

"It was horrible," he recalls. "There were simply far from enough taxis to fulfil demand - an hour wait is ridiculous.

"While the terminal is in the middle of the city, it's also in the middle of nowhere, so you're totally dependent on the shuttle buses provided by the cruise company and taxis that choose to go there."

Setting its sights on creating "Asia's cruise hub", the govenrment has pumped in HK$8.2 billion to build the two-berth Kai Tak Cruise Terminal. This bill is more than three times officials' initial estimate of HK$2.4 billion in 2006 and HK$1 billion more than the projected figure when it was given the green light in 2008.

Officials deemed it a worthwhile investment, estimating that the cruise business would bring in about HK$2.5 billion in economic benefits and create between 5,300 to 8,900 new jobs by 2023. However, economists such as Raymond So Wai-man have questioned how those figures were derived.

The terminal is certainly striking - a futuristic silver structure resembling an open-mouthed whale shark. Designed by Norman Foster's architectural firm, the complex has been described by US lifestyle magazine Departures as "the Rolls-Royce of cruise terminals".

Surrounding waters have been dredged so that it can accommodate the largest liners (up to 220,000 gross tonnes), and waiting halls are designed without columns so they can be used as exhibition and convention venues outside the cruise season.

A consortium formed by Worldwide Flight Services, Royal Caribbean Cruises and Shun Tak Holdings - Worldwide Cruise Terminals - is the operator.

The modest number of bookings at Kai Tak terminal since its soft opening in mid-2013 does not augur well, reinforcing fears that it would become a white elephant.

Just nine ships berthed at the terminal in the last six months of 2013 for a total 15 days. This year, 27 ships will berth for 48 days.

In comparison, 61 ships called at Ocean Terminal in Tsim Sha Tsui in 2013.

Singapore's two-berth Marina Bay Cruise Centre, which opened in May 2012, handled 110 ships in the past financial year ending in March.

In the meantime, the Kai Tak complex remains empty, although shops and restaurants are expected to open later this year, when the second of its two berths is ready.

It holds little appeal for the cruise clients of Doris Lam Cheuk-man, general manager of Momentous Asia Travel and Events, who stop over in Hong Kong during winter as part of a world tour.

"They love Ocean Terminal because if they don't want to join [a local] tour, they can just go out and do some shopping," Lam says. "When they're in Hong Kong, they may only have a few hours and want to make the best use of their time.

"For the ones [stopping] in Kai Tak, we have to include a car transfer because we cannot take public transport. In other words, the tour cost will be much higher because we need to book a limousine for them. Clients will find joining a tour at Kai Tak much more expensive than from Ocean Terminal."

Winston Chu Ka-sun, founder of the Society for Protection of the Harbour, isn't surprised by the wave of criticisms of Kai Tak terminal.

He first proposed building a cruise terminal at the site of the old Kai Tak airport in 1998, arguing that Hong Kong is the perfect place because of its deep water port and proximity to 12 countries.

However, the cruise industry is supply-led - infrastructure must be in place before cruise liners will make bookings - and critical mass is needed to justify investment in hotels, shops and transport.

That is why he proposed establishing a six- to 12-berth home port - a base for cruises operating round-trip voyages, where passengers typically spend three or four days before or after their trip.

"What we have now is a port of call," Chu says. "Ships come in at 8 in the morning and sail at 8pm. The economic benefits they bring are minimal."

Just one ship has made Kai Tak its home port so far, making two sailings to Taiwan and back last year.

Chu says: "The government wasted 16 years, HK$8 billion and came up with nothing but lots of complaints."

Worldwide Cruise Terminals managing director Jeff Bent attributes the slow take-up at Kai Tak so far to the long lead time in setting cruise schedules.

Cruise companies plan their itineraries two years in advance and only started to consider Kai Tak in mid-2013 after the first berthing proved successful, Bent says. "The calls we are receiving in 2014 were planned by the cruise lines in 2012 when they were not sure whether there would be a completed cruise terminal."

Next year, he expects bookings to be about double that of 2014, as with the number of passengers passing through.

Liu Zinan, Royal Caribbean Cruises managing director for China and Asia, acknowledged the terminal had "teething problems" but said these were not unique to Kai Tak and he was confident they would be resolved by next year.

Royal Caribbean Cruises announced last month that Voyager of the Seas, which transited at Kai Tak in May, would return in summer 2015. And it would operate 21 sailings compared with four this year, using it as home port for more than three months, .

The tourism board describes this as a "vote of confidence" in the terminal and Hong Kong's potential as a cruise hub.

Meanwhile, Kai Tak has also been used for events, including car launches, expos and parties and film shoots. Officials say all of the terminal's 5,600 square metre commercial space has been leased and will open in late summer. A high-end multi-brand shop would operate at one end of the second floor and a Chinese restaurant and other eateries would take over the other end. A wedding services company had leased one of the three rooftop shops. Six sites at the southern side of the terminal have been marked out as a hotel belt, with building of five-star accommodation, dining and entertainment facilities.

An MTR station is scheduled to open in 2018 and a HK$12 billion East Kowloon monorail has been proposed.

However, observers such as Oren Tatcher, principal at OTC, a Hong Kong-based consultancy specialising in transport terminal planning and design, say that placing the terminal right at the end of a long peninsula, which is not well connected, presents accessibility problems.

He believes the construction of the MTR and monorail, which are meant to serve the overall Kai Tak development, won't solve access issues for the terminal, and notes that it will be many years before they operate.

Coaches are a better option to ferry out cruise passengers as it would be difficult to convince taxi drivers to go to the terminal, especially at peak times when they make better money cruising the streets, Tatcher says.

Paul Zimmerman, founder of Designing Hong Kong, has objected to locating a new cruise terminal at Kai Tak from the start, and argues the best site would have been at the West Kowloon Cultural Districtbecause it could be linked to the MTR's Kowloon station and the airport rail.

"Cruise ships bring a rush of traffic just for a short, brief moment and there is no regular patronage for any public transport to be viable," he says.

"Talks of building an environmentally friendly tram system or a monorail would be public subsidy of tourism that will never be earned back."

By way of comparison, Zimmerman points to Sydney International Cruise Terminal, a small building in the city centre which quickly handles ships and is then used for events and exhibitions.

"The economic viability of the Kai Tak cruise terminal is extremely limited, and we've given it an enormous piece of land, so it's an over-investment," he says. "This is not a massive growth market; it's going to be a slow, steady increase."

Once the Kai Tak MTR station is completed, things will become easier for the cruise terminal, Zimmerman says, "but it's not an ideal location, you can't ever change that".

George Liu Zhaoping, an assistant professor in tourism management at Polytechnic University, is more optimistic.

"It takes time to build up capacity at Kai Tak terminal," he says.

Cruise lines need to try out the terminal to determine that its facilities and services are working properly before making future plans.

As it stands, Hong Kong is one of the top three hubs for long-haul cruises in Asia, along with Shanghai and Singapore.

Shanghai is becoming far more important than other cities because its market share is growing rapidly - passengers increasingly embark from the city, so more cruise ships are using it as a home port, Liu says.

"In coming years Hong Kong will grow but maybe not as big as Shanghai, which is supported by a huge market."