By Fritz Pinnock & Harry Maragh, ContributorsTHE CARIBBEAN can be described as a minor player in most of the global supply chains except in Cruise Shipping where the region enjoys a distinctive strategic advantage. The cruise industry contributes over US$100 million per year in revenue to the Jamaican economy and has a tremendous multiplier effect throughout. This is no different in other Caribbean countries.
Internationally, the cruise industry is the fastest growing segment of the leisure industry in the world and is currently valued at US$16.6 billion. Cruise ships are basically floating resort facilities with the major advantage of seasonal repositioning. The Caribbean is the single largest market accounting for 51.5 per cent of the total world cruise business, followed by the Mediterranean with 15 per cent, Alaska, 6.7 per cent, Asia/South Pacific 6.4 per cent, and Europe 4.4 per cent as the remaining major players.
The United States accounts for approximately 75 per cent of the world cruise population followed by Europe - 20 per cent and the Far East - 5 per cent. In 2003, approximately 10 million people around the world will go on cruises and 7.5 million will come from the US. Yet, only 15 per cent of the North American population has ever taken a cruise. This further translates to merely 3 per cent of the total leisure US travel market.
The cruise product has evolved tremendously since its definition as an industry some 40 years ago. Offerings include multiple alternative dining choices, non-stop entertainment, outside cabins with balconies, and technological advancements in environmental protection, propulsion, navigation and safety systems. As cruise lines strive to target the mass market, the future promises an industry dominated by mega-liners as passengers expectations are elevated.
CARIBBEAN STRATEGIC ADVANTAGE
It is clear that the Caribbean has a strategic advantage in this industry accounting for more than half the world market share and should capitalise on this through CARICOM and other regional groups. By this Jamaica needs to move its thinking from counting passenger arrivals to differentiating itself as a "cruise destination and home port (a port where passengers embark and disembark) of choice in the region".
Outside of the Bahamas, Jamaica enjoys one of the best strategic, God given geographical position in the entire Caribbean as a cruise ship port of call and homeport destination.
Jamaica is fulfilling most of the requirements as a port of call and with the right "total pricing package" homeport operations can expand significantly from two clients to capture a greater market share.
It is commendable that The Port Authority of Jamaica (PAJ) is actively marketing the Jamaican cruise industry and with its passion and solid understanding of the industry, PAJ only needs the infrastructural support as it expands the vision and horizon for Jamaica. The greatest opportunity for Jamaica currently is to expand service as a homeport destination. Jamaica's main competitors are the Dominican Republic, Florida and The Bahamas. At the end of the day it boils down to cost and Jamaica remains uncompetitive in this area.
MARKET HOMEPORT DIFFERENTLY
Furthermore, Jamaica needs to separate home port calls from the traditional port calls and then market and treat this segment differently as it has a longer supply chain and requires greater integration with the airline industry and other support services. Ultimately, there will be greater contribution to the economy through the multiplier effect.
The Caribbean market will get more aggressive over the next 4 years as the industry awaits the introduction of 30 mega ships valued at over US$12 billion, some of which will end up on this side of the world.
Prices for cruises have dropped dramatically, as cruise operators are trying to fill the excess capacity in stagnant economic conditions. Cruise operators are prospecting for cheaper destinations, as in the case of Carnival in the Bahamas, even calling their own private islands. Others are tapping new sources of income through the introduction of on-board advertisement systems, thereby offering Caribbean island entrepreneurs the possibility to promote their services and products.
As cruise lines are perusing policies of destination diversification to absorb some of the capacity growth there is no doubt the Caribbean will remain the major cruise area for the foreseeable future:
One of the strong points is the large number of accessible islands, which enable cruise lines to offer port-a-day cruises without the need for steaming at high speed between ports-of-call.
Another advantage is that the Caribbean is relatively easy to access from most of North America, which is by far the major source market for cruise sales.
The Bahamas is almost exclusively served by ships home-porting in Florida ports. The most popular cruise market is that of the three and four-day cruise out of Florida. Geographically, the Bahamas is ideally suited as a destination for these ships, particularly as the ships are able to slow steam and still reach a "foreign port". Typically, cruises for the Bahamas include one to three day trips. Disney Cruise Vacations, a subsidiary of the Walt Disney Corporation, for example, has recently entered the cruise market, offering three to four day cruises from Port Canaveral to a private island in the Bahamas. These cruises are being packaged with trips to Disney's theme parks in Orlando. In contrast to the Bahamas cruise market; the rest of the Caribbean market is characterised by longer cruises, ranging typically from seven to 11 days. Recent shifts have shown a shift from Eastern to Western Caribbean destinations.
In 2003, Jamaica along with the Bahamas posted the highest head tax rate of $15/passenger followed by Puerto Rico with $10.30/passenger. Dominican Republic posted a rate of $1.00 while the Cayman Island $2.00 per head. Trinidad & Tobago posted $5.00 per head, Key West, Florida posted $8.00 while St. Croix, St. Martin and Martinique posted Zero dollars. Jamaica's average total costs per call to cruise lines amounts to US$34,309, Freeport US$34,655, making them the two most expensive Caribbean ports, while Puerto Rico has a rate of US$27,836, and Trinidad & Tobago US$14,022 per call, and the least expensive, Dominican. Republic US$1,950. This clearly puts Dominican Republic in a more favourable position than Jamaica to be chosen as homeport destination.
WHERE DO WE WANT TO GO AS AN INDUSTRY?
The question is:" Where do we want to go as an industry?" Jamaica needs to decide if it will settle for being a port of call or does it want to become a major homeport destination - To become a major homeport destination the country needs to accomplish the following:
Number one on the list is the continuous improvement in security as the perceived threat of terrorism and drug smuggling continues to haunt us and threaten the viability of the industry.
It is commendable that our road infrastructure is now being upgraded through highway 2000 and the need is to ensure this connects Negril with Port Antonio thereby reducing the time between airport, attractions and port of call. This is vital as cruise ships only stay in port for an average of eight hours and so attractions that will take up more than one and a half hour return in travel time becomes unattractive. Good road and communication networks are vital to the growth of this industry.
It is laudable that some larger tour operators have invested into better packaging for their tour products, which has got favourable feedback. We still have a lot more variety, which can yield greater value to visitors.
It is quite clear that Ocho Rios is bursting at the seams as for every three vessels occupying a berth, one have to settle for a less desired option or do not call at all. There is a need to expand Ocho Rios facilities to offer more berthing. Lucea port has tremendous potential and will not need much to develop and should be considered seriously and quickly as it could serve both as a port of call and an alternative home port owing to its proximity to the popular trade lanes (Grand Cayman).
There is a growing demand for homeports and Jamaica must expand value added services offered to the vessels. For many years cruise ships were demanding refuelling or bunkering services in Ocho Rios, which could not be efficiently offered. Also, there is need for garbage disposal and sludge removal services.
The viability of Jamaica's cruise industry rests upon competitive pricing and perceived value. Despite the fact that the more than 80 per cent of the world cruise market is controlled by three major lines, they offer 18 different brands. We need to operate as a port of call. The time has come to look at increasing earnings through the provision of more value-added service to cruise lines and not through elevated taxes. Much creativity and a broader focus are required in order to seize and fully exploit this growing market. Whatever happens, time is crucial, as existing opportunities could become tomorrow's regrets.
Fritz Pinnock is the Managing Director - Lannaman & Morris (Shipping) Limited. Harry Maragh - Executive Chairman & CEO - Lannaman & Morris (Shipping) Limited and also President of SAJ.
