Cruise shipping

Caribbean cruise: THE IMPACT

It’s said you should never put all your eggs in one basket. But in terms of tourism that’s exactly what many Caribbean islands have done over the last couple of decades and, perhaps, with good reason. It seemed so much more profitable and provided much better job prospects than those endured in the past.

Now a heavy reliance on tourism – especially revenue from the cruise shipping sector – has come back to bite in the wake of this year’s economy-crushing and job-destroying global coronavirus pandemic.

Until just recently, cruises were a global industry generating US$46 bn in revenues and with earnings flowing in from some 26 million passengers (and growing) a year. Now it’s at a standstill and so are the livelihoods of so many small companies and individuals throughout the Caribbean. And, at time of writing, with little immediate prospect of this industry getting fully back on its feet in the months ahead; although Carnival Cruise Line is tentatively aiming for 1 August.

The tragic situation is also likely to be compounded – at least in the short term – by a dramatic change of assumptions as to the value of the cruise sector. So instead of cruiseships being viewed as highly mobile and amazingly tax-efficient offshore-registered assets, able to effortlessly side-step any hurricane or dodge any national, political or local social upheaval, these vessels were suddenly regarded as potential harbourers of disease – for both passengers and crew – and which few destinations actually want.

Let’s recall that this all started innocuously enough when Princess Cruises’ Diamond Princess was quarantined back early February by Japanese health authorities in far off Yokohama. It seemed somewhat inconsequential at the time, but this stranded ship soon became emblematic of the global health crisis as more and more vessels fell victim to the impact of Covid-19’s virulent spread – even when such vessels had no-known cases of the disease.

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Safe and Secure

Yet it seems only yesterday, that cruiseships were the height of sophistication – a safe and secure way of seeing the world. Just now they are portrayed in a negative light and as a captive environment in which often elderly and vulnerable passengers have almost no escape from illness and infection.

Despite traditionally excellent on-board medical care, this may have always been the case, but Covid-19 has brought this apparent confinement on the high seas in to stark contrast. And it’s an image that may take some time to ameliorate. It’s likely to require highly imaginative marketing and fire-sale discounting to get wary passengers back on board again any time soon.

The past three months has also shown that when the chips are down, maritime and health authorities can act out of national self-interest and prevent cruiseships from operating freely and unhindered. This has happened on a global scale as ships have been denied entry to ports. And in this regard few destinations have emerged with much credit. There have, of course, been notable exceptions, such as the case of Barbados.

Then there is the question of the sheer economic scale of this crisis – not just for cruiseship operators but for the sometimes-fragile finances of Caribbean islands. Many island governments, for example, are now paying back long-term loans for expensive cruise piers and terminals and at a time when they have little or no income from overseas visitors. Many investment banks will no doubt be lenient in the current climate, but interest payments are likely to rack up as repayment terms are extended.

Low Season

Perhaps the only Godsend is that the Caribbean is heading into low season and many must now hope that the cruise sector can get on its feet again in time for the start of peak period in November. The interim hiatus may also give Caribbean destinations a chance to rethink marketing strategies and possibly, drive a much better bargain from a cruise industry eager to get back in business. But don’t bank on it.

Will the Caribbean really benefit from higher head taxes, stop some environmentally damaging new cruise facilities, push for a more level playing field for local tour operators or even call time on the construction of cruise operator-controlled island destinations which do little to generate income for SMEs but only offer low-paid hotel-type work? It seems unlikely. But it’s not just the loss of cruiseship calls that are hurting many islands, it’s the equally devastating disappearance of land-based visitors. It’s a real double whammy. Maybe this sector can recover sooner and once airlines are back in operation.

Positive

Despite the doom and gloom, many positive voices remain. Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings, has gone on record saying: “We believe the disruption to the travel industry, while swift and severe, will eventually subside.” Let’s hope he is correct in his assessment.

Many others believe that there may well now be tremendous pent up demand for cruise and land-based tourism and a boom is coming in late 2020 or by early 2021 after many months with no flights or sailings.

On the up side, bunker prices are at rock bottom. However, there’s nowhere for cruiseships to go to take advantage of these low fuel rates. But at least operators, such as the aforementioned Princess Cruises and others such as Holland America Line and Carnival Cruise Line, are capitalising on this situation by actually sailing stranded seafarers back to their home countries and onboard otherwise idle tonnage.

In the final analysis, it’s hoped that tourists have fairly short memories and as those in Egypt, Mumbai, Paris, Tunisia and other terrorism-hit destinations can eagerly testify. Well let’s hope so and for the sake of a once mighty cruise industry and a slew of hard-pressed Caribbean island economies.

The effect on other ports

It’s not only Caribbean islands that are losing out. The Panama Canal – the activity of which makes up around 40 percent of Panama’s economy – is suffering from a drop in transits.  

The US is not immune either. PortMiami Director Juan Kuryla said: “Every port in Florida is hurting. Not just Florida, but nationwide.” Miami moves around 9.6 million tons of cargo every year, of which a large percentage is to and from the Caribbean and Central America. Added, to which its cruise business has totally dried up.