Cruise tourism and community economic development in Central America and the Caribbean: The case of Costa Rica

              Vol. 4 Nº 2 págs. 213-224. 2006
www.pasosonline.org
© PASOS. Revista de Turismo y Patrimonio Cultural. ISSN 1695-7121
Cruise tourism and community economic development in Central
America and the Caribbean: The case of Costa Rica
Andy Seidl†; Fiorella Guiliano‡; Lawrence Pratt§
Colorado State University (USA); CLACDS -- INCAE (Argentina)
Abstract: This paper illustrates an economic approach to understanding the cruise tourism industry as a driver of
economic development in Costa Rica. The objective is to describe the role and activities of the cruise ship industry
and identify sources of economic benefit and cost such that more informed local policy decisions about the cruise
ship tourism might be made. For example, our analysis indicates: the cruise tourism industry competes with the
cargo shipping industry for port space at a significant cost to Costa Rican ports; the amount of money injected into
the local economy per cruise tourist is substantially lower than for other types of tourism; Cruise ships purchase
relatively few supplies in Costa Rica; Cruise ships generate a great deal of human waste, water and air pollution,
which can create a serious health hazard, cleanup costs, and which are not commensurate with other types of tourism
development available to Costa Rica; Decision makers may want to consider that investment in cruise tourism
friendly ports may be less efficient from a national perspective than investment in infrastructure (e.g., airports) to
increase more profitable types of tourism; And leaders may want to consider the encouragement of smaller “pocket”
cruises over the current cruise version of mass tourism. This approach should be applicable to communities wher-ever
cruise tourism currently exists or is under consideration to be included in the portfolio of community economic
activities.
Keywords: Cruise ship tourism; Economic development; Costa Rica
Resumen: Este documento ilustra un enfoque económico a la comprensión de la industria de turismo de cruceros
como impulsora del desarrollo económico en Costa Rica. El objetivo es describir el papel y las actividades de la
industria de cruceros e identificar fuentes de costo y beneficio económico, a fin de que se puedan tomar decisiones
locales de política con más información sobre el turismo de cruceros. Por ejemplo, nuestro análisis indica que la
industria de turismo de cruceros compite con la industria de despacho de carga por espacio portuario a un significa-tivo
costo para los puertos de Costa Rica: la cantidad de dinero inyectada a la economía local por turista de crucero
es sustancialmente más baja que para otros tipos de turismo. Los cruceros de turismo compran relativamente pocos
suministros en Costa Rica y generan una gran cantidad de desechos producidos por las personas así como contami-nación
de agua y aire, lo que puede crear un serio peligro para la salud y costos de limpieza que no son proporciona-les
con otros tipos de desarrollo turístico de los que dispone el país. Quizás los encargados de tomar decisiones
quieran considerar que la inversión en puertos amistosos con el turismo de crucero podría ser menos eficiente desde
una perspectiva nacional que la inversión en infraestructura (por ejemplo, aeropuertos) para aumentar tipos más
rentables de turismo. Asimismo, quizás los líderes quieran pensar en estimular cruceros más pequeños “de bolsillo”
más bien que la actual versión de turismo masivo. Este método debería ser aplicable a comunidades donde el turis-mo
de crucero existe actualmente o se está considerando para incluirlo en la cartera de actividades económicas
comunitarias.
Palabras clave: Cruceros turísticos; Desarrollo económico; Costa Rica
† • Andy Seidl is an Associate Professor at Colorado State University, USA and a Visiting Professor at the Instituto
Centroamericano de Administracion de Empresas (INCAE) in Costa Rica. E-mail: Andrew.Seidl@colostate.edu
‡ • Fiorella Guiliano is a former Researcher at INCAE and is with Fundación del Tucumán, Argentina
§ • Lawrence Pratt is the Assistant Director of the Latin American Center for Competitiveness and Sustainable De-velopment
(CLACDS) at INCAE.
214 Cruise tourism and community economic development ...
PASOS. Revista de Turismo y Patrimonio Cultural, 4(2). 2006 ISSN 1695-7121
Introduction
Cruise tourism is of small, but increas-ing,
importance in Central America and the
Caribbean. Cruise tourism is of substantial
importance in particular port locations and
is being touted as a desirable local eco-nomic
development opportunity within the
region. Tourism, like all engines of eco-nomic
development, has desirable and un-desirable
features. The results of objective
research about cruise tourism economics
and community economic development ap-pear
to be rather site specific, in part due to
strong differences between terminal main
(dis-)embarkation ports and semi-terminal
(primarily for tourist visitation) ports
(McKee and Mamoozadeh, 1994). Conflict-ing
reports on purchasing patterns among
cruise tourists (Hall and Braithwaite, 1990;
Henthorne, 2000) reveal that the specifics
of the community economic impact of cruise
tourism constitute an important hole in the
literature base on the industry (Johnson,
2002; CTO, 2004). No studies focusing on
cruise tourism in Costa Rica have been
published to date.
A thorough understanding of the indus-try
facilitates recognition of the potentials
and pitfalls of a chosen driver of economic
development. Economic issues surrounding
the cruise ship industry include direct and
potential impacts on the port authorities
and port communities, hidden environ-mental
impacts on marine and coastal eco-systems,
development alternatives to cruise
ships for port communities, distributional
impacts and cultural implications of cruise
tourism development and socio-economic
impacts of disembarking crew members, in
addition to the typically tracked tourist
expenditures.
A number of particular challenges in es-timating
the economic impact of cruise
ships have been identified: 1) The crew is
non-local, so they do not pay income tax in
the locality, their jobs do not “count” to-ward
local economic development, and the-re
is significant leakage of their wage ex-penditures
to other ports and their home
countries; 2) The cruise liner ownership is
non-local and corporate, so they do not ty-pically
pay host nation income taxes, nor
are they required to adhere to local labor
standards or a number of other laws, and
are likely to invest their profits outside of
the port region or country; And 3) for some
tourist visits the cruise is a part, but not
the sole purpose of the trip, making it chal-lenging
to establish which expenditures can
be attributed to the cruise industry (Braun,
et al., 2002).
