the contribution of the north american cruise industry to the u.s. economy in 2009

8/7/2019 The Contribution of the North American Cruise Industry to the U.S. Economy in 2009

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Business Research & Economic Advisors

P.O. Box 955

Exton, PA 19341

The Contribution of the North American Cruise

Industry to the U.S. Economy in 2009

Prepared for:

Cruise Lines International Association

June 2010

BREABusiness Research &

Economic Advisors


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Cruise Lines International Association 2009 U.S. Economic Impact Analysis

Business Research and Economic Advisors Page1 July 2008

Table of Contents

EXECUTIVE SUMMARY .............................................................................................. 2THE CONTRIBUTION OF THE NORTH AMERICAN CRUISE INDUSTRY TO THE U.S.ECONOMY ........................................................................................................................ 6COMPARISON TO THE NATIONAL ECONOMY AND THE TRAVEL AND TOURISM SECTOR . 10THE CONTRIBUTION OF THE NORTH AMERICAN CRUISE INDUSTRY TO INDIVIDUAL STATEECONOMIES.................................................................................................................... 13

SECTION I: IMPACT OF THE NORTH AMERICAN CRUISE INDUSTRY ON

THE U.S. ECONOMY IN 2009 ..................................................................................... 18SPENDING IN THE U.S.ECONOMY GENERATED BY THE CRUISE INDUSTRY.................... 25

Direct Economic Impacts in the United States During 2009 .................................... 28Indirect and Induced Economic Impacts in the United States During 2009 ............ 39Total Economic Impacts in the United States During 2009 ..................................... 42

SECTION II: THE CONTRIBUTION OF THE NORTH AMERICAN CRUISE

INDUSTRY TO THE U.S. ECONOMY BY STATE IN 2009 .................................... 46ECONOMIC IMPACTS IN THE TOP TEN STATES................................................................ 47

Florida ...................................................................................................................... 50California .................................................................................................................. 53Texas ......................................................................................................................... 55New York ................................................................................................................... 57Alaska ........................................................................................................................ 59 Washington ............................................................................................................... 61Georgia ..................................................................................................................... 63Illinois ....................................................................................................................... 65Massachusetts ........................................................................................................... 66Colorado ................................................................................................................... 68Hawaii ....................................................................................................................... 69

ECONOMIC IMPACTS IN THE REMAINING STATES ........................................................... 71APPENDIX ISTATE IMPACT METHODOLOGY ............................................................... 73APPENDIX IIINDIVIDUAL STATE TABLES.................................................................... 77

SECTION III: GLOBAL INCOME OF THE NORTH AMERICAN CRUISE

INDUSTRY IN 2009 ..................................................................................................... 104GROSS REVENUES........................................................................................................ 104OPERATING EXPENSES ................................................................................................. 106ADMINISTRATIVE EXPENSES ........................................................................................ 106DEPRECIATION AND AMORTIZATION............................................................................ 107OPERATING INCOME .................................................................................................... 107EXPANSION OF THE NORTH AMERICAN FLEET THROUGH 2011 ................................... 108


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Business Research and Economic Advisors Page2 June 2009

Executive Summary

Clearly, 2009 was the most challenging year faced by the North American cruise industry in

recent memory. The global economic downturn, which many have called the Great Reces-

sion, officially began in the United States in December 2007. While no official date has been

set for its conclusion economic data released by the federal government suggests that it likely

concluded during the third or fourth quarter of 2009 when the growth in real gross domestic

product turned positive. However, even as Gross Domestic Product (GDP) rebounded, em-

ployment continued to fall and the unemployment rate continued to increase through De-

cember 2009. By the end of 2009, total U.S. employment had fallen by 5.5 million jobs from

the end of 2008 and 6.2 million from the end of 2007. Similarly the national unemployment

rate rose from 5.4% in December 2007 to 7.4 in December of 2008 and to 10.0% in De-

cember of 2009. Thus, most of the negative impacts of the recession occurred during 2009.

With the deteriorating labor market, especially during 2009, real (inflation adjusted) consum-

er expenditures began to contract, falling by 0.25 percent in 2008 and 0.6 percent in 2009.

Spending for discretionary goods and services was even more negatively impacted. During

2009, real consumer expenditures for transportation services fell by 3.7 percent, recreation

spending declined by 1.3 percent and spending for food services and accommodations fell

by 2.9 percent. Thus, the cruise industry and the entire travel and tourism sector were oper-

ating in an economic environment in 2009 in which consumers were steadily reducing their

spending particularly for discretionary services.

The challenge of filling cruise ships in this environment was made more difficult by the fact

that the industry experienced acceleration in capacity growth from 2008. On a net basis, the

North American fleet added six ships with a combined 5.2 percent increase in lower berth ca-

pacity to 284,754 berths. A total of 11 new ships were added while 5 ships were removed from

the fleet. The major additions included: RCCL Oasis of the Seas (5,400 pax); Carnival Dream

(3,652); MSC Splendida (3,300); Costa Pacifica (3,000); Celebrity Equinox (2,850); and Costa

Luminosa (2,260). The principal removals included: RCCL Sovereign of the Seas (2,274); Cele-

brity Galaxy (1,870); Carnival Holiday (1,462); andNorwegian Majesty (1,460).

As indicated inTable ES-1, the net increase in ships and lower berths resulted in a 3.8 per-

cent increase in the number of available bed days in 2009. Even with the decline in consum-


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er spending and the increase in capacity, the industry was able to increase passenger carryings

by 3.0 percent to 13.4 million. The average length of a cruise increased marginally from 7.18

days in 2008 to 7.27 days in 2009 while the capacity utilization increased slightly from 104.2

percent in 2008 to 104.6 percent in 2009. With the slight increase in the average length of a

cruise, purchased global passenger bed days1 increased more rapidly than passenger carry-

ings, 4.2 percent versus 3.0 percent.

Table ES-1 Global Summary Statistics for the North American Cruise Industry, 2006 - 2009

Number of ships and lower berths are for CLIA ocean-going vessels only.

Bed day figures are for CLIA member lines only.

Source: Business Research & Economic Advisors and Cruise Lines International Association

On the financial front, with weakening demand and increased capacity the cruise industry

experienced an 11.4 percent decline in gross revenues to $22.1 billion in 2009. Revenues per

passenger declined by 14.0 percent to $1,641 while revenues per passenger day fell by 14.9

percent to $226. The principal factor behind the decline in gross revenues was a 12.6 percent

decline in cruise fares as base fares were reduced by all lines to maintain full capacity on-

board their ships. But other revenues sources were not immune to soft demand as all other

revenues, primarily onboard revenues, declined by nearly 8 percent.

With respect to passenger carryings, the growth in the United States was not as strong. First,

the cruise industry continued to increase its European presence. Second, the dollar contin-

ued to decline relative to the Euro throughout 2009 which favored dollar-denominated

cruises relative to land-based vacations in Europe. Third, the industry also increased the

number of Caribbean ports used for cruise embarkations. Fourth, cruises in both the Ha-

waiian and Alaskan markets continued to contract. As a result, the United States not only

1 Passenger bed days are the number of days that all berths were occupied during 2009. For example, asingle passenger on a 7-day cruise represents one passenger carrying and 7 passenger bed days.


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continued to experience a decline in its share of global cruise activity but experienced an ac-

tual decline in the number of passengers embarking from U.S. ports. During 2009 passenger

embarkations at U.S. ports totaled nearly 8.9 million, a 0.7 percent decline from 2008 and 3.1

percent decrease from 2007. Consequently, the U.S. share of global embarkations continued

its slide to 66 percent (seeTable ES-2).

