Cruise lines suck up passenger spend

| 16/07/2019 | 34 Comments

Mario Rankin writes: The cruise industry business model has changed radically and aggressively in the last fifteen years, ensuring they attain most of the money passengers spend, and they should no longer be viewed as an ideal “partner” for most countries of the Caribbean, more importantly the Cayman islands.

There is a growing sense in the destinations with the highest cruise ship volumes, like St Thomas and St Maarten, that today’s port taxes are not adequate compensation for the overcrowding of downtown areas and beaches, the pollution from the burning of heavy fuel oil and the minimal spend ashore of today’s cruise ship passengers.

After reading one report about cruise pollution (see here), I was very concerned that we were blindly going down that same path and asked myself the question, why isn’t our government doing research to fully understand what it is they are about to do? The mega ships now have multiple shops, casinos, restaurants and bars offering all-inclusive packages that are a lot cheaper than on-shore places. This is what distract passengers from spending on shore.

In the last twenty plus years ships’ commissions on shore excursions have risen from 10% to 50%, according to what I have read in various articles throughout the region, discouraging passengers from going ashore at all and squeezing any possible profit margin from local tour operators. This is a major issue for Cayman right now before we build any cruise port.

Today, over 80% of a cruise ship passenger’s discretionary spend is on board the ship and we can’t do anything about it.

Do not believe any cruise line threats that they can pull out of the region all together. The Caribbean is the only archipelago with natural beauty and sophisticated tourism infrastructure, which is also where over 60% of their global revenue comes from, making over $3 billion per quarter.

Isn’t it now abundantly clear that, at the very least, there is an absolute logic to re-balance the tax burden between the Cayman stay-over visitor and the cruise ship passenger? Charge cruise line more and stay-over less; it’s very simple.

Stay-over travellers, whether regional or from outside the Caribbean, spend a lot more than cruise ship passengers and generate considerably more local employment than today’s cruise ship business, which is now highly exploitative of Caribbean countries. 

An increase in stay-over visitors drives the development of more hotels and marinas restaurants, dives. etc, as well as many other forms of real estate and tourism infrastructure investment. Competitive air ticket prices keep airlines busy and increase the number of airline seats into Caribbean destinations from the rest of the world.

The importance of the environment and quality in our tourism product is the pulse of our economy, and we cannot afford to make any decision that puts this at risks for any monetary amount. We won’t ever be able to undo that port if it’s built and prove to be a huge mistake, but we could not build it at all and never have to worry about getting it wrong. Not doing it cost nothing.

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    • Jay Oswell says:

      Ok Mario and Robert we hear ya but what ya saying is nothing new really. Many decades ago the same thesis was brought forth by The Prime Zminister of Jamaica at the time the Hon Gong Manley who. Deplored the rap and pillage of cruise ships on the Caribbean.

      Ona seem to forget that Cspitalism reigns Mighty and wherever there are States whose economy rely heavily on a Tourism, they are driven and exploited by the Big Lines whose reason for being is that of profit irrespective of who they hurt. Cayman’s economy limited to financial services and yes tourism is certainly one which they have and will continue to manipulate.

      Old story guys.

  1. Robert MacLellan says:

    Mario, You borrow heavily from my widely published article of 6 July without acknowledgement but, no problem, the wider the message is spread the better.

