Chump Change
Why cruise ships are a bad deal for Portland

By Colin Woodard

 

Over budget and incomplete, the Ocean Gateway International Marine Passenger Terminal on Portland’s eastern waterfront was dedicated May 2 during a ceremony attended by city, state and Canadian dignitaries.  

“The opening of the Ocean Gateway marks an exciting point in history for the waterfront and its future,” Portland Mayor Ed Suslovic declared in a press release. “The new terminal represents a deep held commitment from the City and the State to promoting and growing this vital sector of our economy.”

We’re in deep, all right. 

Having marshaled over $20 million of public money to build Ocean Gateway, Portland officials are now negotiating with a private developer, The Olympia Companies, for another $20 million to finish the terminal and fix the city-owned Maine State Pier to its west — all to attract big cruise lines. 

Is it worth it? City officials have no idea. 

Neither the city nor the state has studied the costs and benefits of the cruise ship industry’s presence in Portland. Passenger spending figures commonly cited by city officials, industry promoters and the media don’t stand up to scrutiny and appear to be grossly inflated — at least double what visitors actually spend when they get off the boat.        

Furthermore, most of what passengers do spend ends up in the pockets of out-of-town merchants, the out-of-state company that holds a near monopoly on arranging shore excursions here, and the cruise lines themselves — global corporations running ships under foreign flags to avoid American taxes.  

[Read our sidebar about this year’s visiting ships here.]

“Most passengers get on a bus and go to Kennebunkport or Freeport, and when they come back to the ship they take a nap, because they’re old, and they eat on the ship, because they’ve already paid for it,” said Mark Usinger, president of A.L. Griffin, a Portland ship chandlery that’s seen little business from visiting passenger vessels. “People have been lying to the people of Portland all along about this,” he said. “Nobody wants to be honest.”

“I think this is a risky basket to put all your economic eggs in,” said State Rep. Herb Adams, of Portland. “The cruise ship companies hold all the cards and ports of call hold very few. All Portland can do is be pleasant and say ‘please.’”

 

If we build it, they will come

Ocean Gateway’s opening day was the culmination of over a decade of planning. The terminal was originally expected to cost $12 million and open in the summer of 2003. 

It was also expected to be the port’s primary dock for cruise liners, but plans to build a “megaberth” — a pier long enough to handle modern cruise ships, which regularly exceed 800 feet — were scrapped when the project went over budget. As a result, nearly all of the cruise ships scheduled to visit Portland this year will tie up at the deteriorating Maine State Pier. Ocean Gateway’s use will be limited to the CAT ferry and a tiny cruise ship, the 99-ton Grand Caribe, which is little larger than a Casco Bay Lines ferry.

Cruise proponents say Portland’s investment in marine tourism will generate a handsome return in coming years — we just need to keep building infrastructure and amenities. 

“We’re poised for a considerable amount of growth in the future if we have facilities that are up to par,” said Amy Powers, director of CruiseMaine, a statewide marketing coalition based in Windham that promotes Maine to the cruise lines. “Tourism is our number one industry in Maine, and I think it’s a wise idea to invest in one of our great income providers… It’s a smart way to bring vacationers to our state who might eventually return for an extended stay. What’s wrong with that?”

CruiseMaine highlights a study that claims cruise passengers and crew spent $5.1 million in Portland in 2005. Including “multiplier effects,” the industry was determined to have generated $6.7 million in economic activity here that year. 

But those figures are unfounded. The study, by faculty and students at the University of Maine in Orono, examined passenger spending in Bar Harbor and Portland, but only the Bar Harbor numbers were based on data collected in the field, according to the report’s lead author, Todd Gabe.

“In Bar Harbor, we went to the pier and handed out surveys to passengers as they returned to the ships. But it’s 120 miles down to Portland, and we’ve never had the funding to do that,” said Gabe, an associate professor of economics. “It could be done, but we haven’t done it to this point.”

Lacking data on passenger spending in Portland, Gabe simply plugged in the average per-passenger spending figure for North American ports, as reported at the time by the industry’s trade group, the Cruise Lines International Association. Gabe said he was encouraged when he found that figure — $103.68 per passenger in 2005 — was close to the $105.82 figure his surveys had found in Bar Harbor. 

But according to the head of the consulting firm that generated the North American data Gabe used, the study’s figures for Portland are much too high. “The average spent per passenger in Maine is probably similar to Atlantic Canada, and those numbers are lower than the [North American] average,” said Andrew Moody of Business Research & Economic Advisors (BREA), in Philadelphia. 

There are considerable differences in passenger spending habits from port to port and region to region, Moody said. Also, “destinations like Halifax and Portland are a different kind of destination — they’re business and government centers, not just tourist destinations, and when you step off the ship, you don’t tend to see 200 vendors waiting at the dock.”

Moody said Halifax and Saint John, New Brunswick, provide better analogs to Portland than either North America as a whole or more tourist-centric destinations like Bar Harbor. The Maritime ports also host many of the same passengers who visit Portland.   

This past March, BREA released a detailed study of those Canadian markets based on last year’s season, when the average expenditure per passenger in North America was estimated at $123 per day. In Halifax, a city five times larger than Portland, that figure was $66.16. In Saint John, which is about Portland’s size, it was just $56.75 — less than half the North American average.

That strongly suggests Portland’s take in 2005 was closer to $2.5 million, not $5.1 million in passenger and crew spending — though it depends what you mean by “Portland.”

 

The first bus out of town 

Further investigation reveals that most of what passengers do spend after their ship docks here winds up not in Portland, but in York County, Freeport, the White Mountains of New Hampshire, and beyond.