Table ES-2 Operating Statistics of the North American Cruise Industry in the United States,2006 2009

Source: Business Research & Economic Advisors and Cruise Lines International Association

As recently as 2004, U.S. ports accounted for 77 percent of global passengers. There were

two primary factors which caused the decline in passenger embarkations from U.S. ports.

1. As indicated above, the North American cruise industry is continuing to increase itspresence throughout Europe. In 2009, the industry deployed 61 ships with a com-bined capacity of 77,300 lower berths. This represented an 8 percent increase from

2008 and a 75 percent increase from 2005.

2. Perhaps, most important to the decline in U.S. embarkations was the deployment ofa single ship in Hawaii, NCL's Pride of America, and the redeployment of ships sailing

from Pacific coast ports to Alaska. As a result, embarkations in Hawaii and the Pacificcoast ports declined by 230,000 passengers, more than offsetting the increase of160,000 passenger embarkations among the remaining U.S. ports.

The growth of U.S. resident cruise passengers had been steadily declining for 5 years and

finally turned negative during 2008. This growth has steadily slowed from 13.9 percent in

2004 to -1.7 percent in 2008. A bright spot for 2009 was that the number of U.S. residentcruise passengers increased by 1.5 percent during 2009 offsetting most of the decline expe-

rienced during 2008. The fact that U.S. embarkations declined during 2009 even as the num-

ber of U.S. resident passengers increase is directly related to the growth of U.S. residents

purchasing European cruises from the North American lines.


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Similarly, the growth in spending by the industry and its passengers in the United States also

declined, falling by 10.1 percent to $17.15 billion in 2009. This was the first year in which

domestic spending by the cruise industry declined since BREA began compiling these statis-

tics in 1997. The $13.84 billion in expenditures by the cruise lines for wages, taxes and goods

and services accounted for 81 percent of the direct spending and was a decrease of 11.7 per-

cent from 2008. Cruise lines' direct expenditures for goods and services (including capital

equipment) declined by 12 percent while payments for wages and taxes made by the cruise

lines in the United States decreased by 8.2 percent.

The $3.3 billion in passenger and crew spending for transportation, accommodations, food

and other retail accounted for the remaining 19 percent and declined by 2.7 percent from

2008. This was the second consecutive year in which passenger and crew spending declined,

although the 2.7 percent decline during 2009 was an improvement over the 6.3 percent de-

cline in 2008. The decline during 2009 was the result of a 2.0 percent decline in passenger

and crew visits and a 0.7 percent decline in the average expenditure per visit.

The major characteristics of the cruise industrys activity during2009 are as follows:

By year-end 2009, the cruise industrys fleet showed a net increase of 6 vessels to167 vessels with a combined capacity of 284,754 lower berths (see Table ES-1).

During 2009, the industry carried an estimated 13.44 million passengers on cruis-es around the globe. This represented a 4.8 percent increase from the previousyear.

Data published by Cruise Lines International Association (CLIA) shows that anestimated 9.4 million U.S. residents took cruise vacations throughout the worldand accounted for 70 percent of the industrys global passengers.

An estimated 8.9 million cruise passengers embarked on their cruises at U.S.ports during 2009, accounting for 66 percent of global embarkations andrepresented a 0.7 percent decrease from 2008. Florida, whose ports handled ap-

proximately 5.3 million embarkations, accounted for 59 percent of all U.S. cruiseembarkations, an increase of 2 percentage points from 2008.

The cruise lines and their passengers directly spent $17.15 billion on goods andservices in the United States, a 10.1 percent decline from 2008. The cruise linesspent $13.84 billion while passengers and crew spent $3.31 billion.


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The Contribution of the North American Cruise Industry to the U.S.

Economy

As discussed above, 2009 was a year in which the North American cruise experienced a

double digit decline in gross revenues and their subsequent spending with businesses in the

United States. As indicated inTable ES-3, passenger embarkations at U.S. ports declined by

0.7 percent in 2009 to 8.9 million. This decline was a slight improvement over 2008 when

embarkations fell by 2.4 percent. Nonetheless, the growth in U.S. embarkations has been

steadily declining since 2004. The continuing decline in the growth of embarkations in the

U.S. has resulted in a steady reduction in the rate of growth in passenger and cruise line

spending. After increasing by 9.0 percent in 2006, the growth in direct cruise industry ex-

penditures in the U.S. slowed to 6.0 percent in 2007 and 2.1 percent in 2008 and then de-

clined by 10.1 percent in 2009, totaling $17.15 billion for the year.

Figure ES-1 U.S. Embarkations by Port, 2008 and 2009

Source: U.S. Cruise Ports and MARAD, U.S. Department of Transportation

The expenditures by the cruise lines and their passengers and crew generated employment,

income and other economic benefits throughout the U.S. economy. These economic bene-

fits of the North American cruise industry arise from five principal sources:


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spending by cruise passengers and crew for goods and services associatedwith their cruise, including travel between their places of residence and theports of embarkation and pre- and post-cruise vacation spending;

the shoreside staffing by the cruise lines for their headquarters, marketingand tour operations;

expenditures by the cruise lines for goods and services necessary for cruiseoperations, including food and beverages, fuel, hotel supplies and equipment,navigation and communication equipment and so forth;

spending by the cruise lines for port services at U.S. ports-of-embarkationand ports-of-call; and

expenditures by cruise lines for the maintenance and repair of vessels at U.S.shipyards, as well as capital expenditures for port terminals, office facilitiesand other capital equipment.

The total contribution of the cruise industry to the U.S. economy is the sum of the direct

and indirect economic impacts. The direct impacts consist of the expenditures made by the

cruise lines and their crew and passengers during the course of providing or taking cruises.

These include cruise line expenditures for headquarters operations, food and beverages pro-

vided onboard cruise ships and business services such as advertising and marketing. Addi-

tionally, cruise passengers and crew purchase a variety of goods and services including cloth-

ing, shore excursions and lodging as part of their cruise vacation or as part of a pre- or post-

cruise stay. These types of expenditures are included in the direct cruise industry expendi-

tures.

The expenditures of cruise line vendors and those businesses that provide the goods and

services to passengers and crew generate the indirect impacts. For example, food processors

must purchase raw foodstuffs for processing; utility services, such as electricity and water, to

run equipment and process raw materials; transportation services to deliver finished prod-

ucts to the cruise lines or wholesalers; and insurance for property and employees.

The major economic impacts of the cruise industry during 2009 as shown in Table ES-3were as follows:

Cruise passenger embarkations at U.S. ports declined by 0.7 percent during2009 and totaled 8.9 million.


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The $17.15 billion in direct spending by the cruise lines and their passengerswas a 10.1 percent decrease from 2008 and generated 134,494 direct jobspaying $5.48 billion in wages and salaries.

Table ES-3 Economic Contribution of the North American Cruise Industry, 2006 - 2009

* Includes wages and salaries paid to U.S. employees of the cruise lines

Source: Business Research & Economic Advisors and Cruise Lines International Association.

The industry spent $8.81 billion in the core cruise travel sector, primarilytransportation services and passenger and crew spending. This spendinggenerated 96,285 jobs and wage income of $3.65 billion. (seeTable ES-4)

The cruise lines directly employed an estimated 26,000 U.S. residents asshore-side staff and crew members, and paid them wage income of $1.1 bil-lion.

Cruise passengers and crew spent $1.53 billion in non-transportation ex-penditures creating an estimated 19,080 jobs in the retail trade, restaurantand lodging industries. These jobs generated $439 million in wage income.

Cruise lines spent another $8.34 billion for goods and services from suppli-ers in the United States in support of their global cruise operations. Thisspending created an estimated 38,208 jobs in virtually all industries and gen-erated $1.83 billion in wage income.

