Cruise Sector Challenges: Making Progress in an Uncertain World

Philip Gibson / Alexis Papathanassis / Petra Milde (Eds.) Cruise Sector Challenges

GABLER RESEARCH

Philip Gibson / Alexis Papathanassis Petra Milde (Eds.)

Cruise Sector Challenges Making Progress in an Uncertain World

RESEARCH

Bibliographic information published by the Deutsche Nationalbibliothek The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at http://dnb.d-nb.de.

1st Edition 2011 All rights reserved © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011 Editorial Office: Ute Wrasmann | Nicole Schweitzer Gabler Verlag is a brand of Springer Fachmedien. Springer Fachmedien is part of Springer Science+Business Media. www.gabler.de No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the copyright holder. Registered and/or industrial names, trade names, trade descriptions etc. cited in this publication are part of the law for trade-mark protection and may not be used free in any form or by any means even if this is not specifically marked. Cover design: KünkelLopka Medienentwicklung, Heidelberg Printed on acid-free paper Printed in Germany ISBN 978-3-8349-3167-2

Acknowledgements This book is dedicated to the fellows and associates of the Cruise Research Society. It is their openness, enthusiasm and commitment that is enabling us to gradually develop an emerging knowledge base in the area of cruise tourism. Particular thanks to the co-authors for their contributions. Moreover, our gratitude goes to the Bremerhaven University of Applied Sciences and rectorate for providing the resources necessary to finance and produce this piece of work. Our appreciation also goes to Ute Wrasmann and Nicole Schweitzer from the Gabler Verlag (our publishers) for their patience, professional support and flexibility over the last years. Prof. Dr. Philip Gibson Prof. Dr. Alexis Papathanassis Prof. Dr. Petra Milde

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Editors’ foreword: analogies and the cruise industry The world of cruising generates easy, almost clichéd, analogies in respect of the business of this form of holiday. ‘In deep water’ or ‘all at sea’ are examples of the efforts of those who seek to create an attention grabbing headline. Yet, during these challenging post recessionary times, the cruise business can be represented as an olden day galleon, sailing the seven seas and making its way in uncertain waters and in unpredictable weather. Like these rather cumbersome historical vessels the cruise industry manages to stay afloat even in the heaviest seas. The captains of this cruise industry seem to have a weather eye for what may be over the horizon. Indeed there is even a sense of the industry being able to harness its overwhelmingly unique characteristic and being able to change course to avoid what might lead to inevitable catastrophe for less flexible industries. Clearly, the cruise industry continues to make progress in this uncertain world. Ship building since the crescendo marked by the introduction of the Oasis and Allure of the Seas may have slowed down and new ship orders may have faltered over the last few years but signs are that this is but a momentary hesitation in the seascape of cruise history. The challenge for cruise operators is to come to terms with a changing world where the realities of the past are not constant. The hegemonies of the pre-recessionary world are likely to be different in tomorrow’s post-recessionary world.

The second international cruise conference This textbook presents a compendium of important issues that were discussed at the 2nd International Cruise Conference in Plymouth (UK) between the 18th and 20th February 2010. The conference title was: 'Cruise industry challenges: making progress in an uncertain world' and the theme of the conference was to consider emerging issues, problems and solutions for the cruise industry at a time when trading conditions were perceived to be highly volatile. The focus for the conference was to provide a platform for cruise industry professionals and academics to engage in dialogue, to share research findings and to examine good practice. The conference attracted a wide range of delegates from industry, from academia and from cruise related businesses. This helped to create an atmosphere of engagement and an opportunity to share research findings and to examine good practice. The benchmark, to create quality in cruise related research and to encourage active research in this field, which was established during the 1st International Cruise Conference in Bremerhaven in September 2008 and subsequently enhanced with the introduction of the Cruise Research Society, played a major part in helping to achieve the outcomes for the conference in Plymouth.

Key themes The main themes that arose from the conference and which are presented in this textbook are as follows:

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Market and trends The first part of the textbook within the theme of market and trends starts by reflecting on crowding and cruise customer expectations. Brochures and on-line content portray ships and destinations neutrally in relation to the possible impacts of large scale cruising but what are the issues in terms of customer satisfaction if what they see is considered unrealistic? The cruise season is a construct that bears examination in terms of strategic development and the consequences on markets and operators. Developing this further the next chapter considers forecast practices when considering increasing capacity at a time of variable growth. Thereafter, implications of Flags of Convenience are considered in relation to competitiveness and factors governing choice are reflected upon. Finally, branding of onboard restaurants by making use of celebrity chefs to generate uniqueness and add to customer choice is examined. Destinations and sustainability What place does traditional ocean cruising have in a fast changing industry dominated by large corporations with the power to construct and develop brands for a changing market. This first paper concerning sustainability is a study of what some believe may be a dying market but what others consider is a blueprint for industry success. As ships anchor off destinations their presence can cause unseen problems below the waterline. This chapter presents a study into the environmental impacts of large cruise ships dropping anchor in Falmouth Bay. Processes and practices Two major international conventions; SOLAS and MARPOL affect all international shipping. These and Codes of Practice such as the ISM Code and the ISPS Code are examined using case studies to identify key issues for cruise operators. Latest regulations consider safety onboard the world’s largest cruise ships and have focused on ensuring ship design assures improved survivability so the ship is, in itself, its own lifeboat. Increasingly, customers are becoming adept and prolific in sharing their experiences online. How do cruise operators make best use of electronic word-of-mouth (eWOM)? Human resources The Maritime Labour Convention (MLC) is a topic worthy of debate and here, in this first chapter on human resources, the International Labour Organisation sponsored convention is considered for what it should achieve in terms of social responsibility. The industry continues to struggle to secure a competent workforce in an ever changing global context. This chapter considers the mechanisms and issues concerning crew retention. Cruise education and research The first chapter in this theme examines cruise education and what is done in respect of the focus, content and approach to develop and deliver the programmes. Research into business settings brings certain challenges, but for the Cruise Research Society the challenges are viii

heightened by the relative immaturity of research in this field. The researchers bring their motivations to the table but frequently it can be claimed that what is missing is the need to ensure that research is legitimate and critical. This final chapter considers the notion of performativity in the context of the purpose of research for this industry and stimulates debate about the next steps that the Cruise Research Society could consider.

Cruise research for the future The plan for the future of the Cruise Research Society is to continue to grow and to develop an ever stronger voice. The annual cruise conference programme continues unabated and society members remain committed to being inclusive, to engage with industry and to develop research that matters. This is no drop in the ocean.

Prof. Dr. Philip Gibson Prof. Dr. Alexis Papathanassis Prof. Dr. Petra Milde

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Table of Contents Acknowledgements .................................................................................................. v Editors’ foreword: analogies and the cruise industry .................................................... vii Table of Contents .................................................................................................... xi

PART A: Market & Trends ..................................................................................1 1.0

Customer deception in the cruise industry ....................................................3 Miriam Crisco Schmenner

2.0

Seasonality: A factor of crisis or development in cruise tourism? ....................25 Tihomir Lukoviđ & Katja Božiđ

3.0

Evaluating cruise demand forecasting practices: A Delphi approach ................39 Hannah Kollwitz & Alexis Papathanassis

4.0

The Development and meaning of vessel flags in the cruise industry ...............57 Cordula Boy

PART B: Destinations & Sustainability.............................................................77 5.0

Consumer behaviour in the traditional cruise market and implications for the sustainability of ocean cruising ..................................................................79 Martin Cholwill

6.0

Assessing the environmental impact of anchoring cruise liners in Falmouth bay ......................................................................................93 Sarah Tuck, John Dinwoodie, Harriet Knowles & James Benhin

PART C: Processes & Practices .......................................................................107 7.0

Ensuring safe and sustainable cruise operations .........................................109 Paul Wright

8.0

Safety perceptions in the cruise sector: A Grounded Theory approach ...........127 Margret Cordesmeyer & Alexis Papathanassis xi

9.0

Cruise passengers’ complaints: an analysis of online reviews .......................147 Mandy Aggett

10.0

Influences of celebrity chefs on cruise fine dining experiences......................163 Patsy Morgan & Christopher Edwards

PART D: Human Resources ............................................................................177 11.0

Staffing the cruise industry in 2020: Exploring solutions ..............................179 Caroline Wiscombe, John McGirl, & Michael Piontek

12.0

Crew retention .....................................................................................199 Wolfgang Lukas

13.0

The Maritime Labour Convention 2006: An instrument to improve social responsibility in the cruise industry ..........................................................207 Petra C. Milde

PART E: Cruise Education & Research ...........................................................225 14.0

Critical cruise research in the age of performativity ....................................227 Michael P. Vogel

15.0

Plotting a course in cruise management education .....................................245 Ate de Groot

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PART A:

Market & Trends

1.0

Customer deception in the cruise industry Exploring the influence of crowding on the expectation – satisfaction relationship

Miriam Crisco Schmenner Bremerhaven University of Applied Sciences Bremerhaven, Germany

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P. Gibson et al. (Eds.), Cruise Sector Challenges, DOI 10.1007/978-3-8349-6871-5_1, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

1.1 Introduction Imagine the following situation: You are on vacation, walking down the alley of an architecturally beautiful village that you always wanted to visit. But, there are 200 other tourists with you in that little beautiful alley. It is noisy and you are not able to fully enjoy the atmosphere that you were awaiting for so long. How do you feel? While working on a cruise ship I often times dealt with complaining or dissatisfied guests on excursions. Complaints of customers often arose from unmet expectations. Especially in small destinations, where many ships called at simultaneously resulting in a high amount of tourists, the number of complaints increased. Often times passengers expected to be the only ones in the specific destination as frequently suggested by cruise lines’ advertisements. The problematic situation that more than one ship calls at one port leading to crowded destinations or attractions caused by a high number of cruise passenger tends to increase due to two main reasons. The first reason is a strong trend of increasing cruise ship sizes. Klein (2002) states that in the 1970s the average accommodation onboard was 600-700 passengers. When looking at Ward´s (2009) list of ocean ships to debut 2010 (Figure 1a), most of the debuting ships can carry 2.000-4.200 Passengers. Furthermore, fleets are getting extended and new cruise lines are entering the market (e.g. TUI Cruises in 2009).

Figure 1a: Ocean ships to debut 2010 The second reason is the limited amount of destinations, which offer both port facilities required for the large ships and sufficient attractiveness for cruise passengers. Therefore, many ships have similar itineraries, calling at the same destinations. This paper will investigate the relationship between expectations of cruise passengers towards crowding derived from publicity material of cruise companies and guest satisfaction. This research topic is relevant since the cruise industry is a highly competitive environment 4

where customer satisfaction is crucial to success and therefore increasingly important to ensure high repeater numbers and to prevent negative word-of-mouth. The paper is composed of six sections. Following this introduction, a section on background information and a literature review will shed light on important topics such as satisfaction theory and crowding. Subsequently, the research methodology and data analysis procedures are described. In the further course of this paper findings are discussed in a concluding section with recommendations for the industry. Finally limitations of this work and input for further research are shown.

1.2 Background The expectation - experience gap (Figure 1b), which occurs if expectations are not met by experience, can be minimized in various ways.

Influencing Variables: Weather Traffic Personal Mood Overall Atmosphere Overall Organisation Crowding

Past Experiences

Needs

EXPECTATIONS

GAP

EXPERIENCE / PERCEPTION

(DIS)SATISFACTION

Communication (WOM, Marketing)

Before Holiday (Pre-consumption)

On Holiday (Consumption)

On Holiday / After Holiday ((Post-) Consumption)

Based on Brown, S.A. et al. (2008), Fallon P. & Schonfield, P. (2004), Govers, R. & Go, F.M. (2009), Kozak, M., Decrop, A. (2009), Moscardo, G. (2009), Oliver, R.L. (1980), Uysal, M. , Williams, J. (2004)

Figure 1b: Expectation - Experience gap Either the perspective of increasing the experience to expectations can be taken, or the perspective of lowering expectations to match with experiences can be favored (Figure 3). In the tourism industry usually the perspective of increasing experience is used to minimize this gap. However, improving experiences may prove challenging as a change of experiences in the destination involves many parties such as port authorities and incoming agencies, who follow contradicting objectives. Measures to align destinations towards the expectations of cruise passengers could include exclusive openings of attractions for cruise passengers, 5

visitor/port restrictions by the government and creating new destinations, which is illustrated in Figure 1c. Some of these measures are already being executed, but in many cases they are not sufficient to successfully handle large masses of cruise passengers. Destination 3 Destination 2 Country of Source Market

Destination 1

(company - passenger relationship)

(company - destination relationship)

Customers‘ Past Experiences

Word of Mouth

EXPECTATIONS

Cruise Company (Advertisement, Internet, Brochures)

Lowering Expectations

Port Authorities (Passenger restrictions, exclusive

GAP

… Government

EXPERIENCES

Sights / Attractions

Incoming Agencies

(Exclusive openings for cruise passengers)

(Stretching day schedules, excursion timings)

Increasing Experience

Based on Brown, S.A. et al. (2008), Fallon P. & Schonfield, P. (2004), Govers, R. & Go, F.M. (2009), Kozak, M., Decrop, A. (2009), Moscardo, G. (2009), Oliver, R.L. (1980), Uysal, M. , Williams, J. (2004)

Figure 1c: Possibilities ro decrease Expectation-Experience gap cause by crowding The reaction of the cruise industry to crowding is to call at private islands (Ward, 2009), build large ships where the ship is the destination itself (Röwekamp, 2009) or operate smaller as well as more differentiated ships, which can sail to small and remote destinations. Since all of these measures are either complicated or costly, the focus of this paper will be on lowering expectations to match with experiences. Therefore it will concentrate on the expectation creation via external communication such as internet, brochures and advertisements. Consequently, this paper is built upon the basic assumption that the expectations of the guest can be changed more easily than the destination characteristics. The idea of this work is to reverse the satisfaction approach the way it is predominantly used nowadays. The focus lies on guest expectations, which are formed by the cruise company´s communication with the guest (e.g. brochure), past experiences of cruise customers and tips and experiences of friends. Although experiences are manifold, this paper will focus on expectations and experiences concerning crowding, neglecting other possible factors that could influence satisfaction. More specifically, the primary goal of this paper is to analyze the relationship between crowding via descriptions of crowding in brochures, the experiences with crowding and the satisfaction level of cruise passengers resulting from crowding experiences. This will be done via an experiment with cruise passengers. 6

1.3 Literature review Due to the specificity of this topic, several disciplinary areas need to be explored in combination. The following secondary research looks at both the relevant academic and commercial literature, including research papers on satisfaction theory, holiday brochures and crowding. 1.3.1 Satisfaction theory Satisfaction theory tries to understand the relationship among ‘a priori expectations, a posteriori evaluations, and subsequent satisfaction’ (Brown et al., 2008, p.52). Fallon & Schofield (2004) define customer satisfaction as a ‘post-consumption evaluative judgment that represents the ‘outcome’ for the customer after exposure to the service product.’ (Fallon & Schofield, 2004, p.203), which hence is an intangible parameter. Due to the fact that ‘satisfactory travel experiences remain an important goal for both tourists and tourism organizations alike’ (Foster, 2009, p.133), the measurement of satisfaction awoke interest in the tourism business in recent years. In a review of literature on tourist satisfaction Pearce (2005) states that literature is replete with the challenges of measurement, elaboration and case studies, whereas most of the literature ignores the fact of satisfaction being an individual judgment. According to him, most satisfaction studies are used for creating competitive advantage and for quantitative measurement of performance targets. Consequently satisfaction measurement should take a more qualitative approach to unmask relationships rather than addressing numbers to it. Hence, a qualitative approach to analyzing (dis)satisfaction towards crowding will be used. There are various approaches to satisfaction theory, but for the purpose of this paper the Expectation Disconfirmation Paradigm (EDP model) by Richard L. Oliver (1977, cited in Oliver, 1980) is used as the fundamental approach (Figure 1d).

Expectations Disconfirmation

(Dis)Satisfaction

On-site Experiences / Perceived Performance Source: Based on Nevo, D. 2005, (Online) available at http://www.istheory.yorku.ca/ect.htm, last accessed on July 11, 2009

Figure 1d: Expectation Disconfirmation Paradigm (EDP Model) The EDP model assumes that customers compare their expectations with the actual product/experience. Depending on the outcome results can be satisfaction, neither 7

satisfaction nor dissatisfaction, or dissatisfaction (Oliver, 1980). This basic assumption is depicted in a linear three-dimensional relationship (Figure 1e). If experience exceeds expectations, there is a high likeliness of satisfaction, which is the optimal outcome for both company and customer.

Figure 1e: Response Surface Representation of the EDP Model Besides measuring disconfirmation, satisfaction theory entails a further step, which takes place after the tourist returns home. Tourists need to make sense of their holiday experiences, which happens through narration and translation of the on-site experience into different contexts (O´Reilly, 2005; Foster, 2009). ‘(Dis)satisfaction is therefore not simply ascribed; rather, (dis)satisfaction is actively achieved’ (Foster, 2009, p.136) through evaluative talk. This process also leads to the positivity bias of satisfaction theory (also called satisfaction trap) as Pearce (2005, p.166) explains as follows: ‘There is (…) an explanation for [a very positive result in satisfaction surveys]. It is likely that a substantial amount of ego or self-esteem protection is operating with customers not wanting to admit that in the free-choice tourism situation they have selected badly. Tourism products and experiences reflect people´s values and represent aspects of (and opportunities to enhance) their identity; it is therefore counterproductive and reflects poorly on personal credibility to be very dissatisfied with a situation that one has willingly entered and often paid handsomely to experience. ‘ Hence, people desire to be seen as discriminating and sophisticated individuals and envision themselves as experienced and competent decision makers. This is also a very important theory to incorporate when interpreting satisfaction results as answers might be more positive than satisfaction truly is. This phenomenon is referred to as positivity bias. Due to its simple structure the EDP model bears some weaknesses. Arnould and Price (1993, cited in Morgan & Watson, 2009, p. 118) question the approach by suggesting that people 8

usually have vague expectations of intense emotional outcomes. Furthermore, expectations are formed upon personal variables, such as individual human characteristics, disposition, nationality and previous travel experiences. This leads to the fact that satisfaction theory cannot be seen in social isolation since various cultures have different satisfaction preconditions (Fournier and Mick, 1999, cited in Morgan and Watson, 2009, p.118). Additionally, ‘word-of-mouth’ (Uysal, 2004, p.235) and marketing efforts of e.g. tour operators influence tourist expectations. Moreover, experience is a multi sensory event where situational variables (Moscardo, 2009), such as external circumstances (e.g. weather), travel companions, general interactions and the personal mood of the tourist are influencing parameters. Pizam et al. (1978) also argue against the completeness of the EDP model, saying that it is inoperative and ‘does not identify the separate components and dimensions of tourist satisfaction’ (Pizam et al., 1978, p.316). As already shown by the positivity bias, satisfaction is also an ongoing evaluation process and may develop as time passes. Although these weaknesses of the EDP model are obviously valid, the approach is a basic starting point to reveal potential relationships amongst some of the components, which this paper will make use of. However, while the mentioned weaknesses should be seen as potential limitations, the research design employed tries to limit these. In this paper, the EDP model will be extended and applied reversely. The focus is not primarily on the satisfaction parameter, but on the influencing expectation parameter. Nykiel (2007) explains that a higher level of expectations and therefore highly demanding tourists lead to an overall decline in tourist satisfaction, as it becomes tougher for the supply-side to live up to those expectations. Therefore publicity material and advertising will be analyzed in detail. 1.3.2 Publicity material From research on tourist brochures Edelheim (2007) concludes that the content of tourist brochures is normally sold in a positive and attractive way in order to create a selling proposition. Govers & Go (2009) identify that this influences the tourists buying behavior. Also Klein (2002) notes that the ‘image is what sells cruises’ (Klein, 2002, p.1). Promotional material typically depicts the ‘romantic holiday, that is a heterosexual couple on their own gazing at the sunset’ (Urry, 2002, p.139), which leads to further expectations on how specifically a place/destination/cruise ship can be consumed. Urry (2002 [1990]) created various categories on how tourists can gaze upon a place. The two most interesting gazes for this paper are the romantic gaze, where tourists expect solitude, to look at an object privately and to see ‘undisturbed (natural) beauty’ (Urry, 2002, p.43) and the collective gaze, where tourists expect conviviality and public places. Here, other people also viewing the site are necessary to give liveliness to the object or place. Although publicity material tells what customers want to hear, the cruise itself can differ from that picture in reality (Ward, 2009; Klein, 2002). The incongruity between the image and reality of cruises creates gaps, which seem to be occurring independently from cruise segments and type of cruise, and may lead to customer disappointments and complaints (Klein, 2002). As competition has become fiercer in recent years (Urry, 2002), the need of tourism companies to offer attractive products and to represent those products accordingly has intensified. After the predominantly promoted positive image of cruises, which creates high 9

expectations, was highlighted in this section, the next section focuses on crowding and its consequences on human behavior. 1.3.3 Crowding Research on crowding classically focuses on space limits and density conditions of human beings and its psychological and sociological consequences. Freedman (1972) discovered that humans may react with increased aggressiveness to crowding/density as they are limited in their usual behavior. Freedman found that there are various forms of reaction to density, but it is generally accepted that density intensifies typical responses to a situation. Other researchers (Stokols 1972; Kuykendall & Keating 1984; Kaitilla 1998; Worchel 1978) hold a rather psychological perspective and define crowding as an internal state, psychological experience or feeling of a perceived loss of personal control over an environment, which is not necessarily related to actual density, but may have a similar influence on people’s behavior. For this paper crowding in relation with limited space availability will be called ‘physical crowding’, whereas crowding in respect to a psychological experience will be called ‘psychological crowding’. If ‘crowding’ is used by itself, then a mixture of both definitions is applicable. Worchel (1978) found that subjects experience least crowding when they are in a state of arousal as for example in a concert or in a big city, where there are many things to gaze at. The biggest impact of crowding is experienced if people are in a relaxed condition. Translating this to a cruise context, visitors of larger cities often feel less crowded even with high physical crowding due to visual arousal than visitors of a nice beach or idyllic place, where moderate physical crowding is given. This is again related to differing expectations and differing expected gazes. Relating this to the previously examined romantic marketing strategy the assumption is not farfetched that tourists expecting a romantic gaze are more likely to experience crowding and hence are subject to aggressive feelings or other negative effects. Furthermore, Klein (2002) claims that often too many cruise passengers are in one place at one time and that the problem of physical crowding (also referred to as people pollution) as well as psychological crowding is much greater in smaller communities as fewer sights and attractions are available to spread the masses. Hence, crowding surely influences the passengers´ experience of a port and can influence the subjective quality of the tourist experience (Klein, 2002). Although cruise operators and destinations are mostly aware of the phenomenon of physical crowding, it has to be weighed against economic benefits, demand patterns, port availability, ship size and other factors, which all influence the itinerary decisions of cruise companies. Looking at the whole picture of satisfaction, expectations, advertisements and crowding this creates a vicious circle. Consequently the question arises why cruises and destinations are still marketed in such positive and stunning ways?

