Fallout

The Caribbean, which accounts for 50% of the world’s cruise market, has  the industry jumpy over renewed talk of implementing a tax on passenger tickets. But the on-and-off debate, which was again kick-started earlier this year, doesn’t seem to be going anywhere fast. The Florida Caribbean Cruise Association (FCCA) has already warned that the Caribbean could become an uncompetitive cruise destination, if it proceeds with the implementation of a US$20 head tax proposed by Caribbean tourism ministers earlier this year. The tax is also not getting the support of all members of the Caribbean Community (CARICOM); Antigua and St Kitts  see it as possibly having some negative fall-out for the region, most which is highly dependent on the hospitality industry.

On the eve of the 26th Caribbean Tourism Organisation Conference (CTC) held in St Thomas in the US Virgin Islands earlier this month, tourism ministers met with representatives of the FCCA but from all indications, very little was achieved. Chairman of the CTO, Bahamas Minister of Tourism Obie Wilchcombe, when pressed on whether progress was made at the meeting, would only say vaguely that discussions will continue either towards the end of the year or in early 2004 with the FCCA. Insisting that the US$20 was “an idea, not a proposal,” Wilchcombe said member states want to understand everything about the cruise industry before it makes any mistakes. “ Some Caricom members expressed comments that they would not do anything to hurt the cruise industry,” he said about the split in support for the levy. The US$20 levy is among several measures put forward by Caribbean tourism ministers to ensure sustainable tourism development for the entire region.The plan involves support for strengthening environmental, cultural and heritage aspects of Caribbean tourism; for dealing with matters of health and security, human resource development, and generally improving infrastructure and promotion of the region. President-elect of the Caribbean Hotel Association and St Lucian hotelier, Berthia Parle says Caribbean cruise lines, which is the only industry growing by leaps and bounds since 9/11 must do more for tourism and for the people of the Caribbean region. “We believe the cruises are a very important sector of tourism ... but a lot more needs to be done by the cruise industry to contribute to the sustainable development of Caribbean tourism and enable governments to create more employment for the people of the region,” Parle said. CTO’s Secretary-General Jean Holder noted that teams from the FCCA have been making their rounds in the Caribbean and presenting their side of the case, somewhat aggressively, both to governments and to private sector suppliers.

Holder said it was even more important for CTO, which represents the tourism interests of Caribbean people, to ensure that the Caribbean public and specifically those Caribbean suppliers to the cruise sector, have a fair and balanced view of what the issues are. While the FCCA denounces the proposed tax in the Caribbean, Holder says very little is known about the very high taxes and fees that countries in North America and Europe impose on the very tourists who are traveling to the region. “ The US government imposes taxes of US $42 on every ticket sold for travel by air out of the country. The World Travel and Tourism Council reckons that taxes included in tickets for travel from Europe are some 30 per cent of the value of the tickets. “As we speak, European countries are considering an additional environmental tax on travel from Europe, with the tax for long haul trips to countries such as ours, being much larger than for shorter trips. It seems that it is alright for developed countries to tax consumers to meet their tourism and environmental development costs, but if Caribbean countries do so, this is in some way immoral,” Holder lamented. President of the FCCA, Michelle Paige, has warned that the Caribbean could become an uncompetitive cruise destination if it proceeds with the implementation of the head tax. “Taxation is a disincentive to travel. Taxation is never the way to go, especially in this economic climate,” she said recently. The US$20 proposal also attracted further criticism from the FCCA during its tenth annual conference, which took place recently in the Netherland Antilles.

FCCA chairman Micky Arison said government officials should concentrate on promoting their destinations rather than focusing on how much revenue they can raise from the cruise operators and tourists. “You don’t promote investments by increasing taxes. You do the exact opposite. If you want to promote investment, you should decrease taxes to airlines, hotels,” he argued.The FCCA chairman explained that several islands have already negotiated head tax agreements with his organisation, and said that the CTO had no right to “tear up” these arrangements. He added that the FCCA will continue to discuss new contracts as well as renegotiate old ones. At CTC in St Thomas, Michael Ronan, Director Destination Development for Royal Caribbean Internationa,l when asked about the proposed levy, said there is no way cruise ships can agree to it at this time. Stating that cruise ships were still 15-18 per cent below 2001 revenue levels, Ronan added,” we have to hold our costs tightly and reduce our overall costs.” Ross A. Klein, Professor of Social Work at the Memorial University of Newfoundland, Canada,  who has written two books and many articles about the cruise industry, said he thought that the cruise industry, given  its concern for Caribbean islands and local communities, would have been anxious to support the Caribbean cruise ticket levy.

He said that the added value to the cruise line is that the levy is to improve the infrastructure and welfare of Caribbean peoples, so the money will ultimately provide an enhanced experience for cruise ship passengers. In his latest publication “Charting A Course”, Klein refers to a study done by PriceWaterhouseCoopers (PWC) for the FCCA which provides some interesting and insightful figures. Spending in ports, according to the 2001 PWC report, ranges from US$53.84 in San Juan, Puerto Rico, to US$173.24 in St. Thomas, U.S. Virgin Islands.The weighted average for all ports is US$103.83. Typical spending by port-of-call passengers includes US$39 on watches and jewellery, US$13 on clothing, and US$12 on souvenirs, as well as smaller amounts in other categories. The PWC report also looks at passenger spending in home-ports. This averaged US$14.33 consisting largely of food and beverages and transportation for passengers who arrived the day of the cruise; US$78.91 per day for those with a pre- or post-cruise stay. Crew spending at home ports averaged US$111.67.

Meanwhile, the “Big Three” Carnival Corp (13 brand names, 50% of the North American market), Royal Caribbean Cruises Limited (25% of the NA market) and Norwegian Cruise Lines (owned by Malaysia-based Star Cruises) which account for 90% of the North American market had combined total revenues in 2002 of US$11.5 billion and combined net income of US$1.66 billion. Key sources of income for cruise line include onboard revenue which is approximately $300 per passenger on a daily basis.At the 4th Caribbean Media Exchange (CMex) held in Jamaica earlier this year, Professor Klein said the distribution of income from shore excursions is disproportionately in the favour of the cruise line and at the disadvantage of local operators.
“ Passengers are given many incentives for buying the ship-sponsored shore excursion (safety, a better experience, we won’t leave you behind) and disincentives for exploring independently (presenting a less than positive image of port safety and security thereby supporting passenger preconceived thoughts and fears, independent passengers often disembark after tour passengers),” said Professor Klein. He also said that cruise passengers come ashore well fed, often have their own beverages (water is sold as they leave the ship), and with their prejudice and fears reinforced onboard. Professor Klein sums up the cruise industry as bringing “ guests to Caribbean islands, the ships take their hefty cut of receipts from shore excursions and sales in onshore stores, they leave garbage and other waste in their wake, and they leave a relatively small economic footprint. “ In addition, they pay no taxes, buy few if any local products, and employ only a small number of Caribbean residents and most of them at very low wages.” These conditions, he said,  are increasing the hostility toward the cruise industry of island people and their governments.