This paper illustrates an economic ap-proach
to understanding the cruise tourism
industry as a driver of economic develop-ment
through a preliminary analysis of the
industry in Costa Rica. The objective of this
approach is to describe the role and activi-ties
of the cruise ship industry in Costa
Rica and identify sources of economic bene-fit
and cost such that more informed local
policy decisions about the cruise ship tour-ism
might be made and a more comprehen-sive
inquiry into this important question
might be initiated in the near future. This
approach should be applicable to communi-ties
wherever cruise tourism currently ex-ists
or is under consideration to be included
in the portfolio of community economic
activities.
Approach
Four principal economic agents are of
interest to this study: cruise tourists, cruise
ship employees, port communities and
countries, and the cruise company itself
(see, for example, Dwyer et al., 2004; Braun
et al., 2002; Gabe et al., 2003). Here, we
focus on the implications of the industry for
local communities. Cruise tourism influ-ences
all four aspects of the tourism mar-ket:
transportation, accommodation, tour-ism
services and tour operations (McKee,
1988). The cruise industry can provide ei-ther
complementary or competing goods
and services to local providers. To the ex-tent
practicable, we provide local informa-tion
about each of these potential sources of
economic opportunity and/or conflict.
A mix of primary and secondary data co-llection,
including expert interviews and
tourist surveys, descriptive and economet-ric
analysis are appropriately applied to
these challenges in order to illuminate so-cio-
economic issues and information sur-rounding
cruise tourism as an engine of
economic development in Central America
and the Caribbean. We illustrate general
approaches to the community economic
Andy Seidl; Fiorella Guiliano and Lawrence Pratt 215
PASOS. Revista de Turismo y Patrimonio Cultural, 4(2). 2006 ISSN 1695-7121
analysis of cruise tourism through work
undertaken in Costa Rica.
Personal interviews and secondary data
constitute the primary information sources
for this first estimation of the effects of
cruise tourism on Costa Rica. Artisans,
travel agencies, port administrators, mu-nicipal
officials, tourism agencies, univer-sity
personnel and others were interviewed
or otherwise consulted in the port commu-nities
of Limon, Puntarenas and Caldera.
The Vice Minister of Public Security, tour
operators who work directly with the ships,
port agents and researchers at the univer-sity
of Costa Rica were also interviewed for
this research. In addition, cruise passenger
data collected by the Costa Rican Institute
of Tourism (ICT) were analyzed. The data
for this study were collected from June
through August 2004.
We begin with a review of the informa-tion
available describing the role and
growth of the cruise ship industry within
the broader context of the tourism industry
in Central America and the Caribbean. We
use published information and secondary
data sources for this overview, supple-mented
by personal interviews with key
informants within the industry.
Next, although a great deal of economic
impact information can be derived from the
travel cost surveys commonly conducted by
national tourism agencies, it is both impor-tant
and useful to obtain an understanding
of the economic contribution of cruise tour-ism
from the perspective of local businesses
for a number of reasons. Tourist surveys
often will reveal expenditures in the port
country, but not necessarily the port com-munity.
If the distribution of the costs and
benefits of cruise tourism development be-tween
the port community and the country
as a whole do not fall equitably, there may
be a potential need or justification for cor-rective
social, environmental or economic
policy. In addition, not all local expendi-tures
remain in the local economy. The size
of the local multiplier is dependent upon
the amount of indirect and induced local
purchases driven by the direct purchases of
tourists.
For example, cruise tourist expenditures
in St. Christopher and Nevis was less than
50% of their expenditures in Antigua and
Barbuda (McKee, 1988). The apparent dif-ferences
in economic impact per visitor may
be exacerbated or eliminated if the differ-ences
in purchasing behavior are from
products with substantial local content or
are from imported luxury goods. The local
multiplier for cruise ship expenditures can
be understood through interviews with port
area businesses.
Finally, the cruise industry poses a sig-nificant
source of potential pollution and
environmental risk. The industry may be
responsible for socially unsavory impacts of
tourism development that would provide
valuable information to local decision-makers,
whether or not the information is
derived specifically from that locality.
For example, few ex ante approaches ex-ist
for estimating the potential cost of po-tential
impacts of pollution due to cruise
ships, cargo ships or other types of devel-opment.
In all such cases, we are depend-ent
upon case history, and a literature re-view
to establish what has happened in the
past, its probably impact and consequences,
and to attempt to get a gauge of the likeli-hood
of it happening in the future in a par-ticular
location.
This is not an exact science by any
means, but it is the best we have and valu-able
lessons and precautionary actions
might be considered locally appropriate
based upon those lessons learned. Such
broad categories of considerations and con-cerns
will be catalogued by this research.
Where appropriate, the likelihood, extent
and estimated impacts of these features
will be derived from available information
and used as a means to illustrate the is-sues.
Analysis and Results
Regional growth of the cruise industry
The long haul passenger jet destroyed
the passenger shipping industry in the
1960s. Cruise ships made the jump from
sea travel as transport to sea travel as lei-sure.
Cruise tourism is now the fastest
growing part of the tourism sector (Klein,
2002; TIES, 2004; McKee and Mamoo-zadeh,
1994). Cruise ships carried 500,000
passengers in 1970, some 8.5 million (6
million Americans) in 1997 (Economist,
1998) and about 9.8 million passengers in
2003 (BREA, 2004). The cruise industry
216 Cruise tourism and community economic development ...
PASOS. Revista de Turismo y Patrimonio Cultural, 4(2). 2006 ISSN 1695-7121
accounts for 1.4% of all international tour-ists,
ranking 20th if the industry were a
nation, and 2.7% of global tourism receipts
(8th) (Kester, 2002). In North America the
number of people taking cruises doubled
between 1990 and 2000 and Americans
constitute some 72% of the global cruise
market, although cruising is becoming mo-re
popular with Europeans in recent years
(Kester, 2002).