    A CALL FOR CARIBBEAN GOVERNMENTS TO TAX CRUISE SECTOR MORE AND TAX AIR PASSENGERS LESS

    Can tourism dependent Caribbean governments learn something from oil producing countries? When relatively small and poor oil producing governments sought to get a fair price for oil – their main source of national revenue – they banded together to negotiate more effectively with the multi-national oil companies and the larger developed nations, which were the major consumers of their oil. In 1960 five of these countries came together to found OPEC – the Organization of Petroleum Exporting Countries – and were later joined by nine additional member states. As a result of their joint stronger bargaining power, oil prices have risen relatively steadily from US$1.63 per barrel in 1960 to an average of around US$77 during the last ten years.
    The weak negotiating position of individual Caribbean governments versus the massive cruise line corporations, relative to port taxes, poses similarities to OPEC’s situation sixty years ago and the same potential “rebalancing” strategy should now be pursued in the Caribbean. If governments across the whole region, including Central America, come together and form OTEC – the Organization of Tourism Economy Countries – they can negotiate as a cartel from a position of greater strength with the cruise lines. Currently, when individual countries try to increase port taxes, they are threatened with being dropped from cruise itineraries and can be picked off one by one by the powerful cruise lines.
    From a better bargaining position, state or national governments with single destination cruise itineraries – Alaska, Bermuda and Hawaii – have already negotiated higher cruise port revenues than those in the average Caribbean country. Cruise ships stay two nights in Bermuda and pay at least US$50 per passenger. For mainland United States and Canada cruise itineraries, an average of 33% of the cruise ticket price goes to port taxes, compared to an average 14% for a Caribbean itinerary. By negotiating together, governments in the Greater Caribbean region can achieve similar results to these destinations with higher port taxes.
    A recent statement from the Government of Antigua & Barbuda summarized the history and current situation of regional cruise taxes, as follows. In 1993 Caricom countries initially agreed to impose a minimum US$10 port head tax for cruise passengers but this was never implemented because of internal disagreements. A range of today’s head taxes in the Caribbean is as follows: US$18 – The Bahamas and The British Virgin Islands, US$15 – Jamaica, US$13.25 – Puerto Rico, US$7 – Belize, US$6 – St Kitts & Nevis, US$5 – St Lucia, US$4.50 – Grenada, US$1.50 – Dominican Republic.
    Imagine the economic benefit, if these cruise tax rates could be increased and standardized across the region at the higher levels listed. One directly relevant and current challenge could be addressed – the current sky-high airport and air ticket taxes in the region could be reduced to help increase the volume of stay-over visitors in the Caribbean.
    Stay-over travelers, whether intra-regional or from outside the Caribbean, spend very much more than cruise ship passengers and generate considerably more local employment than today’s cruise ship business model, which is now highly exploitive of Caribbean countries. An increase in stay-over visitors drives the development of more hotels and marinas, as well as many other forms of real estate and tourism infrastructure investment. Reduced air ticket prices keep intra-regional airlines, like LIAT, flying and increase the number of airline seats in to Caribbean destinations from the rest of the world.
    The cruise industry business model has changed radically and aggressively in the last fifteen years and should no longer be viewed as an ideal “partner” for the countries of the Caribbean. There is a growing sense in the islands with the highest cruise ship volumes, like St Thomas and Sint Maarten, that today’s port taxes are not adequate compensation for the overcrowding of down town areas, the pollution from the burning of heavy fuel oil and the minimal spend ashore of today’s cruise ship passengers. The mega ships now have multiple shops, casinos, restaurants and bars offering all inclusive packages that totally distract passengers from spending ashore. In the last twenty years ships’ commissions on shore excursions have risen from 10% to 50%, discouraging passengers from going ashore at all and squeezing any possible profit margin for local tour operators. Today, over 80% of a cruise ship passenger’s DISCRETIONARY spend is on board.
    Most cruise ships enjoy a double high season – Caribbean for less than six months and the balance of the year in Alaska or the Mediterranean – operating virtually free of corporation taxes and with very low wage bills. The largest ships cost less than US$300,000 per cabin to build, while new hotel rooms in the Caribbean cost double that figure per room to develop and have only one high season. The cruise ship’s highly competitive business model and the further recent growth of cruise tourism in the region might be viewed as a direct disincentive for resort investment and re-investment in the Caribbean.
    The total number of cruise ship passengers was over 27 million world-wide in 2018, up nearly 10% from two years earlier. In the next ten years, 106 new ships are expected to enter service and, currently, over 50% of the world’s cruise fleet is based in the Caribbean for the Winter. The hugely profitable cruise industry can afford to absorb higher port taxes in the Caribbean and will do so, once faced with a stronger negotiating entity.
    Do not believe any cruise line threats that they can pull out of the region all together. The Caribbean is the only archipelago with natural beauty and sophisticated tourism infrastructure, located directly between the established feeder cruise markets of North America and Europe and the growth feeder market of South America.
    Is it not now abundantly clear that, at the very least, there is an absolute logic to rebalance the tax burden between the Caribbean’s stay-over visitor and the cruise ship passenger?

