Perhaps the most enthralling aspect of cruising, for the passengers, is the arrival in a new port-of-call. Here is the opportunity for a once-in-a-lifetime experience in a new and exotic locale, in turn experiencing local culture and personality WITH locals. For many, this is the raison-d'être for cruising.
But before this can happen, there is much preparation that goes into making it happen. To their credit, cruiselines, for the most part, have done the work. These companies have developed markets and ports of call throughout the world. The cruise business is a substantial business within the larger tourism category overall. Tourism is growing faster than the overall economy and cruise tourism is growing faster yet, just look at the development of new cruise ships to guide this assessment.
Although many destinations are drawn to the economic advantages of facilitating cruise tourism, there are legitimate concerns about the environmental and social impacts of allowing this business to come in. As well, there are perceptions that the economic benefits are not being shared equitably and most of the port spend does not remain in local residents hands.
Not only do cruise companies have unfettered access to the passengers while on the ship but many are asking for and getting exclusive rights while in port docking areas when the ship arrives further restricting local operator access. Cruiselines also play up fears about local security issues very much to their advantage and this also has a role in driving down local prices.
Because cruiselines have usually bargained from a position of strength, this means destinations along with the local tour operators are left with difficult choices. Promoting cruise ship visits in the hope of either attracting future tourists - or at least some spending from these visitors while in the destination - VS the costs to support these visits. Many ports are daily overwhelmed by a clutch of visitors that may actually eclipse the local population. "It is also very important that destinations have a serious policy of promotion and management of cruise activity in their territory."1
As far as the cost of docking at a destination, the cruiselines motivation is to keep this cost as low as possible because any licensing/docking fee or port tax will be added to the price of the cruise. In some destinations, the revenue from these charges may not cover the cost of doing business so the taxpayer in the destination could literally end up subsidizing the cruise visitors.
As well, the cruiselines are not concerned about the cost to destinations. Whether it be infrastructure, wear and tear on facilities such as heritage sites, etc or support services in the destination for thing like visitor information facilities, oversight and management of stakeholders, training costs, and so on.
Not to be understated, it costs about 3X LESS to build a stateroom on a cruise ship than for an equivalent accommodation on land. What's more, destinations will be footing the bill for infrastructure for BOTH visitors. So, in addition to bargaining from a position of strength, the cruise company is also at a decisive advantage economically from the get-go, both in relation to the ports of call and to the accommodation business located in them.
And the relationship, destination to cruise ship is a tenuous one, often directly at odds with each other. Cruise companies use the threat of withdrawal as a very powerful pressure tactic against destinations that may be thinking about no longer catering to the cruise tourist. Their tactic has been successful because without the cruise ship showing up, there is no economic benefit.
The truth is: Most visitors spend relatively little and the cost of maintaining facilities to attract the cruise ship visits is very high. The "head" tax that destinations charge would be unlikely to cover the full cost of providing these facilities along with advertising, staffing and maintenance. Often this tax on cruise visitors is lower than the equivalent tax levied on the local hotel rooms.
Mostly, this visit, subsidized by the destination, is looked upon as an opportunity for local operators to capture some business. However, local tour operators are frustrated by the high cost of participating in a risky, low return market for the few passengers who are disembarking without a planned itinerary. Most tour operators will not get enough new business to be worth their while.
"[T]he shore-side spend per cruise ship passenger on each island appears to have declined significantly. Today, even the discretionary spend per cruise ship passenger in the Caribbean is estimated at 82% on board and 18% on shore. While the economic benefit to island economies has declined on a per passenger basis, cruise ships continue to operate in a virtual tax free environment within the region – yet they require island governments to finance and build larger expensive piers for their larger, more cost efficient ships".4
Additionally: Portside vendors often pay placement fees, advertisements with the cruise line and so on. So, "a key element of both the shore excursion program and the shopping program is that only a portion of money spent by passengers remains onshore. Thus, while most ports assume that passengers spend on average between US $85 and $100 per port call, these figures are not adjusted for the amount that remains in the port and the amount that goes to the cruise line and/or its concessionaire."5
In other words, a large portion of the passenger spend returns to the cruise line in the form of rents, fees, commissions, markups, and so on. Out of the $100, or so, that a passenger may spend, it is not uncommon for as little as $20 - 30 to remain in local hands.
