We can’t and shouldn’t support mega cruise ships

The case was made before, mega cruise ships aren’t the answer to reviving tourism.  We simply can’t compete on volume and need to include the tax cruise ships place on our infrastructure when considering whether they are a net add to our tourism industry.

It is increasing becoming clear that we managed the problems caused by the influx of cruise ships by throwing money at the problem, money we did not have.  Our bus schedules were heavily reliant on lucrative overtime pay to maintain the chaos that includes thousands of tourists flooding our transit network.  Now that the funding has dried up and we’re forced to cut costs, the system is decending into chaos.

The evidence is mounting to support our warnings of a few years ago that the model does not work.  It is important to ask what impact cruise ships have and whether we should be in the volume tourism business or not.  Volume tourists means they pack our streets, pack our buses, pack our best beaches and strain our infrastructure and yet because they’re here on volume, they expect ‘discount’ to be included.

The tourist paying $600 a night to stay at a hotel gets second class treatment when our best beaches are packed, buses are full, taxies huddle around the cruise ships but are absent elsewhere and businesses cheapen their products trying to cater to discount.  We offer a poorer product which simply cannot compete with larger islands who can manage discounted volume tourism.  It damages our product and our reputation to trade for short term gains in visitor statistics for long term declines in visitor spending.  Thus we reiterate our calls to go for quality over quantity and focus on providing the best product, not the cheapest.

 

 

Death by volume

Chatting with a tour operator friend reveals hearsay evidence of what we’ve
long suspected and will likely be confirmed by statistics (if they’re released)
that volume tourism means more is less.  Our friend tells us that since the new
mega ships can cut costs based on volume, cruises have become more accessible
for lower classes of tourists.  While indeed everyone deserves a vacation it
sounds like a far cry from the type of tourists we used to cater to and a lot
less likely that they’ve got the disposable income to blow to sustain our
own.

The word on the ground suggests that tourists who hunt for the cheapest
vacation are not proving to be big spenders when it comes to leaving the ship.
Dockyard restaurants are described as being as busy for lunch as dinner on a
Friday or Saturday night.  Not packed, but reasonably filled.  That may seem
reasonable until you realize that two cruise ships means and extra 6000 people
and they usually aren’t here on the weekends.

As we’ve
covered before
, while government may get it’s head tax to slowly pay off the
many millions it’s invested in the dockyard piers, are
Bermudians really better off?  More volume
means a higher expectation for price competition.  More price competition means
lower profits for higher people served.  Lower profits for higher people served
means lower wages and more stress.  Higher people served means higher
frustration and lower quality of service.  Lower wages means more low skilled
expats filling jobs Bermudians could have been filling.  More low skilled expats
means more packing into homes saving every penny so they can live the good life
when they return to their own home countries.  It seems everyone is winning,
except Bermudians.

Let’s remember, cruise ship profits are funneled off island.  That means all
jobs on the cruise ships are foreign as are most earnings.  We collect no taxes
from those workers.  All spending on accommodation, food and entertainment (even casinos) on
those cruise ships all goes to the cruise ship companies.  Taking a cursory view
here, for all the money we’ve blown on the new piers and all the hassle we’re
going through over the “’we’re risking destroying tourism if we don’t approve
casinos on cruise ships’” we well could have skipped the middle man, spent the
pier money on purchasing and outfitting our own luxury cruise ship and had
all spending go to Bermudians and Bermudian businesses.  Just a thought.

The Louis Vuitton of tourism

It’s no secret that Bermudians love Louis Vuitton.  Pay 10 times the price for a product of the same quality simply because of it’s name and recognized brand.  Somehow buying someone else’s name makes your own image seem more reputable.  As my father always tells me, “Son, you get what you pay for” and you can’t argue with the fact that with Louis Vuitton what you’re paying for is branding and exclusivity.

Compare Louis Vuitton’s approach to the one we use for Bermuda tourism.  We’re pandering to the lowest denominator in order to tout the highest “arrival” numbers while not paying attention to what really matters: $$$.  Cruise ships and discount tourists are our business as we think we can compete with the rest of the Caribbean in this market.  It’s saddening.  Ask most Americans what they think of Bermuda and their likely response is “who?  Oh, you mean one of those Caribbean islands?”, though we’re not even in the Caribbean.  To the outside world and those who haven’t witnessed the beauty of our tranquil waters and uniqueness of our architecture and culture, Bermuda is just another island.

