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Destinations, itineraries and the economic impact of cruise calls

Conference speech presented at the Seatrade Asia Pacific Cruise Convention (Singapore, 4-7 December 1996)

by Lee Loong Koon (Director cruise business, Singapore Tourist Promotion Board) (07-01-97)

Introduction
Ladies and Gentlemen,Seatrade Asia Pacific
I am delighted to be here this morning to speak on the topic: Destinations, Itineraries And The Economic Impact Of Cruise Calls, a subject that will certainly take more than the 15 minutes allotted to me.
I will therefore be succinct and hope that the presentation will be a stimulus for lively discussion.

Before dwelling on the specifics of cruising, it will be instructive for us to have a quick look at tourism in general.

World Travel and Tourism
According to the World Travel & Tourism Council (WTTC), the travel & tourism industry is expected to generate USD 3.6 trillion of gross output and 255 million jobs worldwide in 1996, making it the world's largest industry and generator of jobs.
Globally one in nine jobs is generated by the industry.
The travel & tourism industry is also a high growth industry which is expected to more than double in size over the next decade. In 1996, the industry is expected to generate USD 653 billion of taxes and USD 304 billion in government operating expenditures.

Looking at Singapore, the figures are equally significant.
In Singapore, travel and tourism is expected to produce USD 13.5 billion of gross output, 12% of GDP and 162,000 jobs in 1996.
Employment resulting from this industry is expected to be 9.5% or 1 in every 11 jobs. Tax revenue is expected to reach USD1.2 billion.

World Cruising Industry
A look now at the world cruise industry.
According to the Cruise Line International Association (CLIA), over the last decade, the cruise industry has been one of the fastest growing sectors of the international tourism industry.
Over the period 1980 to 1994 average worldwide annual growth for international tourism was 4.5%; for the cruise industry, it was 8.6%.

Those were some of the reasons (though we do not have the numbers then) that prompted STPB to establish a Cruise Development Division in 1989.
We however went beyond just pure tourist arrivals in our analysis but also ask questions on what Cruising as a industry can contribute to our tourism industry.
Besides the number of passengers that were bound to contribute to the Singapore market, we felt that Singapore is also well poised and have all the relevant industry sectors in place to support the Cruise Industry.

We had at least 150 years of experience in servicing cargo vessels with ship chandeling, ship victualing, ship repairs and retrofitting with experience and proficient shipping agents servicing every aspect of the requirements of the shipping industry.
These supporting sectors in 1989 were already developed and in place and we also even then, had more than 25,000 hotel rooms mostly in the 4 and 5 star establishments to accommodate the tourists.
The new Cruise Business that STPB went about to promote will be well served by these experienced business sectors. These considerations together with the new proposed international passenger terminal and our own confidence in PSA's expertise and commitment spurred STPB to promote the ASEAN region as a viable cruising region with Singapore as a hub port.
The roles were clearly defined even then with PSA in charge of the hardware i.e. port operation and berthing and STPB in charge of the software i.e. marketing and promotion.

Destinations and Itineraries
The current situation and the future for tourism and cruising looks bright and promising.
Cruising, being one of the significant element of the total tourism experience, has to take into the twin considerations of destinations and itinerary planning.

Since the early 1990s, cruising in the Asia-Pacific region has and will continue to grow in popularity and importance; it will be a force to be reckoned with by the turn of the century for the reasons of its multi-destination nature and desirable attributes in addition to the attractiveness of year-round cruising.
As a region, this area will in the near future have a critical mass of world-class ports on top of a diversity of attractions and culture.

Coming to mind immediately will be the multi-million port development project at Port Klang near Kuala Lumpur which will have 665 metres of berthing, passenger terminals, shopping complex, hotels and office block linked together to give the cruise passengers easy access to Kuala Lumpur and beyond.

Next, the northern port of Penang has announced that it will commit Malaysian Ringgit 740 million to redevelop their existing cruise port.
They too, will have a international passenger terminal with 600 metres of berthing and 4,000 passenger throughput, hotels, shopping and a 2.5 km boardwalk.
These enhancements will start in 1997 and they will complete the redevelopment by the year 2000.

The Star Cruise Jetty at the island of Langkawi will be ready soon and have a berthing length of some 200 metres.
The concrete jetty will have sufficient space to hold 40-50 coaches to ferry the passengers to town and no doubt, will enhance the pleasure island of Langkawi as a new cruising destination.

These new buildings together with Singapore's enhancement of its present IPT are strong signals to the world cruise community that South East Asia is serious and committed to the cruise business and that we are prepared to commit very large amount of resources to attract reputable international cruise operators to our region.
These state-of-the-art cruise IPTs together with the supporting entertainment/shopping complexes will increase the enhancement of the cruise passengers experience resulting in very satisfied customers who will come back again and again.