Both UMaine and BREA data indicate that a typical passenger’s largest in-port expenditure is a shore excursion. The cruise lines themselves sell the vast majority of these trips and tours, and heavily promote them to passengers in pre-departure mailings, during on-board “port briefings,” and on the closed-circuit televisions in every cabin. 

These excursions are commonly sold at a 60-to-70-percent mark-up. Princess Cruise Lines, for example, charges $59 per person for an hour-long Downeast Duck Adventures tour that normally retails for $24. 

All the major cruise lines doing business here sell pretty much the same array of tours, because they all use the same company to organize them: Destination Florida-New England, a Miami-based company that dominates the market for these services on the East Coast. 

“Shore excursions are one of the main forms of revenue for cruise lines in the region,” said Greg Gordon, a Cape Elizabeth native who serves as the company’s local representative. “We’re able to provide them consistency across the board and ensure a high level of quality and operational support.”

The studies conducted by BREA and UMaine did not include cruise ship companies’ mark-ups in their calculations of local spending, but do include the fees charged by intermediaries like Destination Florida-New England. Based on interviews with local vendors, DF-NE’s cut appears to account for 10-to-20 percent of “local” excursion spending.

The reliance on regional tour contractors also means the vast majority of passengers are funneled to a small set of attractions and retailers, many of whom have paid hefty fees to be included in “approved shopping” programs, maps, and on-board sales pitches. 

“Several thousand people coming ashore for a few hours may sound exciting to local business until they realize that there are contracts with chains that bring the guests to certain places,” said Kristoffer Garin, author of Devils on the Deep Blue Sea, a history of the industry published by Viking in 2005. “On top of that, passengers have already paid for their food and non-alcoholic beverages on the ship, so why should they consume it on shore?”

In Halifax and Saint John, more than 94 percent of all passengers purchase a tour, and eight out of ten of them do so through the cruise line, according to the BREA study. If these figures hold true for Portland, it means most passengers spend most of their shore time outside the city. 

The Kennebunk & Kennebunkport Chamber of Commerce boasts that about 70 percent of passengers who land in Portland travel to their towns. The four- or five-hour excursions include shopping at Dock Square, a drive-by of the Bush compound, and, for some, a stop at Portland Head Light, in Cape Elizabeth. 

Industry sources say another 10-to-20 percent opt to take the L.L Bean Freeport Shopping Transfer, a four-hour trip. The remaining 10 or 20 percent are divided between a nine-hour “Mt. Washington and Cog Train” excursion, a three-and-a-half-hour “Lighthouses of Maine” tour to South Portland and Cape Elizabeth, and a variety of tours in Portland.

In the absence of survey data, it’s impossible to accurately estimate per-passenger spending in Portland. However, based on data from Halifax and Saint John, each passenger probably spends less than $35 on food, drink and shopping — the lion’s share of it beyond city limits.

 

No looking back

Given Portland’s massive public investment in marine tourism, it’s remarkable the city never commissioned a study to analyze the industry’s impact here.      

“I would suspect it wasn’t done because the findings may have changed the course that the proponents were charting,” said Portland City Councilor John Anton. “We’ve never been given very good information about benefits.”

Cruise ships and the CAT ferry pay the city to dock here, but that revenue is largely offset by the cost of accommodating them. Cruise lines are projected to generate over $363,000 this year in berthing fees, passenger fees, security charges and other in-port expenses, but the city will spend roughly the same amount to provide services to the vessels and maintain shore-side infrastructure.

Ocean Gateway is projected to generate about $190,000 in revenue this year, most of it from Bay Ferries, the Canadian company that runs the CAT. Offsetting expenses would make this a break-even deal for the city were it not for the payments Portland is still making on bonds it issued to help finance the facility’s construction.

Portland’s total contribution to the project exceeded $4 million.  

According to city spokesperson Nicole Clegg, debt-service payments for Ocean Gateway amount to about $300,000 annually. Thus, at least until a megaberth is built, Ocean Gateway will drain the city budget of about a third of a million dollars every year.

“We’ve spent the big money and we’re in business now, so we have to try to make it succeed,” said Councilor Anton. “But I think we need to be clearheaded about the benefits.”

Anton and others argue that Portland’s port facilities are regional assets, so their costs should be broadly shared. “Having a municipality of 65,000 people supporting the infrastructure of the region and the state doesn’t make sense to me,” Anton said.

John Henshaw, director of the Maine Port Authority, said the city’s investments will reap rewards in the long term. The cruise business is “a growing industry which has significant economic benefits to the state, and it’s going to play a positive role,” he said. “Beyond the immediate economic benefit of passenger spending, there’s enormous potential if you can entice somebody to do their ship’s turnaround operations out of Portland.”

Convincing a cruise line to make Portland a hub will require more lobbying and promotion, said Sandra Needham, executive director of Discover Portland & Beyond, a cruise-promotion group that’s partnered with CruiseMaine. 

Needham’s newly formed consortium is co-hosting the 10^th annual New England-Canada Cruise Symposium here in Portland this June. It’s a chance for its members — city officials and business and tourism representatives from Portland, Freeport and the Kennebunks — to woo cruise line executives during presentations and networking exercises. There’ll be a formal dinner at the White Barn Inn & Spa in Kennebunkport, and a lobster bake at the Ocean Gateway terminal. Invited dinner guests include Gov. John Baldacci and Senators Olympia Snowe and Susan Collins. 

“The cruise lines always tell us that it’s our job to educate, and our job to create demand for our destination,” Needham said. “We’re seeing results, but if we had more funding we could have so much more.”

[Click here to read “Well Contained,” a sidebar on operations at the International Marine Terminal.] 

 

Colin Woodard is an award-winning journalist and the author of The Lobster Coast, Ocean’s End, and The Republic of Pirates. For more about Colin, visit colinwoodard.com.