The Bermuda I dream of is one that is like the Louis Vuitton of tourism.  I dream of Bermuda being a name so reputable and exclusive that when someone says they went to Bermuda on vacation, jaws drop open in disbelief and envy.  Bermuda should be prestigious, exclusive and the place where everyone wishes they could be and are willing to pay a premium to say they were here.

As I’ve said before, cruise ships are not the answer.  Cruise ships are like Louis Vuitton introducing a wal-mart line of products.  If Louis Vuitton carried a wal-mart line that anyone could buy, it would kill the exclusivity of the brand.  Cruise ships make Bermuda accessible to the “wal-mart” of tourists.   There is of course nothing wrong with the “wal-mart” class of tourists, only that they’re further down the long tail.  Making money on the “wal-mart” class requires targeting large volumes for little profits.  This model works perfectly in large Caribbean destinations but on our tiny little island, we’re easily strained.

Today most hotels are packed with foreign workers.  Why?  Because the profits are so slim that you can’t pay people very well and thus the demands of the jobs are not attractive for Bermudians.  Our cost of living is already high enough.  If we were the Louis Vuitton of tourism, the exclusivity and quality of product offered would allow us to charge 10 times the price of other accessible destinations of similar quality.  Being the Louis Vuitton of tourism means we can greatly increase our profit margins while decreasing the overall numbers of tourists.  If our profit margins were larger, we could pay our people more.  If we attracted high rollers, it would be lucrative to work in the tourism industry rather than a struggle.  Bermudians would have options other than international business again.

The case against cruise

Some people may see the loss of cruise ships in Hamilton next year as a bad thing.  Personally, I think it’s great.  I believe cruise isn’t worth the time or money we spend on it.

Courtesy of data compiled from the Caribbean Tourism Organization, Quarterly Bulletins of Statistics and yearly Bermuda Digest’s of Statistics, here is a breakdown to support my case.

 

Here is a chart of Air vs. Cruise arrivals.   What you’ll note is that while overall arrivals are up considerably since 1998, they are largely comprised of a heavy increase in cruise visitors over air visitors.  Cruise visitors attributing significantly more than they did in 1998 while air visitors still lagging 1998 numbers.

 

Here is a chart of average visitor expenditure.  What you’ll note is that while the total average expenditure for both cruise and air visitors combined hovers around $1400, air visitors heavily outperform cruise by about 6 to 1.

 

Each air visitor contributes 6 times as much to the local economy as each cruise visitor which is demonstrated by the next chart.  Note how most of the increase in expenditure came from air visitors and not cruise.

 

Despite total arrivals being way up according to the first chart, some 75,000 more visitors in 2006 than there were in 1998, we actually earned $30 million less.

Does this suggest that we should be focusing all of our energy on maximizing the expenditure of air visitors?  Perhaps by improving the quality of their stay we could do without cruise visitors entirely?   Here’s some food for thought.  Look at the total expenditure graph for 2006 and note how the air expenditure for 2006 matches the total expenditure for 2005.  That means if we’d had no cruise visitors in 2006 we still would have made just as much money as in 2005.

Less cruise means less people on our roads, our beaches, less garbage, less power consumed, and more for us and our air based tourists.  Should we be focusing 100% of our energy on ensuring a quality and prestigious vacation for air visitors in order to improve Bermuda tourism and forget about cruise all together?

Is a tourism crisis looming on the horizon?

The following was sent in as a letter to the editor that is to have appeared in last friday’s edition of The Royal Gazette.  Unfortunately I could not find it online so I cannot provide a link.

Who out there is still reeling from the shock of the Southlands hotel announcement? Does it make sense to destroy some of the last truly historic representations of Bermuda for all generations to come in order to build a nice fancy 5 star hotel? Is it worth the sacrifice of our environment? Is it worth the strain on our infrastructure? Is it worth the extra cars on our roads, the extra people in our streets and extra ex-pats on work permits? Worse, what happens when we start to see the impacts of the new US passport requirements introduced in January?

