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Cruise Industry’s Economic Impact

Written by: Paul Motter

It is fitting that CLIA would release its yearly study on the Cruise Industry’s effect on our economy this week. CLIA is the cruise industry’s marketing organization, and if it seems like a lot of our blogs have been about the economy lately it is because the economy is so dominating the headlines.

I personally love reading this study, because so many cruise industry critics cite the fact that almost all major cruise ships are flagged in foreign nations and crewed by people from third-world countries. Based on the criticism of the cruise industry you can find in books and web sites online you would think cruise ships are like viking bandits that arrive to pillage and plunder and then steal away leaving nothing but ruin in their wake.

Nothing is further from the truth. Yes, almost all of the 159 CLIA cruise ships that carry American passengers are registered in the Bahamas, Panama and other nations that specialize in offering “flags of convenience,” but many are also registered in more substantial nations such as Norway, Holland and Britain.

Still, the cruise industry itself is responsible for about 350,000 jobs in the United States beginning with people working in the actual cruise line offices in Miami, Seattle and Los Angeles and extending to travel agents, dockworkers, call center workers and industrial suppliers to the cruise industry.

In dollars, the cruise industry contributed some $38 billion to the U.S. economy in 2007, a growth of some 6% over the previous year. This is a phenomenal amount of money for an industry that sails foreign flag vessels and employs mostly non-U.S. crewmembers on 159 ships. The industry was directly and indirectly responsible for generating 354,700 jobs in the U.S. paying a total of $15.4 billion in wages and salaries.

This growth included seven industry groups (in order): nondurable goods manufacturing, professional & technical services, travel services, durable goods manufacturing, financial services, airline transportation and wholesale trade.

All 50 states in the U.S. directly benefitted from the cruise industry last year, and here are the top 10 in order: 1. Florida, 2. California, 3. Alaska, 4. New York, 5. Texas, 6. Hawaii, 7. Georgia, 8. Washington, 9. Illinois and, 10. Colorado.

Where specifically did this economic benefit to the U.S. come from?

  • Spending by cruise passengers and crew for goods and services, including travel, pre- and post-cruise vacations, shore excursions and expenditures at restaurants and retail establishments;
  • On a typical or average cruise ship call, CLIA estimates that a 2,500-passenger ship would generate an average of approximately $358,000 in passenger and crew onshore spending per call in the homeport city. A similar ship making port-of-call visits would generate approximately $318,000 in passenger and crew onshore spending per U.S. port call;
  • Shoreside staffing by cruise lines for headquarters, marketing and tour operations;
  • Expenditures by cruise lines for goods and services, including food and beverage, fuel, hotel supplies and equipment, navigation and communication equipment, etc.;
  • Spending by cruise lines for port services at U.S. home ports and ports of call;
  • Expenditures by the cruise lines for maintenance and repair of vessels at U.S. facilities and for port terminals, office facilities and other capital equipment

How did the cruise industry accomplish this? The following major factors helped:

  • With an 8.8 percent increase in available bed days and an increase in average length of a cruise from 6.9 days to 7.2 days, the industry realized a 9.8 percent increase in actual passenger bed days and an industry wide capacity utilization of 104.9 percent
  • By year-end, CLIA’s fleet totaled 159 ships, with a capacity of 268,062 lower berths
  • In 2007, the industry carried an estimated 12.56 million passengers worldwide, a 4.7 percent increase over 2006
  • 9.45 million U.S. residents were cruise passengers in 2007, accounting for 75 percent of all cruisers
  • Passenger embarkations at U.S. ports totaled 9.18 million, a two percent increase and a 73 percent share of global embarkations
  • Ten U.S. cruise ports accounted for 83 percent of U.S. cruise embarkations: Miami (21 percent), Port Canaveral (14 percent), Port Everglades (14 percent), Los Angeles (6 percent), New York (6 percent), Galveston (6 percent), Seattle (4 percent), Honolulu (4 percent), Long Beach (4 percent), and Tampa (4 percent)
  • U.S. embarkations from additional U.S. ports increased by 17.2 percent reflecting the strong growth in new ports of embarkation throughout the country, which include Baltimore, Jacksonville, Boston and others, while embarkations at the top ten ports declined by 2 percent in 2007.

You can read the entire study at the CLIA web site: http://www.cruising.org/.

Weekly Update on Cruise news for October 10-17, 2008.

The big news in the cruise industry this week is the fall in fuel prices. With the price of a barrel of oil having reached over $140 last summer, the drop to under $80/barrel has been nothing short of amazing. This precipitious drop was caused by worldwide economic incertainty, especially in the third world. The theory is that demand for gasoline and electricity will drop worldwide in a coming economic downturn.

Kudos go to Carnival Corp, the mother company for Carnival Cruise Lines, Holland America, Princess, Cunard, Costa, Seabourn and other cruise lines internationally, for being the FIRST to drop the fuel surcharges that were imposed in early 2008. Right now, they have only been dropped from new bookings for 2010 cruises that get booked after October 31st, 2008.

There is other rather complicated criteria for certain 2008 and 2009 cruises to become eligible for refunds in the form of a shipboard credit. Don’t worry about it, if you qualify they will let you know. Carnival did mention that their cruise fares will go up slightly in 2010 brochures. Royal Caribbean and NCL have not yet followed suit.

Cruise fares are currently dropping industry wide due to the economic incertainty. We are seeing 7-day cruises as low as $329 per person, to the Caribbean (East coast) and the Mexican Riviera (West Coast). These are on quality cruise lines like Carnival and NCL.

Many cruise lines, like Orient Lines, have already dropped prices on European cruises for 2009. Sounds like a great deal to us, the Euro is at $1.34 (Dollar), which means cruising in Europe is reasonable once again. Since Europe is also looking at an economic slowdown, expect the cruise fares and onshore expenses to be even more reasonable this summer than they have been in years.

Cruise lines are upgrading their existing fleets, especially ships built in the 1990s. Carnival Fantasy just received a major facelift, as did Star Princess. Five of the smaller Holland America ships are replacing the rather staid atriums with new public rooms meant to appeal to their now younger and more active clientele. Carnival is adding balconies to 48 cabins on three different ships.

Disney is sending the Disney Magic to Europe once again in 2010. This time it will spend five months over there, and will also visit the Baltic Sea including St Petersburg and Copenhagen. This is in addition to the Mediterranean itineraries Magic sailed the first time it visited Europe in 2005.

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Comments

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Time October 17, 2008 at 12:00 am

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Comment from jean
Time October 26, 2008 at 8:08 am

Cruise travel does contribute to the economy a lot. More like a wholesale product combining different factors of tourism, while offer travelers their own choices as well. It’s emerging in China as a new fashion.

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