A candid conversation with Canaveral Port Authority CEO and SpaceCoast Business 2011 Business Leader of the Year
by Eric Wright
Our local shopping malls, e.g. Melbourne Square or Merritt Square, have anchor tenants like Macy’s and Dillard’s which have the branding and national reputation to pull in customers, enabling the smaller specialty stores to thrive. When a Publix or Walmart leaves a shopping center, they look like ghost towns. Similarly, in regions like the Space Coast, there are anchor business entities that allow others to exist. For Brevard County, one that is near the top is Port Canaveral, with its burgeoning cruise business, tank farm supplying metro Orlando and proposed cargo industry. Thanks largely to the leadership and vision of Stan Payne, last year’s SCB Business Leader of the Year, Port Canaveral continues to thrive.
SCB: Let’s look over the last year and review what has been accomplished at the Port.
SP: Starting last October, when our fiscal year begins, we had the third Carnival ship that will call Port Canaveral its home port. It was no less than a miracle to get a world class cruise terminal ready for that ship in eleven months.
SCB: That doesn’t seem possible.
SP: That is exactly the response I received when I proposed it to staff. But it was a combination of the right circumstances, the right contractors and the right philosophy. By accomplishing that task, it heightened our credibility not only with Carnival, but with all the cruise lines.
SCB: Does Carnival own the terminal that was built to their specifications or does the Port Authority own it?
SP: It is an operating agreement or terminal use agreement. In most ports Carnival makes a one to two year agreement; in this case it is a five year agreement and our projections are that, based on the passenger volume Carnival will generate, this terminal should be paid for in seven to eight years. We now have three home ported Carnival ships and two coming from the northeast that make Port Canaveral an overnight stop; we have become the second largest Carnival port in the world.
The terminal itself was built in a little over eight months and over 80 percent of the subcontractors were from Brevard. So the notion of local impact was accomplished without having a strict legal requirement to do it, which makes it even more special.
SCB: How did that happen?
SP: The Commission was very clear that they wanted substantial local participation and the contractor understood and exceeded our expectations. In addition, we have a new administration building on the Port’s north side and a new fire station, both of which were built by local contractors. So as you look around the Port, most of the buildings are built by local contractors or subcontractors.
SCB: What else?
SP: Well, Royal Caribbean announced that the Enchantment of the Seas will replace the Monarch of the Seas in April. They had disclosed that the Monarch would be sold, but there was no guarantee that they were going to backfill that itinerary. So we worked with Royal Caribbean and they decided to bring in a newer ship.
SCB: Is it larger?
SP: It is roughly the same size, but it has more balconies and a lot of amenities; it is a very serious upgrade.
SCB: How involved are you in discussions with cruise lines like Royal Caribbean?
SP: I am the primary contact. I negotiated the Royal Caribbean, Carnival and Disney contracts personally. Having a background in negotiation and in private business seems to resonate with these companies.
SCB: You understand both worlds?
SP: Yes, these companies like dealing with the head of the operation, and frankly if I were them, I would insist on it as well. The cruise business is very concentrated and since I have a background in cargo, earlier in my career, it makes the role I serve as CEO and Chief Development Officer work for the business we have.
SCB: You also broke ground on your new Welcome Center.
SP: Yes, we are projecting that it will be completed by August or September 2013.
SCB: From the time that project was given the green light to begin serious planning and execution, how long did it take?
SP: It was decades in discussion, though rather quick – a couple of years – in execution.
SCB: What will the Welcome Center mean to the Port?
SP: It will be a huge catalyst for the commercial development of the Port’s south side. It is more than a welcome center; it is a museum, an attraction that describes the history of the area, what we have done, what we are doing and what we are planning for the future. There will be 10 or 11 high tech exhibits along with a number of very creative displays, so it isn’t really a welcome center in the traditional sense. The lake and the promenade will make the south side visitor-friendly and pedestrian-friendly for the first time. There will be a mix of the old and the new, those aspects that represent the heritage and texture of the Port we want to preserve.
SCB: Describe some of the other amenities.
SP: We are looking in Phase 1 to have a community amphitheater, which will have concerts and other activities, but there exists the possibility that it could evolve into something bigger.
SCB: Please elaborate…
SP: It would eventually develop into a major concert venue, with 5,000-6,000 seats, but that is Phase 2 or 3. The economic impact could be huge. Our goal is to make the Port a destination, not only for tourists, but also for local residents.
SCB: We have read about the $24 million pledge from the Governor to widen the Port’s channel, explain the impact and benefits of that investment.
SP: Traditionally, harbor projects are federally funded. But federal money is not being used for construction, even though it is a federal channel. We didn’t wait for the Army Corps of Engineers that may take 10-15 years to do the feasibility studies, we did them ourselves. When those studies came back, we realized we had to look elsewhere for funding; we explored self-funding, but the Governor expressed such an interest in Ports that we were able to move funds forward (in time), so that we can start in July.