The width and depth of the destination experience ranging from sophisticated city-life, idyllic and romantic beach resorts to multicultural exoticism will rival to the relatively staidness and homogeneity of the Caribbean region - currently the number one cruising playground in the world.
In a nutshell, the nature of the cruising experience is multi-faceted and multi-destinational - a result of synergy of many destinations coming together for collective attractiveness.

As the current situation stands, the number and variety of cruises in this region pales in significance to the Mediterranean and Caribbean regions.
The variety and scope of cruises is still rather limited with the 4 to 5 day duration cruises being the most popular.
In addition to a number of international ships such as the Sun Viking, Silver Cloud and the Crystal Symphony together with the coming on-line of Superstar Capricorn, Superstar Leo and Superstar Virgo is a encouraging and exciting development for the regional cruising industry.
Also with the possible development of Vietnam and Myanmar, the number of ports of call and destinations will increase, adding to the range of destinations and itineraries available, thus enriching and enhancing the cruise experience.

We are also pleased to note that at the recent
Seatrade Mediterranean Cruise and Ferry Convention held in September 1996, it was announced that Carnival Corporation, the world's largest cruise line and Hyundai Merchant Marine, subsidiary of Hyundai Group will form a joint venture company to launch cruises for Asian travellers in 1998.
The new company will acquire the 1400 -passenger Tropicale which will cruise in Asian and Southeast Asian waters throughout the year.

General Economic Impact
The brief account of cruising in the context of tourism does not mean that the growth of the cruise industry is limited to tourism development alone.
General economic growth and more employment opportunities will take place whenever there are positive developments in the cruise industry.
This is due to the fact that the cruise industry involves many economic activities across numerous industries.

Because of the newness of the cruise industry in this part of the world and there were no data for reference, the STPB and the Port of Singapore Authority jointly commissioned a study on the economic impact of the cruise industry in Singapore.
I would like to take this opportunity to share some of the major findings with you.

As there is no industrial sector called the "cruise industry", the study defined cruise industry as the complete cruise experience in Singapore including portions of any industry directly impacted by the presence of the cruise industry in Singapore.

Industries Involved
Many different industries in the Singapore economy are directly impacted by the cruise industry and the following industrial categories are affected:
water transportation (local cruise lines), air transportation, hotel, port operation and ship management services, catering (restaurant) , petroleum and petroleum products, retail (margin) and domestically produced goods, ship chandlers & air transportation services, land transportation (transfers and sightseeing), postal and telecommunications services, recreational and cultural services, repairing of (foreign) ships, tankers and other ocean-going vessels and medical and health services.

Total Economic Impact
Besides the direct impact, the study also take into account of indirect and induced impacts. The cruise multiplier is the ratio of total economic impact divided by the direct impact.

Direct Impact
Direct impact is all the new money flowing to Singapore businesses. The major sources of direct impact are: spending by passengers, crew and cruise liners.
Passenger and crew spending will involve elements of air transportation, accommodation, restaurants, shopping, local transportation, sightseeing and entertainment.
International and local cruise liner related spending involves port operations, provisions, bunkering, agency fees and ship repairs.

Indirect Impact
Indirect impact is a measure of additional expansion of the economy caused by the new revenues flowing to the directly impacted industry (eg hotel) and it generates value added income, remuneration, employment and taxes.
For example cruise passenger staying in a hotel is a direct impact and provisions purchased by hotel to feed the passenger is the indirect impact.

Induced Impact
As businesses earn revenue both directly and indirectly from the cruise industry, they provide remuneration for their employees.
Household expenditure resulting from jobs generated from the cruise industry is the induced impact.

Cruise Multiplier
According to our study, the total direct impact of the cruise industry for 1995 is estimated to be SD 304.8, indirect impact was SD106.9 million and induced impact is SD 39.6 with a total economic impact of SD 451.4 million. The cruise industry multiplier is therefore calculated to be 1.46.

Comparison with other Sectors
A multiplier of 1.46 for the Singapore cruise industry compares favourably with other sectors in Singapore: 1.18 for air transport, 1.25 for water transport, 1.44 for restaurants and 1.54 for hotels.

Conclusion
Our intuitive feel that the cruise industry has a significant impact on the general economy is thus confirmed by the study. The study also validates our efforts in promoting cruising in Singapore and in the region. As a brand new industry the Cruise industry will continue to grow and this will be reflected in the future economic impact as more industrial sectors come forward to offer their services to it. So come and join in the fun.
Thank you.

For further information:
Mr. Alfred Poon, Singapore Tourist Promotion Board, fax +65 - 736 9423

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