In 2002, the global cruise industry ca-pacity
was 183 vessels and about 213,000
berths growing at an annual rate of about
7% (Kester, 2002). A more recent count of
the global fleet of cruise ships is currently
220 ships, though the industry announced
plans to increase that fleet by 25% between
2000 and 2005. The cruise ship industry
also plans 56-70 new terminals (docking
points) in the US over the next 15 yrs (Blue
Water News, 2004). Not only will there be
more ships, but ship capacity is increasing
as well. Older cruise liners typically had
capacities of around 1,000 passengers. In
2002, the average cruise liner had 1,163
berths, weighed 43,000 tons, and was in
service for about 15 yrs. The largest four
cruise corporations have a generally youn-ger
(10 yrs) and larger (1,5000 berth aver-age)
fleet (Kester, 2002). A modern 70,000
tonne cruise liner can house 2,000 people,
while a new 135,000 tonne ship can house
3,100.
Globally, eight companies dominated the
industry in the late 1990s (Douglas and
Douglas, 1999). Currently, it is controlled
by two: Carnival Corporation and Royal
Caribbean Cruise Lines. Carnival Corpora-tion
includes Carnival, Holland, Costa,
Cunard, Windstar and Seaborn cruise com-panies.
Royal Caribbean Cruise Lines in-cludes
RCI, Celebrity and Island cruise
companies (Klein, 2003a). Carnival Corpo-ration
reported profits of $1.02 billion on
revenues of $4.37 billion (30% return on
investment) in 2002, making it the most
profitable leisure company in the world.
Royal Caribbean reported $254 million in
profits on $3.15 billion in revenues (9%
return), P&O Princess, $301 million on
$2.45 billion (14%), and Star Cruises, in-cluding
Star, Norwegian and Orient cruise
lines, reported $82.6 million in profits on
$1.57 billion (6%) in revenues (Klein,
2003a). In 2003, P&O Princess became part
of Carnival Corporation.
Profits and total revenues for the top
four cruise lines combined were $1.66 bil-lion
and $11.54 billion, respectively, or a
17% industry level return on investment in
2002 (Klein, 2003a). Cruise ships typically
enjoy 90-95% occupancy rates, relative to
the 70% rates striven for in the hotel sector
(Economist, 1998; Pattullo, 1996a). Despite,
or perhaps resulting in, their profitability,
both Carnival and Royal Caribbean are
registered in “flag-of-convenience” nations,
so they avoid many U.S. environmental and
labor laws and don’t pay U.S. corporate
income tax (Klein, 2003a).
The cruise industry is heavily concen-trated
in the Caribbean, Alaska and the
Mexican Riviera. Some 2/3 of the global
cruise ship capacity is located in the Carib-bean
during the winter months (October-
March) and about ¼ in the summer months
(April-September). In 2002, Carnival Crui-se
Lines controlled 38% of the market in
the Caribbean and Mexican Riviera, Royal
Caribbean commands 26%, P&O Princess
had 6% and Star Cruises some 8% of total
passengers. With the merger between Car-nival
and P&O Princess in 2003, two carri-ers
account for more than 2/3 of all cruises
in the region. Between the winter and
summer months, the global fleet shifts sub-stantially
toward Alaska (0-16%), the Medi-terranean
(8%-31%), and Atlantic Europe
(0-18%)(Kester, 2002). The trend toward
larger ships should increase rather than
decrease this seasonality (McKee, 1988).
Cruise tourism as economic development
McKee (1988), Fish and Gunther (1994)
and others find a number of fairly unique
concerns and opportunities with regard to
the encouragement of cruise tourism as an
engine of economic development. These
concerns focus on local control and the dis-tribution
of local costs and benefits of crui-se
activities.
Communities and local businesses de-pendent
upon cruise tourism must compete
in an environment dominated by very few
multi-national corporations. The local eco-nomy
becomes dependent upon the eco-nomic
conditions of international consum-ers
and on the global economic opportuni-ties
available to the cruise ship industry,
rather than local economic conditions
Andy Seidl; Fiorella Guiliano and Lawrence Pratt 217
PASOS. Revista de Turismo y Patrimonio Cultural, 4(2). 2006 ISSN 1695-7121
(McKee, 1988; Fish and Gunther, 1994).
The dependence relationship between in-dustry
and locality is exacerbated by re-search
findings indicating that there is a
high degree of substitutability among sun
and fun category tourism destinations (Car-ibbean
Islands, southern Mexico, southern
Europe) (Fish and Gunther, 1994). Such
conditions reduce local volition, economic
development alternatives and profit mar-gins
and increase potential local economic
variability.
McKee (1988), McKee (1986) and McKee
and Mamoozadeh (1994) argue that there
may be some unique opportunities provided
by cruise tourism as a driver of natural
resource based economic development. For
example, port calls create a brief taste of a
location that may result in a longer visit in
the future that may not have been other-wise
considered. Gabe et al. (2003) find
that the clientele served by cruise ships is
at a substantial variance from the more
typical Maine visitor. In addition, since
cruise tourists bring their beds with them,
environmentally and financially costly in-vestment
in local built infrastructure can
be postponed or avoided entirely. Fewer
local tourist services imply lower local de-pendence
on tourist expenditures and, po-tentially,
a more informed approach to fur-ther
tourism development planning. How-ever,
it also implies lower local tourist ex-penditures,
thus economic activity, and
local multiplier effects.
Unfortunately for many cruise destina-tions,
though probably not Costa Rica, con-struction
materials are largely imported
and the better known resorts and hotels are
foreign-owned. For example, Alaska, simi-lar
to many island economies, demon-strates
high levels of leakage (wage, high
cost of goods sold (low value added), and
service), low levels of economic diversifica-tion
and infrastructure development
(McDowell Group Inc., 2000). The low de-gree
of local value-added, or high degree of
leakage out of the local economy, results in
a relatively low amount of positive eco-nomic
impact.
