SOE Staff Paper 578
July 2009

Todd Gabe and James C. McConnon, Jr.**
School of Economics, University of Maine, Orono, Maine

This report examines the demographic characteristics and economic impact of cruise ship passengers in Portland, Maine, and its surrounding region. In 2008, the city hosted an estimated 47,841 passengers from 32 ships. Information collected from surveys distributed during the fall of 2008 suggests that cruise ship passengers spend an average of $80.51 on goods and services in the Portland region. This amount increases to $109.68 with the inclusion of passenger expenditures on cruise-line sponsored tours. The total economic impact of cruise ship passenger spending, including multiplier effects, is between $5.8 million and $8.0 million in sales revenue throughout the Portland region. Economic activity associated with this spending supported between 69 and 96 full- and part-time jobs, and provided between $2.0 million and $3.2 million in wages and salaries.

1. Introduction

The North American cruise industry has experienced substantial growth in recent years. Within the United States, direct spending by cruise lines and passengers increased from $14.70 billion to $18.68 billion (27 percent) between 2004 and 2007 (Business Research & Economic Advisors 2008). Including multiplier effects, the North American cruise industry supported 354,690 U.S. jobs and provided $15.44 billion in wages and salaries in 2007.

Spending by cruise ship passengers and crew provide a stimulus to the economies of U.S. ports of embarkation (i.e., where cruises originate) and ports-of-call (i.e., where ships visit). Cruise ship passengers spent an average of $135.36 while at the port of embarkation (Business Research & Economic Advisors 2008). Those who stayed one or more nights before or after the voyage spent an average of $284.88, while passengers in town only for the day of embarkation spent an average of $30.83. Cruise ship passengers spent an average of $122.73 per port-of-call visit, while crew members spent an average of $44.68 (Business Research & Economic Advisors 2008).

The economic impact analysis presented in this report focuses primarily on the expenditures that cruise ship passengers made while in port. Although crew members may also spend substantial amounts of money in the region and cruise lines pay anchorage fees to the city of Portland, these expenditures are beyond the scope of this study. Further, it should be noted upfront that the economic impact figures are based on a total of 47,841 passengers, which is the capacity of the 32 cruise ships that were scheduled to visit Portland in 2008. Since some of the ships may have arrived at less than full capacity, the impact figures presented in the report can be interpreted as an upper-bound estimate of the passenger impact. Spending by ship personnel, however, may offset the diminished realized impact caused by ship vacancies and/or passengers that chose not to disembark in Portland.³

When interpreting the study findings, it is also important to note that there are costs and benefits associated with Portland’s cruise ship industry unrelated to its economic impact as presented in this report. Beyond the industry’s impact on sales revenue, income and employment, cruise ships may generate additional costs and benefits. Thus, findings presented in this report should be interpreted as a part, but not the whole, of the evidence in evaluating the effects of Portland’s cruise ship industry.

2. Data Collection

Table 2 outlines the 2008 cruise season in Portland, which began in July and continued until early November. The general trend, in all years including 2008, is that Portland welcomes more ships in the fall months of September and October than during the summer. The ships included in this study carried, on average, a larger number of passengers (an average capacity of 2,186 people) than the average cruise ship that docked in Portland during 2008 (1,495 passengers). The observed differences in passenger expenditures across the ships included in the study suggest that differences may also exist between the survey respondents and passengers on ships that were not included in our study. Thus, the information obtained from survey respondents in our study may not be representative of all cruise ship passengers who visited Portland in 2008.

3. Passenger Demographics and Place of Origin

Table 4 and Table 5 show the gender and age distribution of Portland’s cruise ship passengers. We received surveys from a high percentage of female passengers (69 percent female compared to 31 percent male) and those who are older than the general population. The average survey respondent is 62 years old and 46 percent of the passengers are between the ages of 60 and 69. In addition, more than 20 percent of the passengers are over the age of 70, compared to only two and one-half percent of the survey respondents who are under the age of 40. The age distribution of Portland cruise ship passengers may be explained, in part, by the time of year when surveys were conducted. Surveys were distributed in late September and early October, when fewer "young families" tend to travel due to the K-12 school schedule.

Tables 6 and 7 summarize the education and income distribution of Portland cruise ship passengers. These two variables typically exhibit high levels of correlation in economic studies, given the substantial earnings premium associated with a college degree (and higher levels of formal education). Over 60 percent of the survey respondents have at least a 4-year college degree, which suggests that Portland’s cruise ship passengers are quite the educated crowd. It should, then, come as no surprise that survey respondents reported high levels of household income. Indeed, over 55 percent of the Portland cruise ship passengers included in the study have annual household incomes of $75,000 or more.

