A Tale of Two Studies

…the cruise industry: “It’s like a circus.”

The long-awaited Historic Charleston Foundation Cruise Ship Study executive summary is out. This new study demolishes the findings in the Crotts and Hefner (C&H) 2010 study conducted for the State Ports Authority (SPA)(1), and it decimates the rosy forecasts for cruise ship tourism. The Post and Courier editorial about it was headlined, “Report on Cruise Industry should open City’s Eyes.”(2) It won’t open the mayor’s eyes, but it should open yours.

Here are a few highlights from this new HCF Study conducted by Miley & Associates:

√ – That over-hyped $37 million annual spending number from the old study was always suspect. Promoted by the SPA to parade the economic benefits of cruise ships for the City of Charleston, the new HCF study says that figure is not merely “overstated,” but any benefits are spread out across three counties, not just the City of Charleston. The study concludes that positive “impacts on the City of Charleston are a fraction of that $37 million.” – “Miley & Associates found that the hotels most benefiting from cruises are not in the historic city,” but in North Charleston and Mt. Pleasant. √ – “[T]hat Carnival Cruise Lines purchases most supplies directly from manufacturers, not from local merchants,” so these projected revenues in the original C&H/SPA study must be deducted from that inflated $37 million figure. √ – “The [HCF] study found that cruise ship passengers visiting Charleston spend only one-tenth of what other tourists spend,” or $66-a-day for cruise passengers vs. the $718-a-day for traditional Charleston tourists! √- And the HCF study “casts considerable doubts” on the prediction that cruise ships will create “407 new jobs [as] presented in [the original] report…widely cited by the SPA, the City of Charleston, and the General Assembly…”(3)

So not only has the SPA been selling an overblown, Pollyannaish, bill-of-goods about the alleged benefits of cruise ship tourism, it ignored the major risks: – It took years of planning and effort for the City of Charleston to become a world-class tourist destination, but a “tipping point” may be reached with the “city’s reputation…harmed by the perception that is has been overrun by the cruise industry.” – There is also a risk that cruise lines could leave Charleston as quickly as they came (Carnival has 78% of the City’s cruise ship passengers). Cruise lines recently pulled out of Mobile, San Diego and Norfolk–“leaving communities holding the bag–or the bill–for multi-million dollar facilities” similar to the $35 million terminal that the SPA, a state agency, is championing for Union Pier. Incidentally, has anyone seen the SPA’s agreement with Carnival? – Then there is the continuous, noxious, bunker fuel air pollution and noise from the ships.

The original C&H-SPA study also failed to calculate the costs related to cruise ship tourism, from the expense of extra police details to handle auto and pedestrian traffic to the intangible cost of the extra time it takes to commute when ships are docked. The C&H study did not estimate the impact of cruise ship tourism the retail landscape of downtown Charleston, positive or negative, even though we’ve seen changes. It did not compute possible health costs tied to pollution. It certainly didn’t calculate the opportunity cost to the City of forgoing the private, multi-use development of the entire 65-acre Union Pier waterfront property that should feature parks, shops, restaurants, hotels and condos, with huge taxable benefits to the city–all lost by sacrificing much of that land for a warehouse-like terminal and endless acres of cruise parking.

So how did the first study get it so wrong? Professors Crotts and Hefner made several assumptions. C&H estimated impacts over three county area, yet the study was widely seen as a study on benefits to the City of Charleston. C&H added hoped-for revenues that never materialized; ignoring, for example, Carnival’s system to provision its regional ships from its Florida headquarters, buying little locally. C&H also exaggerated job creation; most of the jobs needed to handle cruise ships already exist in any port city. Then they plugged their limited data into IMPLAN (4), an economic impact software program that some say is inappropriate to evaluate a tightly controlled, mobile, vertically integrated business like the cruise industry. IMPLAN introduces “multipliers” that may have further exaggerated results.

The cruise industry is different. “It’s a lot like a circus,” said one respected economist and researcher. Traditional businesses and industries, from Croghan’s Jewelry Box to Boeing, buy property, build, buy or lease buildings, pay business, property and sales taxes, hire and train local people, and along with their employees, create deep community roots within local schools, charities, hospitals, museums etc. But the tightly controlled, vertically integrated, mostly offshore cruise industry doesn’t. “It’s a lot like a circus” that comes to town, tries to get everyone under the big tent (or on the big ship), sells them as many things inside as possible, then pulls out when the customers stop coming. “I like the circus,” he said, “but it doesn’t invest in a community in the way a traditional business or industry does.”

Dr. Harry Miley put it more delicately, “Details of the scheduling and logistics of passengers and suppliers coupled with the extremely efficient operating techniques of the cruise industry leave little room for positive economic impacts on the City.”(5)

The Post and Courier accurately observes, “the stakes are high regarding the cruise industry,” and that the new HCF study “confirms concerns that preservationists, environmentalists and many downtown residents have been expressing. City Hall should pay heed”(2) Good luck on that.

-Jay

# # #
1) Port’s Cruise Ship Business worth $37M, study says – Charleston Business Journal
2) “Report on Cruise Industry Should Open City’s Eyes” – P & C
3) “The Cruise Industry in Charleston – A Clear Perspective – Executive Summary,” Miley & Assoc.
4) IMPLAN – economic impact modeling software
5) “Independent and Objective Economic Report…” HCF website story
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