Including the indirect economic impacts, the spending of the cruise lines andtheir crew and passengers was responsible for the generation of $35.1 billionin gross output in the United States, a 12.8 percent decrease from 2008.This, in turn, generated 313,998 jobs throughout the country paying a totalof $14.23 billion in wages and salaries (see Table ES-5).


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Airline Transportation $1.9 Billion in Output 10,692 Jobs Wholesale Trade $1.8 Billion in Output 13,155 Jobs

Table ES-5 Total Economic Contribution of the North American Cruise Industry in 2009

Source: Business Research & Economic Advisors.

Comparison to the National Economy and the Travel and Tourism Sector

As the preceding analysis indicates the North American cruise industry was not able to avoid

the serious consequences of the 2008-2009 recession. Throughout the current decade the

cruise industry has outperformed the national economy and the travel and tourism sector. As

shown in Figure ES-2, since 2000 the growth in the cruise industry's direct expenditures has

exceeded the growth in national personal consumption expenditures and direct output of the

travel and tourism (T&T) sector. By 2008, annual direct expenditures of the cruise industry

had increased by 85 percent, approximately double the 48 percent increase in annual person-

al consumption expenditures and the 40 percent increase annual direct output of the T&T

sector. Even with the 10.1 percent decline of direct spending by the cruise industry in 2009,

the cumulative growth in these direct expenditures was still 50 percent higher than the cu-

4 Includes banking, investment and insurance services.


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Figure ES-4 Total Output Impact of the Cruise Industry Compared to Other Economic Indica-tors, Index 2000= 100

Source: Business Research & Economic Advisors and the Bureau of Economic Analysis.

The Contribution of the North American Cruise Industry to Individual State

Economies

The economic impact of the North American cruise industry spread into every state econo-

my. Cruise passengers came from every state and the cruise lines made purchases in support

of their operations in just about every state. The principal location factors that influenced the

economic impacts by state were:

cruise lines headquarters and other facilities, ports-of-embarkation and ports-of-call, place of residence of cruise passengers, and place of business of cruise industry vendors.

As discussed above, 8.9 million cruise passengers embarked on their cruises from U.S. ports

in 2009. As indicated inTable ES-6, the top fifteen U.S. cruise ports accounted for 92 per-

cent of 2009 embarkations. This represented a decrease of 1.4 percentage points from 2008.

As indicated in Table ES-6, the top 15 share has been fluctuating between 92 and 94 percent

over the past several years.


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gory was largely a function of the decline in resident cruise passengers and the associated

direct spending, primarily travel agent commissions and transportation expenditures.

Table ES-7 Percentage Change in Direct Expenditures by State, 2009

The major economic impacts of the cruise industry by state during 2009 as shown in Table

ES-8 were as follows:

The economic impacts were concentrated in 10 states. These states ac-counted for 78 percent of the cruise industrys direct purchases in the Unit-ed States and 80 percent of the total employment and income impacts.

Total cruise passenger and crew visits to Florida totaled 7.6 million in 2009,a 2 percent increase from 2008. Combined, passengers, crew and cruise lines

directly spent $5.8 billion in the state in direct spending, accounting for justover 34 percent of the industrys direct expenditures. This spending generat-ed 115,093 jobs paying $4.9 billion in income. In addition, the state of Flori-da, the home of corporate or administrative offices for most of the cruiselines, accounted for just over half of the cruise lines U.S.-based employmentduring 2009.

California, like Florida, hosts both cruise line headquarters and ports-of-embarkation. During 2009, cruise passenger and crew visits totaled 1.6 mil-lion. With 11 percent of the industrys direct expenditures, California busi-nesses received $1.9 billion in direct industry spending which in turn gener-ated 42,297 jobs paying nearly $2.15 billion in wage income.


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Table ES-8 Total Economic Impact of the North American Cruise Industry by State, 2009

With just over $1.0 billion in direct spending and 15,541 jobs paying $788million in income, Texas accounted for approximately 6.1 percent of the in-

dustrys direct expenditures. While the impacts in Texas declined from 2008,Texas' ranking rose from 5th to 3rd as the declines in Alaska and Hawaii werehigher.

An estimated 627,000 passengers and crew visited New York during 2009, a17 percent decline from 2008. New York accounted for 6.1 percent of theindustrys direct expenditures with just over $1.0 billion in direct spending.


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These expenditures generated an estimated 13,135 jobs paying $744 millionin income.

Alaska benefits from the cruise industry primarily as a destination market.During 2009, the cruise industry produced 5.3 million passenger and crewvisits to Alaska destinations an 8 percent decrease from 2008. The state pri-marily benefits from cruise passenger spending for shore excursions, pre-and post-cruise stays, food and beverages and general retail. Because of thisspending, Alaska accounted for 6 percent of the industrys direct spendingwith $1.0 billion in expenditures generating 22,840 full- and part-time jobspaying $890 million in wage income. As a result of the 8 percent decline inpassenger and crew visits during 2009, direct expenditures declined by 16percent and the employment and wage impacts fell by 10 percent. Conse-quently Alaska's ranking fell from 3rd to 5th.

The state of Washington is the location of cruise industry administrative fa-cilities and a port-of-embarkation in Seattle. During 2009 an estimated

639,000 passengers and crew visited Seattle, a 2 percent increase over 2008.With $643 million in direct spending and 16,394 jobs paying $740 million inincome, Washington accounted for more than five percent of the industrysnational economic impact.

While Georgia has no direct cruise operations, it is a major source marketfor cruise passengers, making it a net exporter of cruise passengers, and alsosupports the industry with a wide range of goods and services. As a result ofthe activity of the cruise industry, Georgia businesses received $558 million,or 3.3 percent of the direct expenditures generated by the cruise industry inthe United States. These direct expenditures generated total economic im-

pacts of 8,836 jobs and $413 million in income throughout the Georgiaeconomy during 2009.

With the deployment ofa single ship in Hawaii, NCL's Pride of America, dur-ing 2009, passenger and crew visits to Hawaii destinations declined by 18percent to 482,000 during 2009 after falling by nearly 60% 2008. Directspending by the industry in Hawaii fell to $344 million, a decline of nearly37%, and generated 6,462 jobs (including the U.S. crew employees of NCLAmerica) paying $202 million in income. As a result, Hawaiis state rankingfell from sixth in 2007 to eighth in 2008 and now to eleventh in 2009.

The impacts in the remaining states were primarily generated by cruise pas-senger spending for air travel and cruise line purchases from vendors locatedin each of the states.


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Section I: Impact of the North American Cruise Industry on the

U.S. Economy in 2009

Over the past several years, we have noted the decline in the growth of passenger embarka-tions at U.S. ports. During 2007, the 9.2 million U.S. embarkations accounted for just over

73 percent of the industrys global embarkations, down from a 75% share in 2006. As shown

in Table 1, not only has that trend continued, but the absolute number of embarkations at

U.S. ports declined by 2.5% to just under 9.0 million in 2008 and then declined by another

0.6% in 2009 to just over 8.9 million. Passenger embarkations at all North American ports

declined by 2.8% from 10.2 million in 2007 to 9.91 million in 2008 and then by 0.5% in 2009

to just under 9.86 million. These were the first declines in passenger embarkations in North

America and the U.S. since BREA began collecting such figures in 1997.