1.4 Research methodology and data procedures There are several underlying assumptions that this paper builds upon. Firstly, the assumption is made that the degree of crowding is an important factor for creating satisfaction. Secondly, the assumption is made that cruise operators have more influence on 10

customer expectations through their communication than on the actual experiences within the destination, which legitimates the focus on the expectation -experience gap. Thirdly, it is assumed that most cruises in the German source market are still bought via brochures of the cruise operators, as the purchase process is decision and information intensive. Therefore the suggested image of destinations within brochures plays an important role in the expectation generation phase of the cruise passengers. The fourth assumption is that many ships have similar itineraries and that there are attractive must have seen ports which are popular within certain cruise areas and hence, due to competitive pressure, frequently visited. Consequently, the more ships in operation, the higher the possibility that more than one ship calls at each port. This results in a higher probability of overcrowding destinations with an increasing amount of passengers. These assumptions are understood to be valid and therefore not content of the analysis. The goal of the primary research was to analyze the potential causal relationship between catalogue or internet descriptions focusing on crowding and expectation formation of cruise passengers as seen in Figure 1f. Independent Variable: Crowding Elements in Brochures

Existence of Causal Relationship?

“Manipulation” by implementation of Crowding Elements into Cruise Operators’ Brochures

Dependent Variable: Decrease in Expectations Resulting in an Adequate Satisfaction Level

Observation of Changes in Expectations and Satisfaction

Figure 1f: Possible causal relationship between independent and dependent variable Therefore the operational hypothesis is as follows: The customer expectation-satisfaction gap can be decreased by realistic holiday descriptions, including indications towards crowding. Passengers reading the modified description are expected to have lower expectations and hence are more likely to be satisfied with their holiday. In order to achieve the research goal the research method of an explorative experiment was chosen, as an interpretive (qualitative) consumer research paradigm provides the key advantage of uncovering realities that could not be predicted a priori (Blichfeldt & Kessler 2009). The fundamental idea of a qualitative experiment is to draw conclusions about the structure of a matter by controlled and adequate manipulations on the analyzed matter in preferably natural circumstances. Hence, the research design of an experiment was chosen to prove a causal relationship between one independent variable (catalogue content) and one dependent variable (expectation leading to satisfaction) as depicted in Figure 6. Through 11

manipulation of the independent variable (catalogue) and the division of participants into a test- and a reference-group, the effect and impact can be measured or observed looking at the dependent variable (expectation/satisfaction). To test the impact of alternative catalogue content on the expectation formation of cruise customers, a cruise brochure was modified by adding sentences about crowding. The reference group was provided with the non-manipulated -romantic- content of a destination. The test group was provided with the manipulated content of the same destination, where sentences about crowding and images with many people were provided instead of the beautified pictures and descriptions usually used by cruise operators (Figure 1g). Term

Detail

Independent Variable

Crowding description and crowded images

Dependent Variable

Level of expectation and satisfaction

Test Group

Manipulated content (including descriptions and pictures of crowding)

Reference Group

Non-manipulated content (commonly used romantic descriptions and beautiful pictures)

Figure 1g:

added

Overview About Used Terms

The segmentation of the experiment participants into test or reference group happened systematically. Additionally, the experiment participants were restricted to people who cruised before, or people who were about to take their first cruise, and the German population to gain relevant answers and to reduce the scope. The experiment has been designed as a simulation of a whole vacation in accordance to the consumption process, which Crouch (2004) and Duman & Kozak (2009) define as prepurchase, purchase and post purchase. In a tourism context the pre-purchase contains the information search and expectation formation, the purchase can be viewed as the trip itself, and the post purchase is the post evaluation after returning from the holiday. This design helped to prevent a conjoint conduction of expectations, experience and satisfaction, which is necessary to secure initial thoughts and to work out the details of expectations. Since expectations are best measured prior to the experience (Pearce, 2005), this was incorporated into the research design by splitting the experiment into three main parts (Figure 1h).

12

INTRO General Questions

PART 1 Description of the Destination

PART 1

PART 2

PART 2

PART 3

Interview Questions

Statistical Questionnaire

Travelogue Interview Questions

+ Observation

Figure 1h: Experiment Layout Following a general introduction, part one consisted of a destination description including pictures, which simulated the decision and expectation formation process. Part two contained the travelogue, including a description and pictures of a day in the respective destination, and simulated how the experiment participant would have experienced the vacation day. In order to create the link between customer experience and satisfaction an additional set of evaluative questions (travel talk) was included after the first experiences were observed. Hence, this second part simulated not only the experiences, but also the satisfaction formation process of the experiment participant, as first expectations, created and written down in part one, were compared to experience. Both participant groups were provided with the same experience scenario in order to create a comparable situation. Part three consisted of a questionnaire to generate demographic and psychographic data, with the purpose of detecting potential correlations. As exemplary destination the Greek island of Santorini was chosen, since it is a popular cruise destination and the problem of crowding is well known and obvious due to the small size of just 13.000 inhabitants and its popularity among cruisers. Many people think about Santorini as having beautiful little white and blue houses. They think about the view from the crater onto the ample sea, which is being advertised and reflects the romantic gaze. As already elaborated, the romantic gaze is most vulnerable to crowding effects, but most appealing as a marketing tool at the same time. Considering this, the non-manipulated destination description for the reference group was produced in the style of a regular brochure/internet description with beautiful pictures from Santorini. The experiment was executed employing the method of open face-to-face interviews as Pearce (2005) detected it to be common for collecting satisfaction data. To enrich the findings resulting from the open ended questions, observation was used as an additional research method as shown in Figure 1i. To reduce the probability of misunderstanding, questions were created with simple, specific and short wording and a pilot experiment was carried out. Findings from the pilot were incorporated into the interview design used in the actual experiment.

13

Part 1

2

3

Action

Task of Interviewer

Handing out the destination description and Observing pictures to the experiment participant Interview part 1 Interviewing Handing out travelogue and pictures to the Observing experiment participant Interview part 2 Interviewing Questionnaire Observing and paying attention to the participants while they are completing the questionnaire

Figure 1i:

Overview of the Experiment Execution

Source: Author

The experiment was conducted the following way: Firstly, destination descriptions were read by the experiment participant, before the decision to purchase had to be made. Afterwards experiment participants were given a scenario (travelogue) about how they would have experienced their holiday in order to find out the participants´ satisfaction level about their simulated vacation. The experiment was executed in the Columbus Cruise Centre in Bremerhaven as well as in the harbour area of Kiel in the first week of June 2009. Caused by the restriction of time, areas and the available budget the sample is a non-probability sample, which means that the sample was not randomly selected (Nykiel, 2007). Since this research paper is based on an interpretive experiment approach the weakness of non-probability sampling and the small sample size of 24 participants can be neglected. EXAMPLE Question 1 Question 2 …

Figure 1k:

Participant 1

Participant 2

…

Answer Participant 1 Answer Participant 2 … Question 1 Question 1 Answer Participant 1 Answer Participant 2 … Question 2 Question 2 ... … …

Example Excel Spreadsheet for the Experiment Analysis

Due to the highly individualized design of the experiment interview notes were digitalized into an Excel spreadsheet (Figure 1k and specific data interpretation techniques were established. Firstly, data was sorted according to reference group and test group. Then various analyzing approaches were undertaken. One approach was a combination analysis, where each part of the individual participant experiment was analyzed according to a specifically designed decision tree (Figure 1l) which visualizes answer patterns. Both test and reference group were visualized in their own decision tree. The decision tree was designed 14

according to the three parts expectation/image, experience/reaction and satisfaction. After participants were sorted according to the decision tree, the satisfaction level, word-ofmouth attitude and their experience were written down accordingly. As the test group is faced with the additional hassle of dealing with a manipulated description, some additional information had to be included in the details of each participant.

Image

Reaction

Satisfaction po ne

positiv neutral negativ

ne

Experiment

Reference code of participant (statement, word of mouth attitude, experience with crowding) ...

positiv

...

positiv Participan t-Group

neutral

neutral negativ

negative

positiv neutral negativ

Figure 1l: Decision tree template After sorting the answers, findings within and between test and reference group were compared. Furthermore a classification of participants into various segments, such as repeaters or not attracted participants, was made to uncover more similar or differing patterns in tourists` behaviours.

15

Participant 1 Question about Image Question about Reaction Question about Satisfaction … Figure 1m:

Participant 2

Participant 3

…

Topic Analysis

Combination Analysis

Data Analysis Approaches

A second analysis according to topics (questions) was undertaken. As the combination analysis detects the vertical relationships among the answers, the topic analysis detects the horizontal patterns (Figure 1m) within and between test and reference group. Wordings and phrases used by the participants were split into various categories. An example of categories about the participants’ expectations towards Santorini would be expectations towards nature, expectations towards local culture (architecture, townscape), (historical) culture, overall picture of Santorini and not fitting into other categories. Via a specific word analysis predominantly used words and word groupings were identified, which not only detected details referring to the expected gazes, but also formed a predominant image from the various answers. Consequently, the different analyzing approaches were used separately as well as conjointly to produce the findings described in the following section.

1.5 Discussion of findings General characteristics of the test group and the reference group are shown in Figure 1n. The most obvious finding of the experiment is the differing image of Santorini between participants of the test group and the reference group after the different brochures were distributed. Twelve out of 13 participants in the reference group had a rather positive image of Santorini, whereas the images of Santorini from the test group were more diverse as four either had a neutral or negative image. Consequently, fewer people from the test group were willing to purchase the cruise. Hence, we can suppose that the manipulated brochure influenced the image formation of Santorini and the willingness to buy.

Number of Participants Gender Distribution

Test Group

Reference Group

11

13

5 Female / 6 Male

8 Female / 5 Male

Average Age

60

49

Number of Repeaters

6

7

16

Who They Take a Cruise With Most Decisive Factor

Partner

Partner

Itinerary, Travel Time

Ship, Itinerary

Prior Visit to Santorini Preferred Vacation Form

0

2

Sun & Beach, City Trips

City Trips, Cultural Vacation

Figure 1n: Details of Participant Groups The central objective of this study was to analyze the effects of realistic cruise brochures on passengers´ expectations with the subordinate aim of testing the impact of the crowding phenomenon on overall customer satisfaction by applying realistic cruise brochures. These two focuses will be analyzed in detail in the following two sections. 1.5.1 Effects of brochure manipulations on tourists´ expectations The analysis of the experiment reveals many fascinating trends. The first striking tendency is that the participants of the test group can be split into two sub-groups: either the manipulation has been recognized by the participants or it has not. For further discussion only those participants of the test group who recognized the manipulations will be called the real test group as the others more likely have the same preconditions as the reference group since they did not recognize any differences to regular brochures. In fact, it is fascinating to note the similarity of test group participants’ answers of those who did not notice the manipulations, to those in the reference group who did not receive the manipulations. The created destination image is predominantly positive. Keeping this in mind, it is interesting to note that the real test group participants tend to have a more negative or neutral image of Santorini. Further indications for this trend are derived from the topical and the word analysis. The first reactions to the description of the reference group are all positive (taking out the answers from repeaters) and pictured with words such as ‘ideal vacation destination’, ‘worthwhile visiting’, ‘gorgeous’, ‘desire to go there’ and ‘I definitely get itchy feet, I want to go there’. In addition, the expectations of the reference group concerning Santorini as a destination are all positive, too (neglecting the answers of repeaters). Expectations are mainly about nature and local culture and are worded the following: ‘picturesque’, ‘breath-taking perspective’, ‘pristine nature’, ‘idyllic’, ‘romantic’, ‘not many tourists’, ‘cute white and blue houses’ and ‘beautiful winding alleys’. These expressions also fit to the ‘romantic gaze’ (Urry, 2002) participants would expect including privacy and exclusivity. In contrast, the first reactions to the manipulated descriptions of the real test group also included negative aspects next to positive ones. Words such as ‘nice winding alleys’ as well as ‘impressive panorama’ are contrasted by expressions such as ‘I don’t want to visit during high season’ and ‘I am scared of the masses’. More specifically, when looking at the expectations towards Santorini as a destination derived after reading the manipulated description, the real test group comments more on the overall picture of Santorini by saying ‘I expect Santorini to be dreamy but crowded’ and ‘crowded with tourists, but a worthwhile destination’ than only on the nature and local culture. Usually a positive trait is mentioned in 17

the same breath with crowding/density or masses of tourists. This way of describing Santorini leads to the assumption that the romantic gaze is still predominant, but that also the masses play a role in the expectations of the real test group. Looking at these findings it can be concluded that the manipulated brochure does have an effect on the created destination image and thus on the participants expectations. Participants of the real test group expect many tourists to be in Santorini beside themselves, whereas participants of the reference group did not expect crowds of tourists to be present. This finding additionally supports the theory that publicity material influences tourist expectations as mentioned by Jenkins (2003, cited in Moscardo, 2009) and Govers and Go (2009). Accepting this conclusion as valid, it is then interesting to take a closer look at the implications that different expectations towards Santorini as a destination may have on the willingness to buy. The combination analysis shows that from the reference group only repeaters would not book this vacation. Both repeaters argued that there are nicer places to visit and one even mentioned the masses of tourists. However, it can only be assumed that they would not visit Santorini again because of their negative experiences with crowding. In contrast to this, four out of eleven participants of the test group would not have booked the vacation. To specify it even further, three out of the seven real test group participants refused to book this holiday mainly due to crowding. In summary, it can be concluded that the manipulations of the brochure had effects not only on the participants’ expectations, but also on their willingness to buy. 1.5.2 Impact of crowding (descriptions) on satisfaction This section will highlight the second part of the hypothesis, where the derived expectations are first compared to the experiences and then jointly compared to the claimed satisfaction level of the experiment participants. The real test group expects Santorini to be crowded. However, they still tend to desire gazing exclusively at nature and cultural sights, as derived from the topical analysis. Consequently, it can be concluded that an individual exploration of the island is favored over an organized excursion as participants hope to escape the masses this way. However, the findings suggest that there is no one single reaction to crowding among the participants. The analysis showed that there are five predominant stereotypes of tourists´ reaction to crowding and crowding descriptions: The blocking tourist – I hate mass tourism

This reaction only applies to tourists who are faced with real crowding facts. Blocking tourists are already scared about the masses of tourists when examining the brochure, which results in a choice not to book this holiday/cruise as the destination is classified as unattractive. Blocking tourists are either falsely convinced that small ships will never face crowding, or have had negative experiences with crowding before. The shocked tourist – Help! 18

These tourists usually do not have much experience with crowding. Shocked tourists are often individual cruisers, go on holiday in low season, cruise on small ships, or are first time cruisers. Shocked tourists tend to be dissatisfied when faced with crowding. The convinced tourist - I know what I have to expect This type of tourist can only emerge if realistic information (about crowding) is available. The convinced tourist is educated about possible crowds by realistic descriptions or other sources, but still convinced to go due to the perceived attractiveness of the destination. But still, he would rather explore the island by himself to escape the crowds. In case the convinced tourist still faces crowding, he would presumably react with dissatisfaction. The experienced tourist – Crowding can happen anywhere if you go on holiday The experienced tourist has experienced crowding before and knows that there are usually other tourists as well, especially when sailing on a big ship. This type of tourist either expects and accepts crowding or knows exactly where to go (destination, ship) in order to avoid crowding. He is assumed to have similar characteristics as the ‘post-tourist’ (Urry, 2002, p.91). The post-tourist knows about other tourists, is prepared to queue from time to time and is prepared for hassles during vacation, since he knows that glossy brochures are ‘a piece of pop culture’ (Urry, 2002, p.91). The happy tourist – I don’t care about anything, I´m on holiday! Although crowding might be present or has been mentioned in publicity material, these tourists state as their immediate reaction that the positive aspects outweigh negative ones and that they are satisfied with their holiday. There are two possible explanations for this behavior. Either these tourists pretend to be ignorant against hassles, or they truly possess such a positive basic attitude. Since no direct indications were found for either possible explanation, the actual source of this behavior is still open to research. In order to verify this stereotyping attempt, further research needs to be undertaken as the analyzed sample size was very limited. Also people might qualify as a mix of these stereotypes. Besides these findings on the five tourist reaction types to crowding, it is important to note the influence of the positivity bias, which seems to take place within almost all participants at least to some extent. None of the participants claimed to be very dissatisfied, although the word analysis showed that some were ‘shocked’, ‘angry’, ‘bothered’, ‘frightened of masses’, ‘disillusioned’, ‘disappointed’ or that they felt ‘awful’. Hence, I strongly assume that the positivity bias is present and satisfaction findings should be treated cautiously. The question arises if the real test group participants, who claimed to be satisfied, are more truly satisfied than those of the reference group, or if the positivity bias and therefore a glorification process occurred within the real test group. According to the EDP model, lower expectations of the real test group should lead to a higher level of satisfaction. However, contrary to the initial assumption that the real test group participants are more truly satisfied, no indications for this assumption were found. The word analysis within the real 19

test group shows that participants were not always strongly convinced by their satisfaction. Phrases like ‘It is hard to say whether I am satisfied or not. I would not have wanted to miss Santorini. I would be satisfied that I went there although there was crowding’, or ‘I did the possibly best I could out of the given situation’ state this clearly. As a result, it cannot be supported that lower expectations result in higher satisfaction, given the same experience. Hence it can be assumed that ”tourists perceive the destination as an extraordinary holistic experience” (Morgan & Watson, 2009, p.120) and that it is difficult to test influencing aspects of satisfaction, such as crowding, in isolation.