“We don’t have any unemployment” claims Immigration Minister Derrick Burgess in a Feb 28th Royal Gazette article. If we have no unemployment, how are the hundreds of jobs of this proposed hotel going to be filled?

“If we do not have the capacity as a community to meet the work force demands of the construction … management and operation of the development …, we simply place additional stresses on our social infrastructure in the area of affordable housing, increased traffic congestion, additional stress on our already struggling health care system, increased crime and so on” suggested director of professional and career education at Bermuda College, Dr. Euginie Simmons.

Where are all of these extra workers going to be housed? A 10 Storey Housing Complex has been proposed as part of the plan. This when there are now more then 583 people on the housing waiting list, do we not have bigger concerns on our hands? If we must use special development orders and build 10 Storey housing complexes, why are we not using them for our people first and foremost? Why are we not solving the crisis at hand rather then taking the piecemeal approach of building housing that is barely affordable for many Bermudians?

“The intention is to take Bermudian staff to Jumeirah hotels overseas as part of their training programme so they can learn and match the high standards of the luxury hotel chain”, suggested one Royal Gazette article on the project. Who are these Bermudians? Who will be paying for the travel and training? How are they going to be convinced to live in the desert in 118 degree heat in order to get trained on working here?

Top CEO’s know to ask themselves a very simple question whenever they are approached with a new idea of how to do things better. “What problem does it solve?” Ask yourself this same question, what problem does this hotel project solve? Is it possible we’re creating a solution for which there is no problem? So much so that it needs to be rushed without following proper planning procedure that could result in a development worse then Berkeley?

Why do we need a new 5 star hotel? Why do we need 300+ new suites when we only have a short peak season and many days out of the year our hotels struggle to fill rooms? Again, are we creating a solution for which there is no problem? Bermuda needs to do more about tourism itself long before it gets more new rooms. It needs to improve the level of service at our present hotels. We need a better nightlife, better daytime entertainment, more activities and events to draw people here. How are we going to improve the attitudes of those working in our service industry? A casino isn’t the answer, its nothing new, it’s been done before and will only bring more problems.

What happens if the new US requirement for American citizens to have a passport to reenter the country causes a major drop in our tourist figures? According to an August edition of the New York Times, only 27% of Americans are believed to have passports. What happens if the vast majority who would have chosen to take a Bermuda vacation instead opt to travel within the US rather then go through the hassle of getting a passport?

“This is going to have a tremendous negative impact” said Roger Dow, president of the Travel Industry Association, which represents the nation’s largest airlines, hotels, cruise lines and car rental companies. “We’re going to have a chaotic situation upon us.”

Last year, 20 percent to 30 percent of cruise passengers used passports as documentation, with the rest using birth certificates or driver’s licenses, said Brian Major, spokesman for the Cruise Lines International Association.

According to Bermuda4u.com, in 2006, 298,973 visitors arrived by air and 336,299 by cruise ship. What happens if some 70% or 235,000 cruise visitors and 209,000 air visitors decide to travel locally in the US rather then putting up with the hassle of meeting the new passport requirements? If even 30% of our visitors don’t show up and tourism represents some 12.6 percent of our $4.857 billion Gross Domestic Product (GDP) like it did in 2005, that represents nearly $175 million that won’t flow into our economy this year alone. If as many as 70% opt not to get passports, that is more then $400 million or an 8.4% drop in our overall GDP. That amounts to more then $6000 for each of the estimated 65,000 people on our island that won’t be flowing into our economy.

Dr. Brown may be very pleased with his ‘banner year’ of arrivals (note that the figure is measured in ‘visitors’ and not tourists), which are up some 23.2% this year. However, one must admit that some things may be out of his control. Let’s roll back a year. Do you remember what happened to the Club Med deal? What happens if we have a large downturn in actual tourist arrivals and very suddenly Jumeirah backs out like KJA did?

Will Southlands be as fruitful as the web that is being weaved around it? Does it make sense to destroy some of our last truly historic representation? Is it worth the sacrifice of our environment, the strain on our infrastructure, the extra cars on our roads, extra people in our streets and extra ex-pats on work permits? Will we truly face a tourism crisis when we start to see the impacts of the new US passport requirements introduced in January? Time certainly shall tell.