Cruise ship industry a ‘Trojan horse’ to Caribbean small island economies, hotel industries

For decades the leaders of Barbados and other Caribbean countries courted the cruise ship business in a largely symbiotic relationship. The cruise ship passengers enjoyed the ships, but they anxiously disembarked to spend island time enjoying themselves in ways that weren’t available onboard.

Then something changed the dynamics of the relationship between the cruise ships and the Caribbean nations: the ships themselves became destinations. The ships became massive floating hotels with shopping, extensive entertainment, themed vacations and even sand beaches onboard – and, as author Robert MacLellan points out in the following article, the cruise ships are built at a fraction of the price of land-based hotels.

Somewhere along the journey, the cruise ship industry changed from being a being a support and an asset to island tourism to being more of a parasite: in the view of the cruise ship industry, the Caribbean islands now existed only to service the floating hotels called cruise ships. As the author of this post, Rob MacLellan, wrote to Barbados Free Press:

“CHTIC and CHRIS hotel investment conferences are coming up this month and next month. The attached is sure to be controversial with the different interests involved in the region but I truly believe the impact of today’s cruise ship presence in the Caribbean has reached a “tipping point” in its impact on a beleaguered local hotel sector.”

This post was submitted to Barbados Free Press by Rob MacLellan, and is a worthwhile read for every Bajan…

Caribbean Cruise Ships – The Imbalance of Risk / Reward and A Trojan Horse

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.

Since the beginning of 2012 alone, four cruise ships have now experienced very serious incidents which could have resulted in disastrous damage to the marine environment in tourism dependent areas of the world. One ship, the MSC Poesia, was stranded on a reef in early January while approaching Port Lucaya, Bahamas. The other three ships drifted helplessly, without power or steering capability.  The Azamara Quest was adrift for 24 hours in late March near the UNESCO World Heritage Site of the Tubbataha Reefs in the Philippines. The Costa Allegra was adrift in late February near the pristine Alphonse group of coral atolls in the Seychelles, until towed to port by a fishing boat, and the Costa Concordia drifted until it capsized on rocks in mid January on the Italian tourist island of Giglio.

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 which will bear the full environmental and economic impact.

How much cooperation or finance have Caribbean governments received from cruise lines to even 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 labor 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.

Robert MacLellan

www.machospitalityconsultants.com

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13 Comments

Filed under Barbados, Barbados Tourism

13 responses to “Cruise ship industry a ‘Trojan horse’ to Caribbean small island economies, hotel industries

  1. watcher

    From what I can see the Caricom governments are not a strong single voice. Caricom countries constantly bicker among themselves and appear to have no effective ways of dealing with Caricom issues.

    The cruise industry has its own competitive issues among itself. Have several cruise ships not already announced they are leaving Barbados. The soloution to onward hotel and villa investment is also tied to the cost of travel. These days getting to a hotel in the Caribean for a week is rapidly approaching 75% of the total cost of some cruises and If your building costs are correct and there is a 5 month season and a 6% money cost, then a $750,000 room will have a cost for intersest of $300 per night. On the other hand a cruise ship has a 12 month season bringing its interest cost per room per night to $41.

    Lots of complications to resolve.

    .

  2. Get Real.

    I suspect Robert MacLellan is barking up the wrong tree.

    The cruise industry has already pulled several ships from Barbados
    -lying 100 un-necessary miles out into the Atlantic(despite claiming its calm-water side to be “Caribbean”!) -and could/would just as soon depart Barbados altogether, if we don’t look sharp!

    The alarmist notion that cruise ships might wreck themselves on our shores
    is as far-fetched as airliners crashing themselves into our cane-fields.
    Sure it might happen, but it very likely will not!

    Maybe Robert MacLellan has an axe to grind with the cruise ship industry?

    Helloooo? We need the cruise ship industry
    a heck of a lot more than the cruise ship industry needs us
    - but here we go again, strangling the golden goose!!

  3. John Baptiste

    Yes the islands need the cruiseships but not at any cost! – These crusie ships load in Miami or US based ports to avoid having to stock up when reaching the various islands thereby cutting out local businesses opprtunities. Some are now even bringing “their own excursions” such as bicycles to do their own tours, cutting out the local shore excursion companies. The tax that cruise ships pay per passenger is far less than land based hotels – putting the hotels at a disadvantage. There have been five incidents of cruise ship accidents/breakdowns in the past four months around the world – the islands need to be aware of the possibility.
    The golden goose has turned into the Trojan Horse – looks impressive but is raping the islands of revenue opportunites and has aggressively seized the business of hotels on the islands without any resistance- reducing the employment possibilities of the locals. Wake up before it is too late!