In Tables 8 and 9, we report information related to the survey respondents’ past experience with cruising, as well as the number of past visits to the Portland area. Most of the survey respondents are "veteran" cruisers; over 40 percent have taken at least five other cruises. The voyage that visited Portland represented the respondent’s first such vacation for only 10 percent of the passengers that completed the survey. Although the survey respondents had considerable past experience with cruising, very few had spent substantial time in Portland prior to the cruise ship visit. For over 75 percent of the respondents, the one-day visit in Portland represented the passenger’s first time to the area. Less than two and one-half percent of the survey respondents had made five or more trips to Portland previous to the cruise ship visit.

Tables 10 and 11 show the country and state of origin, respectively, of Portland’s cruise ship passengers. Although we received surveys from individuals representing nine different countries, 95 percent of the respondents are from the United States. Looking at table 11, we see that over 30 percent of the passengers are from the states of Maryland (15.6 percent), Virginia (7.6 percent) and Pennsylvania (7.1 percent). This is explained, in part, by the fact that several of the ships included in the study departed from the port of Baltimore, Maryland. It is also interesting to note that over 20 percent of the survey respondents hail from the states of California (9.5 percent), Texas (6.8 percent), Missouri (3.0 percent) and Arizona (2.5 percent), which are located west of the Mississippi River.

Maine’s tourism market is heavily dominated by places located within a one-day’s drive; over 50 percent of overnight trips made by out-of-state visitors come from Massachusetts (31 percent), New Hampshire (10 percent), New York (8 percent) and Connecticut (7 percent) (Longwoods International 2007). This means that the cruise industry helps extend Maine’s tourism market beyond its usual borders.

4. Passenger Expenditure Profile

The right-hand side column of Table 12 displays the percentage of survey respondents that reported expenditures greater than zero in the given category. As shown at the bottom of the table, 93.7 percent of the survey respondents reported an expenditure figure greater than zero for at least one of the spending categories. By a wide margin, the category of "food and beverages" has the largest percentage (77.8 percent) of respondents that reported expenditures greater than zero. On the other hand, less than ten percent of respondents indicated that, while in the Portland region, they spent money on fine art and jewelry, or rentals.

Along with the expenditures that passengers make while in port (see Tables 12 and 13), they also provide an economic impact to the Portland region through their purchases of cruise-line sponsored tours. A portion of the money that passengers pay to the cruise lines for organized tours is used to cover the costs of transportation (e.g., expenses related to operating the tour bus) and other services provided as part of the package.

Table 14 summarizes the amount of money that survey respondents paid for cruise-line sponsored tours. About 57 percent of the survey respondents indicated that they took a cruise-line sponsored tour while in Portland. Some of the more popular excursions indicated by tour-goers include visiting the sites of Portland, traveling to Kennebunkport, and shopping in Freeport. Of the survey respondents that indicated they took a cruise-line sponsored tour, the average amount paid to the cruise line was $51.28.

Applying this amount to all passengers, including those that did not take a cruise-line sponsored tour, we arrive at an average spending figure of $29.17 on cruise-line sponsored tours.

Table 15 summarizes the amount that survey respondents spent in Freeport, Maine. About five percent of all survey respondents – not just those that took an organized tour – indicated that they visited Freeport on a cruise-line sponsored tour. Of those passengers that took a shopping tour, the average respondent spent $146.60 in Freeport. In some cases, the amount spent in Freeport represented the entire amount the passenger spent while in port. In other cases, it did not.

We are able to estimate spending in Freeport using a survey question that asks, "How much of the total amount (spent in port) was spent at local businesses while on tour?" Information from this question, as well as a different survey question about the sites visited while on tour, allows us to isolate passenger spending in Freeport. Applying the average figure of $146.60 spent in Freeport to all passengers (including those that did not visit Freeport on a cruise-line sponsored tour), we find that the average survey respondent spent $6.80 in Freeport.

