George Palermo, president of San Diego Harbor Excursion and chair of the San Diego Port Tenants Association, says waterfront business is better than ever. (photo/alandeckerphoto.com)

These are fat times for leisure, recreation and tourism-related businesses on San Diego Bay. “I think everybody’s doing extremely well,” says George Palermo, president of San Diego Harbor Excursion and chairman of the San Diego Port Tenants Association.

“Tourism is at a high point in San Diego,” agrees Richard Bartell, general partner with Bartell Hotels, owner of seven hotels in San Diego, including three on the tidelands. “All hotels in San Diego are doing very well.”

The trend holds across the varied leisure and tourism businesses found along San Diego’s “Big Bay,” as it’s been dubbed by the San Diego Unified Port District, from sport fishing and restaurants to marinas and museums. Business has rebounded strongly since the terrorist attacks of Sept. 11, 2001, when “everything stopped,” says Palermo. But all that is in the past, as business is now better than ever before, say Palermo and other waterfront business owners. And the future looks good enough.

Consider just a few of the projects along the bayfront that are either proposed, in negotiation or under construction:

• Port and city officials are negotiating for a master-planned development in Chula Vista that would encompass 550 acres of land and water. The anchor tenant would be Gaylord Hotels, which would build a combined resort hotel and convention center. Entertainment, retail and two marinas also would be included in the project.
  
  
• A new marina has been completed in National City, and city officials are planning an aquatics center.
  
  
• Construction has begun on a 1,200-room, $348 million Hilton hotel on the south side of the San Diego Convention Center. The hotel project, which will include a 4.3-acre public park, abuts the “working waterfront,” the 10th Avenue Marine Terminal, where the Dole Fresh Fruit Co. unloads bananas from Ecuador. It is slated for completion in November 2008.
  
  
• The Port District is negotiating with GMS Realty, the owners of Seaport Village, for a new restaurant and retail development at the site of the former San Diego police headquarters at Market Street and Pacific Highway. The complex would include a farmers market — a sure hit with Downtown residents — a police museum and a 3.3-acre park. The project comes before the state Coastal Commission in August, and if approved, construction could begin late this year.
  
  
• A partnership of the Viejas tribe and developer Doug Manchester is negotiating with the Port District on development of the former Lane Field, at the corner of Broadway and Harbor Drive. The project could include two hotels, parking and a new cruise ship terminal on the nearby B Street Pier. Some 190 cruise ships stop in San Diego each year, and port officials say they dump as much as $2 million apiece into the local economy. The new terminal and parking will cost about $100 million, while the Lane Field Development is estimated at $500 million.

That’s Not All, Either

The Port District also is working with the Centre City Development Corp., San Diego’s redevelopment agency, on the $220 million North Embarcadero Visionary Plan, which would spruce up the waterfront from Broadway north to Grape Street, creating wide, landscaped pedestrian walkways.

Just south of Broadway, Doug Manchester plans four condo-hotel towers as part of the Navy Broadway Complex redevelopment. (See related column on Page 5.)

All that investment and attention means San Diego’s waterfront — already a powerful economic engine for the region — should pick up steam in the future.

The Port District reports that the tidelands — Port District-owned property that runs along the bay in the cities of San Diego, National City, Coronado, Chula Vista, and Imperial Beach — generates $8.4 billion annually in direct and indirect sales revenue, jobs and wages. The travel and commercial sector, including hotels, restaurants, marinas, shops and other recreational attractions, has an annual impact of $1.7 billion. These figures came from a 2003 analysis now being updated.

Sharon Cloward, executive director of the San Diego Port Tenants Association, worries that rising fuel costs could hurt marinas, boatyards and other marine-related businesses. (photo/alandeckerphoto.com)

The tidelands are home to 17 marinas, 14 hotels with 6,500 rooms, 66 restaurants, seven yacht clubs, and two museums, says Sharon Cloward, executive director of the San Diego Port Tenants Association. The group was formed in 1989 to give more clout to businesses dealing with their landlord, the Port District, and now counts 230 members.

One of the few clouds forming on the waterfront’s otherwise sunny horizon, says Cloward, is the rocketing cost of fuel, which could eventually hurt marinas, boatyards and other marine-related businesses.

“People are going to start selling their boats because they can’t afford the fuel,” says Cloward. However, local businesses haven’t been stung by the run-up in fuel costs just yet, she says.