Further to this, cruise passengers embark on their voyage with the expectation that the cruise fare covers nearly all of their holiday costs. "Just 36 per cent of cruise ship passengers visiting the Bahamas purchase a shore excursion offered by local providers, a survey produced for the Florida-Caribbean Cruise Association (FCCA) ranking this nation next-to-last in this category."6
Without a doubt, cruiselines have been very successful in capturing the shore excursion market 'because' they were on top of the game and organized themselves very well to go after this market. It was a market ripe for the taking and cruiselines seized on it to the point where most passengers disembarking in a port had committed to take the cruise line sponsored tour, usually at a substantial premium to the passenger:
Cruiselines use all the right tools to make the sale:
Of the remaining passengers who have not already made a purchase - many are not interested and simply plan to spend time in port sightseeing on their own or visiting shops, the beach and so on without any further spending. A small number of passengers are willing to participate in excursions at extra cost. Also, many passengers do not disembark, leaving this cohort out of reach for any local marketing efforts.
What remains is a limited market at destination among passengers who are interested in local experience. This marketplace is extremely competitive often placing local operators in head-to-head on-site confrontations for customers. This often leaves a negative impression because tourists have no interest in being hustled or in the middle of a local dispute.
In fact, at many ports, a tour is not necessary, a taxi driver or just visiting local eateries/bars will provide an authentic local experience. Tour guides, trinket/souvenir sellers, food and beverage, taxi drivers all have a product/service to sell and also need to attract these shoppers.
Tourists visiting for first time are looking for an introduction to the place. They want to enjoy the sightseeing but they also want an experience AND an education. First impressions are paramount and will determine whether the visitor will return for a longer future stay. Most passengers have already had a good look at blogs and info sites before they get on the ship. So they already have questions planted in their heads but the majority being first-timers need to 'learn the ropes'. And the Press is chipping away as can be seen in articles like the ones appearing in Fox News8 or the one written by Chris Owen9. But, mostly, cruisers tend to return on another cruise.
So then old battle lines have been mostly set but this seems to be slowly changing. The shift to slightly favouring the destination may be taking place.
More recently, this perception may be starting to change. As J.G Brida and S. Zapata explain: "Ports too often perceive that they need the cruise ships more than the cruiselines need them, but in fact there is a mutual need. Ports have not yet realised that with the recent expansion of the cruise industry cruiselines need new ports as much if not more than the ports need them."2
Further to this last point: "The overriding viewpoint is that the port needs the cruise line and that if one cruise ship visits others will follow. Interestingly, successful ports have a slightly different perception. A Key West, Florida city commissioner recently observed: "We need to stand back and evaluate where we are at and make sure we are controlling the cruise ships and they aren’t controlling us." This observation gets at the crux of the issue: in looking at cruise line – port relationships: one must step back and ask, "Who needs who?"3
Now, the question is becoming: How to break the model and give local suppliers a chance to attract some of this business. And this is starting to happen.
"Technology is shifting yet another industry, moving control from the cruiselines to the end customer. The web became the avenue for local shore excursions operators to reach cruise passengers before they disembark – in other words, a complete game changer".10
Worldwide, the shore excursion business potential is enormous but it all hinges on delivery on a very small scale, in fact, in most cases, a single tour leader and group sizes less than 8 - 10 participants on a daily basis. Often, the group is only 2 - 4 passengers.
Nonetheless, the relationship between destinations and cruise ship visitors 'is' slowly changing. So being well-placed to capture more business from them is becoming more possible but it is important to follow a strict set of rules in order for the sale to be made. This takes finesse and careful preparation. Cruiselines still get it right more than they get it wrong, so effectively learning what the cruiselines are doing 'right' to be able to replicate this approach when asked to do so. And mobile roaming charges are still prohibitive so passengers are still reluctant to embrace this channel just yet.