Table 16 presents a spending profile of the average cruise ship passenger in Portland, Maine. The table highlights four average spending figures ranging from a low of $73.71 to a high of $109.68. The expenditure estimate of $109.68 can be interpreted as the average amount spent in the Portland region (including Freeport), assuming that the cruise lines impose a zero percent mark-up on cruise-line sponsored tours. The expenditure estimate of $73.71 can be interpreted as the average amount spent in the Portland region (excluding Freeport), assuming that the cruise lines do not pass any of the tour-related passenger expenditures to tour operators. Both of these cases, related to our assumptions about the mark-up on cruise-line sponsored tours, are extremely unlikely. The amount of money that tour operators receive from the cruise lines falls somewhere between zero and the full amount paid to the cruise line by the passenger.

5. Economic Impact of Cruise Ship Passengers

Cruise ship passengers impact the Portland regional economy both through their direct expenditures made while in port and the "multiplier effect" that this spending has on local businesses and workers. Estimates of the total amount of money spent directly by cruise ship passengers are based on the average expenditures made by the survey respondents and the number of passengers that visited Portland. As discussed in the introduction, the analysis uses a total passenger count of 47,841 people, which is the full capacity of the 32 cruise ships that were scheduled to visit Portland in 2008.

The associated multiplier effects are estimated using an input-output model for the Portland regional economy. The Portland IMPLAN (input-output) model traces the circular flows of expenditures and income through the economy with a complex system of accounts that are uniquely tailored to the area. Underlying these accounts is detailed information regarding transactions occurring between businesses located in the region, the purchasing patterns of local households, and transactions occurring between the Portland region and the rest of the world. Some of the data sources used to build the IMPLAN model include County Business Patterns from the U.S. Census Bureau, Regional Economic Information System (REIS) data and the input-output accounts from the U.S. Bureau of Economic Analysis, and the ES-202 statistics from the U.S. Bureau of Labor Statistics.

Table 17 summarizes the economic impact, including multiplier effects, of cruise ship passengers in Portland. The top panel of the table is the estimated economic impact based on a per-passenger expenditure figure of $109.68, which includes spending in Freeport and the full cost of the cruise-line sponsored tours. The bottom panel of the table is the economic impact based on a per-passenger expenditure of $80.51, which includes spending in Freeport but not money paid for cruise-line sponsored tours. Based on the higher spending figure, we estimate a total economic impact (including multiplier effects) of $8.0 million in sales revenue, of which an estimated $3.2 million is paid in wages and salaries to support 96 full- and part-time jobs. Based on the lower passenger spending figure, we estimate a total economic impact of $5.8 million in sales revenue, $2.0 million in wages and salaries, and 69 full- and part-time jobs.

Looking at the top panel of Table 17, we find that the ratio of total-to-direct spending generates a sales multiplier of 1.52. This means that each $1.00 of passenger spending in the Portland region contributes a total of $1.52 in overall sales revenue. The $0.52 in multiplier effects per $1.00 spent by cruise ship passengers represents additional spending by businesses (i.e., indirect effect) and workers (i.e., induced effect) that are impacted by the Portland cruise ship industry. The income and employment multipliers are 1.38 and 1.35, respectively.

6. Conclusions

This report provides a summary of the demographic characteristics and economic impact of cruise ship passengers in Portland, Maine. Our analysis is based on a large sample of cruise ship passenger surveys conducted in the fall of 2008. Portland’s cruise ship passengers tend to be older, more educated, and earn higher annual incomes than the general population. They tend to be "veteran" cruisers, having taken several cruises prior to their trip to Portland; however, very few had spent substantial time in the region prior to the cruise ship visit. Although passengers surveyed in our study come from nine countries, 95 percent of the respondents are from the United States. Within the United States, Portland’s cruise ship passengers come from all regions of the country.

Cruise ship passenger survey results show that the average respondent spends a combined total of $109.68 on cruise-line sponsored tours, and goods and services while in port. Excluding the money paid to cruise lines for organized tours, we find that the typical passenger spends $80.51 in the Portland region. The results from an economic impact model show that cruise ship passengers generate an estimated impact, including multiplier effects, of between $5.8 million and $8.0 million in sales revenue, and support between 69 and 96 full- and part-time jobs.

References:

Business Research & Economic Advisors, "The Contribution of the North America Cruise Industry to the U.S. Economy in 2007." Report prepared for the Cruise Lines International Association, 2008.

Gabe, Todd, Colleen Lynch, James McConnon and Thomas Allen, "Economic Impact of Cruise Ship Passengers in Bar Harbor, Maine." Department of Resource Economics and Policy, University of Maine, Staff Paper 518, March 2003.

Longwoods International, "Travel and Tourism in Maine: The 2006 Visitor Study." Report prepared for the Maine Office of Tourism, June 2007.

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