Of Cruise Lines, Motor Coaches and Tour Providers

As I was poking around that old CPCS due diligence report on Sydney’s second cruise ship berth for an earlier story, I got interested in the question of motor coaches — defined as  “47-58 passenger vehicle[s] which ha[ve] three axles and a washroom.”

I know what you’re thinking, “Be still my heart — the article on motor coaches I’ve longed for lo, these many years!”

To which I can only say, “You’re welcome.”

 

Bus bank?

CPCS analysts point out that if the second berth successfully attracts additional cruise ships to Sydney, the Port will require additional motor coaches (presumably we have enough of the horse-drawn variety) to handle them:

As our consultations have confirmed, there is a lack of adequate motor coach capacity available at Sydney during the peak cruise season. There is only one local carrier (Carabin’s & Transoverland Ltd), licensed to operate 17 buses (some of which may not be useable at any given time), and other carriers cannot bring in buses until all of the local supplier’s buses are being used.

The CPCS report ended on a hopeful note, though, stating:

It is also our understanding that the Government of Nova Scotia is considering how the legislation might be changed to enable more flexibility for companies in being able to respond to peak demands.

I decided to check what progress had been made on the motor coach front, over a year later, so emailed Brian Taylor, spokesperson for the NS Department of Transportation and Infrastructure (TIR) this week, to ask what was up with “the legislation” (The Motor Coach Act). Taylor replied:

As with any regulations, government looks to balance public interests and the needs of industry. Staff have had ongoing discussion with industry around ways to improve the regulations to fit the unique seasonal needs of motor coaches. While there are currently no specific amendments currently planned on this legislation, the [Motor Coach] Act is current undergoing a review.

I asked when this review of the Act was expected to be completed and he said:

There is currently no set timeline.

When I spoke to Bernadette MacNeil, the head of cruise services at the Port of Sydney, last year about the proposed second berth, she acknowledged ground transportation was an issue and pointed to a “proposal” to create a “not-for-profit” bus company — basically a “bus bank” — that tour operators throughout the Maritimes could tap into once local bus reserves had been exhausted.

I emailed Port of Sydney CEO Marlene Usher to see if this plan had advanced at all in the past year and she replied (promptly, which I would like to note here she always does):

There has been no further action on our part for a [not-for-profit] bus company and or a bus bank. Ground transportation improved this year due to an investment by Carabin’s and Transoverland in their bus fleet.

 

Fragile industry

Now, it all could have ended there (and obviously, it could still end it there, you could just stop reading and wander off right now) but in the course of my research I began poring over old Nova Scotia Utility and Review Board (NSUARB) decisions related to the Motor Coach Act (and people think I don’t know how to have a good time) and began to realize how complicated the industry is in Nova Scotia — and how difficult it is to serve the needs of the cruise lines while at the same time ensuring the “sustainability” of the motor coach industry (one of the “overriding directives” of the Act).

Basically, if you have enough motor coaches to keep the cruise lines happy (and everyone wants to keep the cruise lines happy) during the peak cruise season (September-October) in Halifax and Sydney, you’ll have too many coaches available for the rest of the year. I think that’s why the motor coach industry has a Game of Thrones feel to it — alliances forming and falling apart, companies turning up at UARB hearings to support or block each other’s expansion plans, that lady with the three pet dragons who controls most of the industry on the South Shore. When times are good, they work together, but inevitably, winter comes…

According to a report commissioned by the UARB from the consulting firm Gardner Pinfold in 2012, the motor coach industry in NS is “fragile” as well as “unhealthy and under-revenued.” It is also shrinking. Mike Cassidy, owner of the PEI-based Coach Atlantic Transportation Group, testified during a 2013 UARB hearing that between 2005 and 2013 his company purchased the assets of 14 other carriers in the Maritime Provinces — including some carriers that had entered and exited the business within that eight-year period.

Cassidy’s Coach Atlantic is one of two dominant carriers in Nova Scotia, the other being Absolute, owned by Dennis Campbell, who also owns seven different boat tours and the Murphy’s Cable Wharf restaurant and gift shop in Halifax and the Harbour Hopper tours in Sydney and has apparently been invited to operate a chunk of our waterfront too.

Campbell also owns Ambassatours Grey Line, one of two cruise shore excursion providers in Nova Scotia, the other being Atlantic Cruise Ship Services (ACSS), also Halifax based.

Ambassatours has proven a valuable partner for cruise lines like Holland America which, as Holland executive VP Paul Goodwin told that 2013 UARB hearing, prefers “not to have independent tour operators because they have not been vetted for safety and delivery of service.” (Why such independent tour operators couldn’t be vetted for safety and delivery of service was not explained.)

The UARB was told that since 2005, Ambassatours had been selling excursions at pier-side (in addition to those passengers booked when buying their tickets), and such sales had generated an additional $2.8 million in revenue for the cruise lines between 2005 and 2011.