  4. NYC/BGI

    Part of the problem is that there is not an aggressive marketing effort from the BTO. Cruise ships could mean a boon for the hotels and shops if the approach is structured to benefit both the Cruise Lines and the destination, i guarantee no one from the BTO has sat down with the Cruise marking decision makers to hammer out a synergistic deal. The Cruise ship industry is agressive and will survive as many destinations in the warm weather will see a decline in arrivals and just wait until Cuba opens up. BTO has been warned and alerted years ago that Cuba will drain arrivals and still they sit on their hands using the same old playbook. . . .

  5. 189

    Barbados became a very nice place to visit . After a while the business see greed, move prices up out of the reach of the people that can afford to reach the shores. To see the same prices back home or even more in Barbados is no vacation at all, no deal at all. The people feel they can over price the man as i saw a few
    years ago and man was over charged for 5 dbs for a coconut because of the size as all other even me looked on , The man looked on at all of us .I never went back to that vendor for water. Others told me to mind my business.Now to be paying 9bds for fish i bring in my own cans of fish.We will price our self from the market in all things.The cutting of all the trees to build houses no one can afford to get good work for a loan . Soon we will bring in all food and many will go with out.But the cell phone LIME and Digi cell they will find money for their phones.
    Visit Barbados with your eyes, hold on to your cash, better deals else were on your cruise.Even the cruise ship have sales right before the stop at the Islands to get the money before the people get of.Many now walk for the taxi price is much.

  6. Get Real.

    Tell you what: let’s petition the government to forthwith cease and desist all cruise ships from entering Barbados waters!
    We can do it! We can afford it.
    We don’t need no stinking cruise-ships!

    Let’s show those people we don’t want or need their stinking eco-unfriendly ships of latent danger in our waters!

    OH the emotion. Oh the nationalism. Oh the economic logic.
    You guys are (once again) clueless.
    -except for 189 immediately above, pointing out that our prices ashore here are nothing short of OUT-RAGEOUS
    and that is inded why cruisers prefer to walk (they need the exercise maybe??) rather than pay ripoff rates to ripoff taxi drivers here.

    You guys need to do some lurking at http://www.cruisecritic.com
    -get over to their message boards. Find the Caribbean section, where it’s broken down into individual island-destinations. See what cruiser folks are saying about our islands, both good and bad. It’s called feedback. Surprisingly most of it is still positive, but you should take the negative ones quite quite seriously too (but probably won’t).
    I wish your island a great economic future, but don’t see how, given local attitudes to those who PAY YOUR WAY.
    You just keep on biting the hand that feeds you!

  7. victor

    People who go on cruises may want to dream about the lovely life on Caribbean islands but at the end of the day they just want a taste, whilst they are simply enjoying a boat trip with all the treats, yukky as they may be. Real visitors come to Barbados because they love the beautiful island, its people and the culture. I’ve seen them again and again taking their photos on the Jeep Safari yet never speaking to a single local unless he was selling some form of coconut.

  8. Let’s get off this tourism time-wasting topic which is purely pandering to the “lighter persuasion” and their laundermat activities and get some real topics for discussion going here which can help to catapult Barbados out of the stone ages which it now finds itself in. Here are a few mild suggestions.

    Roads and other infrastructure.
    Alternative energy and cutting our energy import bill.
    Improvement in our work ethic: Getting Barbados productive!
    Entrepreneurship and small business development.

    Any half useful businessperson knows that a failing venture is one that you put more money into than you are able to realize it generates. Tourism is one such product.
    We can’t go borrow any money for Tourism Based activities anymore because we’ve shown no value with the money which we already had. That is a true condition which repeats itself across the Barbadian landscape. We borrow people’s monies, thief and squander it amongs friends and close collegues, and then expect that the lenders arent’ watching to see how their money is being utilized. Like they wont be concerned that if no improvements are being made, their R.O.I wont get threatened. We’re really out of our minds to be this ignorant especially in light if the fact that we’re not the smartest country that there is on earth.
    Well, keep tossing money into the Tourism Money-Pit so that a specific group of persons in this fine land can continue to enjoy the high-life at the expense of all the others. Thats how us successfully start events like riots and civil wars.
    Tell you what. Kiffin Simpson now had more money than he can spend is a few lifetimes. He’s a Barbadian whom I believe has the interest of the country at heart. Let’s go ask him for a loan. If we at minimum need to sell out to anyone, let it be one of us!

