World Maritime University The Maritime Commons: Digital Repository of the World Maritime University World Maritime University Dissertations Dissertations 2007 An analysis of cruise tourism in the Caribbean and its impact on regional destination ports Adrian Hilaire World Maritime University Follow this and additional works at: http://commons.wmu.se/all_dissertations Part of the Regional Economics Commons Recommended Citation Hilaire, Adrian, "An analysis of cruise tourism in the Caribbean and its impact on regional destination ports" (2007). World Maritime University Dissertations. 349. http://commons.wmu.se/all_dissertations/349 This Dissertation is brought to you courtesy of Maritime Commons. Open Access items may be downloaded for non-commercial, fair use academic purposes. No items may be hosted on another server or web site without express written permission from the World Maritime University. For more information, please contact [email protected]. WORLD MARITIME UNIVERSITY Malmö, Sweden AN ANALYSIS OF CRUISE TOURISM IN THE CARIBBEAN AND ITS IMPACT ON REGIONAL DESTINATION PORTS By ADRIAN HILAIRE Saint Lucia A dissertation submitted to the World Maritime University in partial fulfillment of the requirements for the award of the degree of MASTER OF SCIENCE In MARITIME AFFAIRS (PORT MANAGEMENT) 2007 © Copyright Adrian Hilaire, 2007 Declaration I certify that all material in this dissertation that is not my own work has been identified, and that no material is included for which a degree has previously been conferred on me. The content of this dissertation reflect my personal views, and is not necessarily endorsed by the University. ……………………………… Adrian Hilaire 27th August 2007 Supervised by: Patrick Donner Associate Academic Dean World Maritime University Assessor: Prasad Rajendra Lecturer Institution: World Maritime University Co-assessor: Klas Brogren Publisher Organization: Cruise & Ferry Info, Sweden ii Acknowledgement I wish to first thank the good Lord for making it possible for me to complete this dissertation as well as blessing me with good health and a positive attitude towards life and my studies at the World Maritime University. My sincere thanks and appreciation goes the to Executive Management of the Saint Lucia Air & Sea Ports Authority for nominating me to attend the World Maritime University and pursue my dream of obtaining a Masters Degree in Port Management. I also extend profound gratitude to the World Maritime University for taking on the responsibility, of not only funding my studies, but making it possible for me to study in a very conducive environment and giving me the opportunity to meet and learn from so many resourceful, dedicated and helpful staff. In that regard, I wish to recognize the efforts of Professor Pierre Cariou, and my supervisor Professor Patrick Donner, who did a fantastic job supervising my work and who was always able to fit me into his very hectic schedule. To Inger, Rick, Eric, Susan and Cecilia, thank you so very much for your assistance which was always rendered with a smile. I would like to convey my special thanks to Maria, Claudette, and Ed for their friendship and warmth which made living here in Malmo very Caribbeanish! I am most grateful to Michael Manuel for the assistance given to me during my studies in Malmo and to Carolyn who assisted by editing my various chapters. My deepest thanks to the Class of 2007 for the great moments we shared and a special thank you to Aisha, Nana, Eya, Marcy, Mercy, Hadiza and Nadege for their warmth and friendship. Last, but not least, I wish to thank my family and close friends in Saint Lucia for their love, prayers, support and well wishes. May the good Lord bless you all! iii Abstract Title of Dissertation: An analysis of cruise tourism in the Caribbean and its impact on regional destination ports Degree: MSc This dissertation examines cruise tourism in the Caribbean and its impacts on the Small Island Developing States whose economies are all highly dependent on foreign injected capital. This dissertation develops profiles for the Caribbean and cruise operators so as to better understand the context within which this research is undertaken. A cost benefit analysis is then done to establish the net impact of cruise tourism to the region. In that regard, an analysis is performed to determine the economic, environmental, security and social impacts of the industry on regional destination ports. Additionally, for islands with multipurpose berths, a further analysis is done to examine the impact of cruise tourism on the operations of liner shipping. Noting the high level of concentration in the industry as well as the trend of cruise operators to build mega cruise vessels a further examination is done to ascertain the capacity