Cruise Tourism Generates Jobs & Income

Cruise Tourism generates

jobs and income

The cruise industry in Malta needs to have a proper economic impact analysis of cruise tourism. Without it, one can neither evaluate exactly the contribution that the cruise industry is making and can eventually make to the Maltese economy, nor strategically plan ahead to maximise our resources. Without it, we are on the losing side. Having such an analysis means knowing the present parameters and therefore this will be an excellent launching pad for the Maltese cruise industry development plan for the coming years.

After all, how else can the industry stakeholders form an objective assessment of the potential of this tourism segment? This applies equally to all those impacted by the industry, from policy makers to the general public. It also applies

Joshua G Giordimaina

to those members of the tourism industry who could benefit with further product growth strategies, such as hoteliers and airlines, with the advent of homeporting.

Business Research and Economic Advisors, as engaged by the European Cruise Council and its partners. This study makes for some eye-opening reading.

So forgive me for not being able to explain in detail the contribution of cruise tourism to the various segments of the Maltese economy. In view of the lack of this material, we are left with only one option: refer to studies undertaken at a European level, extrapolate meaningful research findings, and contextualise them to the scenario in Malta.

A European growth industry

Our point of reference? The comprehensive analysis “Contribution of Cruise tourism to the economies of Europe” undertaken by G. P. Wild (International) Limited and

The first thing to get your attention within this report is the phenomenal growth of cruise tourism in Europe and its economic significance. In 1996, an estimated 1.2 million Europeans cruised, but by 2006 this figure had nearly trebled to 3.4 million, representing an increase of 183%. A 17% growth in 2007 has taken the figure to a record high of 4 million. In 2006, cruise industry direct expenditures increased by 27% over 2005. In turn, they generated

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a 25% growth in total output, a 20% expansion in total employment and a 25% increase in employee compensation.

Which European countries benefit the most and in what way?

These economic impacts included the following:

Different countries benefit in different ways. Some were able to take a bigger share of the total direct spending.

• €10.6 billion in direct spending by cruise lines and their passengers, • €23.9 billion in total output, • €225,586 full-time equivalent jobs, and • €7.5 billion in employee compensation.

For example, Italy managed to grab 30% (€3.2 billion) as the leading centre for cruise ship construction in Europe, and for being the largest cruise embarkation and destination market.

Where does the income come from? The typical argument about cruise tourism goes something like this: “Ships are here only for a day, and their passengers are rushed from one place to the next. At most, they stop for a coffee and a souvenir! There is only so much that the country can benefit from these one-day visitors.” This argument is quickly proved wrong when one looks more closely at how cruise tourism operates, and more specifically at what services and products are required to sustain this industry and its growth.

Construction and maintenance of cruise ships plays such an important role that the four major centres for cruise ship construction, Italy, Finland, Germany and France, not only accounted for 88% of shipbuilding expenditure, but also for 62% of total industry expenditures in Europe during 2006. This is, of course, fuelled mostly by the large number of ships on order from the major cruise operators to increase their capacities, to keep up with future demand and in their continuous search for cost efficiency. But construction and maintenance is not the sole source of income for European countries.

Where did the €10.6 billion in direct spending by cruise lines and their passengers go? These expenditures were derived from four major sources: • Cruise passengers, • The construction and maintenance of cruise ships, • Cruise line purchases in support of their operations, and • Compensation of cruise line administrative staff and crew in Europe.

33%

19%

The €10.6 billion in direct expenditures throughout Europe in 2006, as indicated in the following figure, were broadly distributed across the major source segments. Furthermore, throughout Europe during 2006, cruise tourism expenditures generated €3.6 billion in compensation. This compensation included that received by employees of the cruise lines, direct suppliers to the cruise lines and the employees of establishments providing goods and services to cruise passengers.

Where does Malta stand? In a rather good position actually. According to the same report, with €77 million in total compensation impacts, Malta accounted for 1% of the total European impact. Furthermore, with 382,400 passengers in 2006, Malta ranked in the 8th position, with a market share of 2.4% of total European cruise passengers. Businesses in virtually every sector of the economy can be positively impacted by the cruise industry here in Malta. On the “Direct Cruise Industry Expenditures

Direct Cruise Industry Expenditures in Europe, 2006 Passengers Purchases

9%

Value of Shipbuilding 39%

Cruise Employees Compensation Cruise Line Purchases

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by Country 2006” (ECC) ranking, Malta ranked 11th with €100 million in direct spending, a 7.8% growth from 2005, and accounting for 1% share of the total. This is not to be underestimated – especially when one considers that Malta is a single-port country and primarily a destination market. In fact, Malta was the first single-port destination on the ECC ranking, with all preceding countries having multiple ports.

But isn’t this enough? Of course, having a cruise tourism impact analysis focused on the cruise industry in Malta would give all stakeholders a much clearer and more detailed picture of the benefits – not to mention a measurement tool for the eventual development of product-market growth strategies. However, lacking that information, we can reach certain conclusions by inference. As a start, one would do well to take a close look at the performance of other European countries and use them as benchmarks. Doing this, one immediately notices that the best performers participated in ALL segments of this industry, and not just by being

destination markets. This can be seen for example with Italy, UK and Germany. Together they accounted for almost two-thirds of the direct expenditures of the cruise industry. This means that, as a country, we need to step up our game in all segments. This can be achieved by being a source market for cruise passengers, promoting Malta to cruise companies to maintain headquarters facilities and providing crew, providing shipbuilding and repair services, providing provisioning and fuelling of cruise ships and other products and services and, of course, improving our product offer so passengers spend more of their money in Malta.

So the next time you see a cruise liner entering our Grand Harbour, think beyond the number of passengers onboard and into the infinite possibilities that are open for virtually every business sector in Malta. Feedback and further discussions on these issues are more than welcome, and can be addressed to Joshua G Giordimaina, VISET Malta plc, [email protected]

This should be coupled with targeted and aggressive marketing in the major source markets for cruise passengers, to generate enough brand appeal to turn Malta into a “must-see” destination for cruise passengers while making it more saleable to itinerary planners. Such a wide embrace will give Malta the possibility of capitalising more on the growth of cruise tourism in Europe, and create positive ripple effects across the whole economy.

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