  9. Brudah-Bim

    @ THE WATCHER; I COULDN’T AGREE WITH YOU MORE.
    @ “Get Real”; Maybe its time that you GET A CLUE!

    There was a post here written by the good sir Mr. Caleale Goodridge, and he made a good attempt at mapping out how Barbados can structurally overhaul its economy through productive industries such as manufacturing agriculture, and by owning domestic corporations. To be honest, Bim’s economy as well as her bureaucratic and political systems should have been restructured a long time ago! With all the “education” and “leadership in competence” we boast of here in Bim, the nation would have already been well on its way to achieving a standard of living reminiscent to that of Luxembourg, New Zealand, and Iceland combined!

    If we had TRULY COMPETENT leaders, the nation would have no external debt and we would have quite the substantial Budget surplus by now. Had we politicians that scrutinized and closely oversaw the sectors that are essential to our nation’s economy through preemptive and strategic means that could have enabled mutual flexibility on part of domestic and foreign markets is a PLAN LONG OVERDUE to the people of Bim.

    IN OTHER WORDS the Government of Barbados should have pushed to establish the nation’s economy through heavy emphasis on the DOMESTIC such as through AGRICULTURE, FISHERIES, and Strategic TECH & LUXURY BRAND MANUFACTURING, RENEWABLE ENERGY, PHARMACEUTICALS, TELECOMMUNICATIONS, ICT technologies and DOMESTIC BRAND/OWNED TOURISM as well as building DOMESTIC OWNED FINANCE/ INSTITUTIONS.

    Had we done so, COUPLED ALONG WITH FORGING STRATEGIC diplomatic ties with key regional members in both the Caribbean and Latin America SHOULD BE BIM’S FIRST PRIORITY. We’re bordered by the Caribbean region, Central America, And South America, and Mexico to a lesser extent. Not to Mention that AFRICA is RIGHT ACROSS the ATLANTIC and offers yet another large source of wealth and mutual business opportunities for Barbados.

    What this article fundamentally gets at is that there seems to be an increasingly corrupt and exploitative relationship between Bim vs. America, Canada, & the U.K. when it comes to Bim trying to establish TRULY BENEFICIAL trade and economic agreements. However, that cannot be sustained as these economies are showing signs of growing MATURE thus equating to low market growth.

    Hell, if we had a government that were TRULY COMPETENT and AWARE of what needs to be done; we Bajans would also see a MASSIVE overhaul in our education system and will see the inclusion and emphasis on the mathematics and sciences as well as through key languages such as Spanish, French, Portuguese, and even German to a lesser extent.

  10. Brudah-Bim

    And not to mention that “Get Real” poses no actual proof, and tries to pass off FORUM DISCOURSE AS FACTS! Truly, how warped s/he is in terms of trying to posit a “logical” argument. I suppose that you would also argue that the current financial situation thats gripping the nation could be remedied by simply just employing “appropriate” measures that would offer “ajustments” to the economy through. THE TAX CODE. You truly do not know how macroeconomics works so you should just stay shut and actually TRY TO LEARN what people are saying.

    That is, since you take peoples arguments at face value and don’t even bother to make a determination that would PROVE otherwise. Other than that, You’re just a tool that REGURGITATES nonsense and is blindly fixated on the idea the tourism industry is currently a sustainable one for Barbados. what doesn’t help our situation either is that there is a HIGH oversaturation of other economies within the caribbean market that is avidly competing with Barbados in two of her major economic platorms; TOURISM AND OFFSHORE BANKING. Not to mention that the global financial woes thats gripping the global economy is als placing a highly pressurized strain on our economy.

    Look at the facts “Get Real”, its time that Barbados started acting in her OWN favour for a change in order to safeguard her economic future. This doesn’t equate to not being able to be FLEXIBLE by making PROPER PROVISIONS to accommodate the global market without having to NEDDLESSY sacrifice our nation’s economic capacities, complexities, and its overall SOVEREIGNTY. it is WITHIN OUR RIGHT to do so, and trading Partners such as CHINA, BRAZIL, and ARGENTINA are willing to make such arrangements for a change, as opposed to the imperial leeches known as America, Canada, and Great Britain.

  11. Pingback: Signs of recovery, but many Caribbean resorts are “not viable” – and never will be | Barbados Free Press

  12. Pingback: Killing the Caribbean tourism ‘Golden Goose’ – Governments taxing hotels and tourists to death | Barbados Free Press

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