By Peter de Langen
Cruises are increasingly relevant in port development so taking a look at pricing can be insightful, writes Peter de Langen.
In Spain, dues charged by the port authority for cruise ships, expressed per passenger, vary from about €1 to about €6, depending on the port and ship capacity. These costs seem below the costs for the infrastructure and facilities. As a comparison, average ‘airside’ revenues of the Spanish airport company (AENA) are more than €9 per passenger.
I acknowledge that this comparison is not like for like: the investments in airport infrastructure may be higher, but the turnaround is much faster. For instance, Barcelona’s airport handles about 40 million passengers, but the port receives about 2.4 million cruise passengers.
Regardless of cost levels, the cruise fees seem to be well below the economic value of the cruise location, often very close to the city centre. The value of attractive tourist destinations like Barcelona is huge and cruise ports often stress the economic impact of their calls for the city. In contrast, such arguments are seldom heard for airports, even though cruise passengers spend a huge part of their money on board, while airline passengers spend on hotels and restaurants. 4
The pricing for cruise seems not to follow commercial principles but a public sector logic, in which the value creation for the city is central. This is in line with the institutional position: whereas AENA is stocklisted, the Spanish port authorities are government owned.
This approach towards attracting cruises has a downside, especially in regions with substantial competition between ports to attract cruise calls. This leads to private profit and public loss: revenues from cruise calls are probably not enough to recover investments, and certainly not in line with the economic value of the port. For instance, in Andalucia, the ports of Malaga, Algeciras, Huelva, Cadiz, Motril and Almeria all aim to attract cruise calls, leading to very low port dues, which are in contrast with the value of Andalucia as a cruise destination.
For the whole of the Mediterranean, the conclusion is the same. The Mediterranean is a very popular cruise market with unparalleled tourist destinations such as Venice, Barcelona, Rome, Athens, Istanbul and Dubrovnik. Nevertheless, the cruise companies pay very low fees for locations close to city centres – this is a logical consequence of port governance structures in the Mediterranean, but one has to wonder whether this outcome is in the public interest.
First published by The Analyst in his Port Strategy column