Table 1 Global Embarkations of the North American Cruise Industry, 2006 - 2009

Source: Port Authorities, MARAD and Business Research and Economic Advisors


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The decline in North America embarkations during 2008 and 2009 was more than offset by

the 31 percent increase in passenger embarkations in the Rest of the World in 2008 and the

16% increase in 2009. As a result, global embarkations of the North American cruise indus-

try rose by 3.5% in 2008 and by 3.4% in 2009 to 13.4 million by 2009. As indicated in Table

2, the decline in activity in North America can be directly traced to the deployment strategy

of the North American cruise lines. The share of the global capacity deployed in the Carib-

bean, the Bahamas, Hawaii and Alaska declined from 53 percent in 2007 to 46 percent in

2009. During 2009, the bed day capacity deployed in Alaska and Hawaii declined by a com-

bined 12.8 percent while the capacity in the Caribbean and Bermuda increased by 4.0 per-

cent. At the same time, the capacity in Europe and All Other markets rose by 10.1 percent

and 7.4 percent, respectively. Europes market share has steadily increased from 19.8 percent

in 2005 to 26.6 percent in 2009.

Table 2 Destination Bed Day Capacity of the North American Cruise Industry, 2004 2009

Millions of Bed Days

Source: CLIA

Within North America there were some fairly dramatic shifts in passenger embarkations,

some permanent and others temporary. After seeing passenger embarkations decline by

200,000 in 2008 as a result of the redeployment of the Pride of Hawaiiand the Pride of Aloha,


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embarkations fell by another 36,000 in Hawaii during 2009. As a consequence, Hawaiis

share of U.S. embarkations has fallen from 4.2 percent in 2007 to 1.4 percent in 2009.

Led by Jacksonville and Port Everglades embarkations at Florida ports increased by 2.9 per-

cent during 2009 even as embarkations among all U.S. ports declined by 0.6 percent. As aresult Floridas share of U.S. embarkations rose to 59 percent.

California ports experienced an 11.8% decline in passenger embarkations in 2009 and saw its

market share fall from 16 percent in 2008 to 14.2 percent in 2009. During 2009, 1.27 million

passengers boarded cruises at California ports, down from 1.44 million in 2008. Los Angeles

with a 33 percent decline lost nearly 200,000 passenger embarkations. These losses were only

partially offset by the 13 percent gain in Long Beach. Embarkations in San Diego remained

virtually flat during 2009 at 401,000.

Figure 1 - Distribution of Global Embarkations - 2009

Source: Port Authorities, MARAD and Business Research and Economic Advisors


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Passenger embarkations at New Yorks two cruise terminals declined by nearly 20 percent to

420,000 passengers. New Yorks share ofU.S. embarkations fell to 4.7 percent in 2009 from

5.9 percent in 2008.

The remaining U.S. ports, accounted for a combined 21 percent of U.S. embarkations in2009 up from 19 percent in 2008. Passenger embarkations at these ports totaled 1.84 million

which represented a 6.3 percent increase from 2009. However, there were considerable dif-

ferences in growth among these ports. Boston (16 percent), New Orleans (31 percent) and

Baltimore (234 percent) experienced significant growth while passenger embarkations de-

clined in Philadelphia (-16 percent), Seattle (-4 percent) and Alaska (-2 percent).

The remaining ports in North America, primarily Vancouver and San Juan, handled 950,000

cruise passengers in 2009, a one percent decline from 2008. Vancouver experienced a 4.4

percent increase in passenger embarkations while San Juan experienced a decline in passen-

ger embarkations for the fourth consecutive year, -2.7 percent in 2009, -2.4 percent in 2008,

-3.8 percent in 2007 and -4.5 percent in 2006.

Embarkations in the rest of the world, primarily Europe and the Mediterranean, totaled 3.6

million during 2009, a 15.6 percent increase from 2008, and accounted for 26.6 percent of

global embarkations, up from 23.8 percent in 2008 and 18.8 percent in 2007. As noted earli-

er, the North American cruise industry is rapidly expanding their deployment in Europe andthe Mediterranean, especially during the Caribbean low (summer) season.

As shown inTable 3, just over 9.4 million, or 70.1 percent of the global cruise passengers,

lived in the United States during 2009. This represented a 1.5 percent increase from 2008.

However, this growth was by no means uniform. Of the nine regions, three (New England,

West South Central and Mountain) experienced double-digit gains. One (South Atlantic) ex-

perienced a single-digit gain. Three (East South Central, West North Central and Pacific)

experienced single-digit losses. The remaining two regions (Middle Atlantic and East NorthCentral) experienced double-digit losses during 2009.


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Table 3 U.S. Cruise Passengers by Place of Residence, 2006 20095

Source: Cruise Lines International Association

As shown in Figure 2, the South Atlantic region is the single largest source of passengers,

accounting for 34 percent of all U.S.-resident passengers. After experiencing a 2.3 percent

decline in 2008, resident passengers increased by 1.6 percent in 2009. However, Florida was

the only state in the region to show an increase in cruise passengers.

The highest growth, 37.7 percent, occurred in the Mountain region which saw resident cruise

passengers increase from 620,000 in 2008 to 853,900 in 2009, an increase of nearly 234,000

cruisers.

The remaining two regions that experienced double-digit growth in 2009, New England and

West South Central, gained a combined total of 353,000 cruisers. The gains were concen-

trated in the West South Central region which accounted for 75 percent of the increase in

passengers from the two regions. The West South Central region is the third largest source

market among the nine regions, accounting for 13 percent of U.S.-resident cruise passengers

while the New England region is the sixth largest source market.

5 The definitions of the nine census divisions are as follows:New England: Connecticut, Maine, Massachusetts, New Hampshire, Vermont and Rhode IslandMiddle Atlantic: New Jersey, New York and PennsylvaniaSouth Atlantic: Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina,Virginia and West VirginiaEast North Central: Illinois, Indiana, Michigan, Ohio and WisconsinEast South Central: Alabama, Kentucky, Mississippi and TennesseeWest North Central: Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South DakotaWest South Central: Arkansas, Louisiana, Oklahoma and TexasMountain: Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and WyomingPacific: Alaska, California, Hawaii, Oregon and Washington.


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Figure 2 Distribution of U.S. Cruise Passengers by Place of Residence - 2009

Source: Cruise Lines International Association

The remaining five regions of the country (Middle Atlantic, East North Central, East South

Central, West North Central and Pacific) experienced a combined loss of 502,700 cruisers in

2009. In aggregate, they accounted for 35 percent of U.S.-resident cruise passengers in 2009.The Pacific region, which lost 92,600 resident cruise passengers, is the second largest source

market in the U.S. and experienced its second consecutive year of decline in resident cruis-

ers. The losses were concentrated in California while Washington was the only state to show

an increase. The Middle Atlantic, which lost 253,300 resident cruise passengers, is the fifth

largest source market and lost cruise passengers for the fifth consecutive year. The East

North Central, East South Central and West North central regions lost a combined 159,600

resident cruise passengers. The East North Central region accounted for 79 percent of the

losses in the three regions.

While we have had only one year of decline in resident cruise passengers and two years for

embarkations in the United States, the declining trend in growth and market share has been

in place for several years. The losses experienced during 2008 can be partly traced to a falter-

ing economy during the second half of 2008 but may also be reflective of a longer term im-


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pact resulting from an increasing redeployment of cruise ships from the North American

market. Nonetheless, even though the U.S.s share of global passengers is declining on a

year-over-year basis, it is the dominant source of cruise passengers for the North American

fleet, accounting for 70 percent of all passengers. In addition, U.S. passengers come from all

regions of the country with passenger growth reflecting both the changing deployment strat-

egy of the cruise industry and the underlying population growth in each region. The number

of cruise passengers that reside in the United States is greater than the number of cruise pas-

senger embarkations from U.S. ports. Consequently, U.S.-resident cruise passengers also

provide an economic stimulus to embarkation ports outside the United States. Finally, with

nearly 9 million cruise embarkations from U.S. ports in 2008 and 2009, the North American

cruise industry is a source of significant economic activity in the U.S. economy. In fact, the

U.S. economy is the recipient of the majority of the industrys global economic impact. Ouranalysis of the industrys operating and administrative expenses shows that nearly 70 percent

of the industrys non-wage expenditures are made with U.S.-based businesses.