The channel is built for ships 800 ft. in length; right now you have four ships that are home ported here that are over 1,000 ft. The Disney ships are 1,115 ft., so that creates added cost issues, like the cost of tugs for certain cruise ships and delays. This further cements our place in the cruise business and it adds 2 feet of depth, which allows larger ships to use our channel. This opens the door to bring in bulk aggregate, petroleum and in the future more commercial shipping development.
SCB: Most attention at the Port is focused on the cruise ship industry, but I know you have led the way in developing the Port’s commercial value. Where is that and where is it headed?
SP: One of the things we have done is that by December 2012 or January 2013 we will have our first new cargo pier here in decades. A second will follow some months after that. Cargo will be our focus this year. Currently the tank farm on the north side is reaching its operational capacity. Because of the increased size of the ships and the widening of the channel, we are having two new cargo berths built right now.
SCB: Your background is in cargo. Is everyone as on board as they are with the cruise development?
SP: Because we have moved so quickly with the cruise industry here, perhaps we haven’t done a good job managing expectations with cargo development. That arena takes a lot longer to nurture, because there are so many logistical issues and it is so competitive, perhaps more than any other state. It can be served from Palm Beach, Miami, Tampa, Jacksonville and Savannah.
SCB: What is your edge or niche?
SP: We have two things going for us: first is proximity, we are less than an hour away by truck and trucking costs are very reasonable.
SCB: So you are looking to be East Central Florida’s cargo port?
SP: We are looking at that right now. Currently we are breaking records on the petroleum side; we also believe we can be a major bulk aggregate port for road construction. Until the construction industry rebounds the cement side will continue to be dormant; in 2006, we moved 600,000 tons of lumber, last year there was none. What we want to focus on is the container market.
SCB: What are the steps you’re taking to capture part of that market?
SP: We are latecomers; the Port tried in the 90’s unsuccessfully and abandoned it, now we are setting our sights on that target again, and looking for terminal operators. All it takes is a couple of successes and people realize they can ship their products through here and then others follow.
SCB: What infrastructure changes have to take place to accommodate that industry and what is a terminal operator?
SP: They would be responsible for unloading the ships and getting the cargo out the front gate. Our goal is to get a terminal operator that is interested in our two new piers. We’ve had discussions with several companies and want to find a terminal operator that would make a substantial financial commitment at the Port. Once they have done that, then they are incentivized to find clients to use their facility. General cargo can spur spinoffs like a distribution center here in Brevard County, perhaps in north Brevard, which is also one of my goals.
Recently I went to Freeport to talk about the cruise industry, but in the process we had discussions on cargo, because they are one of the largest transshipment ports in the world. We could be a natural link with the Caribbean.
SCB: How do you go about your strategic planning process?
SP: We have clearly identified our three business elements: cruise, cargo and entertainment. But it is seizing opportunities, more than strategic planning and long-range planning – my experience tells me everything is opportunistic. No one foresaw the Sea Port Canaveral Tank Farm; it wasn’t in any plan.
SCB: So what happened?
SP: It is an interesting story; in 2004 Central Florida was running out of fuel. A storm had hit Port Everglades and Tampa, and Central Florida was at a critical low. Because of our proximity and our available land we started looking at the idea. We did a study and then went out with an RFP and we received a lucrative bid from the second largest oil trader in the world, Vitol. They ended up investing, depending on who you talk to, between $130 and $150 million of their money, without any investment from the Port. It was simply opportunity.
SCB: So you plan many things and then look for where lightning strikes?
SP: We ask, ‘Would you be interested in this?’ When we initially talked to Carnival about CT6 (Cruise Terminal), it was the same thing. If we were to have this, would you be interested in expanding your presence here. We are doing the same thing with cargo. ‘Would you like to get in on the ground floor? We only have so much space and once it’s gone, it’s gone.’
SCB: How do you determine who the right partners are?
SP: You ask the tough questions and demand the best answers. One thing we do is bring in consultants who are immersed in those industries to bring us perspectives and expertise that we don’t have on our staff, and to bring us the best possible clients. No team or staff can have expertise in all the segments you need to have to make the best decisions. We choose to keep the staff numerically lean and utilize consultants.
SCB: Finally, what are the key leadership lessons or principles you have learned that are transferable?
SP: The older I get the less I think of leadership principles and the more I think of life principles. These are the things I would tell my kids: 1) Life has its ups and downs, and that is part of life; and 2) I’ve always known what is really important in life, my priorities, and that is primarily my family. Though my days may be hellish, I was with my kids at night. That carries you through those ups and downs; 3) Someone told me that we need to pause and celebrate the achievements; I’m always focused on the next thing, but I realized I need to allow time to enjoy the moment; and 4) Who I am is not who I am at work; I am not my job. My measure isn’t Stan Payne the CEO, but Stan Payne the person.