Increasing the proportion of local con-tent,
or reducing the imported content, of
tourism services, increases local multipli-ers.
Most items in “duty free” shops have
very little local content. Wilkinson (1989)
estimates that 40% of money spent in Car-ibbean
Island economies immediately leaks
out to multinational hotel chains and air-lines,
resulting in abysmal income multi-plier
estimates of 0.58-1.195 (Fish and
Gunther, 1994). These, and the few other
published results that are not derived from
consulting firms, have lead researchers to
strongly question the accuracy of the 2.5
multiplier used by Price Waterhouse’s
FCCA contracted study in 1994 (Pattullo,
1996a) and beyond (e.g., Price Waterhouse
Cooper, 2004).
Local multipliers will be higher for ter-minal
(home) ports for cruise ships than for
ports that simply entertain day visitors
from the ships. In addition, multipliers are
higher as the population and complexity of
the local economy increases. Braun et al.
(2002) found that the total impact of the
cruise industry increased almost two fold
by expanding the scale of analysis from
Brevard County to include all of Central
Florida. Moreover, the share of economic
impact shifted away from cruise liners
(89% vs 94%)and toward passengers (7% vs
5%) and crew (4% vs 2%) as the scale of
analysis became smaller. That is, passen-ger
and crew spending is concentrated near
the port, whereas cruise liner spending is
more geographically dispersed.
Although the cruise industry initially
touted exotic ports of call as a principal
thrust of its tourism experience, increas-ingly
marketing campaigns focus on the on
board amenities available to cruisers.
“Mass cruise tourism has been likened to
all-inclusive resort experiences, with the
cruise ship itself providing the holiday ex-perience
rather than any destinations to be
visited” (Ubersax, 1996). This shift from
floating hotels to floating resorts increases
the incentives for the industry to maximize
the time (and money) cruisers spend on
board and minimize their time in port. As
such, cruise ship companies are in direct
competition with local communities for the
expenditures of cruise tourists (McKee,
1988; McKee and Mamoozadeh, 1994) and
with land based resorts for the tourism
market more generally (Kester, 2002; Pat-tullo,
1996a).
In order to maximize their take, the in-dustry
sells land based tours to selected
providers on board for a substantial mar-
218 Cruise tourism and community economic development ...
PASOS. Revista de Turismo y Patrimonio Cultural, 4(2). 2006 ISSN 1695-7121
kup (typically 50%) and contracts with local
retailers for “preferred” status in exchange
for as much as 40% of gross sales (Klein,
2003a). Some, including Disney Corpora-tion,
have gone so far as to purchase their
own islands, cays, or beaches, generating
the least possible positive local economic
impact (Pattullo, 1996a). “With respect to
the Caribbean region, it has been suggested
that ‘there is little interaction between the
passengers and the economy and the popu-lation
of the islands they visit’ (Barry et al.,
1984)”(McKee, 1988).
Local economic impact of tourist
expenditures
Tourism expenditures are considered
exports because new money comes from
outside of the region in order to purchase
goods and services from inside the region.
Export industries, also called base indus-tries,
are essential to regional growth and
development because they increase the
amount of regional economic activity, whe-reas
nonbase industries simply increase the
rate of circulation of goods and services
within a region and do not create any new
wealth.
There is great variety and, therefore, si-te
specificity in predicting the amount of
ship board vs in port spending by cruise
tourists. Although many costs of cruise
vacations are included in their prices, Klein
(2003b) finds industry wide averages of
$220-232 per day in ship board spending.
This constitutes a sharp increase relative to
CLIA’s 1987 report of $22.50 per day
(McKee and Mamoozadeh, 1994), even ad-justing
for inflation and, potentially, in-come
differences over the period.
Klein (2003b) implies that the changes
in ship board spending come at a cost to
land based spending and are due to chan-ges
in the marketing of cruises as floating
resorts rather than simply floating hotels.
Since about 90% of cruises are between two
and 8 days in duration (Douglas and Doug-las,
1999), and the average cruise is about 7
days (Kester, 2002; McKee and Mamoo-zadeh,
1994; Pattullo, 1996a), approxi-mately
$1,500 in tourist spending per trip
in addition to the cost of the cruise itself
can be estimated from Klein’s numbers.
Kester (2002) calculates an average of
$1,341 in revenues per cruise across all
cruise types.
Average land expenditures for cruise
tourists in the Caribbean range from $15 to
$270 in 2001 (CTO, 2003), differences dri-ven
largely by the purchases of imported
luxury goods with little local content. Pat-tullo
(1996a) finds 45-67% of onshore ex-penditures
went to duty free shopping, 17%
to tours and attractions and 8% on food.
Gabe et al. (2003) finds an average land
expenditure of $85 in Bar Harbor, Maine,
an estimated $106 including tours pur-chased
on board. Both means are somewhat
skewed by jewelry purchases (Gabe et al.,
2003). In the US Virgin Islands some 80%
of onshore purchases is for duty free shop-ping,
while the similar figure for Martin-ique
is 50% (Pattullo, 1996a).
ICT (2004) reports expenditures of ap-proximately
$90-100 per cruise tourist to
Costa Rica. However, ICT (2004b) surveys
indicate that only about $28-36 of cruise
tourist expenditure pass directly from tour-ist
to local goods and service providers (Ta-ble
1). For example, through surveys we
estimate approximately 80 artisans sell
about $74 worth their wares each at each
port and for each ship (Guiliano et al.,
2004). If at most 800 (400) tourists per ship
are exposed to the artisans, the average
expenditure on arts and crafts would be
about $7-8 ($14-16) per person.
