Thursday, October 28, 2010 News

Are cruises a boon for local economy?

by Andy Hollis

When Bryan Burgin and Michael Watson drove to Charleston to take a six-day cruise, they stayed with friends to save money before the ship departed. Once the cruise ended, they grabbed their bags and went straight home to Columbia.

“We’re not doing a thing to stimulate the local economy,” Watson said with a chuckle.

Fellow passengers Lee and Sherri Romans of Portland, Ore., told a much different story. Drawn to Charleston by the cruise, they ended up staying two nights in a downtown hotel and dumping more than $400 in the city, taking tours, shopping and dining out.

“We love Charleston,” Lee Romans said. “It’s a city we would come back to.”

These two accounts from people on a September Carnival Fantasy cruise show the widely varying economic impact ship passengers can have on the host city where they begin and end their voyage. Some passengers spend freely during their time here, providing a boon to local businesses. Others spend next to nothing, contributing only to congested sidewalks and streets.

As the community debates the effects cruise ships have on the city’s environment, infrastructure and quality of life, a larger question looms over the discussion: From a pure dollars-and-cents perspective, is it all worth it?

The only study to examine the financial implications of cruises in Charleston paints the industry as a bonanza for the region in sour economic times, contributing some $37 million a year to the local economy. Direct spending by cruise passengers alone is expected to top $5.5 million, the study found.

But that study was paid for by the State Ports Authority, which claims as much as 8 percent of its annual revenue from the cruise industry. That makes some residents and business leaders skeptical of the study’s conclusions, particularly since the analysis did not examine potential negative impacts associated with the ships.

Chief among economic concerns is whether cruise-ship passengers displace other tourists who visit Charleston for its events and historic attractions rather than as a vacation stepping-off point. Stay-over tourists tend to spend more cash on hotel rooms, restaurants and activities. Will they balk at the increased traffic and crowds and go elsewhere?

The port’s study estimates the average cruise passenger spends between $43 and $66 while in town. Traditional tourists, by comparison, spend about $170 per day during their stay, according to the Charleston Area Convention and Visitors Bureau.

Cruise supporters insist the industry is simply augmenting the region’s tourism trade, not pushing traditional visitors out. About 600 passenger surveys collected by the Ports Authority in August showed that nearly two out of five cruise guests rented a hotel room in the region. The same number shopped and visited sites including the S.C. Aquarium, Patriots Point Naval and Maritime Museum and the historic plantations. Nearly half of those surveyed ate in local restaurants as well.

Each ship also carries a crew of about 900 people, a group that collectively spends about $2.6 million a year in town, the study found. These are folks like Amanda Cupido, a bright-eyed Toronto native who is part of the entertainment staff aboard the Carnival Fantasy. On a recent morning, she sipped sweet tea at Bubba Gump restaurant as she made plans to shop for makeup, shampoo and other necessities. It’s a routine she repeats on each visit.

That doesn’t surprise Jim Newsome, the port agency’s chief executive officer. Newsome suspects time will show that the impact study actually underestimated the cruise dollars flowing into Charleston, providing vital revenue during a crippling recession.

Hank Holliday isn’t so sure. Holliday, who owns three downtown hotels and four restaurants, has seen little revenue from the increased cruise traffic. Furthermore, he worries that the influx will lead to a “dumbing down of tourism” in the city, with discount travelers and tacky trinket shops replacing the upscale tourist trade Charleston worked for decades to cultivate. Holliday said he has seen this happen before in Key West, Fla., where he has owned a home for 25 years.

“I have seen it up close and personal, and that makes me fear for the security of my business and the job security of the 300 people I employ in Charleston,” he said.

Newsome insists such worries are unfounded, and he bristles at some residents’ attempts to paint cruise ship passengers as T-shirt-buying, fanny-pack-wearing undesirables — in short, a lower class of tourists.

“I find some of those arguments offensive,” Newsome said as the Carnival Fantasy’s foghorn blew outside his Concord Street office, preparing to leave for the Bahamas. “The Charleston peninsula is a beautiful place, but it’s not exactly killing it economically.”

Newsome said the cruise study, prepared by two College of Charleston researchers, shows the average cruise passenger comes with an above-average income — “not that we should even be talking about that” — and that they, by default, spend money.