    Robert MacLellan
    Managing Director
    MacLellan & Associates
    Note: MacLellan & Associates is the largest hospitality consultancy based in the Caribbean. Robert MacLellan is a veteran of the hotel and resort industry. In his early career, he was an onboard hotel officer with a major cruise line and, later, a Vice President of an explorer cruise line.
    For further information: Contact robert@maclellancaribbean.com Tel (1) 242 602 1577

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    • Anonymous says:

      Well thats embarrassing for Mario lol

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    • Rick says:

      I read the article and wondered if this was the same Mario I knew, then you cleared it up. Brilliant and factual. Imitation is the sincerest form of flattery…Charles Caleb Colton (1780-1832).

  2. Anonymous says:

    I still don’t understand how limiting port access from six to just four of the currently available ships, increases headcount? Or how the prospect of (still hypothetical) larger all-inclusive discount liners can somehow increase appetite for onshore purchasing of luxury goods? How many times do you have to say aloud a nonsense idea to turn it into good one?

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  3. Anonymous says:

    How many cruise shippers does it take to go back in time to when consumers wore wristwatches, were interested in fine crystal figurines, spring break dollar store souvenirs, overpriced dated perfume, and other crap sold by (non-Caymanian owned) downtown merchants?

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  4. Anonymous says:

    Simple scenario – in 10 to 15 years the cruise industry could grind to a shuddering halt because of environmental issues and the cost of oil to run these beasts. In the meantime much of the core tourism business here will have been killed off by Cuba opening up, offshore banking will be regulated to the point where it’s not worth the hassle and too many cruise shippers will have killed the stayover product – then you’ll all be FUBAR. The problem with the whole DART empire concept and the cruise dock is they don’t factor in any problems – this is the, ‘If we build it, they will come mentality,’ and trust me it doesn’t work.

    I’ve worked in three once popular tourist locations that are now ghost towns simply because the developers assumed everything was guaranteed. I was in one hotel where the owner was escorted out by his own security officers after the building was re-possessed. He’d financed the building on long term room rate and occupancy predictions that never materialised. Before it folded he’d been forced to sell $120 a night rooms to an all-inclusive tour operator for $25 just to generate cash flow.

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  5. Wake up Cayman says:

    Santorini, Greece, one of the most popular tourist destinations in the world, has placed limits on cruise arrivals because their infrastructure is overwhelmed.
    https://www.wsj.com/articles/a-greek-island-paradise-tries-to-be-a-little-less-welcoming-1535799602

    Venice Italy, one of the most popular tourist destinations, has banned mega ships.
    https://www.independent.co.uk/travel/news-and-advice/venice-cruise-ship-ban-55-tonnes-marghera-port-where-is-it-italy-a8044026.html

    Mega ships are an enormous burden on the cities that they visit. Waste removal increases, infrastructure becomes crippled, pollution from ships engines increases and there is the real threat of garbage being dumped into the sea. Do we really want to bring this disaster to our shores for a few more taxi and retail shop jobs? Wouldn’t that money, time and effort be better spent providing better public schools for Caymanian children so that they have better opportunities than retail jobs in tourist shops? Seriously? Four hundred million dollars of public money to build a cruise port, so our children can sell t-shirts to tourists? Is that what you want for your children Cayman?

    Wake up Cayman. Please wake up.

