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Pirate of the Seas: How Caribbean governments can get more out of floating palaces

Royal Caribbean’s Anthem of the Seas traversing the Atlantic Ocean (Photo: Royal Caribbean)

The Caribbean is the world’s most popular cruise destination, but what governments across the region earn from the industry does not reflect this.

In the same way that cruise lines are focused on product improvement, constantly adding new ways of increasing income, Caribbean Governments must now pay better attention to ways they can tap into this revenue stream coming from travellers who love to vacation on the sea.

Cruise lines are continuously engaged in enhancing product, and so must the port managers who desire a reasonable share of spend from the 27 million adventurers who arrive on their shores via cruise lines annually.

The Florida Caribbean Cruise Association (FCAA) – an association of 18 cruise lines – report that an estimated 27.2 million people cruised globally in 2018. Demand for cruising has increased 20.5 percent in the last five years, the FCAA reports.

Political map of the Caribbean region, the world’s most popular cruise destination (Photo: Nations Online Project)

Demand for Caribbean not reflecting regional earnings

Caribbean governments, however, are collecting a mere pittance from this flow.

Jamaica, for example, where port taxes are US$15 a head, collected a mere US$170 million in 2018 compared to nearly US$4 billion for stay-over visitor trade.

The answer could lie in increasing port taxes, but it may also lie in product improvement.

Let’s take a snapshot of what cruise lines are doing to keep guests remaining onboard for their entertainment.

Already one of the world’s largest cruise ships, Royal Caribbean’s Oasis of the Seas, has embarked on a US$165 million upgrade for its 10-year anniversary.

The soon-to-be upgraded Oasis of the Seas, from Royal Caribbean International

Ten ships will receive the same treatment down the line. On the top deck of the first ship will be added a Caribbean-style pool deck, a 10-story slide (the tallest at sea) and other multi-story slides, and a brand new Splashaway Bay for small children.

Added new attractions are Portside BBQ, Royal Caribbean’s first-ever barbecue restaurant and a new Mexican eatery will also be featured. Alongside other food options, Royal Caribbean is adding 80 big-screen TVs, tabletop and arcade games, bar bites, and beer. A new option is Sugar Beach, with  220 types of candy and different flavors of ice cream.

Carnival reported total revenues for the third quarter of 2019 of US  $6.5 billion, higher than the $5.8 billion in the prior year. 

This cruise line and others continuously add products to incentivise guests to come on board and stay on board.

The cruise companies are also buying private islands where they can levy surcharges and fees for the activities thereon,  with added dining options, private beaches, cabanas and more. Spend by passengers is funneled directly to the company rather than out into the local economy of Caribbean islands.

In the Bahamas, the government used to pay the cruise lines US$12 million a year in incentives to dock but stopped when they realised many travelers were choosing to stay on-board.

The FCAA says the Bahamas welcomed the largest number of passenger shore visits — 2.94 million — out of 35 Caribbean and U.S. destinations in the region in 2014-15, the most recent year for which data is available.

Cruise port in Nassau, Bahamas (Photo: CruiseMapper.com)

But the country ranked fourth in total expenditures ($244 million) during those visits — behind St. Maarten ($355 million), Cozumel, Mexico ($304 million), and the U.S. Virgin Islands ($276 million). Meanwhile, The Bahamas ranked 16th in average expenditure per passenger, $83, compared with top-ranked St. Maarten, where visitors spent an average $191.

The Bahamas is now looking at product improvement and also incentives in the form of rebates tied to how many passengers leave the ships while docked in the islands.

Cruise industry presents great potential for the Caribbean, FCAA notes

The FCAA, on its own side, says the impact of the cruise industry on the Caribbean region continues to grow.

From the latest data they provide, which is presented in their 2017 statistics report, but is based on stats from 2014-15, the association claimed:

Some 23.63 million passengers and 4.5 million crew disembarked cruise ships and visited the participating destinations during the 2014-2015 cruise year, spending US$2.45 billion and US $302.2 million, respectively. 

• Average expenditure per passenger across all destinations was US$103.83, and average expenditure per crewmember was US$67.10. 

• The highest expenditure per passenger was US$191.26 in St. Maarten, and the highest expenditure per crewmember was US$149.44 in Puerto Rico. 

• Cruise line expenditures—including port fees and taxes, payments to local tour operators and payments to local businesses for supplies and services—contributed US$400.8 million. 

• Based on these average numbers, a single call from a mid-sized ship (130,000 GRT, carrying 3,000 passengers and 1,250 crewmembers) generates $311,490 in passenger spending, US $83,875 in crew spending and roughly US $110,000 in cruise line expenditures: a total of US $505,365, not including employee wages and indirect contributions.

 • Cruise passengers spent an average of 4.38 hours ashore during their cruise call

In Jamaica where cruise revenues are about one percent of the stay over trade in 2018,  Tourism Minister Edmund Bartlett is hoping that adding to the shopping experience will do the trick of increasing cruise revenues. A new artisan village is set to open in Falmouth Trelawny before year-end, and the tourism ministry has been seeking to increase the number of duty-free items.

Jamaica’s Minister of Tourism, Edmund Bartlett (Photo: Jamaica Information Service)

Products that incentivize tourists to visit a  port are accessible and beautiful beaches, cultural experiences, unique attractions, better shopping and food and beverage options  which delight cruise visitors on their day-cation ashore.

‘Come together, Caribbean nations’

Industry experts are saying that the Caribbean should, instead of scraping an extra coin here and there, come together as one to charge more per head for guests who come ashore.

A James Sellmore article published on Forbes.com in August 2019 noted, “Many think the Caribbean is being exploited by predatory business tactics. One possible solution, however, is collaboration in the form of a cartel to secure better terms for all nations within the region.”

Sellmore quotes Robert MacLellan, a former vice-president of an explorer cruise line and currently a managing director of a Caribbean-based hospitality consultancy, who is calling for an OPEC style response.

They should create, he said, the Organisation of Tourism Economy Countries (OTEC).

“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,” the cruise consultant proposes.

In 1993, Caricom countries considered imposing a minimum US$10 port head tax but it was never implemented because of internal disagreements. 

Today’s head taxes charged at Caribbean ports include US$1.50 from the Dominican Republic, US$4.50 from Grenada, US$18 from the Bahamas and The BVI, US$15 from Jamaica, US$13.25 from Puerto Rico, US$7 from Belize, US$6 from St Kitts and Nevis and US$5 from Saint Lucia.

To conclude, Caribbean governments can safely consider both the route of product improvement and port tax enhancement  as two ways  of getting more from  the cruise industry. As things stand, there is no way to go but up.