"A large company commanding so much business from suppliers is able to extract prices that provide marginal profit for the suppliers. This is particularly the case with shore excursion providers. Several companies may compete for a cruise line’s business and are forced to undercut one another in order to win a contract for the line’s business. The result is that the cruise line (or its concessionaire) buys shore excursions at very attractive prices and then sells them to passengers for as much three times the amount paid to the shore excursion provider. Given the volume of business, many shoreside businesses are left in a position of either selling their product cheaply or not selling it at all".11
Where cruiselines are permitted to dock, local guides should be given an opportunity to sell their excursion directly to the visitor, in an open market. The passengers would, in all likelyhood, still buy the cruise ship excursion but it would open many new possibilities for destinations to offer services and to promote stay-overs and so on. This would allow passengers more choices about how they wish to visit the place. Ultimately this would improve the services on offer, both for the destination as well as for the cruiseline.
One option is to partner with the cruise line. This has the advantage of placing the selling process in the hands of the cruise line along with associated costs. Disadvantage being, the price per passenger is lower. Cruiselines prohibit the tour guide from taking any other passenger, so the risk is that the tour may run with less than a profitable participation for the taxi driver or tour guide.
Possibly, the strongest way to succeed in this market by utilizing the primary key component in all of this, in the broadest sense: The Destination Marketing Organization (DMO) or Tourism Authority. This group has the power to facilitate most aspects of the business of selling tours:
This is what Tourism New Zealand tells potental operators:
"If you are thinking about developing a new tourism product in Dunedin and you have the cruise ships in mind as a target market, it is advised that you take the following steps:
1. Get your tourism product up and running with general tourists (non-cruisers) first.
a. Build up a good tourism product and reputation with tourists.
b. Work closely with the Dunedin i-Site (Visitor Centre). Train their staff about how to sell your tour, and stock your brochures there.
2. Once your tour is established and going well with general tourists, you can then start thinking about getting into the cruise market (not the other way around).12
The need to partner with local authorities is important. Local DMOs, usually tourism's front line, are an excellent place to make your presence known. But it is not just a one-time wave of the hat. The staff will be getting other vendors showing up and making similar presentations. The need to "keep at it" is ongoing. Also, these are people who you do not want to alienate. If there are problems, fix them. Lastly, staff turnover is notoriously high, so the need to make a new face is always going to present new opportunities to make a return sales call. Make sure brochures are up to date, fresh and presentable. Consider too, that tour guides may relocate or not be available, so service would need to be confirmed on a regular basis.
Another strategy may be to develop tools to compete. This may involve partnering with the DMO and with technology companies or tour sellers/providers offering an alternative to the cruiseline offering. This delivers the ability for cruise passengers to take a closer look at the offerings before they become visitors and is potentially the most important selling tool that the local suppliers have. In this marketplace, there's plenty of choice but there's also many pitfalls. The market is complex, volatile and quickly changing. To add to this confusion, new technology solutions are constantly being brought to the market.
As well, visitors are seeking experiences and more active participation. "Meanwhile, passengers are changing and shore excursions are changing, too, Colpitts explained. 'What we sold 15 years ago is no longer relevant today. It is a completely different ballgame. People are more active; they look for adventure and to be engaged.' "13
Training is key to achieving results. Training in how and where to approach passengers so as not to void rules of engagement. Possessing the right tools, accessories and equipment will make the sellers job a lot easier. Bringing into line with selling approaches used in other ports might seem arcane but from the passengers point of view the approach must be seen as familiar and comfortable thereby smoothing the uphill battle to break the natural resistance to being sold something.
Certification/accreditation is well noticed and respected. If you don't have it, likely to be passed over for someone who does. Quality tour guides are in demand and with proper organizational backing will be well prepared to capture a fair share of this market perhaps even to lead it. Dress for success: a well groomed appearance and a well appointed vehicle are always going to be more attractive.
Study the competitors product. Understanding what the cruiselines offer, along with your local competitors, will enable selling a better product to better attract buyers. Know about prices on offer. Most of the time being able to offer a cheaper price will work although, price is often secondary to offering a solid product, such as a 'deluxe tour' from a quality guide and promoting it well. There is certainly no need to move to the price that the cruiselines pay, this is for sure underselling and leaves money on the table.
