Why Two Million Tourists Are Boarding Cruise Ships on a Texas Island -

(Bloomberg) —

Much of the historic Strand District in Galveston, Texas, is about as tacky as it comes. The 19th-century buildings that line its streets are packed with tequila-shot bars, beach shops and souvenir stands.

On a recent visit during a dreary spring day, they were all doing brisk business, filled with cruise passengers checking out t-shirts that read “I Don’t Get Drunk I Get Awesome!” and “Shut Up Liver You’re Fine.” Just a few hundred feet away were two Carnival Corp. ships, the Dream and Jubilee, looming over the port that they’ve helped to revitalize into a regional economic force.

Rodger Rees, the port’s chief executive officer and a booster of the barrier island, loves what he sees.

“If you talk to people who were here that can remember 15 years ago, there was nothing,” Rees said in an interview. “This was a ghost town up until the cruise business came into town.”

“Ghost town” might be a stretch, but there’s no doubt the historic city an hour’s drive southeast of Houston — once known as “The Wall Street of the Southwest” — suffered some painful decades before the cruise industry took off, battered by a sluggish cargo business that starved the port of revenue and new options for tourists that sapped demand for beach days in Galveston. But its recent revival has made it the fastest-growing cruise port in the country and the fourth-biggest by number of passengers, with the busiest days seeing as many as 22,000 tourists embarking on voyages or returning from sea.

Demand for cruising has been surging. Almost 40 million people will take a trip this year, according to the Cruise Lines International Association, an industry trade group, almost quadruple the level of just 20 years ago. Yet as more ships set sail, some destinations are nearing capacity.

More than four in 10 voyages go to the Eastern Caribbean, where cruise passengers increasingly complain of overcrowding. To ease the pressure, cruise lines are pushing stops in Belize, Honduras and especially Mexico.

That’s where Galveston comes in. It provides easy access to those destinations, which are about a day away from the Texas port.

The island — with a population of about 50,000 — was host to more than 1.7 million cruise passengers in 2024. This year, it should pass 2 million. The industry accounts for almost 2,000 direct jobs in Galveston and $291.3 million in direct and indirect wages, according to a study commissioned by the port.

Alongside Carnival and Royal Caribbean Cruises Ltd., the largest cruise companies by market value, ships from Walt Disney Co., Norwegian Cruise Line Holdings Ltd. and, starting in November, MSC Cruises use the port.

“We put ourselves on the map for cruising,” Kimberly Danesi, the chief executive officer of the city’s parks board, recalls thinking after the first time she heard a Disney ship blow its horn to the tune of When You Wish Upon a Star as it left port. “I just smiled and thought, ‘Wow, this is a big deal, this is a big deal for Galveston.’”

But the reaction hasn’t been universally positive, and in the next few months the port’s board is set to decide on a plan that will determine whether Galveston further embraces cruising or takes a pause from the breakneck pace of growth that’s caused some locals to tire of the swarms of tourists.

With a $151 million fourth cruise terminal set to open later this year, a contingent of local politicians has raised concerns about the burden of hosting those behemoth vessels and questioned how accommodating the island city should be to the $100 billion industry.

Residents complain about unbearable traffic — cars and shuttles can get backed up for blocks on Harborside Drive, frequently leading impatient drivers to cut through narrow residential streets where a lack of sidewalks can create dangerous situations — and a sense that tourists take priority over locals. There’s also the risk of growing dependence on a fickle industry that for locals mostly generates tourism-related jobs that pay modestly, an average of less than $45,000 annually, according to the port study.

Birthplace of Juneteenth

The island was a major entry point for immigrants to the US beginning in the 1840s and is the birthplace of the Juneteenth holiday. It was almost wiped off the map in a 1900 hurricane that remains the deadliest natural disaster in US history.

It’s long been a tourist town, catering to anglers who hire charter boats to target tarpon and redfish and families from Houston or Dallas in search of a beach vacation within driving distance. There are upscale hotels and restaurants in the Strand, but the city was always a second- or third-tier destination, overshadowed by places with nicer beaches such as South Padre Island in South Texas.