of destination ports to accommodate such vessels and the balance of power between cruise operators and destination ports. The dissertation concludes by acknowledging the positive impacts of cruise tourism but notes that this may easily be offset by the negative impacts of environmental degradation and the short-sightedness and lack of co-operation among destination ports. From the conclusions, five recommendations are thus made to develop the cruise tourism in the Caribbean in a sustainable manner where all major players can benefit in this collaborative effort. KEYWORDS: Caribbean, Concentration, Cruise Operators, Balance of Power, Destination Ports, Highly dependent, Lack of Co-operation, Sustainable Tourism iv Table of Contents Declaration ii Acknowledgement iii Abstract iv Table of Contents v List of Tables vii List of Figures viii List of Abbreviations ix 1 Introduction 1 1.1 Background Information 1 1.2 Significance of the study 2 1.3 Research Objectives 2 1.4 Scope of the study 3 1.5 Research Methodology 3 1.6 Limitations of study 4 2 The Caribbean-a regional profile 6 2.1 Historical Profile 6 2.2 Regional Resources 7 2.3 Political Climate 9 2.4 Home and Destination Ports 10 2.5 Market Segmentation 12 2.6 World Ranking 14 2.7 Chapter Analysis 15 3 International Cruise Operators 17 3.1 Operator Profile 17 3.2 Market Share 19 3.3 Financial Performance 20 3.3.1 Explanation of ratios 21 3.3.2 Carnival Corporation 21 3.3.3 Royal Caribbean Cruises Ltd 22 3.3.4 Star Cruises Group Ltd 22 3.4 Cruise Associations 23 3.4.1 Florida Caribbean Cruise Association (FCCA) 23 3.4.2 Cruise Line International Association (CLIA) 24 3.5 Vessel Classification 24 3.6 Chapter Analysis 26 4 Cost/Benefit Analysis 28 v 4.1 Economic Impact 28 4.1.1 Direct Impact 30 4.1.2 Indirect Impact 31 4.2 Environmental Impact 32 4.2.1 Air pollution 33 4.2.2 Ship generated wastes 35 4.2.3 Port reception facilities 37 4.3 Social Impact 37 4.4 Security Issues 38 4.5 Liner Shipping Impact 40 4.6 Chapter Analysis 41 5 Critical Issues Facing Destination Ports 44 5.1 Increasing Vessel Size 44 5.1.1 Capacity to accommodate mega cruise vessels 45 5.2 Balance of Power between Cruise Operators and Regional Ports 49 5.2.1 Level of concentration 49 5.2.2 Substitutability of destinations 50 5.2.3 Market representation 51 5.2.4 Cooperation among destination ports 52 5.2.5 Dependence of destination ports on cruise tourism 53 5.3 Ship as a Destination 53 5.4 High Costs of Infrastructural Development 54 5.5 Chapter Analysis 56 6 Industry Analysis 59 6.1 Strategic Analysis of Cruise Operators 60 6.2 Strategic Analysis of Destination Ports 62 7 Conclusion and Recommendations 65 7.1 Conclusion 65 7.2 Recommendations 70 7.2.1 Formation of tourism/agriculture linkages 70 7.2.2 Employment of Caribbean nationals 70 7.2.3 Development of a cruise ship policy 71 7.2.4 Product differentiation 71 7.2.5 Strategic partnerships with cruise operators 72 vi List of Tables Table 1: Port selection criteria................................................................................... 10 Table 2 Geographic segmentation of the Bahamas and Caribbean cruise market .... 13 Table 3: Largest cruise companies worldwide and in the North American Market- 2005 ............................................................................................................... 19 Table 4: Defining vessel types................................................................................... 25 Table 5: Total Economic Impact by Segment, 2005-2006 Cruise Year.................... 28 Table 6: Direct and Indirect Economic Impacts by Segment, 2005-2006 Cruise Year ....................................................................................................................... 29 Table 7: Amount of waste generated in the Bahamas and Caribbean for the year 2004 ....................................................................................................................... 35 Table 8: Comparison of economic benefits of selected destinations for cruise year 2005-2006 ...................................................................................................... 41 Table 9: Changing size, carrying capacity and cost of selected cruise vessels, 1987- 2009 ............................................................................................................... 44 Table 10: Total External Debt of selected CARICOM states, 1995-2004 (Year-end balance, in $US Millions) .............................................................................. 57 Table 11: Herfindahl-Hirschmann Index (HHI) for cruise operators for the period 1996 & 2005 .................................................................................................. 67 vii List of Figures Figure 1: Compound Share of