Study the profile of the passengers carefully. It is possible to gain insight into many buying preferences even before the first contact with the visitors. Amongst the preferences with the highest motivation are: "experience nature, the outdoors, beautiful scenery", "experience the culture of the countries while at ports-of-call", "explore new sights in countries on this itinerary" and "experience life in the countries visited".14 The key word being "experience" and this must be the core selling feature, promoted in every way possible.
Nothing will replace being there when the visitors arrive. Often, just showing up is all it takes. "Being there" not only infers actually being present, it also means "being prepared". Technology can help but the urgent matter of getting the visitor to come on your tour or visit your business means a carefully orchestrated set of pre-conditions must be successfully met before that transaction will happen. Also, offering payment options other than cash can often close the sale.
Cruise companies are well aware that the competition for the shore excursion dollar is heating up. Analysing their own sell-through data tells them that their ratio is slipping. Technology is adding to the pressure because new ways to get to the passengers are being found, many with effective results. These companies are also aware of the impacts and perceptions amongst the residents in the destinations where there is already a high level of resentment.
In an interview about this with Carnival UK, chief commercial officer, Gerald Tempest said: "I just wonder whether third parties have been in our blind spot and we have let some of those parties eat our lunch. We, and I daresay some other cruiselines, are wondering about our traditional model of offering shore excursions and tours. How fit for the future is it? And is there another model we could look at?"15
At one time, cruiselines paid a commission to travel agents to sell shore excursions but this is no longer the case.16 Travel agents, in response, are turning to alternative excursion sellers who willingly pay the commission. So, tour operators again have an opportunity in selling their services to and/or through these after-market suppliers. Some of these companies are stepping up their offer by developing unique and exclusive tours.
It is important to be mindful that cruiselines (and other travel companies) have a great deal invested in their business and aggressively protect this investment. They are, afterall, the original companies, in many cases, that established markets for excursions in the first place. They are not willing to give up this business because it is a key profit centre. These are large companies with well organized and experienced management. Also, they have access to a great deal of research and know the product inside and out. They are motivated to generate profit and capable to negotiate to their advantage 100% of the time.
However, because they are often slow to bring about policy and product changes, the nimble and adept local tour guides may have an advantage in being able to modifiy and adapt more readily to a quickly changing market. Especially because they can be flexible at a local level where the larger company does not have this advantage. This may be a temporary advantage however because the larger company will often have the capability to bring in new marketing programs to appeal to its broader market base.
Finally, cruise companies need to be careful not to alienate the passengers who have bought the shore excursion at a hefty premium. These buyers may not be completely aware of the premium they've paid until they're on the tour. By this time, many may be looking for the "extra value" they've paid for and may become much more cautious when the next opportunity comes around.
Destinations and tour operators also have a bit of work to do in determining why certain passengers do not leave the ship at all while in port. A certain number of passengers never disembark in port, for a variety of reasons: health, safety, no interest, and so on. Recently, there’s "a trend that more passengers are staying on the ships in port. With all the amenities on board the newest ships these days, at times that’s an attractive options welcomed by the cruiselines because passengers are likely to spend more on the ships".17 Perhaps to follow the lead of Belize where the country's unique Cruise Tourism Policy requires "that cruise ships shut down their onboard entertainment activities (including restaurants) while in port appears to have helped increase the percentage of passengers coming ashore. Belize has the highest percentage of passengers disembarking—85%."18 Consider that on a cruise ship with 2,500 passengers, there are 375 or more that don't leave so the potential just in this group is substantial.
The selling does not end when the last visitor leaves the destination. The visitor will broadcast their experience to other passengers and to social media. Being there to respond to visitor concerns will cement good relations for future visitors. No, or poor, response is only going to lead to problems in the future. Most companies, and especially cruiselines request their customers to complete surveys at the end of their travel to get an indicator of overall customer satisfaction.