1.6 Conclusions This study focused on crowding in the cruise context, an increasingly important challenge for cruise operators as the continuous increase in ships sizes, an increasing number of ships and the finite availability of attractive and suitable cruise destinations will lead to a higher probability of cruise ports to face density/crowding of cruise customers. The purpose of this study was to examine the expectation-satisfaction gap concerning crowding in cruise destinations and to test the hypothesis that the customer expectationexperience gap can be decreased, and hence satisfaction increased, by realistic holiday descriptions. The analysis of the conducted experiment shows that the first part of the hypothesis, namely that modified brochure content affects customers expectations, holds true for the German source market as customers reactions to manipulated brochures differed from their reactions to non-manipulated ones. However, no indications were found supporting the second part of the hypothesis, namely the direct impact of crowding on satisfaction. This could possibly be ascribed to the impact of positivity bias. Rather, the analysis of the experiment indicated that there are five different types of tourist reactions to crowding in the German source market. These are the blocking tourist, the shocked tourist, the convinced tourist, the experienced tourist and the happy tourist. If cruise companies took these five tourist types into account when calling at potentially crowded destinations, excursion staff, cruise staff and guides could be briefed accordingly on how to handle those different tourist types. Another implication could be in the domain of personalized marketing. If reaction types were known prior to the booking individually designed offers could prevent a mismatch between personal preferences of a passenger and the type of cruise offered. Coming back to the crowding–satisfaction relationship this study does not show whether the stated satisfaction of the test group is true satisfaction, or whether the positivity bias dominates the level of satisfaction of the test group as well. It can only be hypothesized that participants of the test group who received realistic brochure content including crowding warnings were more truly satisfied than participants from the reference group. This should be the content of potential further research. If true satisfaction was reached, a very positive word-of-mouth would probably be the consequence. As word-of-mouth is a very powerful 20

tool and crucial to economic success in today's competitive cruise industry, the credibility and reputation of cruise companies that use realistic descriptions could improve. This again could lead to increased bookings and thus to sales increases. Combining the findings with respect to the two components of the hypothesis in a practical way, this study provides implications for management as well as marketing. Since it can be assumed that brochure content influences customers’ expectations considerably, but does not seem to have a strong influence on overall satisfaction, there are two possible recommendations: Change company communication and publicity material (e.g. brochures) to a realistic approach. Cruise companies should try to position themselves as an honest operator in their respective target-market and thus create positive word-of-mouth as true satisfaction levels are potentially higher than in the case of regular descriptions. Note, however, that this is a hypothesis and hence to be verified. Keep marketing content as it is or even enhance it by making it more promising and attractive than it truly is. Crowding should not be taken into consideration as it does not have considerable impact on satisfaction in general. By raising the expectations with corresponding beautiful content, competitiveness is going up and potentially prices could be set higher accordingly, as customers have higher expectations and are thus possibly willing to pay more. This approach disregards the actual on-site experience, but as this does not seem to have a great influence on satisfaction over time it can be neglected. In evaluating these two absolutely divergent courses of action, two main factors need to be considered: 1) the opportunity created for the specific tour operator by pursuing the realistic approach and 2) the impact on the industry. Firstly, the opportunities to the specific operator resulting from a change to a more realistic approach in marketing are very clear. Positioning as an honest operator offers the opportunity to increase reputation through true satisfaction levels of customers, resulting in positive word-of-mouth and possibly high numbers of repeaters. Any increase in customer satisfaction will increase the probability for repeat purchases and thus leads to a potential increase in future sales. This holds especially true since the probability for long-term relationships between customers and operators critically depends on trust. Hence, such move can be seen as a customer retention mechanism. In fact proactive connotation of publicity material with respect to potential crowding is a defensive play by the cruise company in order to protect itself from a reputation of making unrealistic promises. Secondly, a potential change to a more realistic marketing approach may prove to have a significant impact on the entire market. The realistic approach offers a great potential for changing the tourism market to a more transparent one in terms of service offerings and thus a more customer-oriented industry standard. From my experience, tourists prefer to be treated with honesty and to know that they will not be disappointed. With current industry practices, however, unless a destination/hotel has been visited or a cruise has been made, one cannot be sure what expectations should be like as publicity material cannot be fully trusted. This is in fact a primary driver for the increased popularity of ‘online communities’ (Aschenbeck, 2008, p.19) and the ‘social web’ (Stirm, 2008, p.31), since customers try to get 21

a realistic picture through this virtual word-of-mouth about their holiday beforehand. Moreover, the internet offers more and more audiovisual holiday content which also faces increasing popularity. Although Parinello (1993) argues that more information equals the impossibility of dreaming, an argument against this would be based on the fact that the customer still determines the degree to which he actively seeks information and thus his ability to dream. If he seeks to get the whole picture of a place, he is likely to succeed with the large amount of available information. For a vacation sold for one price with same characteristics, I would prefer to have moderate experiences according to my expectations, rather than having high expectations that cannot be met. Although people should already be disillusioned about the perfect dream vacation, especially with the dominant mass tourism to attractive destinations today, I think a lot of hassle and frustration during holiday could be prevented or limited by realistic publicity material. To substantially support this opinion I recommend a professional field test to see how potential customers react and whether potential booking hesitation could be overcome by detailed explanations. This could possibly change the whole structure of the industry. In summary, these two aspects are highly convincing to decide for the realistic approach, as opportunities for the companies as well as positive impacts on the whole industry are achievable. Especially cruise operators of small ships should incorporate this approach as their passengers usually chose the ship for its size and to avoid masses. The most important recommendation to cruise companies resulting from this study is to be aware of the extreme influence of holiday descriptions and corresponding pictures on the customers. If this fact is kept in mind, marketing should not solely try to attract customers but also accept publicity material as a source of information for the customer. Hence, effective marketing decisions can be made if this causal relationship of publicity material and expectations is known in cruise companies. 1.6.1 Limitations and further research This study is not immune from limitations putting restrictions to the usage of its findings. Not only the hypothesis, but unintentionally also some underlying assumptions were tested in the course of the experiment, some of which turned out not to hold true and therefore should be given a second thought in future research. The most important limitation is the bounded possibility of generalization caused by the very limited sample size as well as the research method being qualitative. Therefore, the existence of the five tourist reaction types to crowding and the given recommendations need further research in order to be verified. Additionally the research design shows weaknesses as only one sample port is examined, whereas a different choice might have lead to varying findings. Furthermore, a simulated satisfaction level as used in this study does not necessarily have a link to a real satisfaction level. Due to the fact that this experiment was a qualitative research method, further qualitative and quantitative research should be conducted on this topic in order to verify or reject findings or interpretations. During the period of work further questions arose which may found the basis for future research in this area. One important question concerns the types of destinations where crowding problems are predominant and in which part of the destination lifecycle, which predominant tourist gaze and at which population size this problem occurs. Furthermore this leads to the question if displeasure or dissatisfaction 22

within the destination falls back to the reputation of the destination itself or if the customer primarily blames the tour operator for his (dis)satisfaction. With respect to future research it is suggested that other possible factors influencing expectations or satisfaction are to be tested in order to see if findings only apply to crowding or if they are valid on a generic level. Last but not least, it seems appropriate to direct the attention to the potential relationship of the five tourist reaction types towards other tourist behavior models as developed by Plog (Plog, S. C. (1991), Leisure Travel: Making It a Growth Market...Again!. USA: Verlag Wiley), which includes allocentric and psychocentric tourist types with differing needs and behaviours.

1.7 References x x

x x

x

x x

x

x x x x x x x

Aschenbeck, A. (2008). ‘Das große Geplapper’. FVW, Vol.18, 18-23. Blichfeldt, B. S., Kessler, I. (2009). ‘Interpretive Consumer Research – Uncovering the „Whys“ Underlying Tourist Behavior’, in M. Kozak, A. Decrop (ed.) Handbook of Tourist Behavior - Theory & Practice. New York: Routledge. Brown, S. A. et al. (2008). ‘Expectation confirmation: An examination of three competing models’. Organizational Behavior and Human Decision Processes. Vol. 105, 52-66. Crouch, G.I. et al. (2004). ‘Building Foundations of Understanding the Consumer Psychology of Tourism, Hospitality and Leisure’, in G. I. Crouch et al. (ed.) Consumer Psychology of Tourism, Hospitality and Leisure. Oxfordshire: CABI Publishing. Duman, T., Kozak, M. (2009). ‘Service Failure, Tourist Complaints, and Service Recovery’, in M. Kozak and A. Decrop (ed.) Handbook of Tourist Behavior - Theory & Practice’. New York: Routledge Edelheim, J. R. (2007). ‘Hidden messages: A polysemic reading of tourist brochures’. Journal of Vacation Marketing, Vol. 13 (1), 5-17. Fallon, P. , Schofield, P. (2004). ‘First-time and Repeat Visitors to Orlando, Florida: a Comparative Analysis of Destination Satisfaction’, in G. I. Crouch et al. (ed.) Consumer Psychology of Tourism, Hospitality and Leisure. Oxfordshire: CABI Publishing. Foster, C. I. (2009). ‘Processes and Performances of Tourist (Dis)Satisfaction’, in M. Kozak and A. Decrop (ed.) Handbook of Tourist Behavior - Theory & Practice. New York: Routledge. Freedman, J.L. et al. (1972). ‘Crowding and Human Aggressiveness’. Journal of Experimental Social Psychology, Vol. 8, 528-548. Govers, R., Go, F. M. (2009). ‘Tourism Destination Image Formation’, in M. Kozak and A. Decrop (ed.) Handbook of Tourist Behavior - Theory & Practice. New York: Routledge Kaitilla, S. (1998). ‘Privacy and Crowding Concepts in Melanesia: The Case of Papua New Guinea’. Habitat Intl., Vol. 22 (3), 281-298. Klein, R. A. (2002). Cruise Ship Blues – The Underside of the Cruise Industry. Gabriola Island: New Society Publishers. Kozak, M., Decrop, A. (2009). Handbook of Tourist Behavior - Theory & Practice. New York: Routledge. Kuykendall, D., Keating, P. (1984). ‘Crowding and Reactions to Uncontrollable Events’. Population and Environment, Vol. 7(4), 246-259. Morgan, M., Watson, P. (2009). ‘Unlocking the Shared Experience’, in M. Kozak and A. Decrop (ed.) Handbook of Tourist Behavior - Theory & Practice. New York: Routledge. 23

x

x x

x x x x

x x x x

x x

24

Moscardo, G. (2009). ‘Understanding Tourist Experience through Mindfulness Theory’, in M. Kozak and A. Decrop (ed.) Handbook of Tourist Behavior - Theory & Practice. New York: Routledge. Nykiel, R. A. (2007). Handbook of marketing research methodologies for hospitality and tourism. Binghamton: The Haworth Press. O´Reilly, C.C. (2005). ‘Tourist or Traveler? Narrating Backpacker Identity’, in Jaworski & Pitchard (ed.) Discourse, communication and tourism. Clevedon: Channel View Publications. Oliver, R. L. (1980). ‘A Cognitive Model of the Antecedents and Consequences of Pearce, P.L. (2005). Tourist Behavior – Themes and Conceptual Schemes. Clevedon: Channel View Publications . Pizam, A. et al. (1978). ‘Dimensions of tourist satisfaction area’. Annals of Tourism Research, Vol. 5, 314-22. Röwekamp, C. (2009). Lifestyle-Areal statt Landgang. [Online]. Presented at Spiegel Online: Reise. Available at: www.spiegel.de/reise/aktuell/0,1518,611484,00.html . Last accessed 6th March 2009. Stirm, P. (2008). ‘Die große Online-Show’. FVW, Vol.12, 30-33. Stokols, D. (1972). ‘On the distinction between density and crowding: some implications for future research’. Psychological Review, Vol. 79, 275-277. Urry, J. (2002). The Tourist Gaze (2nd edn). London: SAGE Publications [First published in 1990]. Uysal, M., Williams, J. (2004). ‘The Role of Expressive and Instrumental Factors in Measuring Visitor Satisfaction’, in G. I. Crouch et al. (ed.) Consumer Psychology of Tourism, Hospitality and Leisure. Oxfordshire: CABI Publishing. Ward, D. (2009). Complete Guide to Cruising & Cruise Ships 2009. London: Berlitz Publishing. Worchel, S. (1978). ‘Reducing Crowding Without Increasing Space: Some Applications of an Attributional Theory of Crowding’. Journal of Population, Vol. 1(3), 216-230.

2.0

Seasonality: A factor of crisis or development in cruise tourism?

Tihomir Lukoviđ University of Dubrovnik Dubrovnik, Croatia Katja Božiđ Split, Croatia

Abstract: As one of the three basic types of nautical tourism, cruise industry has been developing constantly in the course of the last 30 years. Professor Ross K. Dowling analyzed that development of cruise tourism on the world market. The analysis indicates that there are four main world markets of cruise tourism. The analysis of market of (1) North and Central America, (2) Europe (The Mediterranean Basin and Transatlantic), (3) The rest of the world, and of (4) Unexplored potential market, indicates the essential differences in the levels of development of cruise tourism. If we focus our analysis on the two most developed markets of cruise tourism, North and Central America and Europe, we can see the important differences that can be analyzed from the aspect of seasonality in the industry of cruise ships. If we put the seasonality of cruise tourism in the focus of this paper, the subject of our research will be to determine its presence intensity, and will point out our goal to define the reasons why it occurs in cruise tourism. The purpose of this research is to determine the consequences of seasonality on the strategic development of cruise tourism market, and consequently on cruise industry. The seasonality of cruise tourism is not self-explanatory, therefore its influence on the strategic development should be explained, and all features of active cruise market, as classified by Professor Ross K. Dowling, have to be taken into consideration. Within the framework of global crisis and of this year’s results in nautical and cruise tourism, there is neither stagnation, nor decrease in development, which indicates the constant development of cruise tourism. But there is also a question whether the seasonality in cruise tourism would determine the strategic development of this phenomenon, and in such a case the question is how and to what extent. In the conditions of global crisis, seasonality can be a part of general crisis, but on the other hand it can also be a new chance for development. The introductory hypothesis focuses on the seasonality as a new challenge in development, and by a thorough analysis, we will either accept or reject that hypothesis.

25

P. Gibson et al. (Eds.), Cruise Sector Challenges, DOI 10.1007/978-3-8349-6871-5_2, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

2.1 Introduction Scientifically speaking, cruise tourism is an integral part of nautical tourism, and they are often analysed together. Various scientific studies indicate this mutual connection and dependence. These studies are focused on the consumer's / tourist's primary motives, such as enjoying the sea, the ships and the coastal destinations. The cruise industry, as highly developed and very complex, spread out in several directions, such as large global cruises, small cruise ships of local and regional importance, and finally specialized ports and destinations adapted to cruisers of all sizes. Two variables will be the subject of this research. They are: x x

Large cruise ships as a valuable and highly organized corporative segment of world cruising, Seasonality of this business

The purpose of this study is to investigate the seasonality, as well as its impact on development and management of large world cruisers. Seasonality is different for each of 300 cruisers operating on the global market of large cruise ships. Therefore, the main objective of this research is to determine how seasonality influences the operating of cruisers, what is the standpoint of cruise ships towards seasonality, what are its advantages and disadvantages, should it be countered or not, and in what way. If we set sustainable development as a fundamental business guideline, then the basic hypothesis of this research must consider seasonality as a factor, which should be managed by taking into account the interests of all parties, and also the viability of destination-cruiser relation. Thus, the main hypothesis is that seasonality is not entirely negative, and this research will provide a detailed analysis, particularly from a management perspective. This research is based on Dowling’s (2006) research, as well as on the authors’ statistical analysis and research, published in a specialised magazine of the University of Dubrovnik, “Naše More” 55(5-6)/2008.

2.2 Seasonality in the industry of nautical tourism Seasonality of business is a limiting factor for every manager. Seasonality is known as an undesirable element originating from a business environment that limits the realisation of the business objectives of a company. For this purpose, many strategies, dominated by adverse seasonal impacts, have been developed. But still, like everything in life, even seasonality is not absolutely negative. In the case of diversified sectors, such as nautical and cruise tourism, seasonality increasingly shows its positive aspects. The imperative of sustainable development increasingly supports the existence of seasonality. However, it is undeniable that the development of a particular industry is extremely difficult and complex when seasonality is an integral part of a particular business. There is an open question that 26

we will try to answer. The question is how and in what way does seasonality occur in the global nautical and cruise tourist market, and what are its key aspects. 2.2.1

Seasonality, comparative analysis

Building on the seasonality research, conducted by Dowling (2006)1, tourism and nautical tourism of a small, but yet significant Mediterranean country, such as Croatia, we will get a clear overview of the intensity of seasonality impact. In this part of our study we will define the quarterly movements in global cruise industry. We will also define Croatian tourism and its nautical segment from the aspect of sailing licenses issued and extended in Croatia, which is the basis for the operations of ports of nautical tourism and of charters in 2004. We will base our statistical analysis on the comparative analysis of seasonality coefficient defined as the ratio of the original phenomenon value and the trend of values (Y/Yc). The starting hypothesis is based on the assumption that seasonality in cruise industry is significantly lower than in tourism and in its nautical segment, i.e. in ports and charters. Available data show that the research was carried out in 2004 (Table 2a.)

1. quarter 2. quarter 3. quarter 4. quarter Total

CROATIA 2004 GLOBAL CRUISING MARKET 2004 North and Europe Rest of the Unexplored Tourism in Nautical Central (Mediterranean world potential CRO tourism in America and Transatlantic markets (Tourist CRO cruises taken arrivals in (Permit together) %) issued in %) 4.26 1.64 25.87 5.62 36.83 48.56 25.40 30.03 23.68 32.94 18.76 16.02 63.08 68.04 23.72 41.77 14.29 4.81 7.27 1.08 26.73 19.66 30.12 30.61 100.00 100.00 100.00 100.00 100.00 100.00 Source: author's calculation, Lukoviđ, T.

Table 2a: Structure of basic global cruising markets, of Croatian tourism and its nautical aspect (according to the issued permits for navigation) in 2004, per quarters. Table 2a shows that the quarterly scheme of passenger traffic in nautical tourism and cruising in Croatian and global markets, is suitable for the analysis of cruising seasonality. This layout of traffic by quarters indicates market developments, taking into account the locality of nautical tourism. This table clearly shows that the seasonality is not only a characteristic of Croatian tourism in general, but also of its nautical segment. Seasonality also applies to the global cruise market, and it is appropriate to the hemisphere in which it takes place. Nevertheless, we can conclude that seasonality is least noticeable in the developed cruise market of North and Central America, which is not the case in all other 1

Dowling, K. Ross: „Cruise Ship Tourism“, Cab International Cambridge, Cambridge, 2006

27

markets. From this table we cannot exactly determine the markets with higher or lower seasonality, nor can we identify its intensity or direction. Moreover, it does not provide the explanation of seasonality and its long-term role in development, as well as its role within the concept of sustainable development. In order to find answers to these questions, we have to look into seasonal indexes of the markets we are going to analyze. We will do this by using methods of statistical calculation and analysis of seasonality. 2.2.2

Seasonality of global cruise industry, its intensity and areas of impact

The analysis of intensity and direction of seasonality impact will be based on statistical methods of calculation of seasonal index for particular areas of research. The calculation2 of trends in the development of this phenomenon shows discrepancies in the parameters, not only in terms of quarterly changes of the phenomenon (parameter “b”), but also in terms of its direction, (+) increase and (-) decrease. Discrepancies in the intensity of the quarterly changes in the range of 1:41 indicate a highly developed market. The change of 9.2% in quarterly passenger traffic in the Central- and North-American markets, observed by comparing the max. and min. seasonal indexes, suggests that these are the markets where supply and demand intensely meet, which indicates a high degree of market saturation in terms of cruise offer. On the contrary, unexplored world markets show the highest quarterly changes of 909.6%. Differences of direction in quarterly changes of passenger traffic in mega markets, together with positive and negative application, indicate the mega locality in which cruisers operate, i.e. they indicate whether the north or the south hemisphere is in question. Trend parameters are not sufficient for the assessment of seasonality, therefore it is necessary to compare and examine its indexes. (Table 2b) No. 1 2 3 4

5 6

Markets

1st quarter 23.62

2nd quarter 112.04

3rd quarter 230.64

Tourism in Croatia (tourist arrivals in %) Nautical tourism in Croatia 7.83 128.50 252.07 (issued permits in %) North and Central America 102.46 95.02 94.58 Europe (Mediterranean 32.35 146.67 151.62 basin and Transatlantic together) Rest of the world 128.37 71.52 60.12 Unexplored potential market 139.70 56.71 22.13 Source: Author's calculation, Lukoviđ, T.

4th quarter 22.70

Index: max/min 1.016.04

3.41

7.392.08

105.90 60.23

112.00 469.12

141.34 200.98

236.00 908.18

Table 2b. Comparative overview of seasonality indexes in Croatian and international cruising markets in 2004 2

Lukoviđ, T. „Analysis of the Development of World and Croatian Cruising“, Naše more, Journal of marine scienes, University of Dubrovnik, 55(5-6)/2008, page 233.