Puerto Limon-Moin Puerto Caldera-
Puntarenas
Total
Purchased tour on board 59.2% 39.9% 56.8%
Cost and average duration $85.35- 5 hrs $72.41- 6 hrs $84.32 – 5 hrs
Purchased tour at local agency 8.6% 3.8% 8%
Cost and average duration $48.12 – 4 hrs $29.17 – 3 hrs $46.94 – 4hrs
Self guided tour 0.9% - 3 hrs 11.4% - 4 hrs 2.1% - 4 hrs
Average time off ship 4.24 hrs
(min = 1; max = 10)
4.41 hrs
(min = 3; max = 8)
4.26 hrs
(min = 1; max = 10)
Average expenditures off ship $36 $26 $34
Table 1: Tour purchases by Costa Rica cruise tourists. Source: ICT Tourist Survey, 2003
Andy Seidl; Fiorella Guiliano and Lawrence Pratt 219
PASOS. Revista de Turismo y Patrimonio Cultural, 4(2). 2006 ISSN 1695-7121
Tour Description Duration (hrs) Cost on board
(US$)
City tour of San Jose Tour of city and surrounding area,
coffee plantations
10 100
Visit to Sarchi Arts and crafts shopping 5 40
Costa Rica countryside and
coffee tour
Coffee plantations around San
Jose region
8.5 89
Carara/Villa Lapas, The king-dom
of nature
National park and private biologi-cal
reserve
8.5 99
Villa Blanca and Los Angeles
Cloud Forest
8.5 94
La Paz Waterfall and Gardens Private park 8.5 82
Eco-jungle River Adventure Biological reserve 5.5 79
Corobici River Raft Float Trip down the Corobici River 7.5 99
Rainforest Skywalk and Pura
Vida Gardens
Visit to Braulio Carrillo National
Park
8.25 109
Arenal Volcano and Tabacon
Resort Hot Springs
Volcano and private resort visit 10 99
Poas Volcano and Cloud Forest National park 9 79
Horseback Riding Adventure Horseback riding 5 79
Costa Rica Outrigger Canoe
Adventure
Beach and canoeing excursion 5.5 99
Pacific Aerial Tram Rain forest 5.25 109
Averages 7.5 90
Table 2: Tours offered to Costa Rica cruise tourists, P&O Princess. Source:
www.princess.com
Approximately 35% of tours purchased
are ½ day in duration, allowing partici-pants
to return to the ship for their pre-paid
meals. The cruise operator also com-pensates
local tour companies for the
tours purchased on board (Table 2). The
cruise line typically captures as much as
50% of the fees charged the tourists for
these local tours (Klein, 2002), so we
might calculate an average of about $70-
75 per cruise tourist, or 70-75% of total
local tourist expenditures, finds itself in
the local economy.
The economic impact of that $70 in-creases
(multiplies) with the proportion of
locally produced goods purchased (e.g.,
locally grown and processed agricultural
products, locally grown and produced arts
and crafts) and decreases with the pro-portion
of imported goods (e.g., canned
and bottled beverages, film, sunscreen,
pharmaceuticals). Braun et al. (2002)
estimate cruise passenger spending mu-tipliers
of 1.43 in employment effects,
1.62 for wages and 1.88 in value added
creation for an economically complex and
highly populated terminal port in Central
Florida. INCAE (2004) estimates that
about $0.40 of each tourist dollar spent in
Costa Rica remains in the local economy,
potentially implying a local multiplier or
1.4 and a total local impact of about $98
per cruise tourist to Costa Rica.
The ratio of employees to passengers
on most cruise ships is approximately 1:2
or 1:3 (McKee and Mamoozadeh, 1994),
increasing to four employees for every
five passengers on luxury liners (Klein,
2003a). Thus, each cruise ship that comes
to a Costa Rican port carries 500 to 1000
employees (e.g., musicians, maids, cooks,
etc.). Based on anecdotal evidence, ap-proximately
40% of ship employees tend
to disembark at each port of call. Costa
Rican ports of call are thought to be popu-lar
with ship employees in part due to the
country’s reputation for value in dental
and health care.
One operator in Limon who markets to
ship employees relates that he captures
approximately 20% of the ship employees
with shorter duration tours and activities
including rafting, canopy tours, national
park visits, beach parties at an average of
about $60 per person. Braun et al. (2002)
finds multipliers for crew spending of
1.66 employment impact, 1.59 wage effect
and 1.66 in value added creation for Cen-
220 Cruise tourism and community economic development ...
PASOS. Revista de Turismo y Patrimonio Cultural, 4(2). 2006 ISSN 1695-7121
tral Florida. If the local multiplier for
cruise ship employee purchases in Costa
Rica is more like 1.4 (due to lower popula-tion
and less economic complexity), and at
this point there is insufficient evidence to
suggest otherwise, the total local eco-nomic
impact per visiting ship employee
purchasing a tour is about $84 or about
$5,380 in local economic impact per ship,
excluding local expenditures of employees
who left the ship but did not purchase
tours.
Cruise ships, port authorities and local
business
Cruise and cargo ships compensate
ports for services provided to them.
Cruise ships are charged per passenger
and per meter for a stay of up to 12 hrs,
for services related to passenger disem-barkation.
Puerto Limon receives about 7
to 11 times as many cargo ships as it does
cruise ships during the high tourist sea-son.
In Puntarenas, the number of cruise
ship visits is steadily declining, while the
number of cargo ships is steadily increas-ing.
From the perspective of the port au-thority,
when the port is working at or
near its capacity any cruise ship docked
represents a (fraction of or multiple of)
cargo ship that could not be attended. As
a result, typical revenues (and costs) of
cargo ships should be weighed against
that of cruise ships in the port authority’s
accounting framework.
It is considered a nearly universal
practice to give docking priority to cruise
ships over cargo ships, to the considerable
detriment to the latter. Wood (1982) con-tends
that it is the nature of the cruise
ship industry not to wait in line; but
rather to move along to another port
when faced with even slight delays, which
contributes to the universality of this port
priority policy. Wood (1982) finds that
this priority policy for cruise ships is gen-erally
unjustified economically.