Finally, destinations regionally will be somewhat different, product will vary according to demand, customs will vary, seasonality will vary and so on. While these differences may also be marketable, there are similarities and underlying issues which are applicable universally. To re-iterate, this is a fast-growing, volatile, quickly changing market that is yet to find its resonance with the players in the game.
1. Impacts of cruise tourism, J.G. Brida and S. Zapata, 2007 [ https://www.researchgate.net/publication/228304461_Cruise_Tourism_Economic_Socio-Cultural_and_Environmental_Impacts ]
2. ibid
3. ibid
4. Cruise ship industry a ‘Trojan horse’ to Caribbean small island economies, hotel industries by Robert MacLellan, Barbados Free Press, 2012
[ http://barbadosfreepress.wordpress.com/2012/04/13/cruise-ship-industry-a-trojan-horse-to-caribbean-small-island-economies-hotel-industries/ ]
5. Cruising – Out of Control: The Cruise Industry, The Environment, Workers, and the Maritimes by Ross A. Klein, 2003, page 10
[ http://www.cruisejunkie.com/ccpa1.pdf ]
6. Cruise Visitors: Just 36% Buy Local Tours by Neil Hartnell, 2012 [ http://www.tribune242.com/news/2012/oct/09/ cruise-visitors-just-36-buy-local-tours/ ]
7. Cruising – Out of Control: The Cruise Industry, The Environment, Workers, and the Maritimes by Ross A. Klein, 2003, page 7
[ http://www.cruisejunkie.com/ccpa1.pdf ]
8. Are Cruise Line excursions worth it??, Fox News, 2011 11 07
[ http://www.foxnews.com/travel/2011/11/07/are-cruise-line-excursions-worth-it/ ]
9. Cruise line scams by Chris Owen, 2011
[ http://www.gadling.com/2011/01/15/cruise-line-scams-shore-excursions/ ]
10. Cruise excursions - the latest tech-led battle in the travel ecosystem by Martin Miodownik, co-founder of Cruise Excursions Italy, guest article in tnooz, 2013
[ http://www.tnooz.com/article/cruise-excursions-latest-tech-battle-battle-travel-ecosystem/ ]
11. Cruising – Out of Control: The Cruise Industry, The Environment, Workers, and the Maritimes by Ross A. Klein, 2003, page 7
[ http://www.cruisejunkie.com/ccpa1.pdf ]
12. Getting Started in Cruise, Tourism Dunedin, 2013
[ http://www.dunedinnz.com/visit/corporate/cruise/getting-started. Page archived at Wayback Machine, 2014 ]
13. Cruise Industry News Quarterly Magazine: Fall 2010, pg 92
[ https://www.cruiseindustrynews.com/cruise-magazine/feature-magazine-articles/22173-cruise-industry-news-fall-2010-quarterly-magazine.html, Excellence in selling shore excursions. ]
14. Cruise Line Industry and Caribbean Tourism: Guests Motivations, Activities and Destination Preferences by Victor Teye and Cody Paris, 2008. Refer to Table 8.
[ https://www.researchgate.net/publication/233599707_Cruise_Line_Industry_and_Caribbean_Tourism_Guests%27_Motivations_Activities_and_Destination_Preference ]
15. Carnival UK questions how lines sell port excursions, By Hollie-Rae Merrick, Travel Weekly, May 29, 2014
[ http://www.travelweekly.co.uk/Articles/2014/05/29/48123/carnival-uk-questions-how-lines-sell-port-excursions.html ]
16. See: Excursions a point of contention between agents and cruiselines - Travel Weekly, 2010 [ http://www.travelweekly.com/Cruise-Travel/Excursions-a-point-of-contention-between-agents-and-cruise-lines/ ]
17. Cruise ships compete with ports for passenger dollars, Dennis Schaal, Skift, 2014 [http://skift.com/2014/03/01/cruise-ships-compete-with-ports-for-passenger-dollars/]
18. Cruise Tourism in Belize: Perceptions of Economic, Social & Environmental Impact, CREST, 2006, page 10
[ https://www.responsibletravel.org/wp-content/uploads/sites/213/2021/03/cruise-tourism-belize-executive-summary.pdf ]