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Comparative overview in Table 2b shows that, in Croatia, seasonality is much more present in nautical than in general tourism. Quarterly seasonal index of nautical tourism in Croatia varies within the range of 3.41 in the 4th quarter, up to 252.07 in the 3rd, which gives us a variation of 7.292%. If we compare the seasonal differences between nautical and general tourism; then we can see that seasonal index in nautical is more than 6 times higher than in general tourism. Seasonal fluctuations in the Croatian tourism, especially nautical, are quite pronounced, which indicates its great development potential. There are hardly any residual impacts suggesting a highly pronounced seasonal effect that can be interpreted as a “pure” seasonal impact. This implies that Croatian nautical (in terms of tourism) and tourist markets are not sufficiently developed, which is a good precondition for the development of strategic management of sustainable development at the macro level. The situation is similar in the Mediterranean basin. From the analysis and comparison of seasonal indexes of the world mega-market cruising, we can conclude that the seasonality index of North and Central America markets is not significantly pronounced, which means that there is no seasonality impact. On the contrary, seasonality index is quite expressed on the European market, i.e. in the Mediterranean basin, the Baltic and the European Atlantic region. Although the Mediterranean market is developed, this analysis indicates that the ratio of the market indexes of North and Central America on one side, and Europe on the other, is 1:4. That difference is more pronounced if we compare the developed market of North and Central America with the so-called unexplored/potential, and still undefined market of southern hemisphere. Any conclusions regarding the relatively undeveloped European cruise market should be presented with a great deal of caution, since there is a high level of seasonality caused by climatic factor, as shown in Graph 2a, in the Northwest European market, i.e. the Baltic and the European Atlantic area. However, the development of cruise ship building completely reverses the adverse climatic effects, as we can see in the example on the markets of North and Central America. We can certainly expect further development of the European cruising market in the Mediterranean basin, as well as in the Baltic and the European Atlantic region. With the exception of the markets of North and Central America, the global cruise industry will undoubtedly and continuously develop at a high growth rate. Good financial results of major cruise companies and corporations are an incentive for technological adaptation to the factor of nature. Major cruise corporations build larger and more luxurious, as well as smaller, but well-equipped cruisers which are suitable for reaching small and secluded ports and bays.

29

45

39,16

40

40,70

40,16

36,88

34,93

Mediterranea n

35

32,41

30 25 18,85

20

15,95

15 10

7,67 4,63

4,99

S

V

6,86

5 0

-

O

T

S

L

S

K

R

L

S

P

X-axis: months Y-axis: global markets offer in %

Source: Ross, K., Dowling: «Cruise Ship Tourism», CAB International Cambridge, Cambridge, 2006., p. 25.

Figure 2a. Monthly review of the cruise ships occupancy rate on the European and Mediterranean markets, compared to the global offer (% bed/night; annual average: 24,10%)

Source: Internet, www.portdubrovnik.hr

Table 2c. World's top 50 busiest cruise ports in 2009, according to the number of passengers and calls 30

However, an open question remains as to whether the big cruise companies and corporations understand the importance of natural factor and the limitations of its potential. Recent market developments are encouraging because it seems that the cruise companies have realised that potential tourists and passengers decide to go on a cruise not only because of the offer on the ship, but also because of the nature which is a crucial factor in the complex system of their decision making. Recent studies of the large cruise corporations (Dowling, 2006:240) confirm this statement. This suggests that one should not ignore the other element of large cruiser business, without which the global cruising would not exist, and those are cruise ports. In business terms, the large number of port visitors (Table 2c) of the world's busiest ports is quite positive. Dream World Cruise Destinations Autumn 2009 edition features the world's busiest cruise ports of call, among which Dubrovnik takes the 10th place in the 2008 table of the world's busiest ports of call (according to number of transit passengers who use another port as homeport), as well as the 3rd place among Mediterranean ports, following Naples and Livorno. It is important to emphasize that the top ten places of the world's busiest homeports include five Mediterranean ports (Barcelona, Civitavecchia, Piraeus, Venice and Palma), which confirms how important cruise tourism is for the Mediterranean area. Ports, as well as their respective destinations, face significant seasonality fluctuations that have a negative impact on business results and sustainable development of the destination. Fluctuations range from no cruisers in winter to the peak season in summer when such a number of them arrive so that they cannot all enter a port. Therefore, there is obviously a need for better cooperation between port and cruise operators, particularly in terms of planning. Reconciliation the interests of ‘cruiser-port-destination’ relationship is the backbone for sustainable development, which means that it is necessary to intensify cooperation, understanding and planning.

2.3 Managing seasonality Management analysis, related to the operating of large cruisers, should deal with ports and cruise ships separately. Both use diversification strategy in management, but in a different way, due to the immobility of one and the mobility of the other. 2.3.1 Advantages and disadvantages of seasonality, aspect of activity and management The analysis of global cruise tourism market from the aspect of seasonality, and according to professor Dowling's distribution, shows important differences. Quarterly fluctuations are significant and indicate three primary market groups: a) Saturated market without seasonal fluctuations, the market of North and Central America b) Active market with evident seasonality, European market and the rest of the world 31

c) Insufficiently developed market with high level of seasonality, unexplored potential markets. CLIA3 and ECC4 intensively analyze seasonality in cruise industry, and their results are not only obvious, but also stimulating. Intensive research of seasonality and continuous analysis of the market demand enabled CLIA to almost completely eliminate seasonality in its mega market. Table 4 shows that seasonality is almost completely eliminated on the American market. Good equipment, high quality, reasonable prices, efficient management and, of course, marketing based on market research ensure equal occupancy rates in each quarter. Such conditions lead to lower development rates of the American cruise market. Seasonality is quite noticeable in the European market (Figure 2b).

North/Central America Caribbean/Bahamas Mexican Riviera/Panama Canal Alaska North-East Atlantic Europe Mediterranean North-West Europe /Transatlantic Rest of the world South-East Asia and Far East South Pacific and Hawaii Other sub-markets Total remaining active fleet of cruisers Remaining vessels World cruise ship fleet - total

First quarter 15.767

Second quarter 14.430

Third quarter 14.454

Fourth quarter 16.287

Annual total 60.938

13.582 2.182 0 3 1.433 1.419 14

8.888 1.586 3.190 766 8.395 5.847 2.548

7.155 1.246 4.091 1.962 10.644 6.579 4.065

12.974 2.549 12 752 5.012 5.012 0

42.599 7.563 7.293 3.483 25.484 18.857 6.627

6.251 1.269 1.745 3.237 23.451

3.183 1.384 936 863 26.008

2.425 1.340 890 195 27.523

5.112 1.579 1.992 1.541 26.411

16.971 5.572 5.563 5.836 103.393

1.382 24.833

456 26.464

137 27.660

871 27.282

2.846 106.239

Source: Ross K., Dowling: «Cruise Ship Tourism», CAB International Cambridge, Cambridge, 2006., p. 20.

Table 2d. Quarterly occupancy rate of cruise ships in the primary world markets in 2004 (in 000 bed/night) 3

Cruise Line Industry Association (CLIA) was founded in 1975. It is composed of 19 cruise lines, with more that 150 cruise ships and 16.500 travel agencies. Its turnover in 2005 was 23 billion US$, and 10.5 million people took their cruise vacations. 4 European Cruise Association or European Cruise Council (ECC) conducts important market researches with results important for strategic development, cruise ships re-routing, and creation of new routes.

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1

100

0,9 0,8

90

0,7 0,6

80

0,5 0,4

70

0,3 0,2 0,1

60

0 S

50

V

O

Idle Vessels (unexplored market) -

T

S

Rest of the world

L

S

K

R Europe

L

S

P

North America

X-axis: months Y-axis: offer on world markets in %

Source: Ross K. Dowling: «Cruise Ship Tourism», CAB International Cambridge, Cambridge, 2006., p. 21.

Figure 2b: Monthly review of the structural cruise offer in the main world markets in 2004 (in % bed/night). Structural analysis of global market confirms the previous conclusions from Table 4. Structural overview clearly displays the regular seasonal consumption cycles on cruise markets. An interesting phenomenon is idle vessels, i.e. unexplored potential cruise market, which occurs in the three summer months. That market comprises the still undeveloped market on a part of the Pacific, the Indian Ocean and the South Atlantic, and the part of North Atlantic, as well as some other emerging markets, and it occurs in the period of transfer from the Caribbean to the European seasonal market. Thus, with a minor share of the „rest of the world“ and „idle vessels“ markets, the large European market, compared to the American, has pretty noticeable fluctuations. 2.3.2 Strategic features crucial for the management of cruise ships, companies and port: Cruise ships and cruise companies x

x

It is due to their mobility that cruisers and cruise companies can overcome the problem of seasonality. They use diversification strategy, meaning that they adapt the cruise routes to seasonal fluctuations. Constantly exploring demands of the market, they adjust their cruise routes and develop new ones. In doing so, they increasingly face problems with destinations, or cruise ports respectively. Cruise companies strengthen their market position with larger and more luxurious cruisers, and simultaneously develop small cruiser market. For the moment, that market is reserved for small local cruisers concentrated on the minor regional ports not suitable 33

for large cruise ships. Small, but luxurious cruisers of new charter fleet can enter minor ports of beautiful and interesting towns, prepared for that kind of guests/tourists. For cruise companies that means the application of market spreading strategy, but it also means that small luxurious and local cruisers will fight for their position. Cruise ports x

x

x

x

As a rule, cruise ports welcome a lot of cruise ships, which is positive, but they go against the destination interests since the destination sustainability is often threatened by the adverse effects of seasonality, which is negative. On the saturated market of North/Central America (group a) cruise companies have taken over some ports that were not operating well. This implies that there is a need for intensive and capital bonding between ports and cruise companies, and it is the consequence of the seasonality absence due to market saturation, which is a positive effect. The European, as well as the market of ‘the rest of the world’, needs to deal with seasonality in a variety of ways because of their immobility. For instance, they hire a lot of seasonal workers, make their moorings available for public transportation, develop other services in the off-season, and so on. Nevertheless, what they earned in the high season helped them survive through the off-season. On the active cruise market with evident seasonality (group b), the cooperation of ports or destinations with cruise ships in the field of planning and collaboration is not sufficiently developed, which is confirmed by the presence of seasonality in the business. Very often, the local government limits the number of cruise ship arrivals, which is evidently the result of the lack of cooperation.

2.3.3 Strategic development of cruise industry, and seasonality control concept When we analyze the strategic development of cruise industry, then it is of utmost importance to know the environment in which it develops. Apart from the particular features of each of the analyzed markets, the impact of seasonality should also be taken into consideration, which we did. However, if we analyze cruise industry development within the concept of controlling, then we have to base our analysis on four controlling principles: 1. 2. 3. 4.

focus on the problem or subject, clear objectives, focusing activities on the realization of the objectives and long-term success, orientation towards the future

This means that the development, as well as all the factors of its successfulness, should be clearly shaped at all levels of cruise industry (being the tourist and nautical phenomenon). In doing so, the goal of each entity in cruise industry should be defined. Thus, the goal of cruise ships, as well as of companies, is profit. Profit is the goal, but it also has to be a long-term objective in terms of sustainable development. It brings us to the conclusion that strategic planning, together with the overall strategy, is responsible for the future of cruise industry. 34

Although we are now talking about the strategic development of cruise industry in general, all that depends on the development of cruise ships and ports. This development depends on the performance of cruise ships at sea, whether large, small, local, or owned by big companies, as well as those on the rivers, lakes, and canals; finally, it depends on nonspecialized and specialized cruise ports. Therefore, overall strategy and all the entities are important. Strategic planning has a key role, and we are going to present a matrix/scheme of such a planning system, according to the controlling concept.

1. Long-term business and political objectives of the operating with existing and new routes

2. Strategy of target realization

3. Premises (to meet the objectives; important assumptions that cruise management has no influence on) 4. To meet the objectives, it is necessary to implement the following measures in four business segments)

Our main market Potential and new market Appear on the market as a cruise ship Arrange a presentation on the two world’s designed to meet the needs of largest fairs of cruise ships (Miami, passengers/tourists on all the routes. Europe), Implementation of the following market x Participate in the competition for advantages: “green star” in 2010. x create the image of the best cruise ship x Establish a better connection with ports and confirm it with a “green star” in India, China and other new assigned in 2008, which means to attract destinations. elite passengers, x organise entertainment that no other cruise ship has. - Distribution: Use the existing status to advertise via internet, and at the same time strengthen the marketing and sales services. - Advertisements must be oriented only to the market of the most luxurious cruise ships, 95% of advertising should focus on the potential and new, and 5% on the existing markets. a) relative to the objectives and strategy b) relative to the five-year goals (income and result) The initial results confirm the expected Competition is preparing new routes; revenue from doing business with the therefore, based on the research we target clients. carried out, we are developing a new program of additional services that the market needs and the competition has not developed yet. Sales Production Procurement Financing -Reduce credit - Get in touch with -Finalized Training, better indebtedness and the performers of preparations for technical find cheaper the night program new services of equipment and sources of popular with night parties. better financing. tourists. -Finalized qualifications of - maintaining the - Field trips the sales and marketing preparations for current prices. tourists want. entertainment on service on a cruise -Increasing the use the new ship. of loans of our destinations of new company. routes.

Source: Author Lukoviđ, T.

Table 2e: The scheme of strategic planning on the example of a large cruise ship (simulation)

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Cruise ports, i.e. all cruise entities, will develop similar strategic plans. The sum of all strategic plans, based on the cruise concept of all entities in the industry, will stipulate the development of cruise industry as a global nautical and tourist phenomenon. Development of each area should be controlled, particularly in this time of crisis; therefore we advocate the concept of integral development, which means harmonising the approach of all the entities in cruise industry regarding the issues of development, and improving their relations. The concept of organized integral development, with the application of controlling principles, will help avoid the adverse situations that have arisen in some industries, such as in air transport5. The fact that cruise ships and companies face distinctive development problems does not deny their need for better cooperation with cruise ports. The challenge of sustainable development, as well as the problems destinations face in the peak and in the off seasons, indicate the need for adjusted basic parameters of integral development. On the global market the situation is quite different if we observe cruise industry and its development on the primary world markets. The basic conclusions of the situation and development opportunities would be as follows: x

x x x x

x

Developed, but saturated cruise market of North America records no significant developments, but finds new strategic ways of maintaining the traffic of passengers. Market saturation made the prices of cruise arrangements on large cruise ships acceptable for tourists of lower purchasing power, and that form of cruising can be classified as mass tourism European cruise market grows in the coastal and in the continental region. Europe develops special types of cruising, based on prosperous local and regional features. The Mediterranean, an attractive market because of its rich history, records high rates of development, but also a distinct seasonality Baltic, as the market with specific features and evident seasonality, has great opportunities for development Continental European market on rivers, lakes and canals develops cruising as a part of entrepreneurship. This form of cruising is compatible with the general tourist offer of the continental sites Unexplored world markets have the role of a ‘joker’, because for the moment they serve to ‘fill holes’ in the cruise-route itinerary. This is changing since cruise companies are intensively processing, preparing and developing this market

2.4 Conclusion World cruising market shows substantial differences in the level of development. In terms of seasonality on the primary world cruise markets of North and Central America, Europe (Mediterranean and Transatlantic together), the rest of the world, and the unexplored potential markets, the ratio of differences among the most and the least developed markets 5

At the International meeting of representatives of world airline companies and airports, held in Dubrovnik in the autumn 2009, it was concluded that airports had enormous profits, whereas airlines reported huge losses and a decline. It was proposed to accept the concept of integrated development in the aircraft industry, so as to ensure the same conditions of strategic development for each entity.

36

is 1:9, measured by the seasonality index. Saturated markets of the North and Central America have been analyzed in the time of global crisis, and the general conclusion is that they have reached their maximum. Under the pretext of sustainable development, they are trying to maintain the status quo, although it can be labelled as saturated market if observed from the aspect of seasonality. It is due to the saturation and the need for development that there is a better cooperation with cruise ports. Europe, the Mediterranean, other markets as well, base their possibility of cruise industry growth on the classical concept of strategic development, since they think there is room for development within the phenomenon of seasonality. Despite that, the market competition among various types of cruise ships, with associated ports and destinations, has just started. Neither at this level, nor in the relations among cruise ships, ports and destinations, have the conditions for long-term sustainable development been achieved, although they are imposed as a fundamental element of development. In the peak season there are too many, whereas in the off season there are no cruise ships, and that is a result of failure in the operating and strategic integral planning of all the entities in the industry. This condition is negative for each of the entities, and that is why there is a need for cooperation. Since the development of each entity in the cruise industry is at stake, the entities themselves, with mutual respect, should get organized in order to solve their issues of strategic development.

2.5 References x x

Lukoviđ, T. (2008). Analyses of development of Croatian and World Cruising, Naše More, 55(5-6), Sveuēilišta u Dubrovniku, 2008 Dowling, R.K. (2006): Cruise Ship Tourism, Cambridge: CABI Publishing

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3.0

Evaluating cruise demand forecasting practices: A Delphi approach

Hannah Kollwitz Oxford Brooks University Oxford, UK Alexis Papathanassis Institute of Maritime Tourism Bremerhaven University of Applied Sciences Bremerhaven, Germany

Abstract This work evaluates current cruise demand forecasting practices with the main focus drawn to the European branch. Various forecasts underline the immense growth potential of this particular cruise market tempting cruise operators to launch additional capacity in this market. Given under-capacities in the cruise sector, forecasts tend to focus on the expected availability of lower berths rather than the market’s demand for them. The implicit assumptions here are: Conditions of under-capacities and a near-100% capacity utilisation will persist in the foreseeable future. Those implicit assumptions potentially render forecasts into self-fulfilling prophecies thus warranting further examination and discussion. This study adopts a Delphi methodology in order to examine the influence and validity of such assumptions. Cruise industry experts were questioned on their expectations for the development of European cruise industry over the next ten years. The aim was to identify their perception of published forecasts and the influence they exert on the market’s development. Our research results confirm the tendency towards self-fulfilling prophecies. New cruise ships are financed and ordered on the basis of an increasing demand, which is nevertheless fuelled by lower prices set by cruise operators creating an ‘artificially-maintained’ under-capacity, reinforcing existing forecasting practices. Keywords: Cruise Tourism Demand Forecasting, Under-Capacity, Delphi-study.

39

P. Gibson et al. (Eds.), Cruise Sector Challenges, DOI 10.1007/978-3-8349-6871-5_3, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

3.1 Background & objectives For several years it has been pointed out that the international cruise industry is annually growing by an average rate of eight per cent (CLIA, 2008). The European cruise business, the world’s fastest growing cruise markets, is now where the North American market was 20 years ago – “primed and ready for growth” (Ariston, 2006). Even in the time of the recent financial crisis, reports promise an average growth rate of 18 per cent for the German cruise market for the year 2009 (Koch, public presentation, May 11, 2009) while the United Kingdom, the second biggest source market after America, expects to reach two million passengers by 2012 (Dennis, 2008). According to SeaConsult, international cruise operators have recently discovered the lucrative European cruise market and are launching more and more additional capacity in this segment (cited in Welt-Online, 2008). The shared view among analysts and shipbuilders is that the number of ships required to satisfy European demand has not been reached yet. (Antonini, 2008) These expectations underline the impression of an unaffected and never ending fairy tale. The cruise industry is still growing as far as capacity is concerned. Above all, the European market shows a rapid growth. However, this growth and the predicted developments are mainly based on the supply side since enough potential is perceived on the European market. If these forecasts are promising, companies plan accordingly. Therefore, this work examines if forecasting cruise demand is professional practise or rather wishful thinking with the potential of creating self-fulfilling prophecies. Faulkner and Valerio (1995) argue that there is a naive attitude towards forecasting, characterised by a tendency to adopt forecasts without challenging, or even considering, their underlying assumptions. Assessing current forecasting procedures reveals that especially in the cruise industry as described by Faulkner and Valerio’s arguments (1995), forecasts may be accurate but based on the wrong assumptions. This has an impact on the cruise industry as many forecasts have already adjustment. Although forecasting is a key input for strategic management, but it is still in its beginnings and a naive attitude towards forecasting can be observed. It is reflected in the frequent acceptance of forecasts without questioning underlying assumptions. A forecast might be accurate but based on wrong reasoning; while under other circumstances a soundly-reasoned forecast might not eventuate. Some forecasts have such an influence on planning targets that they become self-fulfilling prophecies. (Faulkner & Valerio, 1995) Forecasts made for cruising promise an increase in cruise passengers; as these are based on the supply side, these forecasts are influenced by new cruise ships planned until at least 2012. If cruise companies rely on these forecasts and decide to acquire additional capacity on this basis, the forecasts turn into a self-fulfilling prophecy. A tremendous array of methods exists, but due to the young age of the cruise industry, applying common quantitative forecasting methods is subjected to significant validity limitations. The relatively small amount of available historical data renders both trend extrapolation as well as the development of sufficiently-validated forecasting models 40

unreliable (Gregan-Paxton et al., 2002). Nonetheless, planning ahead is of paramount importance since launching new, capital-intensive ships has to be planned carefully; shipyards specialising on the production of cruise ships are scarce and already fully booked two up to three years in advance. Decisions to launch additional capacity on the market have to be taken well in advance. This implies that decisions need to be based on accurate and reliable extended projections, putting the applied methods in the cruise industry into the spotlight. Despite the common awareness that tourism is a very complex construct that can easily be upset by external factors like an economic crisis or a natural disaster, forecasts for cruise demand mainly still rely on an arguably simplistic reasoning. It is assumed that additional capacity is generating additional demand. The forecasted growth of the European market tempts cruise operators to launch more ships in this market. Since the supply side forms the basis for demand forecasts this additional capacity positively influences the forecasts.