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Spending in the U.S. Economy Generated by the Cruise Industry

Business Research and Economic Advisors (BREA) conducted a survey of the member

cruise lines of the Cruise Lines International Association (CLIA) that provides the basis forour estimates of the industrys 2009 expenditures for the operating and administrative ex-

pense categories outlined in Table 4. These data were collected for global payments and

payments made to U.S. businesses. Surveys were returned for 12 cruise lines. These cruise

lines were: Carnival Cruise Lines, Celebrity Cruises, Costa Cruise Lines, Crystal Cruises, Dis-

ney Cruise Line, Holland America Line, Norwegian Cruise Line, Oceana Cruise Line, Prin-

cess Cruises, Regent Seven Seas Cruises, Royal Caribbean International, and Seabourn Cruise

Line.

Combined, these cruise lines accounted for approximately 90 percent of the industrys gross

revenues and 95 percent of its passengers.

Table 4 Operating and Administrative Expense Categories

Source: Business Research and Economic Advisors

In addition to the aggregate revenue and expense data, more detailed data on vendor pur-

chases in 2009 were obtained from a smaller group of cruise lines. Vendor-specific data were

obtained from the following cruise lines: Carnival Cruise Lines, Royal Caribbean Interna-

tional, Celebrity Cruises, Holland America Line, Princess Cruises and Seabourn Cruise Line.


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These six cruise lines accounted for approximately 85 percent of the industrys non-wage

U.S. operating and administrative expenses. These data were then aggregated by industry

group and state and used to estimate total cruise industry expenditures by industry. These

detailed expenditures totaled $5.5 billion and accounted for about 60 percent of the esti-

mated $9.4 billion that the North American cruise lines spent with U.S. businesses (exclud-

ing travel agent commissions). The vendor purchases were aggregated into 95 industry sec-

tors consistent with the 2008 U.S. input/output accounts.

The economic benefits that accrue to the U.S. economy arise from five principal sources:

spending by cruise passengers and crew for goods and services associatedwith their cruise, including travel to the port of embarkation and pre- andpost-cruise vacation spending, onshore tour excursions, food and beverages

and other retail;

expenditures by the cruise lines for goods and services necessary for cruiseoperations, including food and beverages, fuel, vessel maintenance and re-pair, ships supplies and so forth;

spending by the cruise lines for port services at U.S. ports-of-embarkationand ports-of-call;

the shore-side staffing by the cruise lines for their headquarters and market-ing operations; and

capital expenditures for facilities constructed in the U.S., including port ter-minals, office facilities, and other capital equipment.

As shown inTable 5, the cruise industry spent an estimated $11.1 billion for goods and ser-

vices with U.S. businesses during 2009. This represents a 10.6 percent decrease from similar

expenditures in 2008 and was the first year in which domestic spending by the cruise indus-

try declined since BREA began compiling these statistics in 1997. Excluding wages and sala-

ries of its employees, the North American cruise industry spent approximately 76 percent of

its global operating and administrative expenses with U.S. businesses.

Cruise passengers and crew added $3.3 billion in spending with U.S. businesses. Approx-

imately 40 percent of these expenditures represented airfares that were directly purchased by

passengers. Of the remaining passenger and crew expenditures, 25 percent were spent on

food and beverages and lodging. Entertainment, local transit, retail purchases and sightseeing


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accounted for the remaining expenditures. Passenger expenditures, excluding airfares, were

made at the U.S. ports-of-embarkation and ports-of-call.

Table 5 U.S. Expenditures ($ Billions) of the North American Cruise Industry, 2006 2009


Estimated passenger and crew spending for 2009 was just under 3 percent lower than the

2008 estimates and declined for the second consecutive year. The decline in passenger and

crew spending was driven primarily by the decline in passenger embarkations at U.S. ports,especially in Hawaii which has among the highest per passenger expenditure rates. This is

primarily due to the large percentage of passengers that purchase pre- and post-cruise vaca-

tion packages in Hawaii. As will be discussed later in this report, the average spend per pas-

senger and crew visit also fell by nearly one percent during 2009. Passenger and crew spend-

ing estimates were based on data collected from various research reports prepared by BREA

and other researchers for the following ports: Port Everglades, Port of Miami, Port of New

Orleans, Port of New York, Port of Philadelphia, Port of Tampa, Port of San Diego, Port of

Los Angeles and Hawaii and Alaska ports-of-call. Per passenger spending estimates for the

ports-of-embarkation were used to estimate total passenger spending at each of the ports.

The average for the ports was then used to estimate total passenger spending for all other

passenger embarkations.6

The North American cruise lines spent an estimated $1.6 billion for capital expenditures (in-

cluding net interest) during 2009, a 20 percent decrease from 2008. Vessel maintenance and

drydock fees at U.S. shipyards accounted for nearly halfof the cruise industrys capital ex-

penditures in the United States. The remaining half of the capital expenditures was made for

machinery and equipment, including computer and telecommunications equipment, and

buildings.

6 Per passenger spending estimates were segmented by passengers who stayed overnight either prior toor after a cruise and those passengers who arrived on the day of the cruise.


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Thus, the North American cruise industry and its passengers and crew spent a total of $16

billion for goods and services provided by U.S. businesses, a 10.3 percent decrease from sim-

ilar expenditures in 2008.

In addition to the direct purchase of goods and services from U.S. businesses, the cruise in-dustry made combined payments of $1.17 billion in wages (including benefits) to its em-

ployees and taxes to federal, state and local governments in the United States. Wage and

benefit payments accounted for about 80 percent of the total. The tax payments consisted

primarily of employer contributions to Social Security and sales and property taxes to state

and local governments. This represented an 8.2 percent decrease from 2008.

Including wages and taxes, the North American cruise industry and its passengers made total

payments of nearly $17.15 billion to U.S. businesses, U.S.-resident cruise line employees and

U.S. taxing jurisdictions. This was a 10.1 percent decrease from total industry spending in

2008 and as mentioned above the first such decline calculated by BREA since collecting

such data in 1997.

Direct Economic Impacts in the United States During 2009

The direct economic impacts of the cruise industry in the United States are derived from a

broad range of activities including:

port services and cruise industry employment; transportation of cruise passengers from their place of residence to the ports of

embarkation;

travel agent commissions; spending for tours and pre- and post-cruise stays in U.S. port cities; passenger and crew spending for retail goods in U.S. port cities; and purchases of supplies by the cruise lines from U.S. businesses.

As shown inTable 6, the North American cruise industry and its passengers and crew

spent $17.15 billion in the United States during 2009, a 10.1 percent decrease from 2008.

Spending in the core cruise travel sector totaled $8.8 billion while the cruise industry

purchased an additional $8.3 billion in goods and services from its suppliers. As a result


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of this spending, an estimated 134,494 full and part-time jobs 7 were generated, paying

wages of $5.5 billion during 2009.8 Thus, the 10.1 percent decline in direct industry ex-

penditures resulted in a 13.2 percent decline in the direct employment impact. This is

primarily the result of the overall increase in labor productivity in all sectors which re-

duced the number of employees per dollar of final demand. This increase in labor prod-

uctivity resulted in a smaller decline, 10.8 percent, in direct wage income relative to the

direct employment loss.

Table 6 Direct Economic Impacts of the Cruise Industry in the United States 2009


7 Throughout this report all employment impacts are the sum of full- and part-time jobs.8These figures include the U.S. employees of the cruise lines and the industrys trade associations andtheir wage income.