The frequently brown water in the Gulf near Galveston is full of sediment that drifts down from the mouth of the Mississippi River. It often reaches bathtub-like temperatures in the peak of summer. Basketball star Charles Barkley, who played for the Houston Rockets for a stretch, made the beach the butt of jokes on the TNT Sports NBA Countdown TV program.

“You couldn’t even go in the water,” Barkley said in April 2024. “Dirty-ass water.”

Locals are used to the criticism.

“It’s not a beach that anyone like Charles Barkley is writing home about,” said Josh Owens, the executive director for the Galveston Economic Development Partnership. “But I love it.”

Last year, the port reported revenue of $79 million, up 17% from the previous year. Cruise ships contributed about 65% of that figure, according to Rees. Besides charging for cruise parking, the port collects a tariff on each passenger and rent from the companies leasing land for their terminals. Meanwhile, the amount of tonnage through Galveston’s port shrank 7.3% in 2024.

Carnival arrived in Galveston in 2000 and was joined by Royal Caribbean in 2001, while Disney and Princess Cruises — a Carnival subsidiary — entered the city a decade later. MSC, operator of the third-largest cruise fleet, is set to open a terminal in November.

Galveston’s location halfway between the west and east coasts is its greatest asset for the cruise companies, providing an alternative to the top three ports, all of which are in Florida. Some 36 million people live within a five-hour drive of Galveston, according to Stats America, including growing population centers in Houston, Austin and Dallas.

Galveston could rival Miami or Fort Lauderdale as a cruise hub within three years as more vessels come to Texas, according to Patrick Scholes, who covers the cruise industry for Truist Financial.

“Florida dock space is pretty close to capacity,” he said. “You have to look for new opportunities.”

Royal Caribbean is especially tied to Galveston because of its plans to open two private beach destinations in the Cozumel region of Mexico, aimed at replicating its wildly successful Bahamian private island.

Jim Yarbrough, a member of the port’s board and former mayor of Galveston, has been a backer of the cruise industry in the past, but is now among the group worried about excessive growth. He thinks the port’s priority should be prioritizing the less-lucrative, but arguably more economically impactful, cargo business.

Rees estimates the port is spending close to $100 million, supported by a $36 million state grant, to repair outdated slips and build a new retaining wall to expand the cargo area.

At a January meeting of the ports board, Yarbrough and Richard Moore, another trustee, pushed for a discussion on pausing further cruise infrastructure development beyond what was already planned. The idea caused such consternation — it was called a “colossal mess” in minutes from the meeting — that a special session of the board had to be called for the next month. Eventually, trustees voted against any pause.

The situation will likely come to a head this month or next, when a new, so-called Master Plan will be finalized and put to a vote by the port’s board. The strategy it lays out will determine how much capital the port can allocate for cruise development well into the next decade.

Much of the conflict boils down to a belief that while the cruise business is really good for port financials, cargo is not. On the other hand, cargo makes a much bigger economic impact for the community. Using the broadest measures, cruises generated $880 million in economic activity for Galveston in 2023. Not chump change, but measly compared to the $6.5 billion cargo was responsible for, according to the port’s study.

Rees, the port CEO, says the two businesses can coexist, and that slowing down cruise expansion could send the wrong message to the industry. His ultimate ambitions are to turn the more than 300 acres of undeveloped land on Pelican Island, situated north of Galveston, into a major cargo and mercantile enterprise. That could push contributions from the cargo business to as much as 40% of port activity, up from 15% today.

His efforts to expand the cruise business are broadly supported by the businesses that benefit.

“The hotels love the cruise business” and so do restaurants, said Marty Miles, president of the Galveston Hotel and Lodging Association. “To limit tourism in any way, shape or form means we’re gonna serve less breakfast, lunches and dinners.”

That said, even those who depend on cruise customers can be wary of welcoming even more.

“As a local, like being from here, tourism isn’t my favorite thing,” said Cera Gonzalez, owner of Groovy Grind Coffee Co., a coffee truck situated in a small park on the Strand. “There are things that we can do to improve the city first and then bring in another terminal.”

“But as a business owner, I love tourists,” she said.