The success of Ambassatours pier side sales has caused its cruise lines to ask it to provide guidance to service providers at their other ports of call.

 

Nova Scotia Motor Carrier Licenses

CarrierPlace of BusinessNumber of Vehicles
AbsoluteHalifax70
Coach AtlanticHalifax, Moncton84
TransoverlandSydney17
Tri-StarYarmouth3
MolegaMount Uniacke7
MarkieTruro6

*Subject to the specific licenses of each carrier. Includes both active and “on-hold” plates. Source: NSUARB

 

Deadheading

But Campbell’s double tie to the cruise industry, as both motor coach operator and “shorex” provider, means that what’s best for his business is not always necessarily best for the sustainability of the provincial motor coach industry — or for local operators.

Consider Campbell’s operations in Sydney, where he competes with Craig Carabin’s Transoverland, a Glace Bay-based company that has served the local community for 30 years and “does cruise ship work through ACSS.” In other words, the kind of company we’re told we’re supporting when we invest in infrastructure for the cruise industry.

Campbell, apparently with a straight face, told board members at a 2015 hearing that Nova Scotia should continue to regulate out-of-province providers, ensuring they are only permitted to pick up passengers in Nova Scotia “if or when Nova Scotia carriers cannot provide the service” while deregulating (or, in his words, “re-regulating”) the industry within the province, creating a single market with no protection for rural or smaller carriers.

In fact, during that 2013 hearing, where Absolute was seeking to add six vehicles to its fleet to service the cruise ship business in Sydney and Halifax (with a request for an additional six to follow at a later date), it emerged that Campbell had not been following these regulations anyway. For example, one of the protections for rural or smaller carriers is the requirement that carriers (unless the job has been tendered) charge deadhead fees — that is, the costs associated with moving the empty bus from its place of business to the pickup point, and then from the final dropoff point back to the place of business. Obviously, the effect is to make it hard for an outside carrier to compete with the local carrier, but that only works if the outside carrier actually charges the fees:

In May 2013, the Board first became aware that as early as 2008, Absolute had placed some of its extra vehicles into communities, mostly rural, for the “off” (or “winter”) season from November to May and did not charge its licensed deadhead kilometre rates from its equipment point in Halifax. Some were positioned as early as September…

In Sydney, the board found that:

…Absolute has been operating in the Sydney area contrary to its Licenses as it has not been charging deadhead kilometres for charters in and from the area, including the port of Sydney.

Secondly, the Board finds the presence of Absolute’s vehicles in Cape Breton have had a negative impact on another transportation operator, Transoverland.  Transoverland’s vehicles sat idle while Absolute’s were operating charters in the Sydney/Cape Breton area.

The Board accepts Absolute was initially responding to customer requests and Transoverland may have required some improvements. However, today, as Absolute stated, Transoverland has done these upgrades and operates a service to be proud of in Nova Scotia. The Board finds the continued presence of Absolute affects Transoverland’s ability to improve and sustain its business.

Carabin, who was requesting (and received) permission to add three buses to his fleet at that 2013 hearing, told the board that ACSS had given his company expanded work in Halifax and Charlottetown that year and was “working with Transoverland to help it financially afford to buy newer coaches.”

Carabin, by the way, was granted permission to add the extra buses. Campbell’s application was less successful:

Absolute’s amended Application to add six vehicles for cruise ship services in Nova Scotia at both the Sydney and Halifax ports from June 1 to October 31 each year is not approved…

In Sydney, the Board finds these vehicles would be an excess of coaches in the area and would have a negative effect on other transportation providers, in particular, Transoverland.

With the Halifax Port, the Board finds that for the last five years Absolute has stated there is an excess of equipment in the Province such that [Mount Uniacke-based carrier] Molega could not add a mere two vehicles less than 10 months ago.

Board member Dawna J. Ring, who heard the case, said it was time to start dealing with such applications all together rather than piecemeal, but:

In the interim and to address the peak days this year when extra vehicles may be required, the Board will grant Absolute a Temporary Authority to operate up to six vehicles for cruise ship services for the months of September and October and to cover the remaining three days in July (or others) by trip permits.  Transoverland is granted the same for its three vehicles in Halifax. Other carriers will be treated the same.

Bernadette MacNeil, head of cruise operations for the Port of Sydney, told the Chronicle Herald at the time that the Sydney Ports Corp was “thrilled” by the board’s decision:

“From the port’s perspective, we only want to ensure that when the local carrier can’t fill demand, there is a process to move buses in, which might be challenging,” she said.

“We’ll be paying close attention to whether the local carrier can meet demand.”

 

The Pink Bus

The Absolute buses stationed in Sydney included a few painted a distinctive color.

Ambassatours charters pink, double-decker buses from Absolute for the BIG Pink Sightseeing Tours in Sydney, donating $1 for every passenger to the Canadian Breast Cancer Foundation. The company uses “vintage” London double-deckers which Wikipedia tells me seat up to 72 passengers. According to the UARB:

The contribution by a carrier to a charity, although it is “not a lot of money,” as stated by Mr. Campbell, is a very laudable program.

