COMMISSION AGENDA MEMORANDUM Item No. ACTION ITEM Date of Meeting 8i February 11, 2025 DATE: December 23, 2024 TO: Stephen P. Metruck, Executive Director FROM: Marie Ellingson, Senior Manager Cruise Operations & Business Development Peter Lindsay, Assistant Director Airport Operations, Landside SUBJECT: Port Valet Luggage Service Funding and New Contract, 2025-2027 Amount of this request: Total estimated project cost: $6,500,000 $6,500,000 ACTION REQUESTED Request Commission authorization for the Executive Director to execute a contract with Baggage Airline Guest Services, Inc. to provide cruise passengers Onboard Airline Check-in ("OAC") and Airline Baggage handling, screening, and storage services for participating carriers at SeattleTacoma International Airport at an estimated cost of $6,500,000 for the 2025, 2026, and 2027 cruise seasons. EXECUTIVE SUMMARY Port Valet allows cruise passengers to place their luggage outside their stateroom door the night before disembarking their cruise ship in Seattle. Their luggage is then off loaded from the ship and delivered directly to SEA via truck for security screening and inducted into the baggage system. The guest retrieves their luggage at their destination airport. Guests participating in the service also receive their airline boarding pass onboard the cruise ship. The program has resulted in important operational efficiencies at both the cruise terminals and the airport. As ships get larger, and we welcome more brands this program is key to our success. Furthermore, without their luggage, these guests can easily enjoy area attractions, restaurants, and retail opportunities prior to making their way to the airport. This aligns with the Century Goal Agenda to double the economic value of cruise. Per SLOA IV, airlines have agreed to pay for 50% of costs incurred by the Port to handle baggage transferred from cruise ships to the Airport. Maritime costs are covered by revenues generated from cruise passenger fees and dockage fees. We consider this part of the premier service to our guests that allows us to charge a premier rate. Template revised January 10, 2019. COMMISSION AGENDA - Action Item No. 8i Meeting Date: February 11, 2025 Page 2 of 6 Bags Inc. has proprietary software and special permissions from Customs and Border Protection and the Transportation Security Administration to offer this service. There is a CPO-(5) Policy Waiver currently in place which covers this service contract through 2027 This request is for a term of three years, which would include the 2025, 2026 and 2027 cruise seasons. The current contract with Bags Inc is valid through 2025 but due to the success of the program in 2023 and 2024, we would need additional funding for 2025. This request for funding and contract through 2027 aligns with the CPO-(5) Policy Waiver that expires in 2027. The cost of this program for 2025 is estimated to be $1,800,000. The charges will be based on actual services rendered. The port will pay a per-passenger-fee for only those passengers that sign up for the service. It is anticipated that passenger participation will grow approximately 12% in 2025 with the addition of a new cruise line and 20% in 2026 with the addition of two new cruise lines and increased interest in the program. We estimate $6,500,000 program cost over three years. JUSTIFICATION The success of the Port Valet program has significantly improved the operational efficiencies of processing cruise passengers at both the seaport and at the airport. The reductions in congestion and passenger wait times throughout the ship to plane process have given the cruise lines the confidence in Seattle's ability to process larger ships. Since the program started in 2017, the Port of Seattle has welcomed additional homeports. In 2025 five of our ships carry upwards of 5,000 guests during peak season. We are seeing continued growth in cruise passenger participation in the program year over year, resulting in economic benefits to our community and continued operational efficiencies in passenger processing/ baggage handling at cruise terminals and airport. This is especially important during the ongoing construction at SEA. The potential for the most beneficial impact to the airport is a reduction to the number of cruise guests that arrive at the airport during the peak morning hours. For passengers with flight times that require them to travel directly to the airport, this program will free them of their luggage while making their way from the Airport's Northeast Ground Transportation Lot to security. Without their check luggage and with a boarding pass in hand, wait times for elevators and congestion at the check-in counters is reduced for all SEA passengers. The program also reduces congestion on the baggage system during peak times. In addition to the operational benefits, the program allows passengers to be unencumbered from their luggage to sightsee and spend time in Seattle which results in increased economic benefits to downtown Seattle business and tourist attractions. The service provides a competitive advantage for Seattle as a cruise homeport by offering a one-of-a-kind customer service that transforms cruise passengers into tourists who can readily contribute to the local economy. Template revised June 27, 2019 (Diversity in Contracting). COMMISSION AGENDA - Action Item No. 8i Meeting Date: February 11, 2025 Page 3 of 6 Diversity in Contracting Bags, Inc. does not use subcontractors, therefore no WMBE goals are included in the contract. This was discussed with Diversity in Contracting. DETAILS The Port Valet service, in partnership with Bags Inc., will offer luggage service, including airline boarding passes, to passengers flying all major airlines. Bags Inc. has proprietary software and special permissions from Customs and Border Protection and the Transportation Security Administration to