Cruise ship passengers likely spend far less in Portland than generally thought. That’s because some overly optimistic assumptions have been made of the only scholarly passenger study focused on the issue.
The 2009 study by University of Maine economists Todd Gabe and James McConnon concluded that the average passenger visiting Portland spent as much as $109.68, including on cruise ship-sponsored excursions, and said it represented as much as $5.25 million in direct economic impact in Greater Portland in 2008. Scaled up to today’s passenger levels, that would represent over $20 million in 2018.
A Portland Press Herald/Maine Sunday Telegram analysis, however, found the study greatly overstated both average passenger spending and the resulting economic activity, which was based on 2008 surveys of passengers stepping off the same three ships during seven calls in Portland.
When calculating overall activity, the study assumed all ships visiting Portland arrived at full occupancy and that everyone who arrived got off the ship. But city records of passenger fee collections show surveyed ships have an occupancy of about 88 percent, and the cruise industry estimates that only 87 percent of passengers disembark when in port.
As a result, the study assumed 47,841 passengers disembarked in Portland that year, when the real number was about 36,627.
Not only were there fewer passengers, but each of them on average spent much less than $109.68, not least because that figure included cruise ship-sponsored excursions and assumed “that the cruise lines impose a zero percent markup.”
In reality, such tours are a major profit center for the cruise lines, which impose markups of 30 percent to 90 percent – money that never goes ashore. A recent paper from Danish researchers found a 40 percent to 70 percent markup, with some sources saying most tour operators in Copenhagen made no profit at all from the tours, while Ross Klein of Memorial University in Newfoundland says cruise lines keep 50 percent to 70 percent of the purchase price.
Assuming a conservative average of 55 percent, the overall per-passenger spending average for Portland would be adjusted downward to $93.64.
More consequential: The Portland survey never asked how many people were in the respondent’s party. Klein, a critic of the UMaine researchers’ methodology, says his research team’s surveys of passengers in Halifax, Saint John and Charlottetown – ports often visited as part of a cruise including Portland – showed the average party size is 2.1 to 2.23, meaning many respondents are spending for spouses, partners or children.
Conservatively, per-passenger spending would have to be divided in half, reducing it to $46.82, a figure similar to the $46.32 to $50.70 ($59.51 to $65.14 Canadian) daily spending estimates that Klein and his colleagues have found more recently in the three aforementioned Canadian Maritime ports in 2016.
Multiplying the adjusted per-passenger spending by the adjusted number of passengers who visited Portland in 2008 yields a direct economic impact of $1.71 million, or $1.47 million if cruise ship excursions are excluded. That’s just over a third what the Gabe and McConnon study assumed. Total economic impact – arrived at by using multipliers for indirect sales – would be reduced to between $2.2 million and $2.6 million instead of the $5.8 million to $8 million in the study.
Gabe told the Press Herald that his team didn’t have access to either ship occupancy or disembarkation data at the time, and his later study of Bar Harbor corrected some of these shortcomings and asked some respondents about party size.
The Portland study acknowledged the problem with cruise line excursions by providing both best- and worst-case scenarios – the former including undiscounted excursion spending, the latter excluding such tours entirely, which reduced daily spending estimates to $80.51. The subsequent Bar Harbor study discounted cruise line tours by 55 percent.
The study did not quantify crew spending, an additional benefit to a port, but Klein and his colleagues found each crew member who leaves a ship spent about $35 ($43.88 to $48.05 Canadian) in each of the three Maritime ports in 2016. A 2007 study prepared for Canadian cruise promotion agencies found a ratio of 1 crew person coming ashore for every 2.88 passengers who did so in Atlantic Canada, suggesting Portland might have received something like $416,250 in direct crew spending in 2008 and $1.7 million last year.
Colin Woodard can be contacted at 791-6317 or at:
cwoodard@pressherald.com
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