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Despite the decline in the direct employment impact in both 2008 and 2009, the North

American cruise industrys direct contribution to the U.S. economy has grown significantly

since 2000. The direct spending by the cruise industry has increased by $6.9 billion, an in-

crease 67 percent. Similarly, the annual direct employment contribution has increased by

nearly 39,000 jobs, an increase of 41 percent (see Figure 3).

Figure 3 Direct Cruise Industry Expenditures and Employment, 1997 - 2009


The Core Cruise Travel Sector in the United States

The core cruise travel sector in the United States, which includes the cruise lines, airlines,

travel agents, port service providers and local businesses, such as hotels and restaurants that

are directly impacted by passenger and crew spending, received an estimated $8.8 billion in

direct spending by the cruise lines and their passengers and crew in 2009. This was a decline

of 13.7 percent from 2008. This, in turn, supported the employment of an estimated 96,285

workers, a decline of 15.2 percent, and $3.6 billion in wage income, a decline of 14.3 percentfrom 2008. The core cruise travel sector accounted for 51 percent of the direct spending by

the cruise industry, 72 percent of the direct employment, and 67 percent of the direct wage

income. Until 2009, industry expenditures in the core cruise sector and their economic im-

pacts had steadily increased since 2000. Core cruise travel spending in 2009 was 80 percent


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higher than in 2000, while the direct employment and wage impacts were 47 percent and 92

percent higher, respectively.

Figure 4 Distribution Cruise Travel Sector Direct Spending - 2009


Port Services and Cruise Lines in the United States

Cruise lines and port service providers are the leading component of the core cruise sector,

accounting for 33 percent of cruise industry spending in this sector (see Figure 4 ). This

segment of the core cruise sector includes three primary components: i) expenditures with

port service providers, ii) the direct U.S.-based employment and wages of the cruise industry

and iii) the cruise industry trade association employment and income.

Port service providers at each of the embarkation ports and ports-of-call in the United States

provide a broad range of services including tugboat and piloting services, port agents, steve-

dores, passenger reception services, warehousing and other material handling services. Se-

condly, all of the major North American cruise lines maintain administrative and marketing

offices throughout the United States. While Florida hosts the majority of cruise headquar-

ters, cruise line offices are also located in California, Washington and New York. Additional-

ly, the lines also maintain marketing and telephone centers in several other states, including

Arizona, Colorado and Kansas, and also have tour operations and support staff in Alaska


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and Hawaii. These employees and their wages are included in this sector. Third, industry

trade associations maintain staff in Alaska, Florida, Washington and Virginia. As with the

cruise lines, the employees of these associations and their wages are also included in the core

cruise travel sector.

During 2009, the cruise industry spent $2.9 billion on such port services. This represents an

11.6 percent decrease from 2008. The decline in these expenditures is the net effect of a 9.2

percent decline in industry wages and salaries and a 13 percent decline in the costs associated

with warehousing and material handling services and passenger based-fees at U.S. turna-

round ports. As a result of these expenditures, port service providers, the cruise lines and

their trade associations provided 44,293 full- and part-time jobs, a decline of 15.2 percent

from 2008, paying an annual income of $1.8 billion, a decline of 11.4percent from 2008.

On an industry basis, all of these jobs are found in the water transportation industry. The

cruise lines account for approximately 60 percent of the employment and wage impacts in

the industry. The remaining 40 percent of the impacts occur principally with port authorities

with additional impacts affecting ship agents, stevedoring firms and other water transporta-

tion services, such as pilots and tugboats.

Transportation Services in United States

The second largest component of the core cruise travel sector is transportation services

which accounted for 29 percent of cruise industry spending in this sector. This primarily in-

cludes travel agents and tour operators. Payments to travel agents throughout the U.S. ac-

counted for about 55 percent of the total, or $1.4 billion. While tour operators, principally in

U.S. destinations in Hawaii and Alaska, but also in other port cities, accounted for 25 percent

of the total. The remaining 20 percent was paid to businesses providing trucking, courier and

other miscellaneous transport services.

U.S. businesses in this sector received $3.5 billion in spending by the cruise lines and their

passengers. This is a 19.3 percent decrease from 2008. During 2009, total passenger visits

(embarkations plus intransit calls) declined by 2 percent. As a consequence total payments

to tour operators and travel agents also declined from 2008. Our cruise line survey indicated

that the industry paid an average commission rate of approximately 12.5 percent of net


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cruise fares.9 Overall, BREA estimated that the cruise industry spending for transportation

services was responsible for the generation of 22,675 jobs in the transportation services sec-

tor, a decline of 21 percent from 2008, paying $919 million in wage income, a decrease of 19

percent.

Travel agents accounted for nearly 65 percent of the direct employment and wage impacts in

the transportation services sector while tour operators and other providers of transportation

services each accounted for about 17.5 percent of the direct effects. The high proportion of

impacts on travel agents reflects the fact that the United States is primarily a source market

rather than a destination market.

Air Transportation Services in United States

The third largest component of the core cruise travel sector is air transportation which ac-

counts for another 21 percent of cruise industry spending in this sector. The percentage of

passengers arriving by air at the ports-of-embarkation fell slightly in 2009 to approximately

56 percent. At the same time the average airfare declined by about 2.5 percent to approx-

imately $370 per passenger. As a result, cruise passengers who flew to their port city spent an

estimated $1.86 billion on air transportation, an 8.8 percent decline from 2008. These ex-

penditures produced 10,236 jobs in the United States, a 10.4 percent decline from 2008, with

total wage income of $468 million, an 11.6 percent decline from 2008.

Passenger and Crew Spending in United States

The final component of the core cruise travel sector is the spending of cruise passengers and

crew for a variety of retail, dining, local transit and lodging services.10 First, as previously dis-

cussed, 8.9 million passengers embarked on cruises at U.S. ports. Second, the industry gener-

ated approximately 5.2 million visits at U.S. ports-of call, most of which were in Alaska, Ha-

waii and Key West. Finally, crew aboard cruise ships visit both ports-of-embarkation andports-of-call. The combined spending of passengers and crew totaled an estimated $1.5 bil-

lion in the United States during 2009, an 11.1 percent decline from 2008. These expenditures

9 Net cruise fares exclude all onboard revenues and revenues received from passengers for air travel, tra-vel insurance, pre- and post-cruise vacations and all port charges, taxes and fees assessed to passengers.10 Passenger and crew expenditures for sightseeing and shore excursions are included in the Transporta-tion Services category of the core cruise travel sector.


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accounted for 17 percent of cruise industry spending within the core cruise travel sector.

This spending was responsible for the generation of 19,080 jobs in United States, a decline

of 10.3 percent from 2008, paying annual wages of $439 million, an 11.1 percent decrease

from 2008.

On an industry basis, the employment and wage impacts were concentrated in the accom-

modation, food and beverage service and retail industries. The accommodation and food

and beverage service industries each accounted for about 45 percent of the employment and

wage impacts while the retail trade industry accounted for the remaining 10 percent of the

direct impacts.

Adding in the cost of shore tours, which was included in Transportation Services, passengers

and crew spent $1.9 billion in port cities throughout the United States. This represents a de-

cline of 2.6 percent from 2008. As shown inTable 7 and Figure 5, embarkation passengers

accounted for 53 percent of the total spending with $1.03 billion in 2009. Based upon the

passenger survey data referenced previously, about 39 percent of embarking passengers

stayed one of more nights at a port city and spent a total of $865 million during their visits.

On average, these overnight cruise visitors spent $246 per visit. The average length of stay of

these passengers was approximately 1.1 nights. The average length of stay remained virtually

unchanged, while the average spend per passenger fell by 4.1 percent. Combining this with

the 2.7 percent increase in passengers with an overnight stay, the total spend by these pas-

sengers, $865 million, declined by 1.5 percent from 2008.

