We Need To Talk About the Cruise Industry

I’ll say it again: we need to talk about the cruise industry.

We need to talk about its actual impact on our local economy, its environmental impact on our coastal waters,  its questionable labor practices and its crime problem. And we have to do it right now, before we pump 20 million crisp, beautiful, multi-purpose, municipal, provincial and federal tax dollars into a second cruise berth in Sydney.

 

MS Rotterdam of the Holland America Line docked in Sydney.

MS Rotterdam of the Holland America Line docked in Sydney.

 

I’m going to start this discussion off because I’ve been doing some reading and I’ve made an interesting discovery: one of the biggest critics of the industry is right here in Atlantic Canada.

His name is Dr. Ross A. Klein (aka cruisejunkie) and he teaches at Memorial University (MUN) in Newfoundland. He’s written extensively on the cruise industry (including four reports for the Canadian Centre for Policy Alternatives which you can read here, here, here and here) and has testified before the US Congress on the issue of crime aboard cruise ships.

I spoke to him on Tuesday, and began by asking him about the economic impact of the cruise industry on ports like ours. In particular, I asked him about two reports done for the Port of Sydney — The Economic Contribution of Cruise Tourism in Sydney 2012 (BREA) and a 2014 Sydney Cruise Market Assessment by Bermello, Ajamil & Partners, Inc (or ‘ba’ as they style themselves).

Klein introduced two immediate caveats: first, such reports are produced by companies whose interests are “aligned” with those of the cruise ship industry. BREA was initially commissioned by the North West & Canada Cruise Association (NWCCA) “and its Canadian cruise destination partners” to analyze the economic benefit of the industry to Canada. On the basis of that work, the Port of Sydney commissioned a further study focused on Sydney alone.

And Miami-based ba has “advised a majority of major cruise ports in Canada. The advice invariably includes expansion or redevelopment of port facilities.” (See Klein’s 2003 report, “Charting a Course: The Cruise Industry, the Government of Canada, and Purposeful Development.“)

The second caveat is that reports like the two I asked about are “based on a lot of assumptions.”

 

Land, Ho!

Let me give you an example: the BREA report, which studies the economic impact of the cruise industry on Sydney in 2012, (a year which saw 58 cruise ships carrying 86,662 passengers visit the port) begins with this assertion:

Data collected from the cruise lines on disembarkation rates showed that 91% of these arriving passengers, or 78,862 passengers, made an onshore visit in Sydney.

Ninety-one percent is the kind of disembarkation rate I would expect after someone yelled, “Fire in the engine room!” But BREA accepts this industry statistic without demur, and uses it as the basis for all subsequent calculations.

To measure how much each passenger spent, on average, while onshore, BREA placed a questionnaire in “each cabin/stateroom” on a “representative sample of cruise ships” while they were docked in Sydney. Of the questionnaires distributed, 1,146 were completed (the rest, presumably, became part of the estimated 8 tons of solid waste produced each week by a moderate-sized cruise ship).

Those passengers who completed the survey reported spending, on average, $66.92 (Canadian dollars) while onshore.

The math, then, becomes simple:

78,862 X $66.92 = $5.3 million in passenger spending in Sydney in 2012.

Except, says Klein, that “disembarking,” in cruise industry terms, means “walking down the gangway. It doesn’t mean they went anywhere in town.”

And even assuming the self-reported spending of a random sampling of passengers is accurate (a big assumption), Klein warns spending figures must be adjusted for fees and commissions paid to the cruise lines. The BREA report states that the expenditures for tours purchased from cruise lines were adjusted to reflect the lines’ 30% commission but Klein says that commission is usually closer to 50% and can be as high as 90%. He also says that in some ports, cruise lines also demand a share of any onshore spending by passengers in retail stores.

(To add insult to injury, those 50-90% commissions for onshore excursions not only reduce the amount local tour operators are paid, they open them up to criticism from passengers expecting a $150 experience — the amount they’ve paid the cruise line — from an operator who has been paid $75 to provide it. Disappointed passengers, says Klein, don’t complain about the cruise line — they complain about the local tour operator.)

I don’t know what the figures are for Sydney, but if we’re to have the “sober” discussion Klein says we need to have about the business case for the second cruise berth, we’ll need them. We’ll need to know if the cruise lines get a piece of the action from the craft fair at the Joan Harriss Pavilion or from any retail stores visited by passengers and we’ll need to know how much tour operators (including our National Historic Sites) are receiving per visitor.