The economic impact study by professors John Crotts and Frank Hefner estimates that cruises will generate more than 400 local jobs, with each averaging nearly $40,000 in wages, and $3.5 million in state sales and income tax. The report suggests that each cruise call originating in Charleston results in $530,000 in direct local business income.

That direct spending, in turn, generates multiplier effects, the study posits. For example: When a cruise passenger buys a meal at a local restaurant, that’s direct spending. When the restaurant pays for the goods and services to prepare and deliver the meal, that’s indirect spending. Over time, the theory goes, this creates a chain reaction of hiring and spending.

In another positive sign, Crotts noted, the ships are starting to shift toward using more local suppliers. Carnival’s list of local vendors now includes flowers, bottled water, paper products, milk and ice cream. And the Crotts-Hefner study excludes the $330,000 ships pay to refuel each time they pull into port.

The study takes into account 69 cruise calls in 2010. Charleston has 89 calls booked for 2011 so far.

Dana Beach, executive director of the Coastal Conservation League, said the study paints a rosy picture but ignores several key factors, such as the fact that most of the ships’ supplies come from out-of-state vendors who truck in goods at cut-rate prices. Like hotelier Holliday, Beach also worries that other visitors are steering clear of the city on days the ships are in town, hurting other businesses that don’t draw cruise dollars.

The league asked Jim London, a Clemson University researcher who studied cruise impacts on Key West, to lend perspective to the Crotts-Hefner report. His conclusion: Non-cruise visitors account for 98.6 percent of direct tourism expenditures in Charleston County, so they should always take precedence.

“It is important not to lose sight of the golden egg,” his report says. “The crowding-out effect of large numbers of cruise passengers disembarking does encourage both traditional tourists and residents to stay away from high-impact areas.”

Although London draws comparison between Key West’s storied Duval Street and Charleston’s own Market Street, he acknowledges that the Florida island and the Holy City have stark differences. “They’re not going to overwhelm Charleston in the same way they did Key West or the way they do Caribbean island ports of call.”

Key West can handle three ships at one time; Charleston’s Union Pier just one. More than 860,000 cruise passengers visited Key West in 2009, more than eight times the number expected in Charleston this year. And unlike Key West, most of Charleston’s cruise passengers take voyages that begin and end in the Holy City, meaning boarding and off-loading span hours instead of happening in a sudden flood of people.

Port officials say a more apt comparison to Charleston would be cities like Baltimore and Mobile, Ala., which have reaped millions in revenues from cruises with few, if any, drawbacks. In Mobile, which hosted the Fantasy before it came to Charleston, cruise ships contribute nearly $23 million to the local economy annually and generate no real criticism, said Semoon Chang, an economics professor at the University of South Alabama.

“I haven’t heard of any drawbacks, only positives,” he said.

Still, London said Charleston should consider enacting controls to manage the flow of ships and visitors to preserve its current tourism base. The city has the opportunity to become a national leader in addressing cruises in the same fashion it rose to prominence in handling other visitors over the past several decades, he said.

Ross Klein, author of “Cruise Ship Squeeze” and “Cruise Ship Blues,” said without such controls, the cruise industry could expand exponentially in the city, even with just a one-berth terminal. “What happens next year or the year after that, when a cruise line comes along and you end up with a ship every day of the week?” he asked. “Can the city absorb that amount of cruise tourism without displacing other kinds of tourism?”

Port officials insist there is no demand for more than two ships a week in Charleston, but they have resisted the idea of a formal decree capping the number or size of ships. City leaders haven’t pushed the issue or expressed much desire for placing local controls on the cruise industry. They say sufficient controls are already in place at the national and international levels.

That baffles Holliday. He has spent countless hours before local permitting boards getting approvals for his various businesses and he has paid many thousands of dollars in taxes from his enterprises. Why then, he wonders, is a traveling resort three times the size of the city’s biggest hotel allowed to escape those same fees and scrutiny?

“What if I were to announce I was creating a business that would be 10 stories tall with loudspeakers and outdoor water slides, that would lead to traffic congestion and sandwich boards dotting East Bay Street?” he asked. “I would be tarred and feathered and run out of town.”

by Allyson Bird

Post and Courier

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