L.A. port signs cruise line by offering major discount. (Up Front).

The cruise business at the Port of Los Angeles, which loses Carnival Lines to the Port of Long Beach this spring, will stay afloat after securing a long-term contract with Royal Caribbean Cruises.

Port officials, in the tug-of-war with Long Beach for cruise passengers, said they are also in negotiations to persuade another line to dock in L.A.

The five-year deal with Miami-based Royal, approved Feb. 11 by L.A.'s Board of Harbor Commissioners, means that as many as 250,000 passengers a year will be boarding the company's Monarch of the Seas and Vision of the Seas ships when operations reach full steam this fall.

That's the same number of passengers being lost to L.A. when Carnival ships make Long Beach its local base of operations in April or May.

"We basically saved the cruise line business for Los Angeles," said Marla Smalewitz, the L.A. port's property manager. "We're reaching out to try to get back what we lost."

The new long-term deal updates a temporary contract Royal signed with the L.A. port in September when the cruise line returned after using San Diego for seven months as its main Southern California base of operations.

Permanent loss of Royal would have left Princess Cruises, which departs only once a week, as the only major line departing from the L.A. port regularly. Other cruise lines make periodic stops.

Other negotiations

L.A. port officials said they are in negotiations with Princess to increase its number of departures and by this summer hope to reach agreements with another line to dock at San Pedro. They refused to name the line.

L.A. lured Royal back with an offer to lower passenger tariff fees to $4 per person each to board and unboard, down from the current $9.35 each way, during the first year of a five-year contract. Royal Caribbean can nullify the pact with no penalty after three years.

After the first year, tariffs will be paid on a sliding scale but would remain at $4 per person each way as long as at least 275,000 passengers take Royal Caribbean cruises each year. (The maximum fee would be $7 per person each way if 125,000 passengers or less use the service.)

Under the new contract, L.A.'s revenues from Royal Caribbean passenger tariffs would drop to $2 million annually, from $4.7 million, but port officials, in danger of losing their entire cruise line industry, felt they had no choice.

"It was, do you want your glass empty or half full," said Smalewitz. "We made the decision to retain and build on our cruise business."

Royal's return to L.A. underscores the size of the area's cruise market and its easier travel connections in relation to San Diego.

"L.A. has always been very important to us from a strategic perspective. The consumer and population base is very significant. It helps us build our brand," said Lisa Lutoff-Perlo, Royal Caribbean's associate vice president of product marketing and strategic alliances.

L.A. renovation

The change in fees marked a significant compromise for L.A. port officials, who threatened to increase tariffs for Carnival passengers in the late 1990s. That prompted the cruise line to ultimately move to Long Beach, where the company committed $40 million of its own funds to build a 50,000-square-foot terminal, 1,450-space parking garage and a 1,000-footlong pier next to the Queen Mary.

The L.A. port recently completed its yearlong $17 million renovation to its 400,000-square-foot passenger terminal at Berth 93, which is capable of docking three ships simultaneously.

The improvements include 100,000 square feet of luggage storage and customs space and a more user-friendly 200,000-square-foot area for passenger loading and unloading.

Royal plans to use its 2,350-person ship Monarch for three- and four-night trips to Baja, Mexico beginning in June and bring its 2,000-person Vision offering seven-night trips to the Mexican Riviera back to the port in late September. (Vision will be in Alaska this summer.)

The loss of the cruise line industry would have had a devastating effect on local retail, restaurant and hotel businesses that rely on passenger revenues.

The 244-room Sheraton Los Angeles Harbor Hotel in San Pedro, for instance, sold 4,500 rooms as part of package deals last year, generated $460,000 in sales plus another $450,000 in food, beverage and shuttle service revenues.

"(Cruise lines) are the only reason I have to be here;' said Stephen Robbins, the hotel's general manager. "Without the cruise business, I don't have a business."