Table 7 Passenger and Crew Expenditures in the United States 2009


Embarking passengers who arrived at the port city on the day of their cruise spent an aver-

age of $31.22. Most of these expenditures were for local transit, parking and limited food


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purchases. In total, we estimated that these passengers spent just over $168 million during

2009, a decrease of 8.7 percent from 2008. This decrease is the result of a 5.8 percent de-

crease in the average spend per passenger and a 2.6 percent decrease in the number of pas-

sengers arriving on the day of their cruise. Relative to 2008, the average per visit expenditure

by embarking passengers fell from $118.48 in 2008 to $116.02 in 2009, a decline of 2.1 per-

cent.

Figure 5 Distribution of Passenger and Crew Spending in the United States - 2009


BREA also estimated that the cruise industry generated approximately 5.2 million port-of-

call visits.11 Nearly 70 percent of these visits were made to ports in Alaska, but cruise ships

also make calls at other ports throughout the United States including Hawaii, Key West and

many of the East and West Coast ports. Survey data for port-of-call passengers indicated

that the typical port-of-call passenger spent an average of $121 per visit. Consequently, we

have estimated that these passengers spent $633 million in the United States during 2009, or33 percent of the total passenger and crew spending. The average spend per port-of-call visit

declined by 2.2 percent from 2008.

11 Since individual passengers will make several port-of-call visits on any itinerary, passenger visits areapproximately three times greater than the number of passengers taking cruises to U.S. ports-of-call.


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Finally, crew aboard the cruise ships will disembark at both ports-of-embarkation and ports-

of-call. We estimated that over 5.7 million crew visits were made at U.S. port cities with an

average per crew expenditures of $48.24 per visit, an increase of nearly 10 percent from

2008. Consequently, crew spent an estimated $277 million in the United States during 2009,

or 14 percent of the total expenditures of passengers and crew.

Table 8 Estimated Onshore Spending Generated by a 2,500-Passenger Cruise Ship 2009

Note: Visits have been rounded to nearest ten.


Another way to view passenger and crew spending is in terms of the onshore spending gen-

erated by a typical or average cruise ship call. As shown inTable 8, we have estimated that a

2,500-passenger ship generated an average of approximately $322,000 in passenger and crew

onshore spending per call in the homeport city during 2009, a decline of 3.3 percent from2008. A similar ship making port-of-call visits generated an average of approximately

$316,000 in passenger and crew onshore spending per U.S. port call, a decrease of 1.2 per-

cent from 2008.

Other Direct Impacts in the United StatesCruise Line Expenditures

During 2009, U.S. businesses outside the core cruise travel sector received $8.3 billion in di-

rect spending by the cruise lines. These expenditures generated an estimated 38,208 jobs in

the nation paying wage income of $1.8 billion. Expenditures with suppliers decreased by 6.4

percent from 2008. As a result of a shift in industry mix and productivity gains, the employ-

ment impact among cruise industry suppliers decreased by 8.0 percent while the income im-

pact fell by 10.8 percent. Table 6 shows the direct impacts of these expenditures by the


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cruise lines on major business sectors of the U.S. economy. These economic impacts by sec-

tor are as follows:

Professional, Scientific and Technical Services ($1.3 billion in direct expenditures,12,619 jobs, and $433 million in wage income): comprised of a very broad rangeof business services, including legal, accounting and consulting services; advertis-ing, promotional and marketing agencies; computer hardware and software con-sulting; and security and manpower services. The cruise industry reduced theirexpenditures with these service providers by 8.0 percent from 2008. The subse-quent employment impact declined by 12.0 percent while the income impact in-creased by 7.7 percent.

Figure 6 Distribution of Direct Expenditures to Cruise Industry Suppliers - 2009


Petroleum Refining ($973 million in direct expenditures, 141 jobs and $16 mil-lion in wage income): the refining of petroleum products used to power thecruise ships and lubricate engines and equipment. Due to the sharp drop in oilprices during 2009, expenditures for petroleum products had the highest rate ofdecline in 2009, -25 percent. However, the employment and wage impacts in thishigh productivity industry declined by only 3.4 and 5.8 percent, respectively.

Finance, Insurance, Real Estate and Leasing ($914 million in direct expenditures,2,919 jobs, $205 million in wage income): banking and brokerage services; vessel,passenger travel and employee health insurance; real estate services and the leas-ing of property and equipment. Spending with financial service providers fell by7.5 percent from 2008 expenditures. The employment impact declined by 13percent from 2008 while the income impact decreased by 8.9 percent.


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cruise ships, the hiring of designers, entertainers and crew for shows aboardcruise ships and other recreational activities on and off the cruise ships. Cruiseindustry expenditures for entertainment services rose by 2.3 percent in 2009. Thedirect employment impact increased by 2.1 percent while the wage income im-pact rose by 3.1 percent.

Indirect and Induced Economic Impacts in the United States During 2009

The indirect economic benefits derived from the cruise industry result in part from the addi-

tional spending by the suppliers to the cruise industry. For example, food processors must

purchase raw foodstuffs for processing; utility services, such as electricity and water, to run

equipment and process raw materials; transportation services to deliver finished products to

the cruise lines or wholesalers; and insurance for property and employees. The U.S. in-

put/output table and multipliers were used to estimate the indirect impacts.12 The in-

put/output table reflects the inter-industry links among industries in the U.S. economy. Use

of the U.S. input/output table permits the estimation of the additional economic impacts

that the direct spending by the cruise industry, its passengers and its suppliers has on all oth-

er industries in the U.S. economy.

In addition to the indirect impacts generated by the purchase of business goods and services

by cruise industry suppliers, the employees of the cruise lines and their suppliers generate

additional economic benefits through their purchases of consumer goods and services in-

cluding such goods as autos, food, clothing, furniture, health care and so forth.

The input/output analysis implied that the direct spending of the North American cruise

industry generated another 179,507 jobs in the United States through the indirect spending

by businesses and employees, a decrease of 11.4 percent from 2007. In addition, these jobs

generated $8.8 billion in wage income for these workers, a decrease of 12.8 percent from

2008. As shown in Table 9, the indirect economic impacts touch virtually every industry in

the nation.

The Services & Government sector was the most significantly impacted sector within the

nation. This sector accounted for more than half of the indirect employment and wage im-

12 Bureau of Economic Analysis, Annual Input/Output Accounts for the U.S. Economy, 2008.


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pacts. The indirect impacts of cruise industry spending generated 102,252 jobs in the Servic-

es and Government sector paying $4.4 billion in wage income. The indirect employment im-

pacts in this sector fell by 10.3 percent while the income declined by 13.3 percent from 2008.

Within the Services & Government segment, approximately 98 percent of the employment

and income impacts were in the services industry, while federal, state and local government

agencies accounting for the remaining two percent.

Table 9 Indirect and Induced Economic Impacts of the Cruise Industry in the United States 2009


Within the Professional, Scientific and Technical Services subsector, the indirect impacts

added 15,578 jobs, a decline of 2.3 percent from 2008, and $1.4 billion in wage income, adecline of 10.6 percent from 2008. These impacts resulted from business demand for a varie-

ty of services, including legal and accounting services, consulting services, especially comput-

er consulting and advertising and other business services.


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Food Processing Ship Maintenance and Repair Petroleum Refining Business Services Wholesale Trade

However, many other industries were affected in some form, including lodging, insurance,

telecommunications, retail trade and many others.

Figure 8 Distribution of Total Employment Impacts - 2009


As shown inTable 10 and Figure 8, the Transportation Services sector accounted for the

most total jobs generated by the North American cruise industry. Just under 70,000 jobs,

accounting for 23 percent of the total employment impact, were generated in this sector.