 

Indirect Benefit

The BREA report makes big claims for cruise line and crew spending in Sydney in 2012 ($2.69 million and $1.07 million, respectively), the first based on cruise industry information, the second based on 365 surveys collected from crew (144 in Sydney and 221 in Halifax).

We’re asked to believe the cruise industry’s spending estimates and to trust the self-reported spending totals of crew members. If we are willing to do so, we now have a total direct economic impact of $9 million.

But that is chump change compared to what happens when you take that $9 million and run it through the Nova Scotia input/out table for estimating indirect economic impact (which I picture as some sort of Rube Goldberg device involving croquet mallets and helium balloons):

The indirect economic benefits derived from the cruise industry result in part from the additional spending by the suppliers to the cruise industry. For example, food processors must purchase raw foodstuffs for processing; utility services, such as, electricity and water, to run equipment and process raw materials; transportation services to deliver finished products to the cruise lines or wholesalers; and insurance for property and employees.

Klein makes the point that most cruise ships do their provisioning in their home ports, so I’m not sure who is “supplying” the cruise ships in Sydney or what they are supplying them with. I would also presume such suppliers would be paying their electricity bills and insuring their property and workers anyway. Nothing in this makes me comfortable with the number arrived at for total economic impact of the cruise industry in Sydney in 2012 — $21 million.

 

 

We need an objective study of the economic impact of the cruise industry on the local economy, one that focuses on local businesses rather than asking cruise passengers to estimate how much they’ve spent — a job, perhaps, for the business department at CBU?

 

Notoriously Fickle

If you find those economic impact numbers dubious, you’re not alone. Klein began his 2003 “Charting a Course” report this way:

Port cities tend to overestimate the value of cruise tourism and underestimate the costs. Estimates of value are often based on erroneous assumptions.

The danger of overestimating the value of cruise tourism is that a port city can easily convince itself that, say, a $20 million investment in port infrastructure makes economic sense.

But Klein says such infrastructure spending should be seen for what it is: a subsidy to an industry that makes billions of dollars in profit each year. A subsidy for companies that avoid US and Canadian taxes (and labor laws) by registering in places like Panama, Liberia, Bermuda and the Bahamas.

Dr. Ross A. Klein

Dr. Ross A. Klein

A subsidy to an industry that is notoriously fickle. Says Klein:

They’ll come to your port if they can make money [but] on a whim they could say, ‘We’re going to Louisbourg. They’re building us a free port so we’re going to go there.’

Klein says Sydney needs a “sober” discussion of the business case represented by the cruise business, but I find people get so giddy when they talk about cruise ships (I blame The Love Boat) that it’s a very hard conversation to have.

Media reports focus on the jaw-dropping size of the ships, their myriad amenities, their town-like populations, the distances they’ll travel and the supplies they’ll consume, rather than insisting on an objective accounting of their contribution to the local economy. (Let alone considering their environmental impact or their reputation as “floating sweatshops” or their problems with robbery and sexual assault — issues The Spectator will consider next week.)

I highly recommend Klein’s reports for The Canadian Centre for Policy Alternatives. They brim with cautionary tales about ports investing millions in infrastructure only to see the cruise industry take its ships and go elsewhere or demand further improvements. It’s happened to Vancouver; to Brisbane, Australia; even to Charlottetown:

The Charlottetown Harbour Authority, with assistance from provincial and federal government funding, in 2007 spent $14.5 million to upgrade its wharf and port facilities to accommodate larger ships. However, when the project was completed the cruise industry informed them that the new dock was not long enough and the depth was not deep enough because there were now larger ships being devoted to the Maritimes. Even though they had exhausted their budget, the port and provincial government had to secure another four to five million dollars.

Which is not to say the future is entirely bleak for the cruise industry in the Maritimes. Klein says Sydney, being a deep-water port, may have something special to offer and should not confine itself to the big cruise lines — Carnival Corporation and RCCL — but should try to attract some of the many, smaller, more ‘niche’ lines out there. And he thinks the Maritime ports — Halifax, Sydney, Charlottetown and St. John — need to work together, rather than allowing themselves to be pitted against one another.

But to reap any real benefit from cruise tourism, we’ll have to make informed decisions. We’ll have to compare the potential benefits from cruise-related infrastructure to those of other infrastructure. We’ll have to weigh the value of cruise tourism versus the value of land-based tourism. We’ll have to ask ourselves what our priorities as a community are. It’s a discussion I hope our new Council will insist on having — in public.

 

 

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