3.2 Literature review 3.2.1 The need for tourism demand forecasting Tourism is a demand driven, service-oriented industry, experiencing rapid growth and innovation (Chu, 2008). Along with this phenomenal growth in demand over the past two decades the interest in tourism research has correspondingly increased. Within this context, modelling and forecasting demand has attracted much attention. (Song, & Li, 2007) Efforts to establish guidelines for practitioners in selecting forecasting techniques have been characterised as unsuccessful (Song, & Li, 2007). The last thirty years have seen many studies of international tourism demand forecasting by tourism researchers and practitioners (Coshall, 2009). Faulkner and Valerio (1995) argue that progress has been made in the development of tourism forecasting techniques as it moved beyond reliance on pure guesswork and gut feelings to more rigorous approaches involving the use of econometric models. However, managers may lose sight of forecasting as an integral part of strategic management by viewing forecasting as simply an attempt to anticipate the future. The primary aim of forecasting is reducing decision-making risk. Particularly forecasting the demand for a tourism product is a core aspect of this (Frechtling, 2002). Forecasting tourism volume is important since it is an indicator of demand providing basic information for subsequent planning and policy making (Chu, 2008). Arguably, all industries are interested in this since it helps to improve the allocation of scarce resources to avoid shortages or surpluses (Burger et al., 2001). Economic forecasts are very important for investors and governments trying to improve future business performance. This renders forecasting a highly important field for the tourism industry needing accurate predictions of demand for planning effectively from season to season (Vella et al., 2008). Therefore, tourist arrival variables have been the most popular measure of tourism demand over the past few years (Song & Li, 2007). Middleton (1990) claims that in tourism this need might be more acute, 41

because the perishability of tourism products increases the necessity of matching supply with demand. Frechtling (2002) states that demand can be shaped in the short run, but has to be anticipated in the long run; especially due to the fact that leisure tourism demand is extremely sensitive to natural and human-made disasters. Forecasting can be defined as a process aimed at “predicting a future event” (Vella et al., 2008). At its most basic, it “takes historical fact and scientific knowledge … to create images of what might happen in the future” (Cornish, 1977, cited in Frechtling, 2002, p. 8). In 1982, Alain Aspect contended that the reality is an illusion and therefore the future is also an illusion (Aspect, cited in Walonik, 1993). This led to a number of supporting statements by Walonik (1993): 1. 2. 3.

It is impossible to state what the future will be with complete certainty; an element of uncertainty will always be an issue. There will always remain blind spots. Forecasting assists in formulating social policy which has an effect on the future and will thus changing accuracy of the forecast.

For tour operators, the most useful forecasts concern tourism demand for the following season or year; because such short forecasting horizons tend to provide the most accurate results. Irrelevant of whether long or short-term forecasts are generated, the accuracy of any forecasting methodology can be affected by unforeseen factors (Vella et al., 2008). Cooper and Hall argued that “a number of possible futures for tourism exist which are more dependent on factors outside of the industry, such as environmental change, economic conditions and lifestyles, than things within the control of tourism destinations of firms” (Cooper & Hall, 2008, p.376). Tourism demand is a very complex construct influenced by economic, socio-psychological and exogenous determinants (Uysal, 1998, cited in Page, 2009, p.87) which themselves are volatile and sensitive to catastrophic influences (Frechtling, 2002). The tourism industry needs to be able to quantify the likely impact of shocks to the demand system; either when the shock takes place or after (Coshall, 2009). The aim of forecasting cannot be generating perfectly quantifiable predictions of tourism demand. Since this is almost impossible, the predicting the most probable level of demand is a more pragmatic ambition. Experts’ opinions and educated guesswork are effective options taking factors into account which may be ignored or over simplified in mathematical models. Qualitative methods aim at quantifying risks of complicated or unpredictable events such as terrorism or changes in the global economic markets. Nevertheless, numbers and precise predictions about tourism demand enable more precise planning and thus are more often preferred by managers (Vella et al., 2008). Quantitative methods organize past information about a phenomenon by mathematical rules assuming that at least some elements of past pattern will continue into the future (Makridakis, 1986). The choice of method depends on what is to be predicted, the level of precision required, and the timeframe (Vella et al., 42

2008). Generally, historical data is used to predict the future. However, the ‘right’ forecast has not been identified yet. Qualitative as well as quantitative methods contain a significant degree of subjectivity. Walonik (1993) argues that if two people use the same model on the same data, the forecast will not necessarily be the same. Mathematical models involve smoothing constants, coefficients and other parameters that must decided on by the forecaster. (Walonick, 1993) 3.2.2 Which is the best forecasting method? Descriptions of the various techniques employed in forecasting of tourism demand are documented by several authors such as “Arscher (1987), Armstrong (1985), Calantone et al. (1987), Bar On (1984), Usyal and Crompton (1985) and Van Doorn (1994) with the general conclusion that each method has specific strengths and weaknesses” (Faulkner and Valerio, 1995, cited in p. 167). Commonly, scientists tend to agree on the data type and collection methods, but disagree on their interpretation. One reason is that all details irrelevant for the investigator’s theoretical arguments are source of a potential alternate hypothesis for explaining the obtained effects theoretically (Neale & Liebert, 1986) It might be likely that investigators neglect details which seem irrelevant for their argument. Yet, ignoring these might lead to wrong conclusions. Various opinions on the performance of forecasting methods exist. Song and Li (2007) state that tourism demand modelling relies heavily on secondary data in terms of model construction and estimation. At the end of the day, the availability of the data determines the forecasting methodologies which should be used to generate reliable forecasts (Song & Li, 2007). The question raising most interest is whether the advantages of several methods can be pooled to generate combined forecasts that are significantly superior to those generated by individual models (Coshall, 2009). Wong et al. (2006) point out that existing non-tourism literature shows that forecast combination can improve forecasting accuracy. The technique of combination was first introduced by Bates and Granger (Wong et al., 2006). However, each method has its own particular advantages and disadvantages. No single forecasting method can generate reliable forecasts in all situations and the relative accuracy of the different models varies with the destination and the lengths of the forecasting horizons (Witt & Song, 2002, cited in Wong et al., 2006, p. 1068). Practical tourism forecasting does not always involve only one method; there is no limit to possible combinations of methods that can be used. At one end of the spectrum there are simple no-change (quantitative) forecasts that can be adjusted on the basis of the (qualitative) opinion of one or more experts. At the other extreme, there are causal models which can add a quantitative dimension to the qualitative scenarios (Vella et al., 2008). According to Witt and Witt (1992) complex modelling approaches are not necessarily more accurate than simpler time-series. It is more prudent to apply a combination of such approaches to a given situation (Faulkner & Valerio, 1995). It is worth noting though that there is no best combination (Vella et al., 2008). Armstrong (1989) underlines this by demonstrating that combining individual forecasts 43

produce consistent gains in forecasting accuracy, although just modest ones. Research does not indicate the conditions or methods for the optimal combination of forecasts (Armstrong, 1989). It is often cost-effective and easier to perform a qualitative forecast or a combination of simple extrapolative forecasting supported by qualitative judgment. Hence, many tourism companies are moving towards the use of qualitative forecasts (Vella et al., 2008). According to Makridakis (1986) these judgmental forecasts can be argued to be superior to mathematical models. This is based on their ability to take into consideration the complexity of the real world opposed to the simplified assumptions made for mathematical models. Coshall (2009) suggests that combining models leads to superior forecasts compared to individual forecasts in terms of accuracy and that more sophisticated methods of forecast combinations perform better than simple mean-combination forecasts. Chu (2008) argues that choosing a method should mainly be based on the accuracy of the forecast generated, the ease of use of the technique, the cost of producing it and the speed at which it can be produced. The most attention has to be turned to the issue of accuracy since it is the most important factor (Chu, 2008). Faulkner and Valerio (1995) remind us that regardless the approach chosen, one ought to accept that the future cannot be predicted with any degree of certainty.

3.3 Research methodology The qualitative research was divided into two phases, the preparation phase and the research phase. Firstly, information on the formation of cruise demand forecasts was acquired as a basis for the ensuing Delphi Study. 3.3.1 Preparation phase: How are cruise forecasts formed? In order to gain information and knowledge in the field of cruise demand forecasting, indepth interviews with experienced practitioners in this field were carried out. The interviews aimed at giving an insight into which methodologies are used and why these options are chosen. Forecasters are subject to an underlying set of assumptions related to the industry which, in turn, influences their choice of methodology. Interviewees were selected based on their knowledge and experience with cruise demand forecasting. Therefore, the professionals interviewed included individuals working for DRV, GP Wild and INR Research. Partly, the interviews were conducted on the phone. However, the major part of the questionnaires was answered by e-mail. Questions focused on their general experience with forecasting, the origin of the input data and how their reliability is ensured. Following this, the next section focused on which forecasting methods are used, why they were chosen and which alternatives exist. In addition to these questions, it was also examined whether the validity of the forecasts produced was checked and if this was fed back to the methodology used for future forecasts. The interviews had a semi-structured character in order enable dominant, widely-adopted future-related beliefs and assumptions shared by professionals. These assumptions were utilized as an input for the following Delphi study in combination 44

with the already outlined argument about the general naïve attitude towards forecasting (Faulkner and Valerio, 1995). 3.3.2 Second phase: Delphi study - ‘The development of the European cruise market’ The assumptions identified in the preparation phase founded the basis for the Delphi Study which assessed the validity of these assumptions and focused on the perception of forecasts published about the cruise market development. Faulkner and Valerio’s (1995) statements contributed to the forming the questions for this Delphi study. They were concerned about the lack of communication between forecasters’ expertise and the industry itself and the lack of questioning the underlying assumptions. This leads to a ‘forecasting alienation’ (i.e. separation between production and utilization) with the consequence that forecasts are just accepted without being questioned or challenged. Returning to our research focus, we were questioning the professionalism of cruise demand. Naïve utilization of cruise demand forecasts, based on questionable assumptions may well lead to misplaced optimism and misguided decisions in the long-term. In other words: Is the continuous growth of the European cruise market is a self-reproducing belief or a reliable forecast? 3.3.3 Delphi-panelling as a research methodology The Delphi method is a flexible research technique organising and providing a structure for a group of individuals dealing with a complex problem (Korhonen- Yrjänheikki, 2009). Even though several variations of this technique exist, all of them share the principles of: anonymity, iteration and controlled feedback (Skulmoski et al., 2007). In an iterative process anonymous judgements are collected and distilled using a series of data collection and analysis techniques interspersed with feedback. In each subsequent round, all participants are made aware of the results of the previous round of questioning, so that the opinions expressed in the new round are enriched by earlier outcomes (Weaver & Lawton, 2006). The Delphi iterations come to an end either when consensus is reached or after a pre-defined number of rounds have been completed. While the purpose of a Delphi study is to develop a consensus among experts regarding the future, an analysis not reaching consensus can also be enlightening by understanding why they disagree (Medical Library Association, 2005). A mixture of the purely qualitative and the consensus-driven Delphi is used to discover as many arguments and points of view on the issue under investigation as possible (Häder & Häder, 2000). Focusing on the advantages of the Delphi method employed for this piece of research, the most obvious and convincing argument is the method’s potential of converting expert opinions on issues, in cases where there is not a single, clear answer (Linstone & Turoff, 1975, cited in Korhonen- Yrjänheikki, 2009). Consequently, the key success factor for this work was the selection of the panellists. Since the results of the Delphi study depend on the knowledge and co-operation of participants, participants who are likely to contribute 45

valuable ideas are essential. It is also important that respondent group members represent the research issue from different perspectives (Gordon, 2002, cited in Korhonen- Yrjänheikki, 2009). Therefore, a blended mix of participants was aimed at. The absence of discussion and communication between the participants contains a number of benefits. It hinders unintended group dynamics and influenced tendencies in opinions which could be reinforced by the presence of other researchers. Nevertheless, the answers created by such an expert panel are informed and take complex factors into account; different than mathematical equations trying to simplify the real world and relationships between variables. Hence, time horizons with this technique can be broader. Additionally, the Delphitechnique enables idea sharing and discussing complex issues despite geographically distance. It offers convenience to participants, as they can contribute from their own office or home (State of Victoria, 2007). Although the Delphi-technique is an effective method, there are a number of limitations to consider (Shin, 2001). Among the problems associated with the Delphi-technique is the identification of the appropriate pool of experts who represent the desired balance of opinions, philosophies and experience. Soliciting experts’ participation is time consuming and obtaining the panel feedback in timely fashion needs to be planned ahead accordingly. From a students’ point of view only few if any experts are likely to take part in a study which is not sponsored and coordinated by a well-known professor or university (Weaver & Lawton, 2006). As the critical factor for the success of this Delphi study was the willingness of the selected experts to take part and their knowledge of the field under investigation, soliciting their participation represented a considerable challenge. Moreover, there is always the risk of misinterpretation responses and the inability to obtain consensus could encourage researcher bias (i.e. temptation to ‘fit’ responses into a pattern of consensus). Therefore, the results were subject to potential biases or misinterpretation from the researchers. 3.3.4 Participants Focusing on the mixture of a purely qualitative and a consensus Delphi ten cruise experts were questioned over three rounds on their opinion concerning underlying forecasting assumptions and their views on the resulting published forecasts. The aim was to reach a consensus on the development of the European cruise market in order to assess whether the assumptions made by forecasters are valid; indirectly assessing the quality cruise demand forecasts. The participants were purposively selected based on: their broader knowledge and experience on the issues under investigation, their willingness to participate, their availability and their communication skills (Skulmoski et al., 2007). The aim was to obtain a well blended mix of opinions from several areas in the industry. Therefore, participants’ occupations cover the cruise industry itself and affiliated areas such as: academia, interior design of cruise ships, ship design, itinerary planning, personnel planning for cruise ships and the IT solutions for cruise ships, providing different perspectives on the 46

topic under investigation. Since broad experience in the cruise sector was a main criterion, participants’ occupations ranged mainly from middle to top management. Soliciting experts’ participation was the major part of the preparation for this Delphi Study. The phase of acquiring participants started on the 6th of May 2009 and was successfully concluded on the 3rd of June 2009. 3.3.5 Data collection The actual data collection started on the 10th of June 2009. A range of open ended questions were used to find contradicting points to focus on in the following round. In order to explore cruise demand forecasting processes, the question areas revolved around the assumptions identified in the preparation phase, the reliability and transparency of current forecasts and the general opinion of which factors influence the quantity of cruise tourism demand. The consolidated anonymous summary of round I was sent out to all participants giving them an overview of the responses and expectations of the other experts. Round II focused on extreme statements which all participants were asked to comment on. The outcome was again distributed to the participants. In the final round the initial questionnaires were reassessed and the responses were refined where necessary. This last round ended on the 30th of June 2009. The process stopped after a pre-defined stop criterion which was the number of rounds. Three rounds were considered as sufficient to reach a consensus; any additional round would not have provided new information. The rapid opinion forming was enabled by fast response rates from the participants. The contact with the facilitator was enabled by constantly communicating via electronic messages or telephone calls. Additionally, participants were given the option to answer the questionnaire by e-mail or during telephone interviews, minimizing their time involved. In general, the response rate was high which underlines that the participants did not lose interest halfway through the research. The Delphi-technique seeks to alleviate biases associated with face-to-face interaction and peer-pressure biases within a group, by keeping the responses and the respondents anonymous (Walonick, 1993).

3.4 Findings & discussion The outcome of these interviews underlined the impression that certain underlying assumptions influence the choice of the forecasting methods applied for cruise demand forecasting. The main forecasting assumptions identified in the preparation phase revolve around: 1. 2. 3.

External factors such as the price or the economic situation have no influence on demand. Under-capacity is predominant. Additional capacity also generates more demand for cruising. 47

4. 5. 6.

Reliable and accurate forecasts are produced by focusing on the supply side. No method available for generating similarly reliable results. Most forecasts focus on short-term prediction.

3.4.1 Results of the Delphi study Summarising, it can be argued that participants divided the industry according to products; the current and planned range of products leading to a fragmentation and diversity of the cruise market. Dividing the industry into the product offerings make cruise demand more liable to external influences like economic shocks or prices. The price has already been pointed out as one of the main issues. On the one hand it is generating the demand. Not only capacity has an influence, but the price is determining the demand of the next season. On the other hand, the price development makes some participants wonder how low it can drop with cruise companies still being able to generate revenue. A large proportion of the profit margins are already generated by on-board revenue and not purely with ticket sales. These developments are not taken into account when cruise demand forecasts are made. Initially, the basis of forecasting cruise demand was one of the contradicting points. It is now apparent that (according to the participants) not all the necessary information is accounted for in these forecasts. The current situation of under-capacity is not expected to be true. Capacity growth until 2012 will be significant, but will presumably have to stop at some point. The maximum occupancy is reached with the current pricing strategy creating the impression of further demand potential. Participants argued that the price is the reason for the increase in cruise demand; the low ticket prices are the reason why even in the consequences of the current financial crisis passenger numbers increase. 3.4.2 Revising the main forecasting assumptions These findings underline argument of a general naivety towards forecasting. Frequently, forecasts are accepted without questioning the underlying assumptions. Forecasts may be accurate for all the wrong reasons. A good forecast may well not eventuate while others influence decision makings strongly and therefore become self-fulfilling prophecies. (Faulkner & Valerio, 1995) Revising the main forecasting assumptions leads to the following: 1. 2. 3.

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External factors influence cruise demand. The younger the cruise passengers become, the stronger this impact will be. Under-capacity might be the case, but it will not continue endlessly. More capacity might generate more demand for cruising, but the main determinant is the price since it generates the demand.

4.

Basing forecasts on the supply side may have generated accurate forecasts to date, but most of them are rarely transparent and were subject to correction. This leads to a more critical view on published forecast.

3.5 Discussion of findings Practitioners argue that the best option is used and no alternative similarly reliable forecasting method exists. Until 2008 the forecasts seemed to be fairly accurate and although some forecasts had to be adjusted slightly, the accuracy up to date is not questioned. However, Faulkner and Valerio’s (1995) arguments for an integrated forecasting approach seem to be valid. Underlying assumptions concerning the cruise industry have not really been challenged so far. On the one hand the practitioners argue that due to the young age of the cruise industry forecasting cruise tourism demand can and even has to be, based mainly on the supply side taking the capacity as the only limiting factor. Additional capacity is consequently generating demand since it is not affected by factors such as the economy, marketing expenditures, socio-psychological and exogenous factors. The difficulty of forecasting demand in a young industry has been underlined by the literature, since not enough historical data is available which limits the choice of appropriate methods for demand forecasting (Gregan-Paxton et al., 2002). On the other hand several researchers on tourism demand argue that it is a very complex variable which is affected by several macroeconomic factors such as the economic situation which cannot be influenced by the cruise companies. The Delphi study has underlined that practitioners working within the cruise industry have seen the impact of these factors on cruise demand. Especially the current financial crisis is a good example. Hence, current forecasts had to be corrected. The forecasting methods which seemed to be reliable up until last year suddenly seem to be considered in a more critical manner. The results of the Delphi study indicate an increasingly critical mindset towards forecasts. The respondents concluded the younger the passengers will be, the more impact these economic shocks will have. Younger passengers will still be in the middle of their careers, which render cruise tourism demand sensitive to macroeconomic events. At the moment it appears that the demand for cruising is outstripping the available capacity. It has also been argued that this demand is generated by price reductions and is cannot be considered indefinite. This suggests that although forecasts have been proven accurate (to date), they could be based on misled assumptions (Faulkner & Valerio, 1995). This would be the case if the assumption of permanent under-capacity is not valid or at least not in the form it has been publicised. The practitioners interviewed admit that tourism demand determinants (economic, socio-psychological and exogenous factors) also hold for cruise tourism demand. They contend that the influences of economic shocks like the financial crisis have an impact which is already noticeable and is expected to increase in the next year because cruising is a market which is booked very early in advance (Goern, personal communication, June 3, 2009). The impacts are visible on the supply side as well. Some large cruise operators called a halt on cruise ship building. Considering the current forecasting practices this development would have an influence on the cruise tourism 49

demand between 2012 and 2014. Although cruise tourism demand forecasters are aware of such influences, they are not taken into account when forecasts are produced, which was underlined by the practitioners questioned in the preparation phase. In recent years, a growing interest to the validity of behavioural research became apparent. People tend to see and even to bring about what they expect, a phenomenon referred to as the self-fulfilling prophecy (Darley & Fazio, 1980, cited in Neale & Liebert, 1986, p. 125). The tendency to judge matters according to our expectations is quite pervasive (Neale & Liebert, 1986). The results show that there are two main attitudes towards the question whether forecasts significantly influence the development of the cruise industry or not. Mainly, participants stated that the optimistic projections nurture cruise operators’ image of further growth. Optimistic forecasts make them plan ahead accordingly. New ship orders have to be planned well in advance. However, the other extreme argues that the cruise industry is ‘made’ by the cruise operators whose decisions are based on their own, individual perceptions and plans. Of course, they take into account the market potential for the product they offer or want to launch. However, these decisions are not based on formalised analysis. According to the Delphi participants, a recent example is TUI Cruises who re-fit an old cruise ship which was operated for the American market and launched it in the German market. More and more international cruise operators also target the lucrative European cruise market re-locating their capacities to this branch. 3.5.1 Summary Participants pointed out that cruise operators have to decide now whether new ships are needed or not. Shipyards are booked out up two to three years in advance. A year ago the predictions for cruise tourism demand have been more optimistic as the current economic shock had no impact. Decisions to launch more ships were influenced by the general atmosphere in the industry. Since additional capacity is expected to generate more demand for cruising, the decision to launch a new ship is influencing newly generated forecasts again. Hence, there seems to be evidence for self-fulfilling prophecies. The industry keeps the image of the growth phase as more capacity is added. This influences the decision-makers’ perceptions and ultimately their business development plans.