These jobs, in turn, generated $2.8 billion in wages.

The Professional, Scientific & Technical Services and the Other Services & Government

subsectors accounted for 10 and 16 percent, respectively, of all (direct and indirect) jobs

generated in the United States by the spending of the cruise industry and its passengers and

crew. Combined, these two subsectors generated 81,165 jobs and $4.2 billion in wages dur-

ing the year as a result of the spending by the North American cruise industry.


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Just over $8.0 billion in output was generated in the Manufacturing sector. The Manufactur-

ing sector accounted for nine percent of the total jobs, over 27,300, and just under 12 per-

cent of the income, $1.67 billion, generated by cruise industry spending. The impacts were

split evenly between nondurable and durable goods industries.

Finally, the Wholesale & Retail Trade sector accounted for 10 percent of the total employ-

ment impact of the cruise industry having generated just under 31,300 jobs and $1.4 billion

in income as a result of the expenditures of the North American cruise industry.


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Section II: The Contribution of the North American Cruise

Industry to the U.S. Economy by State in 2009

The national economic contributions discussed in the previous section also had an effect on

individual state economies. The direct economic contribution of the cruise industry and its

passengers and crew was allocated to each state based on several criteria. First, vendor pur-

chases by industry were allocated to each state based upon a sample of state- and industry-

specific vendor purchases obtained from the cruise lines. Second, wages and salaries of sho-

reside employees of the cruise lines were allocated to each state based upon the location of

administrative facilities as provided by the cruise lines. Third, national travel agent commis-

sions were allocated to each state based upon the place of residence of cruise passengers.

Fourth, air transportation spending was assigned to each state based upon a combination of

the residence of passengers and the ports of embarkation of passengers. Fifth, cruise passen-

ger and crew expenditures were allocated to states based upon embarkation and arrival data.

The total economic contribution in each state was estimated by using state- and industry-

specific multipliers obtained from the Bureau of Economic Analysis. These multipliers re-

flect the industry and wage structure in each state. As a consequence, the direct and indirect

economic contributions estimated for each state reflect the nature of vendor purchases by

the cruise industry, the place of residence of cruise passengers, the regional distribution of

cruise embarkations and port-of-call visits and the economic structure of each state.

As shown in Figure 9, our analysis shows that the North American passenger cruise indus-

try affects every state economy. The contributions result, in part, from the direct spending of

the cruise lines for goods and services used to support their cruise operations. These range

from the purchase of food and beverages, to ship maintenance and refurbishment to engi-

neering, insurance and management consulting services. Economic contributions are also

generated by other components of what we have called the core cruise travel sector. These

include the commissions received by travel agents from the cruise lines, airfares received by

airlines from cruise passengers and fees received by port authorities and port service provid-

ers.


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Figure 9 Direct Expenditures of the North American Cruise Industry by State - 2009


Economic Impacts in the Top Ten States

As shown inFigure 10

, all states had some direct expenditures generated by the NorthAmerican cruise industry in 2009. This ranged from a high of $5.8 billion in Florida to a low

of $2 million in Wyoming.

The top 10 states accounted for 78 percent of the direct expenditures of the cruise industry

(See Table 11 ). Of the top 10 states, seven (Florida, California, Texas, Alaska, New York,

Washington and Massachusetts) had significant cruise ports. Of these, Alaska was primarily a

destination rather than a homeport state. The other three states (Georgia, Illinois and Colo-

rado) had no cruise ports but were significant source markets for cruise passengers and pro-vided vendor support for cruise and cruise tour operations. Hawaii, which had been among

the top ten states in previous studies, fell to 11th in 2009 during which only a single ship,

NCLs Pride of Hawaii, used Honolulu as a homeport.


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Table 11 Direct Expenditures of the North American Cruise Industry by State 2009


Figure 10

Distribution of Direct Expenditures of the North American Cruise Industry by State - 2009



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Florida

As has been discussed previously in this report, Florida is certainly the cruise capital of the

United States, if not the world. As shown in Table 12, just over 5.2 million passengers

boarded their cruises form one of Floridas five cruise ports (Port of Miami, Port Everglades,

Port Canaveral, Port of Tampa and Port of Jacksonville)13. While these ports primarily offer

cruises to the Bahamas, the Caribbean and Central America, cruises that originate in Florida

travel to ports around the world.

Table 12 Summary of 2009 Cruise Industry Impacts Florida

Source: Cruise Lines International Association and Business Research and Economic Advisors

Given the proximity of cruise homeports in Florida and the Gulf Coast to Florida residents,

the state also led the nation in resident cruise passengers with 2.5 million resident passengers,

27 percent of all U.S. resident cruise passengers. With more than twice as many embarka-

tions as resident passengers, the cruise industry in Florida is a net generator of tourism ac-

tivity in the state.

Relative to 2008, Florida experienced a solid increase in both passenger embarkations and

resident cruise passengers. Passenger embarkations rose by 2.9 percent while resident cruise

passengers increased by 10 percent. As a result, Floridas share of passenger embarkations

rose by 2 percentage points from 57 percent in 2008 to 59 percent in 2009 while its share ofresident cruise passengers also increased by 2 percentage points.

13 Key West is a port-of-call for Caribbean cruises and thus does not generate passenger embarkations.However, passenger and crew intransit visits and spending are included in the state visit and spendingestimates.


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Including homeport and intransit calls, cruising at Florida ports generated an estimated 7.6

million passenger and crew visits, accounting for 38 percent of all passenger and crew visits

in the United States. These visits produced an estimated $784 million in passenger and crew

onshore spending, or slightly more than $103 per visit. Total passenger and crew spending in

Florida actually decreased by 4.0 percent from 2008 as a result of the 5.5% decline in the av-

erage spend per visit.

Florida is not only the center for cruise originations; it is the center of just about all aspects

of the cruise industry. Carnival Corporation & plc and Royal Caribbean Cruises, Ltd., which

combined, control three-fourths of the North American cruise industrys capacity, have their

headquarters in Miami. Norwegian Cruise Line also has its headquarters in Florida as do

other cruise lines. Overall, these operations had nearly 14,000 employees, approximately 55

percent of the total employment of the cruise lines throughout the United States. With the

combination of the redeployment of the U.S.-flagged ships from Hawaii and the impact of

declining revenues, total employment by the cruise lines has declined by more than 26 per-

cent since 2007. As a consequence, Floridas share of cruise line employment has increased

by nearly 14 percentage points over the two-year period.

As a result of the activity of the cruise industry, Florida businesses received $5.8 billion, or

just over one-third of the direct expenditures generated by the cruise industry in the United

States. This represented a 7.5 percent decrease from 2008. Tourism-related businesses in ad-

dition to the cruise lines, such as travel agencies, airlines, hotels, restaurants and providers of

ground transportation were certainly the main beneficiaries of the cruise industry. These

tourism-related industries received approximately $2.4 billion, or over 40 percent of the in-

dustrys direct expenditures in Florida. Another $835 million, or 14 percent of the total, was

spent with businesses in five additional business segments, food processors and chemical

manufacturers, including, paints, pharmaceuticals and cleaning supplies, within the manufac-

turing sector; and advertising agencies, management and technical consulting companies andmanpower agencies in the nonmanufacturing sector. Due to the absolute scale of the indus-

try, direct expenditures in Florida impacted just about all segments of the economy, includ-

ing recreation and amusement establishments, wholesalers of products purchased by cruise

lines, manufacturers of communications and navigation equipment, producers of machinery

and equipment such as engine parts, boilers, laundry equipment and computers, manufactur-

8/7/2019 The Contribu

the contribution of the north american cruise industry to the u.s. economy in 2009

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