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$40 Billion and Counting….July 29, 2009 By: Susan Young
Despite a challenging economy for much of 2008, the Cruise Lines International Association (CLIA) member lines did more than just float. They sailed to a $40 billion positive economic impact within the U.S., according to a new 2008 study just released.
That said, the recession, shifts in ships to Europe, the removal of ships from Hawaii, and the wrath of Mother Nature all played a role in tempering those results a bit. For example, 2008 passenger embarkations at U.S. ports were 8.96 million, a 2.4 percent decline from 2007 embarkations.
But CLIA officials, including Terry Dale, CLIA’s president and CEO, and Bob Sharak, CLIA’s executive vice president, both stressed that the slight decline is more about globalization and the increase of itineraries that originate outside the U.S., rather than any lack of interest by U.S. consumers.
Source markets are shifting as more international guests discover the benefits of an inclusive cruise vacation. Dale called it “the natural and logical evolution of an industry becoming increasingly global.” He also noted that a previous cruise market profile study indicated that almost 35 million Americans intend to cruise over the next few years.
“That intention [by North American consumers] to cruise continues to grow, so we’re not seeing any diminish in interest,” said Dale, stressing that, overall, the newly released economic impact report featured many positives.
The Cruise Industry’s Stimulus
The North American cruise industry fielded its own stimulus to the sluggish U.S. economy last year. Direct spending in 2008 for U.S. goods and services by CLIA member lines and their passengers totaled $19.07 billion. That’s up 2 percent from the previous year.
Plus, when considering indirect spending, such as purchases with cruise line vendors and other businesses that provide goods and services to passengers and crew, the cruise industry’s total gross U.S. economic impact was $40.2 billion – a 6 percent increase over 2007.
In addition, the cruise industry generated 357,710 jobs in 2008 and paid $16.2 billion in wages and salaries nationwide. In fact, last year represented the 11th consecutive year of growth in job creation within the cruise vacation industry, despite redeployment of two NCL ships from Hawaii and the subsequent replacement of much of their U.S. crew with foreign workers.
“The cruise industry continues to be an engine of economic growth around the world and a positive force in the United States,” stressed Sharak. “While a 2 percent annual increase in cruise industry spending represents a slower rate of growth than our industry’s historical averages, we are gratified and encouraged to post continued gains during this recessionary environment when many businesses are retrenching.”
The total economic impact of the cruise industry affected nearly every industry in the U.S. More than 60 percent of the $40 billion total gross output and 40 percent of the 357,710 jobs generated affected seven U.S. industries.
These include non-durable goods manufacturing, professional and technical services, travel services, durable goods manufacturing, financial services, airline transportation, and wholesale trade.
CLIA estimates that a 2,500 passenger ship generated approximately $333,000 in passenger and crew onshore spending in a home port city in 2008. A similarly sized ship making a U.S. port-of-call visit generated approximately $320,000 per call.
An Evolving Marketplace
Globally, 13 million passengers took a cruise vacation last year, a 4 percent increase from 2007. In 2008, the industry deployed more than 60 ships with a combined capacity of 71,300 lower berths. This represented a 14 percent increase from 2007 and a 62 percent increase from 2005.
The dipping U.S. embarkation can be tied to several factors. The cruise industry posted a 14 percent capacity increase in Europe from 2007 to 2008, and European capacity was up 60 percent from 2005. This heightened focus on positioning ships in Europe coincided with the dollar’s slide. Consumers favored purchasing a cruise purchased with U.S. dollars versus a higher priced European land vacation purchased in euros.
More Caribbean ports also served as cruise embarkation ports in 2008. And hurricanes disrupted some cruise itineraries and closed some facilities. Hurricane Ike severely damaged the retail facilities at the port in Grand Turk in the Turks & Caicos, closing that venue for nearly one month. That hurricane ultimately made landfall in Galveston, TX, where the cruise terminal was closed for nearly two months.
Perhaps, most important to the decline in U.S. embarkations, however, was NCL’s redeployment of Pride of Hawaii and the Pride of Aloha from Hawaii. As a result, embarkations in Hawaii declined by more than 200,000. That alone accounted for 75 percent of the net decline in passenger embarkations at U.S. ports.
Port, Destination Impact
The impact of cruising expenditures as well as port embarkations and visits by CLIA member ships at U.S. ports was substantive. “From East to West and every state in between, cruising remains one of the most attractive alternatives for Americans demanding affordable prices and diverse options in their vacations,” said Dale.
While the cruise vacation industry’s economic impact touched all 50 states, it was greatest in 10 states, accounting for 78 percent of direct purchases in the U.S.
With 57 percent of all U.S. embarkations, “Florida remains the epicenter of cruising within the United States,” Sharak told reporters in a briefing Wednesday. Florida fielded 57 percent of all U.S. embarkations from the nation’s top cruise traffic ports— the Port of Miami, Port Canaveral and Port Everglades.
Another powerhouse was California, home to several cruise lines. During 2008, the state’s four ports— Los Angeles, Long Beach, San Diego and San Francisco— boarded more than 1.4 million passengers, a 7.7 percent increase from 2007.
More than 5.8 million passengers and crew came ashore in Alaska, which accounted for 6.5 percent of the industry’s direct spending and the generation of more than 25,000 jobs. Those totals are likely to dip in 2010, when many lines redeploy ships from Alaska to other regions of the world.
An estimated 753,000 passengers and crew visited New York during 2008, a decline of 6.8 percent from 2007. New York accounted for 6 percent of the industry’s direct expenditures.
On a net basis, the North American fleet increased by two ships in 2008. During 2008, eight new ships were added while six were sold and/or redeployed from the North American market. In total the eight new ships added 20,722 lower berths for an eight-ship average of 2,590 lower berths.
The six ships that were removed from the North American market had a combined capacity of 10,031 lower berths and, thus, on net the industry saw its lower berth capacity increase by 4.1 percent during 2008 to 270,664 lower berths.
Sharak reported that for 2009, occupancies remain well in excess of 100— at 102 percent (based on third and fourth berths in some cabins), and the mix of U.S. and international guests is comparable.
He also said there are signs of stabilization of both pricing and the booking curve. “We’re actually seeing a light at the end of the tunnel,” he noted, but also said it's difficult to accurately predict 2009’s ultimate results.
For the full 2008 CLIA survey report, an executive summary and an interactive map featuring economic impact data for all 50 states, travel agents might visit www.CruiseIndustryFacts.com.