The port of Limon charges cruise ships
$0.48 per meter per hour and each cruise
ship is charged a flat rate of $5,864 to
dock the ship for passengers to disem-bark.
Puntarenas charges $0.35 per m-hr
and a flat rate of $4,800 for a ship of typi-cal
cruiseline size. In Puerto Limon, cargo
ships pay a flat rate by registered weight,
a rate per meter-hr that is almost three
times the cruise ship rate ($1.27/m-hr), a
port use fee of $0.87 per tonne, tugboat
charges of $0.19 per registered tonne, and
a within port navigation fee of $33.47 per
trip. The analogous payments in Pun-tarenas
are substantially higher. Table 3
provides a side-by-side comparison of the
relative contribution of similar cruise
ships versus cargo ships to the local port
authority in Puerto Limon and Puntare-nas.
It shows that cargo ships in Puerto
Limon pay almost twice as much to the
port than cruise ships under the current
fee structure, while cargo ships pay about
seven times the fees paid by cruise ships
in Puntarenas.
The ship may purchase supplies while
in port, may add or exchange employees,
or may require special services for em-ployees.
Since Costa Rica is known for the
quality of its dental care, there is some, if
not a huge amount of, activity in the local
provision of these services to cruise ship
employees. Similarly, the ships may or
may not purchase water locally at a rate
of $10 per tonne in Limon or $2.58 per
tonne in Puntarenas (200-400 tonnes per
ship). Ships tend not to purchase fruits
and vegetables locally, since Costa Rica is
not among the cheapest locations for such
items in the region, despite its position as
a major exporter of bananas and other
fruits.
Job quantity versus job quality is a
consistent challenge of economic devel-opment.
This can particularly be the case
with nonconsumptive natural resource
based industrial development like tour-ism,
where many of the jobs created are
in the service and retail trade sectors. In
an analysis of the contribution of cruise
ships to the Alaskan economy, McDowell
(2000) found that the local jobs created to
serve the cruise industry were 77-94% of
the average private sector wages in host
communities. The jobs created were pri-marily
in the transportation, retail and
service sectors.
Andy Seidl; Fiorella Guiliano and Lawrence Pratt 221
PASOS. Revista de Turismo y Patrimonio Cultural, 4(2). 2006 ISSN 1695-7121
Categories Puerto Limon Puntarenas
Cruise ships Cargo ships Cruise ships Cargo ships
1) Cruise ship flat
fee for services
5,864 4,800
2) Per passenger
service fees
2,090 2,500
3) Navigation as-sistance
fees
111 5,000
4) Demurrage fees 3,048 840
5) Dockage fee 2,175 25,500
6) Tugboat fee 9,500 13,500
7) Harbor pilot fees 33.47 2,100
Total 7,954 14,867 7,300 52,940
Table 3: Comparative charges of port authorities for cruise ships versus cargo ships, Pun-tarenas
and Puerto Limon, Costa Rica, 2004, US$. Sources: Puntarenas information based
on information provided by INCOP in June of 2004. Puerto Limon information was pro-vided
JAPDEVA in June of 2004. Assumptions: 1000 passenger cruise ships in port for at
most 12 hrs or cargo ship of 50,000 registered tonnes and 200 meters in length with 2,500
tonnes of cargo. Notes: 1) Per trip in Puerto Limon, for more than 13,000 registered tonnes
in Puntarenas; 2) $2.09 and $2.50 per passenger in Puerto Limon and Puntarenas, respec-tively.
3) flat fee for > 300 registered tonnes & 0.10 per tonne in Puerto Limon and Pun-tarenas,
respectively; 4) $1.27 and $0.35 per m-hr in Puerto Limon and Puntarenas, respec-tively;
5) $0.87 and $0.51 per tonne of cargo in Puerto Limon and Puntarenas, respectively;
6) $0.19 and 0.27 pre tonne, in Puerto Limon and Puntarenas, respectively; 7) $33.47 per
trip and $0.1002 per tonne in Puerto Limon and Puntarenas, respectively.
Cruise ships and the environment
Although it has been argued that
cruise tourism offers a unique opportu-nity
for sustainability due to its spatial
confinement and predisposition to precise
management, problems associated with
waste generation and disposal, other
pressures on fragile and unique natural
environments, and social and economic
impacts on host communities continue to
be vetted (Johnson, 2002). Cruise tourism
pollutes sea floors, harbors and coastal
areas, degrades scarce water sources,
destroys coral reef habitat, creates public
health concerns ashore, and generates
pressure on land based waste disposal
sites (Uebersax, 1996 in Johnson, 2002).
Three of the four largest cruise lines
have been convicted of breaking US envi-ronmental
laws since 1998. P&O Princess
was also convicted, but earlier in the
1990s (Klein, 2003a). In 1998, P&O
Group released a corporate environ-mental
report that acknowledged the
impact of cruise liners in terms of waste
generated and the percentage recycled, oil
consumption and carbon dioxide emis-sions,
ozone depletion, sulphur dioxide
emissions, oil spillage, and water use
(Johnson, 2002). In 2000 the Bluewater
Network petitioned the US Congress to
consider cruise ships as point sources of
water pollution (Johnson, 2002).
Cruise lines have paid more than $60
million in fines over the past 5 yrs and
$90 million over the past decade for ille-gal
dumping or concealing it (Klein,
2003a). With a few notable exceptions
(one case each in Egypt, Mexico and Bra-zil),
the enforcement of these environ-mental
regulations has been by the
United States (Klein, 2003a). In 1998
Holland America was fined $2 million for
illegal discharges of oily bilge in Alaska in
1994. Royal Caribbean was fined $18
million for 21 felony counts of violating
US water pollution laws, dumping oil and
hazardous chemicals, in 1999. A $250,000
reward was awarded to passengers of the
P&O Princess cruise who bore witness to
intentional dumping of plastics and other
waste by the cruiseliner (Johnson, 2002).