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  6. Anonymous says:

    Really? How do you know? Did you ask why the merchants in GT want cruise ship people. If all the stayover visitors were only what they need, then why do they want a Cruise ship facility? Honestly, you are like kids who think they know everything and start work and want the bosses job.
    Go and get a merchant to agree with your story.

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    • Anonymous says:

      “like kids who think they know everything and start work and want the bosses job” Seriously? They don’t want the bosses job, they are trying to save you from working a dead end job for a boss who could not give f**k one about you or anything else locally as long as they profit.

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      • alaw says:

        It is stupid to talk, about one group of people profiting, of anything in a country, it is impossible!
        it has to have a dribble effect, even if it is not you!

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  7. Anonymous says:

    Put a medical cannabis dispensary or two in town with a lounge and I guarantee you’ll have plenty of tax revenue coming.

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    • Anonymous says:

      Medical requires a consultation/suitability assessment and Rx from an accredited doctor operating in that medical jurisdiction. In Cayman about $150 before your dosage is prescribed. You’d make more money selling dildos and sex toys.

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      • Anonymous says:

        Doesn’t have to be strictly medical.

        As many states and jurisdictions have shown, retail for recreational follows after medical very shortly once it can demonstrated that it really isn’t the Devil’s lettuce like what opponents to legalization make it out to be.

        Weed doesn’t make you a lazy bum, but like alcohol and cigs, many lazy bums spend their days revolving around getting drunk or high.

        Whereas I know many Caymanian professionals who partake with a cup of tea in the evenings and maybe a joint on the weekend.

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        • Anonymous says:

          Pot and cruise ships would be a bad combo. Their security details are busy enough handling the routine outburstsof misbehaving drunks…high drunks would lead to another level of daredevilry.

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          • Anonymous says:

            I would bet $1000 you have zero personal experience with the plant to make such claims. Alcohol caused my step father to beat my mother. “pot” is the only thing calming and preventing me from going after him and getting an assault charge.

  8. Anonymous says:

    https://www.cnn.com/2019/01/24/health/cruise-ship-air-quality-report/index.html
    (CNN)Cruise ships generate high levels of air pollution that could endanger the health of passengers, staff and port communities….

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  9. Anonymous says:

    “All I wanted was a magnet and a t-shirt…but GT shops were closed after cruise ships left…” a visitor said on Trip Advisor. Majority of visitors come for unique, small Caribbean island experience, not shopping. The experience you see in this video filmed in Bahamas https://m.youtube.com/watch?v=VqM0X3LARl0

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  10. SSM345 says:

    Are the Pro-Port Kool-Aid drinking Muppet’s cool with casinos and gambling or is that ok in the grand scheme of things to get Mega ships here as long as the PPM provide an extra taxi fare?

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  11. Ron the Observer says:

    I couldn’t agree more! Although I believe the cruise port is an important development (preferably not at waterfront), a strategy of charging cruises more and stay-overs less at this point is common sense if we’re looking at our bottom-line in our economy.

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  12. Anonymous says:

    Yep. This should have been done 20 years ago when the cruise shippers spending was island driven. This is so spot on and well written.
    Now is not the time to get on board with this new port. We missed that boat looooong time ago. And thank the heavens above that it didn’t happen back then!

    Anyone can go to cruiselawnews.com and see the gritty icky trash side of the cruise industry.

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  13. Anonymous says:

    Very well written and absolutely spot on Mario. The whole Port thing here continues to be a farce. The mugs at the helm really believe that no one can see the self interest here nor the looking after certain families interests over the combined interests of the Cayman Islands. We should be telling them to pay more to come, and fine them for pollution, and we should be expanding the airport and opening more hotels not just on SMB to expand the overnight product, you know the one that really pays. Even the Kirk family would benefit from that, as those people spend more money on quality stuff, not the “I went to Cayman” T shirt made in China.

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    • SSM345 says:

      Pretty sure you can already get those t-shirts in every shop in Cayman, let alone the exact replica Caribbean-wide but for a different island mentioned in the design. Been to the “Craft-Market” yet or any shop in GT?

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