Joan Harriss Cruise Pavilion, Sydney, NS. (Spectator photo)

Joan Harriss Cruise Pavilion, Sydney, NS. (Spectator photo)

Do you a sense a “however” coming? There’s a”however” coming:

However the development of this product is very important. Ambassatours is a tour company that has marketed this product in Sydney using Absolute’s vehicles that have not charged their licensed deadhead rates. This is conduct contrary to Absolute’s license. The Board cannot reward a company for services it has created by operating contrary to its License.

In other words, anyone wanting to enter into an area or segment of another carrier’s market could adopt another charity, paint their vehicles a different colour, operate outside of their licenses and then claim the Board should change the nature of its regulation, permit further discounts, or expand their licenses to meet the public’s demand…

Finally, Transoverland advised it was prepared to paint its vehicles pink to provide the service to Ambassatours. Absolute’s pink vehicles are 12-14 years older than Transoverland’s oldest coaches. A tour company cannot seek to have its related motor carrier company obtain the work by painting a vehicle, or a different vehicle, a different colour. There are dozens of different types of vehicles and thousands of registered charities. One is unable to expand its License by painting a vehicle a different colour to exclude the local carrier.

Ambassatours had basically carved out a piece of the Sydney market for Absolute by saying (as Campbell actually said during the hearing) that the public “expected” to travel on pink buses. The UARB wasn’t having it and ruled that Ambassatours had to charge the same rate for pink buses it would charge for any bus it was operating in Sydney during the cruise season.

 

The Lion’s Share

Campbell’s 2013 testimony to the UARB also reminded me of a math problem I’d started trying to work out almost a year ago: how much do cruise lines make on local shore excursions?

Memorial University professor and cruise industry expert Ross A. Klein told me last November the cruise line is likely to receive 50% of the price of an excursion (although that can be as high as 90%) and Campbell backed that up, while providing a glimpse into how Ambassatours figures into things:

I think the other factor that is at play for us that may not be as relevant to many other carriers is the fact that we happen to be in both the business of charter operations and cruise ship servicing and, as a result, a cruise ship day to us is worth double what…it would be worth to a regular charter operator…Absolute Charters provides a charter rate according to Tariff 2 [to] Ambassatours. Then Ambassatours, you know, adds in the tour guides and the restaurants and the attractions and so on in its own mark-up. But, at the end of the day, Absolute Charters is charging the correct rate and then Ambassatours has its profit that it creates.

The end result is a coach operator of any kind, Absolute Charters, or any other one, might average $1200 a day in revenue but a cruise ship operator will get double that in revenue when selling per seat. So you charter the bus to the shorex operator. We happen to be the shorex operator or we’re chartering out to somebody else, in which case it’s only worth the charter value. But, to us, instead of $1200, it’s worth, you know, 22 to $2400, on average. And that’s an average bus. You take a larger bus like an articulating coach, it’s worth more.

This information added to what I already know about the cruise industry makes it possible to estimate what each player makes from an excursion like Holland America Lines “Baddeck & the Alexander Graham Bell Museum” package (click on the image to enlarge it):

CLICK TO ENLARGE. (Source: Holland America Lines)

 

The excursion is priced between US$51 and US$100 which, as I’m writing this, puts it between $65 and $128 Canadian. Let’s split the difference and say the cruise line charges $96.50 Canadian per person. The average motor coach (not the super fancy new ones, but the older ones that tend to be used to service the cruise industry in Sydney) carries 45-47 passengers. Again, split the difference, call it 46.

Those 46 passengers pay a total of $4,439 for the excursion to the Bell Museum. If the cruise line gets half, that’s $2,219.50. If the carrier gets $1,200 then the tour provider’s share is $1,019.50, out of which comes the Bell Museum’s share.

So, how much does the Bell Museum get?

Well, as I discovered last November, the Bell Museum’s commercial rate for cruise ship buses is $6.55 per person, so those 46 visitors would pay $301.60.

Except they wouldn’t, because tour companies get an additional discount depending on how many visitors they brought to the museum the year before. In 2016, for instance, 4,839 cruise ship passengers visited the Bell Museum which should have meant revenues of $31,695 but actually meant revenues of $29,839.83, representing a discount of 6%.

Discount $301.60 by 6% and the Bell Museum gets $283.50 or 6.3% of $4,439.

I’m sure neither the Bell Museum nor Transoverland will appreciate me looking critically at the cruise industry; business, after all, is business. But as a community that has put millions into building that industry to date and is preparing to pour another $20 million — and let’s face it, probably more — into that second berth, this is the sort of analysis we need to do.

The cruise lines and Dennis Campbell profit handsomely from the industry — can the same be said of local operators?

 

 

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