3.6 Implications & further research 3.6.1 Implications Despite the fact that tourism demand has proven to be volatile and easily affected by external factors, cruise demand forecasts rarely take them into account. The impact is that the financial crises 2008/2009 forced forecasters to adjust previous predictions and forced managers engaged in cruise tourism to consider them more critically. Some may argue that 50

all forecasts for the cruise industry are purely based on the supply side. This is of course a simplification. Yet, it is assumed that increasing capacity will generate more demand and therefore the main focus can be drawn to the supply side. Research has underlined that this is expected to change. Demand cannot be expected to outrun supply indefinitely. These basic forecasting assumptions will need to be adjusted, encouraging the utilization of alternate methods or combining forecasting methods. It remains questionable though if all the assumptions made are correct. Currently, forecasts are not very transparent. Participants stated that sources are unknown. Thus, they do not rely on these projections. Some of them might be relevant, but to some extent Churchill’s (n.d.) “do not trust any statistic you did not fake yourself” still seems to have an impact in this context. A result of the main assumption of demand outstripping supply is the ongoing growth which had been extensively publicised extensively over the last years and has led to the question whether this growth was reality or just a construct based on wrong assumptions and misinterpretation. It has been argued that the growth which is based on additional capacity is only an illusion. In reality, the surplus of demand is caused by pricing strategies. Recently, cruises are promoted by through aggressive pricing; lower package prices than any other tourism destination can offer. Tourists do not get a cheaper offer anywhere. This suggests that one main determinant for cruise demand is the price, an economic factor. If competitors such as hotels and other destinations, plainly different holiday options, lower their prices, the supply demand disequilibrium might change into the reverse. This time the effect would not be as positive for the cruise industry as before. The development of the European cruise industry is expected to be similar to America where cruise tourists represent 3 per cent of the population. If demand is rising at the same rate, this 3 per cent figure seems to be realistic for Europe. In general, the European cruise market is still to grow. Capacity is growing since more ships, corresponding to more additional berths, will be launched until 2012. Due to a lag of time the impacts of the financial crisis will manifest in a decline of additional capacity after 2012. The financial crisis has led to a number of new ship order cancellations. As the basis for cruise demand forecasting is the supply side, these cancellations of additional capacity will have influence on new forecasts. Alternatively stated, it is worth mentioning that up to date the cruise industry has managed to balance a paradox between the complexity of tourism demand determinants and supplybased forecasts. Underlying assumptions seemed to be valid which encouraged forecasters to continue with the current methods. However, under-capacity, if it really is the case, does not seem to proceed endlessly. It is expected to change which challenges current forecasting methodologies. Literature suggests that reliable and accurate forecasts are generated by combining forecasting methods. Forecasting the future of cruise tourism demand will remain a challenge; mainly, due to the young age of the cruise industry and the lack of extensive, reliable historical data. An important aspect of forecasting is that a variety of variables and parameters depend on the forecasters’ interpretation. These findings underline Faulkner and Valerio’s suggestions that more communication between forecasting specialists and the industry should take place. This would encourage the monitoring and continuous evaluation 51

of the underlying assumptions. Challenging assumptions might lead to their reconsideration, thus impacting on the choice and application of forecasting methods. Forecasting is a useful tool supporting decision-making when applied correctly. The actions taken based on these forecasts are followed by reactions. Hence, the future development is influenced by forecasts and vice versa. If constant growth is promoted and ships have to be ordered years in advance, this is having an influence and the phenomenon of self-fulfilling prophecies emerges. Circumstances can change; this does not imply that current forecasts are unreliable; just that they should be utilised under a more critical manner. In the past, cruise demand forecasts had to be corrected to account for recent economic shocks, rendering the assumption that cruise customers are recession-resistant highly questionable. 3.6.2 Future recommendations Future research could focus on the aspects which could not be further elaborated on in this work. Under-capacity was outlined as a major underlying assumption. It is expected to change influencing the forecasting methods. This could be assessed focusing on when undercapacity will not be the limiting factor anymore and which forecasting methods would be appropriate. Keeping the interest in this area, it has been argued that under capacity is an illusion. Further research could focus on assessing how much influence the prices set by the cruise operators generating this demand. Recently, the centre of attention was put on the supply side, but future research should take the demand side and the influencing factors of tourism demand into consideration as well. The Delphi participants gained respectable work experience in the cruise industry and agreed on the factors which have an impact on demand. Including them into existing forecasting models may well be a starting point for sound forecasting. Authors argue that combining forecasting methods tends to generate more reliable results. Hence, future research could focus on the development of context-specific forecasting method combinations to create reliable forecasts, perhaps including a more rigorous qualitative element to rigorously assess and revisit underlying assumptions. Additionally, it would be worth to pay attention in simplifying forecasting methods. This would enable practitioners to get more involved into the forecasting process and raise awareness of the corresponding limitations. Another aspect which could be covered by future research is concerned with Peisley’s (2008) question concerning the current level of growth and its sustainability in terms of market and profit growth. The results of the Delphi study support the validity and relevance of this question. How long will cruise companies are be able to offer these dumping prices and whilst remaining profitable with the help of on board revenue? This leads to monitoring the competition. Increasingly, floating destinations (the mega liners) are competing with destinations ashore (hotels, other holiday options). If the price is having such a big influence, competitors’ new pricing strategies would create totally new circumstances. Up to date, only 52

cruise operators are able to offer these low prices, due to the profits generated with on board revenue; especially which inexperienced passengers or first time cruisers who are not really aware of the ‘un-forecasted’ costs. A Delphi participant suggested a comparison between revenue generated on board during a sea day and the revenue generated in the city during a port day. The idea behind this would be to identify an additional source of income for cruise operators and shed some light into the competitive interface between land- and floating destinations. Offering cruise operators a margin of the additional revenue generated in the respective port city (‘off-board’ revenue), could for example alter the nature of competition between destinations and may even ease the mega-ship trend. An additional source of income might enable cruise companies to maintain low prices, generating more demand, filling the ships and maximizing occupancy.

3.7 References x

x x x

x x

x

x x x

Antonini, C. (2008). Cruise Ship Building. Personal Speech at the Seatrade Convention on March 12, 2008. Retrieved May 2009 from: http://event.on24.com/event/ 11/61/90/rt/1/ documents/player_docanchr_1/corrado_antonini_transcript_.pdf Ariston (2006). Europe: The Future is Now. Retrieved June 2009 from: http://www. worldcruise-network.com/features/feature617/ Armstrong, J. (1989). Combining Forecasts: The End of the Beginning or the Beginning of the End?. International Journal of Forecasting, 5 (4), 585-588 Burger, C. et al. (2001). A practitioners guide to time series methods for tourism demand forecasting – a case study of Durban, South Africa. Tourism Management, 22 (4), 403409 Chu, F. (2008). Analyzing and Forecasting Tourism Demand with ARAR Algorithm. Tourism management. 29, 1185-1196 Churchill, W. (n.d.). Famous Quotes. Retrieved June 2009 from: http://www.gprs-ratesblog. com/2008/05/28/do-not-trust-any-statistics-you-did-not-fake-yourself-winstonchurchill/ CLIA (2008). 2008 CLIA Cruise Market Overview - Statistical Cruise Industry Data Through 2007. Retrieved April 2009 from CLIA Homepage: http://www.cruising.org/ press/overview2008/ Cooper, C. & Hall, C. (2008). Contemporary Tourism – an international approach. Oxford: Elsevier: Butterworth-Heinemann Coshall, J. (2009). Combining Volatility and smoothing forecasts of UK demand for international tourism. Tourism Management. 30, 495-511. Dennis, J. (2008). UK Cruise Market to hit two Million Passengers by 2012. Retrieved April 2009, from Travel Weekly Homepage: http://www.travelweekly.co.uk/ Articles/2008/02/13/26646/uk-cruise-market-to-hit-two-million-passengers-by2012.html

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x x

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Faulkner, B. & Valerio, P. (1995). ‘An Integrative Approach to Tourism Demand Forecasting’, in Fredline et al (ed.) Progressing Tourism Research – Bill Faulkner. Clevedon: Channel View Publications Frechtling, D. (2002). Practical Tourism Demand Forecasting: Methods and Strategies. Oxford: Elsevier Butterworth-Heinemann Gregan-Paxton, J. et al. (2002). So that’s what it is: examining the impacts of analogy of consumers’ knowledge development for really new products. Psychology & Marketing. 19 (6), 533-550. Häder, M. & Häder S. (2000). Die Delphi-Technik in den Sozialwissenschaften. Methodische Forschungen und innovative Anwendungen. Wiesbaden: Westdeutscher Verlag. Retrieved: June 2009 from: http://www.qualitative-research.net/index.php/fqs/ article/viewArticle/901/1966 Korhonen- Yrjänheikki, K. (2004). Using Argument Delphi to Anticipate the Challenges of Egineering Education in a Systematic Way: Case Finland 2015. Presented at the SEFI 2004 Annual Congress. The Golden Opportunity for Engineering Education. Retrieved May 2009 from: http://www-ice.upc.es/butlleti/sefi/pdf/OUTLINES/78.SEFI04OUTLINE _KKY.pdf Makridakis, S. (1986). The Art and Science of Forecasting. International Journal of Forecasting, 2, 15-39 Medical Library Association (2005). Library as place: results of a delphi study. Retrieved May 2009 from: http://www.pubmedcentral.nih.gov/articlerender. fcgi?artid=1175798 Middleton, V.T.C. (1990). Marketing in Travel and Tourism. Oxford: Heinemann Neale, J. & Liebert, R. (1986). Science and Behavior: An Introduction to Methods of Research 3rd edition. New Jersey: Prentice-Hall International Editions Page, S. (2009). Tourism Management-Managing for Change 3rd edition. Oxford: Butterworth-Heinemann Peisley, T. (2006). The Future of Cruising- Boom or Bust. Tourism Management 29 (2008) 821-830 Shin, T. (2001).Delphi Study at the Multi-Country Level: Gains and Limitations. Retrieved June 2009 from: http://www.nistep.go.jp/achiev/ftx/eng/mat077e/html/ mat077he.html Skulmoski, G. et al., (2007). The Delphi method for Graduate Research. Journal of Information Technology Education, Volume 6. Retrieved June 2009 from: http://jite.org/documents/Vol6/ JITEv6p001-021Skulmoski212.pdf Song, H. & Li, G. (2007). Tourism demand modelling and forecasting – A review of recent research. Tourism Mangagement 29 (2008). P. 203-220 State of Victoria (2007). Delphi Study. Retrieved June 2009 from: http://www.dse.vic.gov.au/DSE/wcmn203.nsf/LinkView/D7B9E063A2B4FFAFCA25707E0 0248822EBB2EB2F9035229BCA257091000BF7A6 Vella, L. et al. (2008). Handbook on Tourism Forecasting Methodologies. Madrid: World Tourism Organization Walonik, D. (1993). An Overview of Forecasting Methodology. Retrieved May 2009 from: http://www.statpac.com/research-papers/forecasting.htm

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4.0

The Development and meaning of vessel flags in the cruise industry

Cordula Boy University of Applied Sciences Bremerhaven, Bremerhaven, Germany

Abstract At present, a significant amount of vessels engaged in international trade is flying flags of convenience (FOC), allowing ship operators better terms of competitiveness. This study examines the meaning of vessel flags and FOCs in particular in the specific context of the cruise industry. It investigates factors governing the choice of vessel flags while revealing the reasons behind major cruise lines’ flagging decisions. Building upon a comparative analysis of the development of registered ships per flag State in 1997 and 2008, findings were derived and assumptions tested with the help of interviews conducted with industry professionals. It was found out that the meaning of FOCs in the cruise industry is significant and further expected to increase. Flag States involved in the cruise ship flagging business are mainly found among the quality flags. Reasons behind this motivation are, next to acting responsibly, cruise lines’ own interests, comprising the fear of public pressure and negative press but also the interest of maintaining ship operations which both result in a high level of safety. Furthermore, it was revealed that there is a link between cruise lines’ corporate policy and the choice of vessel flag. However, the major factor in the choice of flag remains costs. cruise market. Keywords: Traditional cruises, consumer experience, sustainability.

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P. Gibson et al. (Eds.), Cruise Sector Challenges, DOI 10.1007/978-3-8349-6871-5_4, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

4.1 Introduction Liberia, Panama and the Bahamas are the countries most frequently found on the stern of ocean going ships. The reason for this is that many ships are flying a so called ‘flag of convenience’ (FOC). Cruise ships are no exception. They do so for specific reasons: cost savings (low registration fees, lower taxes and lower wages), lax safety and environmental regulations and the freedom to choose the nationality of their workforce. Compared to traditional ship registries safety standards are said to be lower and working conditions for crew are worse. The reputation of FOCs is rather negative due to their safety record. In 1998, FOCs accounted for 55% of the total number of ship losses and 66% of total tonnage lost while at the same time presenting 20% of the total number of ships and 47% of total tonnage (ITF cited in Alderton & Winchester, 2002). Being a topic of global concern, a lot has been written on vessel flags and FOCs in general, yet little is known about its meaning and implications for a very small but rapidly growing branch of the maritime industry: the cruise industry. In 2007, over 12 million passengers worldwide have booked a cruise; compared to 1990, this means a 7.4% annual growth rate (CLIA, 2007). Cruises are becoming more attractive to a larger group of people, as the product portfolio has broadened and cruise concepts have been developed for various preferences. At the same time cruises are becoming cheaper on average (The Passenger Shipping Association, 2009). This development can mainly be explained by two factors: the growing size of cruise ships, allowing economies of scale on the one hand, and the flagging of ships, which has been ‘outsourced’ to mainly developing countries, known as so called ‘flags of convenience’. In 1997, 62% of all cruise ships were flying an FOC which is considerably higher than the proportion in the shipping industry in general. In 2008, FOCs accounted for 33% of the number of ships in the global merchant fleet, while in the cruise industry the proportion increased to 66% (Flottenkommando, 2008). So obviously, FOCs seem to be of growing importance. Therefore implications of this system, particularly on the cruise market, are worth while studying, as also recent reports on exploitative conditions for seafarers on board cruise ships flying FOCs show. Furthermore, in the face of piracy the issue of safety on board, naval protection and the jurisdiction over vessels flying foreign flags has also come to the fore. While aiming at understanding the meaning of vessel flags and FOCs among them, this research paper primarily investigates what factors influence the choice of vessel flag in the specific context of the cruise industry. The first section of this paper provides background information on the context of vessel flags. The second segment introduces literature existing on this subject, followed by the third segment which focuses on the development of vessel registration in the cruise industry, in the time between 1997 and 2008. The fourth part aims to find out reasons behind this development and thus enables to infer to the meaning of vessel flags in the cruise industry and in particular, factors governing the choice of vessel flag. The final section comprises future implications and the conclusion of the findings, followed by the limitations of this study.

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4.1.1 The vessel flag The United Nations Convention on the Law of the Sea 1982 (UNCLOS) determines that every ship sailing the seas has to be assigned a nationality as stated in Article 91: “Every State shall fix the conditions for the grant of its nationality to ships, for the registration of ships in its territory, and for the right to fly its flag. Ships have the nationality of the State whose flag they are entitled to fly. There must be a genuine link between the State and the ship. (United Nations, 2001)” Every ship can be seen as a ‘floating piece of the country where it is registered’ (Wood, 2006, p. 400). Therefore the ship has to adhere to the laws of that particular country. The flag refers to the nationality of a ship and to the flag State where the ship is registered. Furthermore, in Article 92 it is articulated that a ship is ‘subject to its [flag State’s] exclusive jurisdiction on the high seas’. As stated in Article 91, a ‘genuine link’ is required between the flag and the ship. However, the nature of this link has not been specified. Additionally, no sanctions are defined in case of the absence of such a link either (Ready, 1998). Although this link is obvious in the case of national flagged ships of traditional flag States, the situation is different for foreign flagged ships. UNCLOS implies that the responsibility for the compliance of ships with international regulations rests with the flag State. Therefore, beside administrative duties, flag States are required to perform inspections on a regular basis, issuing and renewing certificates which state conformance with international accepted standards (UNCLOS, Article 94). Nowadays, there are four different categories of flag States: traditional registries (as e.g. the EU member States and Japan), dependent registries (former British colonies, as e.g. the Bahamas, Gibraltar or the Cayman Islands), second registries (e.g. NISR, GISR) and most relevant for this study, the category of open registries (or FOCs). As there are virtually no entry requirements, FOCs are also referred to as ‘open registries’. They were defined by the International Transport Workers’ Federation (ITF) in 1974 as: ‘Where beneficial ownership and control of a vessel is found to lie elsewhere than in the country of the flag the vessel is flying, the vessel is considered as sailing under a flag of convenience’. Currently there are 32 countries which

have been officially declared FOCs by the ITF. The list includes: Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda (UK), Bolivia, Burma, Cambodia, Cayman Islands, Comoros, Cyprus, Equatorial Guinea, French International Ship Register (FIS), German International Ship Register (GISR), Georgia, Gibraltar (UK), Honduras, Jamaica, Lebanon, Liberia, Malta, Marshall Islands (USA), Mauritius, Mongolia, Netherlands Antilles, North Korea, Panama, Sao Tome and Príncipe, St Vincent, Sri Lanka, Tonga and Vanuatu. (ITF, 2009) 4. Literature Review A lot has been written about vessel flags and FOCs in particular. Yet, research has virtually exclusively been concentrated on the maritime industry in general; only little exists with regard to vessel flags in the specific context of the cruise industry, albeit of major interest for this study. 4.1.2 Flag state reputation and enforcement As Hill (2003, p.20) notes: ‘“Flags of convenience” is a phrase which has fallen into disrepute politically’. Hence, various studies exist on the negative aspects of the system of open 59

registries. Skourtos (1990) for example claims that open registries do not perform sufficient supervision; some flag States were even missing controls at all which would result in a serious threat for ship, crew and the environment. Among the most relevant arguments against FOC are the difficulties to identify the real owner of a ship due to the abstruse structure governing the system of FOCs. It is argued that in such cases PSC is weaker as substandard ships can only be reported without any possible actions to be taken accordingly as the owner cannot be controlled. Finally, enforcement is said to be inconsistent because the majority of FOC States only aims at generating profit out of the flagging business without exercising control (Ready, 1998) what Chin calls the ‘commercialization of state sovereignty’ (2008, p. 7). However, Ready notes that this aspect is no longer applicable as a common characteristic of an FOC. Although this might have been true for the early beginnings of the FOC system, nowadays, most of the major open registries make an effort to ensure their compliance with international regulations, ‘particular in safety matters where port state control (PSC) is acting as a major disincentive to the retention by open registers of substandard tonnage under their fleet’ (Ready, 1998, p.18). Therefore it is no longer appropriate to generalize the performance of FOC States as pointed out by Alderton and Winchester (2002). They revealed that there are obvious differences between FOCs and traditional flags but similarly, also within the group of FOCs itself. Larger, established FOCs more and more comply with international standards, due to a more effective PSC (Alderton and Winchester, 2002). According to Bloor (2003) there is the widespread perception in the maritime industry that the problems of global governance are caused by an inadequate enforcement, instead of existing regulation being inadequate. He questions this view and points out a current regulation deficit concerning seafarers’ fatigue, addressing the labour aspect of FOC opposition. Chin (2008) highlights the lack of enforcement power of IMO and ILO. According to Hill (2003), the system of FOC will exist as long as international law allows flag States to determine the conditions under which it will grant ships to fly its flag. However, Ready (1998) claims that abolition of the system of open registries does not automatically lead to the elimination of substandard shipping. Conversely, he suggests that the ‘key to improving safety standards on FOC vessels is held by the consumers’ within the shipping industry itself (Ready, 1998, p.20). Ready (1998) states that whether a vessel might seem suitable for charterers (consumers) depends on its flag as many operators will register their ships in countries with a low detention rate to avoid continuous inspections. Therefore fewer PSC inspections are also seen as major incentive of pursuing quality ships (Witt, 2008). 4.1.3 Determinants of vessel flag Factors influencing the shipowners’ choice between an open and a traditional registry primarily comprise economic and political factors (Ready, 2008). Economic factors include tax related issues, annual and registration fees as well as operating costs, while political factors refer to naval protection, trade restrictions, the access to cabotage, easy entry, prestige and labour regulations (Chin, 2008; Dickinson & Vladimir, 2008; Hoffmann et al, 2005; Ready, 1998; Skourtos, 1990). Within the list of FOCs itself, other factors are determining the choice, as adopted from Ready (2008, p.55-59): x x 60