offer this service. There is a CPO-(5) Policy onetime competition waiver currently in place which covers this service contract. This request is for a term of three years, which would include the 2025, 2026 and 2027 cruise seasons. The current contract with Bags Inc is valid through 2025 but due to the success of the program in 2023 and 2024, we would need additional funding for 2025. This request for funding and contract through 2027 aligns with the CPO-(5) Policy Waiver that expires in 2027. The cost of this program for 2025 is estimated to be $1,800,000. The charges will be based on actual services rendered. The port will pay a per-passenger-fee for only those passengers that sign up for the service. It is anticipated that passenger participation will grow approximately 12% in 2025 with the addition of a new cruise line and 20% in 2026 with the addition of two new cruise lines and increased interest in the program. We estimate $6,500,000 program cost over three years. Participating Airlines • Alaska • American • Delta • Horizon • JetBlue • Southwest • United Participating Cruise Lines • Carnival Cruise Line • Celebrity Cruises• Holland America Line • Norwegian Cruise Line • Princess Cruises • Royal Caribbean • Cunard (expected to begin participation in 2025 as a new homeport cruise line) Template revised June 27, 2019 (Diversity in Contracting). COMMISSION AGENDA - Action Item No. 8i Meeting Date: February 11, 2025 Page 4 of 6 Scope of Work Following approval, staff would complete all necessary steps to have the program in place by the start of the 2025 cruise season. The first ship call with disembarking passengers eligible to receive this service is April 19, 2025. (1) (2) (3) (4) Complete negotiations and execute service contract with Bags Incorporated. Port staff work with Bags, Inc., airlines, and cruise lines to develop and implement a plan to increase guest satisfaction, efficiencies, and participation in the program. Complete development of and kick-off 2025 promotional program for the courtesy luggage valet service. Collaborate with all stakeholders for a successful launch of the program at start of 2025 cruise season. ALTERNATIVES AND IMPLICATIONS CONSIDERED Alternative 1 - Discontinue the passenger check-in and luggage valet service. Cost Implications: $0 (however congestion will likely result in increased operational costs) Pros: (1) Cons: (1) (2) (3) (4) (5) No cost to the Port at this time. Tourism opportunity and growth in economic impact (spending and job creation) is lost. Congestion in the airport and cruise terminal resulting in reduced customer service. Cruise lines and airlines may express frustration with passenger delays, long lines, and lowered guest ratings. Late vessel sailings and delayed passengers on larger ships calling Seattle and two ship days. Potential grievance with Customs & Border Protection as disembarkation clearance will be slowed down. This is not the recommended alternative. Alternative 2- Provide the Port Valet luggage service to cruise passengers. Cost Implications: $1,800,000 in 2025 ($6,500,000 for a 3-year period with an annual cost escalation assumed for increased passenger participation and addition of new cruise lines) Pros: (1) (2) (3) Increases positive customer experience for cruise/airline passengers. Make it possible for the seaport and airport to handle the operations of larger cruise ships and the growth in our cruise business. Eases impact to airport during ongoing construction. Template revised June 27, 2019 (Diversity in Contracting). COMMISSION AGENDA - Action Item No. 8i Meeting Date: February 11, 2025 (4) (5) (6) Cons: (1) (2) Page 5 of 6 Increase the economic impact to Seattle. Increase airport jobs. Reduce congestion at airport and cruise terminals. Increase in cost of investment by the Port. Not available to passengers with early flights or flights the next day. This is the recommended alternative. FINANCIAL IMPLICATIONS Cost Estimate/Authorization Summary COST ESTIMATE Estimated Service Contract Bags Inc. cost full 2025 season AUTHORIZATION Request for authorization for a term of up to three years anticipating year over year growth of additional cruise lines and passenger participation (2025, 2026, 2027) Capital Expense Total $0 $1,800,000 $1,800,000 $0 $6,500,000 $6,500,000 Annual Budget Status and Source of Funds Funds are approved in the 2025 budget and come from two sources since the program benefits both the Airport and the Cruise operations. Per SLOA IV, airlines have agreed to pay for 50% of costs incurred by the Port to handle baggage transferred from cruise ships to the Airport. Maritime costs are covered by revenues generated from cruise passenger and dockage fees. This service is available as part of the premier services available to guests. The benefits achieved in Cruise and Airport Operations in processing baggage as a result of this program being in place in prior cruise seasons, turned out to be crucial in meeting vessel sailing schedules by enabling quick movement of large volumes of people and baggage through the facilities. ATTACHMENTS TO THIS REQUEST (1) Presentation slides Template revised June 27, 2019 (Diversity in Contracting). COMMISSION AGENDA - Action Item No. 8i Meeting Date: February 11, 2025 Page 6 of 6 PREVIOUS COMMISSION ACTIONS OR BRIEFINGS February 14, 2023 - The Commission authorized the Cruise Luggage Valet Program for three years, 2023, 2024 and 2025 seasons. March 10, 2020 - The Commission authorized the Cruise Luggage Valet Program for three years, 2020, 2021 and 2022 seasons. March 26, 2019 - The Commission authorized the Cruise Luggage Valet Program - 2019 season. April 10, 2018 - The Commission authorized the Cruise Luggage Valet Program - 2018 Season. April 11, 2017 - The Commission authorized the Cruise Luggage Valet Program - 2017Season. Template revised June 27, 2019 (Diversity in Contracting).