Innovation, pent-up demand and a desire for low-emission vessels drive new orders
Uncertainty in the passenger vessel market during the Covid-19 pandemic had a significant impact on the flow of vessels entering service in recent years. But the situation has begun turning around.
Despite economic headwinds, consumers are opening their wallets. They are commuting to the office again. They are taking vacations. And they are looking for new experiences. All those things are driving a resurgence that has been felt across much of the industry.
According to the Market Statsville Group (MSG), the global maritime passenger transport market is estimated to grow about 5.2 percent each year from 2022 to 2030. Anecdotally, North America is following a similar path.
“We’re currently seeing a strong upward trend in demand for passenger vessels and that industry,” said Ron Wille, president and COO of All American Marine, a Bellingham, Wash., shipbuilder. He credits the rebound in the tourism industry post-pandemic and renewed interest in unique travel experiences, such as dinner cruises and sightseeing tours, for the uptick. “We are currently faring well, but that doesn’t mean we have taken our foot off the gas,” Wille said.
In addition to the rising demand for passenger-carrying vessels, All American Marine also is experiencing a post-pandemic surge of projects in the research, survey and workboat sectors. These typically are versatile, high-performance vessels tailored to specialized missions. Wille noted that the shipyard also has several potential passenger vessel projects in the contracting stage, reflecting the market’s strong interest in innovative designs and custom solutions. Coming from a long background as a builder of aluminum vessels, Wille said the yard has more recently paved a path as builder of not only traditional vessels but also those with hybrid-electric and other alternative propulsion systems.
“We are committed to providing these solutions for our diverse client base,” he added.
Driving demand
The rebound in passenger vessel construction has multiple financial sources. Both the public and private sectors are investing more in maritime infrastructure and services, recognizing the importance of marine transportation in reducing urban congestion and providing efficient transit solutions. Overall, these trends are contributing to increased demand, Wille explained.
Looking broadly at the market, he sees seven factors driving the demand for vessels, accelerated by a mix of both public and private investment further fueling growth.
Technological advancements: Innovations in maritime technology, such as hybrid-electric propulsion systems, advanced navigation and eco-friendly materials are pushing demand for custom vessels that leverage these advances.
Environmental regulations: Stricter environmental regulations are encouraging public and private sectors to invest in more sustainable and highly efficient vessels. Custom designs allow operators to meet specific regulatory requirements while optimizing performance and reducing operations costs.
Economic growth: As certain sectors of the economy stabilize or grow, there’s an increased need for transportation, tourism and industrial services, leading to higher demand for custom vessels tailored to these industries.
Government initiatives: Many government agencies are investing in maritime infrastructure and services as part of broader transportation and environmental strategies. This also includes funding for research vessels, patrol boats, ferries and other specialized vessels.
Capital Construction Fund: There are also positive changes from expanding the U.S. Maritime Administration’s Capital Construction Fund. This program encourages construction, reconstruction or acquisition of vessels by allowing owners or operators to defer some federal income taxes. Wille said it may take a few more years for it to reach full steam but coupled with a growing emphasis on sustainable and efficient transportation options, it has increased demand for high-speed and hybrid vessels.
Private investment: Private companies are also investing heavily in custom vessels to meet specific operational needs, enhance service offerings and gain competitive advantages. Chugach Express, delivered recently by All American Marine for Phillips Cruises and Tours in Alaska, is just one example (profile on page 35).
Marine Tourism
Renewed interest in marine tourism is another factor. The travel sector’s recovery and expansion post-pandemic have increased demand for custom passenger vessels, such as sightseeing boats, dinner cruises and high-speed ferry projects. In many cases, plans for such vessels were shelved during the Covid pandemic as operators hunkered down.
The Ferry Godmother?
Ferries are a particular sweet spot for Eastern Shipbuilding Group. Shipyard Chairman and CEO Joey D’Isernia agrees growth is back in the passenger vessel market and sees a variety of drivers. Ferries that carry paying passengers between one location and another are a source of emphasis and growth for the shipyard based in Panama City, Fla. Eastern has delivered more than 350 vessels in its 48-year history, of which 21 were auto and/or passenger ferries. Several have been built in recent years and others are on the way.
“There is a noticeable push towards modernizing aging ferry fleets, which further boosts demand,” D’Isernia said. Additionally, he noted, there has been a lot of activity among the municipal and state agencies adding to or replacing their existing fleets, which is one of Eastern’s target markets.
Indeed, late last year, the Federal Transit Administration (FTA) announced grants totaling $220.2 million from the Bipartisan Infrastructure Law specifically for modernizing U.S. ferry systems. A total of 13 grants in eight states and the territory of American Samoa were made to replace older boats and expand fleets, though some of the funding also went for new terminals and docks.
Among the awards, two of the biggest go to the state of Alaska. It will receive nearly $131.3 million to invest in the Alaska Marine Highway that serves remote locations throughout the state. That total includes nearly $92.8 million to the Alaska Department of Transportation and Public Facilities to build a new ferry to replace a nearly 60-year-old vessel.
For Eastern, D’Isernia said the big news has been their recent delivery of three new award-winning Staten Island Ferries and the launching of a new Long Island ferry in May for the Bridgeport & Port Jefferson Steamboat Co., which runs between Connecticut and Long Island, N.Y. That ferry, Long Island, is 302 feet long and can carry vehicles and up to 1,000 passengers. Recently, Eastern signed a contract for a vehicle ferry to serve the Fisher Island community in south Florida.
D’Isernia’s enthusiasm for ferries matches the perspective of Mike Corrigan, CEO of Interferry, the trade association that represents the worldwide ferry industry. He says the North American and world market are exhibiting similar behaviors — post-Covid recovery and growing demands for safety, comfort and, above all, reduced environmental impact. “Most companies are back to where they were before Covid and are now starting to surpass that level,” Corrigan said.
Unmistakably, though, they are prioritizing new fuels and propulsion options. “I think most ferries from now on will have some sort of battery power, if not as a single source of power then at least in a hybrid arrangement with a gaseous fuel or some other fuel as backup, at least for any run of less than three hours,” he explained.
But to keep the good times rolling for builders and operators, the limits in further marine electrification must be recognized. “These vessels need substantial electrical power at the dock and in some jurisdictions, including New York City, it just isn’t readily available,” Corrigan said.
But with much of the push for electrification coming from the ratepayers, such as public authorities in the transport business, necessary support may in fact be forthcoming. Some agencies are aiming for zero emissions and in many cases, they are setting up subsidies — for example tapping into bridge tolls — to pay for new construction.
But with or without a boost in electrical infrastructure, the passenger vessel industry seems to be currently fully charged. •