From the water, San Diego’s bayfront offers a vista of sparkling blue water backed by gleaming skyscrapers, broken up by marinas full of luxury yachts, the stately gray Midway aircraft carrier museum enlivened by red, white and blue bunting, and such landmarks as Seaport Village and the San Diego Convention Center.

Waterfront sidewalks bustle with people out for a jog or stroll, taking pedicabs and lining up for restaurants and museums. The Maritime Museum offers visitors a chance to tour five different vessels including the Star of India, the world’s oldest active sailing ship, and a retired Russian submarine.

Additions to the waterfront such as the Midway and the planned North Embarcadero upgrade are just what the area needs to further enhance its draw to locals and tourists alike, says Susie Baumann. She and her husband Larry run two well-known eateries, Tom Ham’s Lighthouse on Harbor Island and Bali Hai on Shelter Island.

“It’s just good for all of us,” says Baumann, whose family business, in operation for more than 50 years, has just had its best year ever.

The USS Midway and restaurants like The Fish Market are contributing to the healthy economy of the bayfront. (photo/alandeckerphoto.com)

While tourism is important to the tidelands commerce, locals also contribute a large chunk to revenues, says Baumann. She estimates that 90 percent of her restaurants’ banquet business comes from San Diego County residents celebrating special occasions such as birthdays, anniversaries and graduations. San Diegans also spend a lot of time enjoying the natural beauty of the waterfront, she says.

Palermo, of San Diego Harbor Excursion, says all segments of his business are up, from ferry passengers to sales on the company’s signature harbor tours and yacht charters. In late 2004, company revenue jumped with the addition of a new $5 million boat, the California Spirit, which holds 600 passengers for special events and Sunday brunches.

The success now being enjoyed by San Diego Harbor Excursion and other waterfront businesses can be traced in part to solid marketing efforts by the San Diego Convention & Visitors Bureau and the San Diego Convention Center, says Palermo. Port tenants also have a great relationship with their landlord, the Port District, he says. San Diego’s climate and beautiful scenery also play a part in its success as a tourist destination.

“People want to come here,” Palermo says.

Richard Bartell, whose company, Bartell Hotels, owns Humphrey’s Half Moon Inn and its popular concert venue, along with two other tidelands hotels, also credits the Port District for fostering a positive business climate along the tidelands.

“The port has created policies which encourage lenders to loan on the tidelands and tenants to invest in their businesses,” says Bartell, who sits on a committee that advises the port on real estate matters.

One such policy allows tenants to get an extension on their lease in exchange for making significant improvements to their business.

Business along the waterfront has rebounded strongly since 9/11. Several projects are proposed, under construction or in negotiation. (photo/alandeckerphoto.com)

Bartell says the port is on the right track with the projects now in the pipeline, such as upgrades to Seaport Village and the old police headquarters, and a rebuilt cruise ship terminal that could handle larger vessels. But he’s concerned about the number of proposed new hotels that could put a damper on today’s robust occupancy rates.

Including the new Hilton under construction on the bayfront, Bartell says, there are some 5,000 to 7,000 new hotel rooms slated to come on line in the next three to four years.

“The demand for hotel rooms in San Diego grows about 2 percent annually,” says Bartell, so if all the proposed hotel rooms are actually built, “there will definitely be a softening in occupancy as the increase in supply outstrips the demand.”

Sal Giametta, vice president of the San Diego Convention & Visitors Bureau, counts 54,000 hotel rooms in San Diego County, with some 10,000 new rooms projected to be built over the next decade. He says some of the proposed projects may not be built, but the need is there.

“From where we sit, we see a very healthy demand continuing for San Diego product,” says Giametta. “We believe the demand will continue to grow, both in terms of leisure travel business, as well as meetings and convention business.”

The waterfront is important to San Diego not only as a tourist attraction, says Giametta, but as a filament that weaves together neighborhoods stretching from Little Italy to the Marina District to the Gaslamp and East Village, or more broadly, sharing a shoreline culture from Imperial Beach and Chula Vista to Point Loma.

“All of those things are connected. None of them exist in a vacuum,” Giametta says. “Our waterfront is iconic, just as our major attractions, like the zoo, Wild Animal Park, Sea World and Legoland are.”

Only bigger.