Vessel eligibility (vessel type, size and age) Costs (registration and annual fees)

x x x x x x x

Ownership restrictions (need of respective company to be incorporated in flag State) Labour problems (due to ITF campaign) Manning requirements and certification Accessibility and Administration Government stability Trading limits Flag State reputation

Yet much of the findings are related to the maritime industry as a whole. Therefore this study aims to find out whether there are any distinct factors additionally influencing the choice of flag in the cruise industry. Thus, literature on the cruise industry has been reviewed which refers to the vessel flag. 4.1.4 Vessel flags in the cruise industry Cartwright and Baird (1999) were among the first who mentioned implications of vessel flags in the cruise industry. Concerning the emergence of FOCs in the cruise industry, it is argued that traditional companies ‘clung to their national registration’ whereas new companies registered their ships under an FOC (Cartwright & Baird, 1999, p. 30). There was the general perception that FOC ships were less safe than traditional flagged vessels. Additionally, the differences in national willingness to cruise on foreign vessels are stated. It was found out that while US citizens do not seem to care whether they cruise on a foreign ship or not, UK residents strongly prefer to cruise on British flagged ships. However, it is argued that the vessel flag is not as relevant anymore as it has been before. (Cartwright & Baird, 1999) Concerning the meaning of FOCs in the cruise industry, Chin (2008) raises another issue: morality. Similar to Skourtos, she focuses on the ‘underside of loss and pain’ generated by the FOC system. This includes primarily low wages and long working hours under ‘exploitative conditions’. According to Chin, an average workday can be 12 to 16 hours, seven days a week. She claims that seafarers on board many FOC ships seeking union rights are blacklisted, making further employment virtually impossible. In case of crime or sexual harassment on board, virtually no one can be made responsible as the matter of jurisdiction is unclear due to the obfuscate structure enabled by the system of FOC. It is argued that open registries offer the ‘important minimal regulatory framework for cruise lines’ pursuit of profits at sea’ (p.11). Chin concludes that the problem is not that cruise lines pursue profits, but how profit is pursued. Therefore, to come back to the aspect of morality, she suggests that cruise lines reevaluate corporate conduct to moderate the underside of cruising. (Chin, 2008) As foreign flagged ships have access to a global workforce, they can save considerable sums regarding personnel costs. Spruyt calculated the costs of an Asian crew in comparison with a northern European crew on a 24-member ship; the difference amounted to 698,400$ annually (cited in Wood, 2006, p.401). Transferred to the context of the cruise industry where often 1,000 crew members work on board one single cruise ship, cost savings enabled by flying an FOC are tremendous. On the other side, Alderton and Winchester (2002) claim that the proportion of sunken ships registered in open registries is twice as high as for the rest of the global fleet. Yet, Wood (2006) states that ‘cruise ship and passenger safety is central to the industry’s marketing and profitability’ (p.402). This seems to be a key tension. 61

However, as Klein claims: “the [cruise] industry appears to be relatively effective in managing the media and influencing legislative processes” (2006, p. 387). The literature review revealed that the topic of vessel flags is very broad, having implications for several fields of the shipping industry. The reputation of vessel flags was investigated and it was found out that although the general reputation of FOCs is negative, differences within this system exist. A general problem of enforcement in the global shipping sector can be observed, dominated by the minimal regulatory framework and the non-ratification of conventions by a majority of open registries. Vessel determinants mainly comprise economic factors but also political factors play a role. Furthermore, it was stated that obviously, ship and passenger safety is crucial and thus, might also influence the choice of flag. This is what this study wants to build on. It aims at investigating whether cruise companies are influenced by additional factors governing the choice of flag.

4.2 Methodology The applied research methodology is a combination of secondary and primary research techniques. At the beginning, secondary research was undertaken to understand the context of vessel flags in the cruise industry as well as the complexity and relationships between the forces acting in the maritime industry which have an influence on the flag a ship is flying. Additionally, quantitative data was collected from secondary resources in order to allow analysis of the development of registered cruise ships per flag State as well as the factors influencing the choice of flag in the particular context of the cruise industry. For collecting the required quantitative data on cruise ships and their corresponding flag State, Douglas Ward’s ‘Complete Guide to Cruises and Cruise Ships’ was used. This process was necessary as no such detailed list was accessible elsewhere. The obtained quantitative data was used to create statistics and diagrams which were evaluated subsequently. To allow comparison, data from two different editions was extracted, from the 1997 edition as well as from 2008. This facilitated a thorough analysis of the development of the various flag States over an 11 year period from which several findings could be derived. These findings led to a hypothesis, which was subsequently tested in the qualitative research part. To obtain the qualitative data, primary research was undertaken. It was aimed at understanding the development process as well as to confirm or reject the findings of the previous search of literature and quantitative data analysis. Thus, it was decided to conduct qualitative, semi-structured interviews, the most applicable data collection method considering the exploratory nature of this study. It aimed at understanding the reasons behind the development of flag States in the cruise industry, next to factors governing the choice of respective vessel flag. The interviews were conducted on a one-to-one basis. A total of three experts were interviewed, all of them either being employed in the maritime industry or directly in the cruise industry. Subsequently, the qualitative interviews were analyzed with regard to the hypothesis.

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4.3 Results & discussion 4.3.1 Findings of quantitative research Development of flag state registration in the cruise industry According to Ward (1997) a total of 208 cruise ships, registered in 25 different flags States were represented in 1997. Figure 4a illustrates their distribution among flag States. In 1997, the Bahamas, Liberia and Panama were the top three in the cruise ship flagging business, controlling together more than 50% of total cruise ship capacity. The Bahamas were leading with 24%, which results in a total number of 50 cruise ships, Liberia accounted for 20% (42 vessels) and a total of 18 cruise ships (8%) were flying the Panamanian flag. Norway closely follows with 17 cruise vessels, also resulting in a share of 8%. To outline the overall significance of FOC in the cruise industry, the percentage sailing under FOCs has been calculated: when referring to what the ITF identified as FOC, in 1997 a total of 128 vessels of the cruise fleet were flying the flag of an open registry, which results in a percentage of 62.

Distribution of Registered Cruise Ships per Flag State (1997) others 19%

Bahamas 24%

Italy 3% Ukraine 4% Great Britain 4% Russia 5% Liberia 20%

Greece 5% Norway 8%

Panama 8%

Figure 4a: Proportion of Registered Cruise Ships per Flag State, 1997 In 2008, a total of 280 cruise ships were sailing the seas, flying the flags of 27 different nations (Ward, 2008). As figure 4b indicates, the Bahamas are still heading the statistic with a percentage of 36. They even strengthened their position by registering additional 50 ships, resulting in 100 ships flying their flag in 2008.

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Distribution of Registered Cruise Ships per Flag State (2008) others 19%

Bahamas 36%

Greece 2% Cyprus 2% Great Britain 4% Netherlands 5% USA 6% Bermuda 6%

Italy 8%

Panama 12%

Figure 4b: Proportion of Registered Cruise Ships per Flag State, 2008 Panama has become the number two with 12% (33 cruise ships), followed by Italy (8%, 23 registered cruise vessels) which again is closely followed by the USA and the Bermuda. The latter one has tremendously gained in popularity and increased its cruise fleet from one single cruise ships in 1997 to 18 in 2008. In the same year the top three flag States account for 56%, signifying an increase which means that their dominant position in the cruise flagging business has been extended. Further analysis implies that this dominance is related to the dominance of the ‘big three’ cruise lines: Carnival Corporation, Royal Caribbean Cruises Ltd. and Star Cruises, together controlling 80% of the world cruise market in terms of bookings (Wood, 2006). When having a closer look at which cruise lines are behind the flag States, it can be observed that the big three cruise lines have registered their vessels in one or more of the top three flag States (figures 4c-4e).

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Star Cruises according to Flag States (2008) USA; 3

Bahamas; 7

Panama; 8

Figure 4c: Star Cruises according to Flag States (2008)

Royal Caribbean Cruises Ltd. according to Flag States (2008) Malta; 1 Liberia; 1

Spain; 2

Bahamas; 32

Figure 4d: Royal Caribbean Cruises Ltd. according to Flag States (2008)

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Carnival Cooperation according to Flag States (2008) Bahamas; 13

Panama; 16

Bermuda; 16 Netherlands; 13

Gibraltar; 2 Great Britain; 9

Italy; 18

Figure 4e: Carnival Cooperation according to Flag States It can be deduced that the dominance of the big three in the cruise market in terms of bookings is reflected in the cruise flagging business in terms of the number of registered ships. Additionally, when examining the composition of involved flag States of a cruise company, much can be said about the nature of the corporation and its history, as e.g. in case of Carnival and its consolidated brand portfolio.

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Flag State

1997

2008

Change in %

Bahamas Bermuda British Virgin Islands Cyprus Dutch Antilles Ecuador Equatorial Guinea Finland France Germany Gibraltar Great Britain Greece Honduras Italy Japan

50 1 1 5 3 0 0 2 1 5 0 8 10 1 6 5

100 18 0 7 1 1 4 1 1 1 2 12 6 0 23 4

+100 +1700 -100 +40 -67 new new -50 0 -80 new +50 -40 -100 +281 -20

Liberia Luxembourg Madeira Malta Marshall Islands Mauritius Netherlands Norway Panama Russia Scotland Spain St.Vincent/Grenadines Thailand Ukraine USA Wales Wallis & Fortuna unknown

42 2 0 2 0 0 0 17 18 10 1 0 0 1 8 4 1 1 3

3 3 4 5 5 2 13 0 33 5 0 3 3 0 0 16 0 3 1

-93 +50 new +150 new new new -100 +81 -50 -100 new new -100 -100 +300 -100 +200 -67

Table 4a: Overview of Development per Flag State Analyzing again the proportion of cruise ships sailing under an FOC, a slight increase can be observed. In 2008, 66% are registered in FOC countries. This means FOC States account for two thirds of the whole cruise fleet. When comparing the composition of the cruise flagging business in 1997 and 2008, one can observe significant changes. The overall proportion of cruise ships registered in FOC States has increased by 4% in the time from 1997 and 2008, with today, two thirds flying the flag of an open registry. Table 4a states the development of each flag State in absolute numbers and gives the percentage change in the number of registered cruise ships within the 11 year time frame. Table 4b summarizes the findings derived from the analysis of the quantitative data for the cruise industry as a whole.

# Cruise Vessels % of FOC Total Capacity Average Capacity/ship Total Gross tonnage Average tonnage # Flag States

1997 208 62% 165.455 795 5.620.559 GT 27.022 GT 25

2008 280 66% 352.650 1.259 13.570.150 GT 48.123 GT 27

Change in % 34.6 4 111.1 58.4 141.4 78.1 8

Table 4b: Summary of Changes in the Cruise Industry

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To summarize the findings of the quantitative research it can be concluded that the most noticeable developments are the following: x x x x x x x

increase of total cruise ships on the market increasing ship size link between big ships and “young” fleet cruise ship flagging business is dominated by three leading flag States, responsible for more than half of the cruise ship fleet every cruise line has one or a few characteristical flag States most popular flag States are FOC FOC further on the rise, traditional flag States leaving the business (with a few exemptions: Great Britain, Italy and USA)

Comparison to global merchant fleet To see the results of the previous analysis of the cruise industry in context, the distribution of the global merchant fleet to various flag States has equally been analysed. Panama takes the role of the leading flag State in terms of number of registered ships regardless vessel type, controlling 14% of the global merchant fleet, followed by Japan (6%) and China with 5% (Flottenkommando, 2008). Remarkable when having the proportions of flag States in the cruise industry in mind, is the dense succession of the number of registered vessels per flag State. Apart from the leading flag State Panama, only marginal differences between flags can be observed. Furthermore, there are more than 150 flag States in total involved in the global flagging business (Witt, 2007), about five times more than the number of flag States in the cruise industry. Although the proportion of cruise ships in the world merchant fleet is likewise comparatively low, this suggests that there are particular flag States that seem to be attractive to the cruise industry. Regarding the global merchant fleet, the top three flag States account for a quarter of ship registration, which is significantly lower than in the cruise industry where the percentages of top three amounted to 56% in the same year (2008). Considering the role of FOCs in the global merchant fleet, it is interesting that, although playing a major role in ship registration in general, their importance is not as remarkable as the situation on the cruise market showed. While 33% of the global fleet is flying an FOC, in the cruise industry this number amounts to 66%. However, it has to be noted, that the data used for figure 4f is based on the registered number of ships per flag State, to allow comparability with the situation on the cruise flagging business. Usually, statistics regarding flag States in the merchant fleet are based on the proportion of registered tonnage per flag State as more appropriate for cargo shipping. Referring to tonnage, Panama, Liberia, Greece, Hongkong and the Marshall Islands form the leading five flag States in the global merchant fleet. Based on tonnage calculations, the proportion of vessels, flying an FOC in 2008, amounts to slightly more than 50% of the global merchant fleet (Flottenkommando, 2008). The comparison with the distribution of flag States in the global merchant fleet has highlighted two important aspects: first, the importance of FOC in the cruise industry seems to be higher than for the global fleet in general. 68

The Biggest Merchant Fleets by Flag (2008) Panama 14% Japan 6%

China 5% others: 51% Liberia 5% Indonesia 4% Malta 3% Singapore 3% Hongkong 3%

Russia 3% Bahamas 3%

Figure 4f: Distribution of the Global Merchant Fleet (>300GRT) according to Flag State (2008) While two thirds of the cruise fleet is sailing under an FOC, FOCs only amount for one third in the global fleet (based on number of vessel calculations). Secondly, more than 150 flag States are present in the global merchant fleet, while just a few dominate the whole cruise industry. This suggests that the cruise ship flagging business is specialized, with some flag States offering seemingly attractive conditions for cruise companies as not all of those cruise flag States are also among the leading flag States in the whole maritime industry. Top performing flag states in the cruise industry This part aims to investigate the performance of the flag States involved in the cruise industry, based on the situation in 2008. In this regard, the “BGW” list of the Paris MoU on Port State Control was used. The analysis reveals that the broad majority of flag States having a stake in the cruise industry is positioned on the white list, while two flag States, the USA and the Dutch Antilles are listed on the grey list and another two, St. Vincent and the Grenadines as well as Panama are to be found on the black list. So generally, it seems that cruise ship flags are performing well. However, the placement of Panama, being number two in terms of registered cruise ships, on the black list, is remarkable. Conclusion of quantitative analysis Each part of the analysis of the quantitative data has lead to certain findings describing the importance and characteristics of vessel flags in the cruise industry. The most important findings on the cruise ship flagging business are the following:

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x x x x x

Three leading FOCs dominate the business: responsible for more than half of the cruise ship fleet. FOC further on the rise, traditional flag States leaving the business (with a few exemptions: Great Britain, Italy and USA) The importance of FOC is higher in the cruise industry than for shipping sector in general. There are cruise specific flags. Flag States involved in the cruise industry are primarily quality flags.

Based on the last finding following hypothesis was formed: Cruise companies choose well performing flag States due to the intention of the cruise companies to have diligent controls. Whether this hypothesis is applicable, the following qualitative analysis found out. 4.3.2 Findings of Qualitative Research The underlying assumption of this paper is closely linked to the various factors governing the choice of vessel flag. It needs to be investigated, why cruise companies decide for specific and in particular well performing vessel flags. Although literature provides factors determining the choice of vessel flag for the whole maritime industry, this study found out that regarding the cruise industry, a few more factors have to be taken into account. Determinant 1: Cost savings emanating from labour regulation It was found out that the cost factor is of prime importance for cruise companies regarding the choice of vessel flag. Although this seems quite plausible it has to be emphasized that its meaning is much higher for cruise ships than for the rest of the global fleet. Cruise ships are facing vast additional amounts of operating costs, relative to cargo ships, especially when it comes to manning. Flying an FOC implies that also non-nationals, seafarers from ‘low wages countries’ are allowed to work on board. It was argued in one of the interviews that reflagging a 300-crew cruise ship from a traditional to the Bahamian register should ‘lead to cost savings of about 1.5million DM, annually’. Similarly, it was claimed that a Filipino in the decks department costs ‘a third of what a German costs’. So considering that nowadays, a cruise ship has up to 1,000 crew members, the ‘cost pressure is immense’. Moreover, the importance of cost savings is expected to further increase, as noted by Chin (2008): cruise ships are getting bigger and bigger which implies that more crew is needed. Therefore manning costs increase and thus, also does the meaning of FOCs, particularly in the mass cruise market in which major cruise lines are involved. As the choice of flag is made by ‘business people, they do not care whether you as crew feel well onboard’, only costs are decisive. Determinant 2: Link between safety standard and choice of vessel flag In literature it is often stated that FOCs are attractive to some shipowners due to lax safety, labour and environmental regulations. Though the aspect of avoiding strict labour regulation certainly applies in the cruise industry, the opposite is true for safety regulations, for the following reasons: 70

First, PSC pays special attention to passenger ships which increases the likelihood of being subject to an inspection. This forces the cruise companies to strictly adhere to standards at all times, unless they want to risk detention, which would disturb the course of the cruise planning and much more important, create bad press. Similarly, a cruise company has an ‘immense interest itself’ in the smooth running of its vessel, as a ‘cruise already requires a certain level of technical support’. Second, owners of most cruise ships are known, unlike owners of many cargo ships. Therefore, in case of any incident, the owner can be held accountable and has to deal with the consequences. In such cases ‘it is always the name of the ship and the name of the cruise operator which are made accountable’ and published in press. To avoid bad press and thus, ‘getting into trouble’, major cruise companies strictly adhere to safety standards. This attitude is strengthened by primarily choosing well performing flag States. These quality flags also exist within flag States labelled FOC by the ITF. It was stated that the Bahamas cannot be seen on one level with other flag States as e.g. Lebanon, as there are significant differences among FOCs. According to Alderton and Winchester (2002), established FOC more and more comply with international standards, due to a more effective PSC. These ‘established FOCs’ are exactly those involved in the cruise industry. Therefore, the safety standard of currently operating cruise ships is ‘comparatively high’. Poor performing flag States, as identified by PSC, are having a bad reputation and thus, are usually avoided by (major) cruise lines because they do not want to foster negative associations with passengers and as mentioned before: compliance with international safety standards is ‘in the interest of the passengers, the crew and ship but also in the interest of my company, due to my reputation’. So third, as cruise companies mainly decide for quality flags within FOCs, they are also forced to comply, because flag State responsibilities are taken seriously; moreover, cruise companies nowadays bear the responsibilities for the lives of several thousand people. Therefore, even cruise ships flying the flag of generally poor performing flag States as e.g. Panama will strictly comply with safety regulations. Thus, it is an interplay of willingness and pressure. Hence, a link between the choice of vessel flag and safety standard on board exists. Given these three aspects cruise lines have realized that there is no sense in avoiding safety regulations. Determinant 3: Corporate Policy Furthermore, it was revealed that the flagging decision and the corresponding safety standard on board are also linked to the company’s corporate policy. Relevant factors regarding corporate policy comprise, as stated by the interviewees: x x x x

Product and price segment Company structure Existing fleet/ company portfolio Route

Corporate structure in combination with the existing fleet plays a major role. Furthermore, the routing of cruise ships is an additional determinant in special cases as the example of NCL America shows. Finally, of major influence is also the corporate philosophy, linked to the ‘cruise product’ and chosen price segment. Some renowned cruise companies ‘take good care of their reputation’ and therefore, have an interest in keeping standards high to protect 71

their reputation. When entering the market with a ‘high quality product’, companies care about reputation and safety standard. However they also have much more money to hand for investing in a high standard. Conversely, when companies are following a low price strategy companies will have to cut costs and save money wherever possible, therefore all that counts is cost. Although it seems that the flag does not directly influence the cruise product, implications for crew are significant. When the new EUROPA (VI) of Hapag Lloyd Cruises was introduced to the market it was decided for the Bahamian flag. The old EUROPA (V) was flying the German flag and crew had German contracts. Even though flying an FOC, the ‘new’ EUROPA has been chosen ‘best cruise ship of the world’ for many years (Ward, 2008). Just a few passengers claimed they would stop sailing when the ship was registered under an FOC. So obviously, there were no negative implications apart from a few guest complaints. However, implications for crew were more significant. Existing German contracts were terminated (except for a few who went to court); instead, new ones were made, no longer depending on German law, thus social protection was no longer included in contracts. So although there were virtually no visible changes for passengers except for a different flag flying from the stern of the ship, crew conditions changed, as the company decided to cut costs. Hence, as illustrated, the ‘loss of image is probably lower than what can be saved flying the flag of the Bahamas or Liberia’. 4.3.3 Conclusion: ‘Cruise companies have an immense interest themselves’ To sum it up: ‘every shipping company is doing what it is forced to do’. Therefore it can be concluded that the flag is primarily chosen according to costs. Moreover, this study revealed that there is also a link between vessel flag and corporate policy which is reflected in the choice of flag. However, the avoidance of safety standards is not a determinant; conversely, quality flags are chosen in order to maintain a high safety standard, as cruise companies have realized, that it is a necessity to keep operations running. Therefore, the cruise lines’ sense of responsibility is not the only motivation for responsible acting. The hypothesis applies- yet, with an important extension: Cruise companies choose quality flag States due to the intention to have diligent controls which maintain a high safety standard. This is primarily based on own interests: to keep the operation running as well as to protect their reputation in order to maintain a good image with guests.