Klein (2002) among others argues that
“the cruise industry has the resources to
build cleaner ships, stop dumping in
coastal waters and contribute to coastal
environmental protection and clean-up,
but prefers to forward unenforceable vol-
222 Cruise tourism and community economic development ...
PASOS. Revista de Turismo y Patrimonio Cultural, 4(2). 2006 ISSN 1695-7121
untary agreements less likely to impact
the bottom line if violated. They are get-ting
a free ride…” Holland America Line
has been involved in attempting to re-store
accidental reef damage, although
there appears to be rather limited suc-cess.
Unlike this case where the blame is
clearly traceable to a single operator,
there is little evidence of the industry
addressing the more general cumulative
effects of cruise tourism on the worlds’
marine and terrestrial ecosystems (John-son,
2002).
Conclusions, lessons learned and future
directions
Growth in the cruise ship industry in
Latin America and the Caribbean in gen-eral
and in Costa Rica specifically will be
accompanied with demands for invest-ment
in ports of call for these larger ships
arriving in greater numbers. Such in-vestment
will create jobs and income for
host communities and countries. It will
also generate pollution, increase conges-tion,
and have other social and cultural
impacts in port communities and beyond.
The question is whether this is the ap-propriate
economic development path for
Costa Rica and/or other countries and
communities in the region to follow.
McKee and Mamoozadeh (1994) conclude
against the notion stating “…it seems
doubtful that Third World economies
should consider cruise tourism as a major
factor in development plans.”
The Costa Rican government has re-sponded
to growth in the cruise ship in-dustry
by designating Puntarenas and
Limon as “Primary Centers of Tourism
Development,” providing tax holidays,
infrastructure investments to separate
tourism activities from cargo shipping,
and other inducements to further develop
these ports to accommodate cruise ship
tourism. Costa Rica must seriously con-sider
whether cruise tourism is an engine
of economic development it would like to
encourage or discourage based upon the
following comparisons where appropriate:
no cruise ships vs cruise ships; cargo
ships vs cruise ships; and other tourism
vs cruise tourism.
Our analysis raises the following is-sues
and concerns with investing in
cruise tourism at a cost to other potential
avenues of local economic development.
􀂾􋹔 The cruise tourism industry com-petes
with the cargo shipping industry for
port space at what appears to be a signifi-cant
cost to Costa Rican ports in favoring
cruise ships to cargo ships. Port fees in
Limon and Puntarenas are skewed
against the cargo ship industry. Charging
the industry standard per passenger and
the same per meter-hr rate as is charged
to cargo ships would essentially equalize
the payments to the port authority be-tween
cruise ships and cargo ships in
Puerto Limon. The fee structure in Pun-tarenas
is strongly skewed against the
cargo ship industry relative to cruise
ships and equalization appears unlikely
there. Moreover, cruise tourist numbers
are in decline in Puntarenas, unlike Li-mon,
and their local expenditures are
lower than their counterparts in Limon.
It may be that cargo ships are a more
viable long term development alternative
than cruise ships in Puntarenas.
􀂾􋹁 Although the total tourism expen-ditures
of cruisers may be similar to other
tourists, it appears that the amount of
money injected into the local economy per
cruise tourist is substantially lower than
for other types of tourism. Much like the
reputation of land based “all inclusive”
resorts, cruise companies appear to cap-ture
most of the economic returns from
the cruise tourist experience, regardless
of the role the local natural resource base
and people might have played in it.
􀂾􋹄 Due to the country’s relative afflu-ence
regionally, cruise ships purchase
relatively few supplies in Costa Rica,
mitigating potential benefits of their stop
in a Costa Rican port.
􀂾􋹃 Cruise ships generate a great deal
of human waste, water and air pollution,
which can create a serious health hazard,
cleanup costs, and which are not com-mensurate
with other types of tourism
development available to Costa Rica.
Here again, regional, multi-national pol-lution
policies applied to marine indus-tries
would work to mitigate these effects
without harming local competitiveness
narrowly defined, and perhaps enhance it
considering economic development alter-
Andy Seidl; Fiorella Guiliano and Lawrence Pratt 223
PASOS. Revista de Turismo y Patrimonio Cultural, 4(2). 2006 ISSN 1695-7121
natives more broadly.
􀂾􋹄 Decision makers may want to con-sider
that investment in cruise tourism
friendly ports may be less efficient from a
national perspective than investment in
infrastructure (e.g., airports) to increase
more profitable types of tourism.
􀂾􋹌 Leaders may want to consider the
encouragement of smaller “pocket”
cruises over the current cruise version of
mass tourism (McKee, 1988). Such ships
would probably not compete with cargo
ships for port space, rather they would
contribute to the increasing number of
local harbors for private leisure vessels,
and would potentially create more “value
added” than mass cruise tourism. Current
examples of pocket luxury cruises in-clude:
Abercrombie and Kent Interna-tional,
providing luxury nature watering
trips around Antarctica; Windjammer
Barefoot Cruises, small sailing yachts
around the Caribbean; and Swan Hellenic
historic tours with lectures around the
Mediterranean.
The importance of the cruise industry
to the economies of Central America and
the Caribbean is undeniable. The ques-tions
surrounding the benefits and costs
of such development are similarly unde-niable,
yet relatively site specific and
poorly understood. This work has raised
many of the important questions and
provided some potential answers with
sufficient empirical support to demand
consideration by policy makers and re-searchers
alike. We hope that subsequent
work can provide greater precision and
application in responding to the question
of the efficacy of cruise tourism as an
engine of community economic develop-ment
in this region.
Acknowledgements
Seidl’s work on this project was supported
through a Fulbright Scholar Award to
INCAE from 2004-2005. The authors
would like to thank Ana Maria Majano
and Rene Castro for their assistance and
support. All errors remain the responsi-bility
of the authors.
