By Robert MacLellan
April’s annual Caribbean Hotel and Tourism Investment Conference in Puerto Rico provides a highly appropriate time and venue to raise questions about the future of the cruise industry in the Caribbean and its impact on the region’s hotel sector.
The Caribbean is THE most tourism dependent region in the world, marketing itself primarily on its pristine beaches and reefs. In total, over 60% of the world’s cruise ship fleet is in the Caribbean in the winter high season – a greater number of ever larger ships today -- but which, self evidently, have inadequate emergency back-up systems to allow safe operation of the vessel in the event of a major fire or severe grounding or collision.
Costa is a division of Carnival Group and Azamara is one of Royal Caribbean Group’s brands. Together, their ships call at every major tourist island in the Caribbean. These two groups completely dominate the world cruise industry and their financial resources dwarf the GDP of most island economies in the region.
Few resources exist in most Caribbean island ports to limit the effect of similar or greater cruise ship incidents -- a serious grounding or collision could result in a devastating and long term environmental disaster. Most cruise ships move to “high season” in other parts of the world at the end of the Caribbean’s winter season and detailed cruise itineraries within the region can be readily changed. Therefore, in the event of a disaster, it is a single island government or small group of governments that will bear the full environmental and economic impact.
How much cooperation or finance have Caribbean governments received from cruise lines even to help resource effective disaster planning in order to mitigate these risks? In overall terms, what is the actual economic risk/reward balance with cruise ships in the Caribbean?
Caribbean government port taxes have not even kept up with regional inflation rates and in recent years the shore-side spend per cruise ship passenger on each island appears to have declined significantly. Today, even the discretionary spend per cruise ship passenger in the Caribbean is estimated at 82% on board and 18% on shore. While the economic benefit to island economies has declined on a per passenger basis, cruise ships continue to operate in a virtual tax free environment within the region -- yet they require island governments to finance and build larger expensive piers for their larger, more cost efficient ships.
Furthermore, today’s cruise ship business model is now a highly aggressive one, operating from multiple home ports in the USA. Larger ships have lower levels of capital and operating unit costs and, thus, correspondingly lower fares -- as low as US$45 per passenger per day, including meals. Construction cost of the larger ships is around US$250,000 per cabin, compared to US$750,000 per room for a new 4/5 star resort in the Caribbean. Cruise ship food costs, liquor costs and comparable labour costs are lower than in Caribbean hotels.
The cruise industry’s overpowering competitive edge over Caribbean hotels in high season is a “Trojan Horse” with its resultant negative impact on inward investment for new resorts. This factor has been consistently and grossly underestimated both by governments and the private sector in the region. In the meantime, Caribbean hotels struggle desperately to absorb ever higher energy and food costs, while being the largest direct and indirect tax contributors and the largest employers in almost every economy in the region. The region’s governments tax their own major “export” industry, while allowing massive international corporations to make massive profits from the Caribbean’s natural resources.
Is it not time that the fiscal contribution by cruise lines to Caribbean governments more fairly reflected the industry’s impact on the local environment and, ultimately, their potential for environmental disaster in the region? If the Caribbean Tourism Organisation is evidently not powerful enough for that challenge, then CARICOM governments should act with the governments of Mexico and Central America to present a united front in negotiating with the cruise lines.
In today’s global cruise market from November to April there are virtually no realistic, alternative itineraries to the Caribbean -- relative to major passenger feeder countries, adequate port facilities, attractive tourism infrastructure and cruising distances. Cruise ships are currently “using” most Caribbean destinations almost for free. NOW is a highly appropriate time to end that scenario -- while the cruise industry is struggling hard to protect its image and to achieve good “corporate citizen” status. Even Alaska, on its own, negotiated a better deal for its ports. The countries of the Caribbean basin can and should dictate better terms with the cruise lines, while also helping to protect their own domestic hotel industry.
April 17, 2012