How the Leisure Cruise Industry Benefits the Economy?

The worldwide leisure cruise industry has encountered gradual development in the previous three decades. It is regularly viewed as the 'quickest developing portion' of the tourism area. Be that as it may, it still records for a little part (around 2%) of general worldwide tourism incomes. Regardless, the way that it is the quickest developing segment of the travel business for as long as a quarter-century, an estimated normal yearly development rate of travelers of 7.5%, makes it one of the quickest developing fragments of the tourism business.

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The multiplier benefits of the cruise activities at a port come from income that was originally spent elsewhere being spent in the local economy. It impacts on direct, indirect and induced benefits. The multiplier shows a relationship between an initial increase in investment and the resulting increase in national income. The value of this multiplier determines the rate of increase in benefits. One cannot estimate indirect expenditure without information about local multipliers, estimated using input/output or general equilibrium models. The size of a region's multipliers depends on the industrial mix of the local economy, its myriad interactions and the industry/sector of interest.

Reports in this respect show that the number of passengers carried by the cruise industry has grown yearly and expected it to exceed 24 million in 2018. They indicate that the industry creates $117 Billion in the worlds economic activities and shows the gradual shift from land-based to cruise ship tourism. This has made many countries to put more investments to boosting the cruise industry. Arabian Gulf states governments have joined this race. The past years witnessed substantial investments by many of them in expanding their port infrastructures to make their cities cruise destinations. Other states are gearing up for new developments in this field as well so as to boost further the tourism development. This is because it is a major component in their countries economic diversification. This increase in investment in the sector increases the benefits through the multiplier.

I recently visited one of the cruise terminals in the region with three of my best friends, a Greek (economist), Canadian (Tourism consultant) and Romanian (Sailor). We had a long discussion on the economic impact of investing in them, and whether the regional economic impact of tourism expenditure is greater than the tourists direct spending. Our Economist friend started taking us through it. He gave an example of a visitor spending money earned outside the region at a local grocery store (say $1000 the direct expenditure), the store-owner, hence the region, earns an extra $1000 in income.

We stared at him, waiting for his elaboration, he smiled and explained, the owner of the store may put aside some money for savings/profit (say $100) and for taxation (say $200). He/she may spend money importing stock from overseas (say $300), and may spend the rest on fresh produce from the local gardener (say $400 indirect expenditure). Therefore the gardener, hence the region, earns an extra $400 in income. This makes the economic impact of the tourist expenditure greater than just the $1000 spent. It is equal to the $1000 earned by the grocer, plus the $400 earned by the gardener. The impact will be larger if the gardener spends more locally.

Our Canadian friend started talking about the cruise related expenditure, classified into four principal categories: passenger spending, crew spending, vessel spending (including state, federal charges and taxes), and supporting expenditures (expenditures related to the promotion and marketing payable within the local economy). He added that many cruise lines promoted shopping excursions arranged by concessionaires. A cruise ticket is inclusive of all meals, so disembarking passenger spends less in local restaurants than land-based tourists. However, passengers accumulate some spending on food and beverages during their stay. The arrival of a cruise ship can also be beneficial to taxi drivers, who experience a temporarily increased demand among passengers en-route to activities throughout the city.

What influences the regional economic impact of cruise related expenditure? our Romanian friend asked. Yes!! Responded my Canadian friend, and added that the passenger spending depends heavily on the type of port, the amount of time a ship spends in port, passengers personal preferences and income and the duration and composition of the cruise itinerary. Does it matter? The Romanian friend asked. Whether the ship has berthed quayside or via Anchorage should not influence the passengers who disembark. An intermediate port must have high tourism appeal by all the virtues of its natural environment. Also, the longer a port remains on a cruise ships itinerary, the greater the chances of it being integrated into the supply chain. However, cruise ships do not contract intermediate ports for resupply services.

A home port touristic characteristic is like those of intermediate port, but with several important additions. The former requires a complementary transportation infrastructure. Also, vessel-related expenditures tend to be higher at a home port than at an intermediate port. Other benefits are the crew members spending, based on salaries, a function of nationality. Ship-related expenditures in a given port are a product of the ships needs. They tend to be greater for larger ships, but also depend on existing supply chain arrangements. Revenues from the sale of traditional crafts to passengers bear a relatively high multiplier as a significant portion of such items value-added is locally produced.

Multipliers tend to be smaller in rural/regional economies than in urban centers because of the few opportunities to spend on local products. The local economic impact of tourism expenditure, therefore, exceeds the visitors direct spending, as estimated by multiplying direct spending by a multiplier. The economic benefits of home porting a cruise vessel can be substantial. Earnings per cruise passenger by local businesses are less than those currently earned for land-based tourists. Total benefits may be distributed amongst a narrower group of stakeholders.