References
Barry, Tom, Beth Wood, and Deb Preusch
1984 The other side of paradise: Foreign
control in the Caribbean. New York:
Grove Press.
Blue Water News
2004 Website accessed: October 1, 2004.
Braun, Bradley, M., Xander, James, A.,
and Kenneth R. White.
2002 “The impact of the cruise industry
on a region’s economy: a case study of
Port Canaveral, Florida”. Tourism
Economics, 8(3): 281-288.
Business Research and Economic Advi-sors
(BREA)
2004 “The contribution of the North
American Cruise Industry to the US
Economy in 2003”. International
Council of Cruise Lines. August 2004.
Caribbean Tourism Organization (CTO)
2004 “Barbados tourism minister calls for
independent study on impact of cruise
and land based tourism”. Caribspeak,
October 19, 2004. http://news.cari-bseek.
com/setup/exec/view.cgi?archive
=46&num=4776
Caribbean Tourism Organization (CTO)
2003 Caribbean Tourism Statistical Re-port.
Barbados.
Costa Rican Tourism Institute (ICT)
2004 Annual Statistics for cruise ships-
2003.
Douglas, Ngaire and Norman Douglas
1999 “Cruise consumer behavior: A com-parative
study”. In Pizam, Abraham
and Yoel Mansfeld (eds.), Consumer
behavior in travel and tourism. Ha-worth
Hospitality Press: New York. Pp
369-392
Dwyer, Larry, Douglas, Ngaire, and Zelco
Livaic
2004 “Estimating the economic contribu-tion
of a cruise ship visit”. Tourism in
Marine Environments, 1(1): 5-16.
Economist
1998 “Floating fantasy. Travel and tour-ism
survey”, the Economist,
01/10/1998, V 346, I 8050, p 14.
Fish, Mary and William D. Gunther
1994 “Small island economies, tourism
and political crises”. In McKee, David
L., (ed.), External linkages and growth
in small economies. Praeger: Westport,
Connecticut. Pp 82-112.
224 Cruise tourism and community economic development ...
PASOS. Revista de Turismo y Patrimonio Cultural, 4(2). 2006 ISSN 1695-7121
Gabe, Todd, Lynch, Colleen, McConnon,
James and Thomas Allen
2003 Economic impact of cruise ship pas-sengers
in Bar Harbor, Maine. REP
Staff Paper 518. Orono: Department of
Resource Economics and Policy, Uni-versity
of Maine. March 2003.
Guiliano, F., Pratt, L., Castro, R., and
A.M. Majano
2004 El impacto del turismo de cruceros
en Costa Rica. Costa Rica: INCAE.
Johnson, D.
2002 “Environmentally sustainable cruise
tourism: a reality check”. Marine Pol-icy,
26: 261-270.
Hall, J.A., and R. Braithwaite
1990 “Caribbean cruise tourism: a busi-ness
of transnational partnerships”.
Tourism Management, 11(4): 339-47.
Henthorne T.L.
2000 “An analysis of expenditures by
cruise ship passengers in Jamaica”.
Journal of Tourism Research, 38: 246-
50.
The International Ecotourism Society
(TIES)
2004 “Eco Currents. Special feature: The
cruise industry”. In Laura Ell and
Anne Marie Moore, (eds.) The Interna-tional
Ecotourism Society. Sec-ond/
Third Quarter, 2004.
Kester, John G.C.
2002 “Cruise tourism”. Tourism Econom-ics,
9(3): 337-350.
Klein, R.
2002 Cruise ship blues: The underside of
the cruise industry. Gabriola Island:
New Society Publishers.
2003a. “Cruising-out of control: The
cruise industry, the environment,
workers, and the Maritimes”. March,
2003. Canadian Centre for Policy Al-ternatives-
Nova Scotia. http://www.-
policyaltneratives.ca
2003b “Charting a course: The cruise
industry, the government of Canada,
and purposeful development”. Sep-tember
2003. http://www.kahea.-
org/ocean/pdf-/charting-a-course.pdf
McDowell Group, Inc.
2000 “The economic impacts of the cruise
industry in Southeast Alaska”.
McKee, David L.
1986 “Tourism and the planning of Third
World infrastructures”. Foreign Trade
Review, 21(2): 148-156.
McKee, David L.
1988 “Some reflections on cruise ships
and the economic development of
small island nations”. Canadian Jour-nal
of Development Studies, 9(2): 249-
259.
McKee, David L. and Mamoozadeh,
Abbas
1994 “Cruise Ships in the Third World:
Developmental versus corporate finan-cial
objectives”. In McKee, D.L., (ed.),
External linkages and growth in small
economies, Westport, Conn. and Lon-don:
Greenwood, Praeger. Pp. 91-101.
Pattullo, Polly
1996a “Sailing into the sunset: The
cruise-ship industry”. In Last resorts:
The cost of tourism in the Caribbean.
London: Casell and Latin American
Bureau. Pp 156-177.
1996b Last resorts: The cost of tourism in
the Caribbean. London: Casell and
Latin American Bureau.
Price Waterhouse Coopers for Florida-
Caribbean Cruise Association (FCCA).
2004 “Economic impact of the Cruise In-dustry
on the Caribbean”. http://ww-w.
fcca.com/pages/research.html.
Uebersax, M.B.
1996 “Indecent proposal: cruise ship pol-lution
in the Caribbean”. http://ww-w.
planeta.com/planeta/96/0896cruise.h
tml
Wood, Thomas W.
1982 “The economics of mixed cargo and
cruise ship traffic in a port”. Journal of
Transport Economics and Policy,
January: 43-53.
Recibido: 18 de mayo de 2005
Reenviado: 10 de diciembre de 2005
Aceptado: 10 de febrero de 2006
Sometido a evaluación por pares anónimos