4.4 Future implications The importance of FOCs are further expected to increase due to ships becoming bigger on average, therefore more crew is needed which will again increase the need for cost savings. In this study it has been found out, that the safety standard on major cruise ships is comparatively high, as cruise lines seem to be forced to comply with international regulation, regardless of the minimal regulatory framework in many FOC States. However, the less visible side enabled by the system of FOC, the absence of labour regulation, leading to ‘exploitative conditions’ for seafarers on board cruise ships, is fully taken advantage of. Using the insights of this study could help to indicate ways to improve the general situation. In addition to adopting further conventions, it should not be neglected that the ‘key to 72

improving safety standards on flag of convenience vessels is held by the consumers within the shipping industry itself’ (Ready, 1998, p.20). Therefore ways need to be found that make cruise companies realize that there is no other way than to keep labour standards high and fulfil Chin’s (2008) demand of re-evaluating corporate conduct of how profits are pursued.

4.5 Conclusion This study investigated the meaning of vessel flags, with a particular regard to open registries, in the specific context of the cruise industry. In the course of the research literature on this issue has been reviewed which identified a gap when it comes to factors governing the choice of vessel flag in the cruise industry. This study aimed to close this gap. Based on the analysis of the development in the cruise flagging business over the past few years, several findings could be derived. It was found out that the meaning of FOCs in the cruise industry is significant. In 2008, two third of the cruise ship fleet was flying an FOC, dominated by a few flag States, reflecting the situation on the global cruise market. Out of 27 flag States, the top three control 56% of the cruise ship fleet. For many years in the shipping industry, flying an FOC indicated the avoidance of safety regulations on the side of the shipowner; however, this does not apply to the cruise industry. Although most cruise ships are flying FOCs, cruise lines generally conform to international safety standards. Further analysis revealed that those flag States involved in the cruise ship flagging business are mainly found among the quality flags. By interviewing industry professionals, it was found out that the reason for this motivation lays in the cruise companies’ own interests. Quality flags imply high safety standards. So when deciding for a quality flag, on the one hand ship operation, which already requires a certain level of ship maintenance, is secured. On the other hand there is the fear of bad publicity as in case of non-compliance to safety regulation, reputation would suffer. Furthermore, it was found out that there is also a clear link between cruise lines’ corporate policy and safety standard, maintained on board cruise ships, which is reflected in the choice of vessel flag. Next to acting responsibly when carrying several thousand people on board, own interests primarily determine cruise lines’ choice for quality flags. It is concluded that in general cruise lines only do what they are forced to do. As they are forced to comply with safety standards in order to protect their reputation and enable operation, mainly quality flags are chosen. To sum it up: the meaning of FOCs in the cruise industry is significant. It is higher than for the rest of the global merchant fleet. It seems that flying an FOC is the optimal solution for cruise ships as it is economically seen the only viable option, while at the same time, negative aspects combined with a FOC seem to be minimal, as safety standards have increased. Guests do not seem to bother. On the contrary, they benefit from low prices. FOCs are what ‘makes it possible… to offer cruises at a much lower cost’ (Dickinson & Vladimir, 2008, p. 64). The system of FOCs has made cruising affordable for a broad mass and is the basis for the annual growth on the cruise market which could be observed in the past years. Hence, the industry in its present shape depends on this system as eliminating FOCs ‘would be financially devastating to the cruise industry’ (Schulkin cited in Wood, 2006, p.402). These important insights could also be used to improve also other aspects of shipping, as e.g. the working and living conditions of seafarers but also better environmental protection 73

of the oceans as it starts at the roots of corporate conduct where regulation and its enforcement have no direct access to. 4.5.1 Limitations This research paper underlies some limitations. The secondary data used in this project has not been collected by the researcher herself but is extracted from Ward’s ‘Complete Guide to Cruises & Cruise Ships’. Therefore it relies on its correctness. As only cruise ships rated by Ward are included in his yearly editions, it might not give the complete picture of the cruise industry because not every single cruise ship on the market is included. Due to the financial limitations of the researcher, other data could not be obtained. However, as Ward’s cruise guide is being published annually for more than 24 years now, it seems reliable. Furthermore, due to time constraints, only a number of three interviews with industry professionals could be conducted. Yet, all of the three interviews were data intensive and therefore provided a sufficient basis to work on. 4.5.2 Further research This research paper only focused on a small area within the broad field of vessel flags and its implications, leaving room for further research. A ship’s flag could become strategically important for cruise companies, particularly, if public awareness rose and eventually even be used for marketing purposes. An interesting research question would be what exactly cruise passengers or potential guests know about the vessel flag and its meaning and whether increased awareness or knowledge of the flag would influence their booking behaviour. Another aspect allowing further research is crew conditions on board of various foreign flagged ships. FOC States are said to operate lower standard ships and to provide bad working conditions for crew. How true is this bad reputation for cruise ships regarding crew? It could be analyzed whether there are any noticeable differences between cruise ships flying traditional flags and cruise ships registered in FOC States. Endnotes: 1 Citations in this paragraph were taken out of the interviews, if not otherwise stated

4.6 References x x x x x

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Alderton, T., & Winchester, N. (2002). Globalisation and de-regulation in the maritime industry. In Marine Policy 26 (pp. 35-43). Elsevier Science Ltd. Bloor, M. (2003). Problems of Global Governance: Port State Control and ILO Conventions. SIRC Symposium 2003 (pp. 9-23). Cardiff: Cardiff University. Cartwright, R., & Baird, C. (1999). The Development and Growth of the Cruise Indusrty. Oxford: Butterworth-Heinemann. Chin, C. B. (2008). Cruising in the Global Economy. Aldershot: Ashgate Publishing Limited. CLIA. (2007). 2008 CLIA Cruise Market Overview: Statistical Cruise Industry Data Through 2007. Fort Lauderdale: Cruise Lines International, Inc.

x x x x

x x x x x

x

x x x x x x x

x x x x

Dickinson, B., & Vladimir, A. (2008). Selling the Sea - An Inside Look at the Cruise Industry (2nd edition). New Jersey: John Wiley & Sons Inc. Flottenkommando. (2008). Jahresbericht 2008 - Fakten und Zahlen zur maritimen Abhängigkeit der Bundesrepublik Deutschland- 21.Auflage. Glücksburg: Marine. Hill, C. (2003). Maritime Law (6th edition). London: LLP. Hoffmann, J., Sanchez, R. J., & Talley, W. K. (2005). Determinants of Vessel Flag. In Shiping Economics - Research in Transportation Economics, Volume 12 (pp. 173-219). Elsevier Ltd. International Maritime Organisation (2002), Conventions. Retrieved June 24th, 2009 from http://www.imo.org/Conventions/index.asp?topic_id=148 International Transport Workers’ Federation (2009), Flag of Convenience Campaign. Retrieved June 23rd 2009 from http://www.itfglobal.org/flags-convenience/index.cfm International Transport Workers’ Federation (2009), What is the ITF?. Retrieved June 23rd, 2009 from http://www.itfglobal.org/about-us/whatis.cfm Klein, R. A. (2006). Troubled Ses: Social Activism and the Cruise Industry. In R. K. Dowling, Cruise Ship Tourism (pp. 377-388). Wallingford: CABI International. Knapp, S., & Franses, P. H. (2009, March). Does ratification matter and do major conventions improve safety and decrease pollution in shipping? Marine Policy (33) , pp. 826-846. Mathisen, O. (2006). Corporate Social Responsibility (CSR) has Multiple Bottom Line: Profitability, Environment, and Social Equity. Cruise Industry News Quarterly - No.67 (Winter 2006/2007), pp. 18-23. Paris MoU on Port State Control. (2008). Annaul Report 2007. LR The Hague: Paris Memorandum of Understanding on Port State Control. Paris MoU on Port State Control. (1998). Annual Report 1997. LR The Hague: Paris Memorandum of Understanding on Port State Control. Paris MoU on Port State Control. (2009). Annual Report 2008- Making Headway. LR The Hague: Paris Memorandum of Understanding on Port State Control. Ready, N. P. (1998). Ship Registration - Third Edition. London: LLP. Skourtos, D. j. (1990). Die Billig-Flaggen-Praxis und die staatliche Flaggenverleihungsfreiheit. Köln: Carl Heymanns Verlag KG. The Passenger Shipping Association. (2009). The Annual Cruise Review 2008. London: The Passenger Shipping Association. United Nations (2001), United Nations Convention on the Law of the Sea 1982. Retrieved July 7th, 2009 from http://www.un.org/Depts/los/convention_agreements/ texts/unclos/closindx.htm Ward, D. (2008). Complete Guide to Cruises & Cruise Ships 2008. Princeton, N.J.: Berlitz Publishing Company Inc. Ward, D. (1997). Handbuch zu Kreuzfahrten und Kreuzfahrtschiffen. Princeton, N.J.: Berlitz Publishing Company Inc. Witt, J.-A. (2007). Obligations and Control of Flag States- Developments and Perspectives in International and EU Law. Berlin: LIT. Wood, R. E. (2006). Cruise Tourism: A Paradigmatic Case of Globalization? In R. K. Dowling, Cruise Ship Tourism (pp. 397-406). Wallingford: CAB International.

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PART B:Destinations & Sustainability

5.0

Consumer behaviour in the traditional cruise market and implications for the sustainability of ocean cruising

Martin Cholwill School of Tourism and Hospitality Plymouth Business School University of Plymouth Plymouth, UK

Abstract The importance of the traditional cruise consumer behaviour forms the frame of this work. In taking a developmental perspective this provides an innovative insight into the cruise concept to evaluate how the traditional cruise market consumer experience is being re-shaped. The globalised spread of the industry and aspects of environmental and social responsibility are examined. The significance of the traditional cruise market in relation to demographics is considered. Conclusions are drawn suggesting reasons why these elements may prove important to sustainability of the traditional cruise market. Keywords: Traditional cruises, consumer experience, sustainability.

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P. Gibson et al. (Eds.), Cruise Sector Challenges, DOI 10.1007/978-3-8349-6871-5_5, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

5.1 Introduction The aim of this chapter is to assess what factors associated with re-shaping the cruise experience are likely to affect the consumer behaviour and sustainability of the traditional cruise market. The traditional cruise market as considered in relation to this study encompasses a style of cruising comprised of experiences historically associated with sea travel. This type of cruise has particular, although not exclusive, appeal to the senior demography and this aspect is reviewed. The behaviour of consumers of the traditional cruise product and particularly those within the senior sector has particular significance in relation to the sustainability of this style of cruising. In order to investigate the consumer behaviour of the traditional cruise market it is necessary to define the constituent parts of the topic. Consumer behaviour comprises: ‘the buying units and the exchange processes involved in acquiring, consuming, and disposing of goods, services, experiences and ideas’ (Mowen 1995:5). The concept of consumer behaviour is a relatively young discipline but is particularly important to enable understanding of the stimuli for customer demand for cruise products. These may include elements such as brand loyalty which may have for example, resulted from a product having an association with ethical trading standards. Companies are mindful that branding is a significant factor in influencing consumer choice as it may signify the quality standard implied as being embedded in the product offering. Some consumers may be looking for social meaning encapsulated by the brand which could for example, in relation to the cruise product indicate informal, casual or formal style cruising (de Chernatony and McDonald 1998). The importance of the brand, and significantly the ethics behind, it can make or break a company should consumers take a particular and opposing view (Olins 2004). As consumer behaviour is a dynamic topic (Block and Roering 1979), consequently, it is important to understand the historiographic social, psychological and economic factors involved. (Antonides and van Raaij 1998). Consumer behaviour provides the framework for this study because when considered together with how products are currently marketed it provides a window on present and potential demand for the traditional cruise product. Marketing can be considered an exchange process. It encompasses the ‘process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services’ leading to satisfactory exchanges in meeting organisational or individual requirements (Hoffman et al 2003:9). Conceptual aspects of marketing are ‘needs’ and ‘wants, with respect to human requirements (Jefkins 1993:5). Needs may be defined as life staples such as food and shelter whereas wants comprise goods or services which are dependent on demand (Jefkins 1993). Wants can become ‘demands’ dependent on consumer resources (Armstrong and Kotler 2000:5). Goods comprise commodities or raw materials and are therefore considered tangible or physical items. Services are more usually considered as a sector which offers intangible value tailored to consumer demand. In their work titled ‘The Experience Economy’ Pine and Gilmore (1999) suggest that customized service has moved to a different sphere and resulted in an experience dimension within which companies’ stage or need to dramatize offerings in order to gratify consumers. The theatrical stage is used to illustrate the Pine and Gilmore view and in this way draws a parallel with sociologist Erving Goffman’s (1959) work later developed by MacCannell (1999:91) as ‘staged authenticity.’ Hospitality 80

services on a cruise ship could be seen as an example of where a company offers a series of staged memorable events creating in the process experiences purchased by the consumer. In creating these events the hospitality and entertainment staff effectively comprise a constituent part of the cruise product (Crang 1997). Their actions are scripted to deliver homogenised offerings via standardised routines not unlike the sociological concept of mass tourism product consumption represented by Fordism (Slattery 2003; Shaw and Williams 2004). Many of the activities, including the way food is offered and delivered in non-formal dining areas on modern cruise ships, can be likened to the phenomenon of ‘McDonaldisation’ suggested by Ritzer (2000). McDonaldisation represents a switch from mass-production in a manufacturing sense to symbolising a modern consumptive process which has global spread. This form of mass consumption has been called ‘neo-Fordism’ as it represents more flexibility within the product offering but this is contained within an otherwise calculable package (Shaw and Williams 2004). It is not clear if this form of cruise product consumption is universally welcome across a wide demography and this work investigates what may be the likely wants and needs of traditional cruise market consumers.

5.2 Traditional cruise market consumers Traditional cruise market consumers’ knowledge of the product may be based on an image placed in their minds through marketing promotion, past experience or opinions of others. It may be viewed by some as a way of fulfilling spiritual needs. Urry (2002) argues that (if) ‘contemporary consumerism involves imaginative pleasure seeking…tourism necessarily involves daydreaming and anticipating a new experience.’ The vision of a cruise is attractive to many as being escapist and offering a licence to relax, self-actualise and be part of a commune ‘something akin to a children’s camp - an environment in which play thrives’ (Dann 1996:118). However, the concept of what can be considered ‘play’ is likely to vary by age and social group. The trend towards building larger cruise ships has presented issues relating to the traditional cruise market which will be considered in this study. Traditional cruise ships tend to be older, smaller vessels which are often chartered, having been formerly operated by large cruise corporations such as Royal Caribbean International, and often presented as a classic alternative to the modern ‘mega-ships.’ Smaller ships remain popular with senior, often well educated and more affluent groups, because they are more likely to engender a closer community atmosphere than larger more impersonal vessels (Foster 1986). In some cases larger vessels operated by cruise corporation companies may include service elements with nostalgic connotations designed to appeal to those preferring a traditional cruise experience. An example of this is Cunard Line’s ‘White Star Service’ which incorporates a quintessentially British tradition of taking afternoon tea served by white gloved waiters (Cunard 2009). Service encounters such as those between waiter and passenger demand an additional dimension, that of expressing emotions expected by the customer. This has been defined as ‘emotional labour’ and requires the server to deliver a performance specific to the type of encounter (Lovelock 1995: 214). Encounters could be ‘nonverbal…the significant acts exchanged can be gestures’ (Goffman 1963: 90). Effectively the consumer expects certain behaviours in the encounter and an exchange or demand for a service can be conducted without words. An example would be a waiter who is familiar with a particular passenger’s drinks preference responding to the lifting of a glass by bringing a refill without discourse.

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Cunard, part of the North American Carnival corporation, do not underestimate these emotional encounters. In what it terms a ‘cornerstone statement’ it outlines the importance to the company reputation of face to face encounters between staff and passengers. As part of the ‘12 points of White Star service’ it states: ‘we smile, we are always in the spotlight…we use correct body language…we exceed our guests’ expectations’ (Cunard 2009). The acknowledgement by a large cruise company of traditional practices is in line with that company’s focussed marketing promotion of ‘The Timeless Cunard Legacy’ (Cunard 2000). It does however, contrast to other less traditional service offerings by the same company which include casinos, fitness suites and other modern facilities all of which are operated in a very similar way to those offered by other cruise lines. The subsuming of a tradition within the framework of a modern mega-ship highlights that these staged inauthentic reflections of traditional cruising are merely marketing promotional by-products designed to sell an experience illusion (MacCannell 1999). However, promoting a certain traditional style of service which evokes feelings of nostalgia can offer appeal, particularly to brand loyal consumers, many of whom are likely to be within the senior age sector. Whilst nostalgia may not be limited to a particular demography it has associations with a longing for what is perceived to have been lost or may be destroyed or rendered obsolete (Crang 1997). An example of this was the announcement of the closure of a cruise company, Swan Hellenic in 2007. The news caused an outrage and an outpouring of emotional comment from brand loyalists (The Oldie Annual 2008). Ships have often stirred emotions and are usually referred to as ‘she,’ a title which humanises a product formed from inanimate raw materials. The cruise liner QE2, now retired, is an example of emotional attachment of this kind. Following withdrawal from service in November 2008 an indeterminate number of previous guests lost an intangible experience but retained an emotional attachment to the vessel based on their nostalgic recollection of wonderful time onboard. This, the last cruise-liner to be built on the Clyde in Britain, had exemplified a design style and superb craftsmanship reflecting the age in which she was built (Daily Telegraph October 3, 2009).

5.3 Traditional cruising history Ocean cruise tourism has indistinct origins but may be considered as having developed in popularity following the demise in the line voyage trade. This is perhaps most notable following the introduction of regular jet airliner services across the North Atlantic beginning in the late 1950s. Surplus liners were utilised as cruise ships to try and sustain their financial viability. Empty cabins were not good business as unlike an aircraft seat, they stay empty for days and secondary income from ship-board purchases is also lost (Papatheodorou 2006). The freedom offered to cruise ship designers by the dissolution of the class system was enormous. Not having to provide for separate spaces formerly dictated by class offered the opportunities for designers to use more imagination when creating ideas for the use of public areas. Cabins although small when compared with hotel rooms ashore, were made to appear bigger by innovative use of modern materials (Cartwright & Baird 1999). The experience of sea travel has associations with ‘glamour, excitement, romance and prestige’ (Graves 2004: 207). These associations with line voyages and the upper classes were transferred to the ocean cruise holiday market together with the notion of sea cruising being expensive, formal and oriented towards rich seniors (Sharpley 2002). Features included dining options and basic entertainment often created by the passengers themselves with assistance from the ship’s officers and crew. Liners had carried cargo and passengers and this tradition notionally remains currently as Cunard Line’s Queen Mary 2 still carries a 82

token mail bag on trips to the United States to allow retention of the Royal Mail Ship prefix RMS and the entitlement to fly a postal banner (Maxtone-Graham 2004). Although this vessel may be considered as primarily a cruise ship it still maintains a current line voyage schedule from Southampton to New York and return. This is however, only a limited schedule compared to the days when air travel was not an option. Although potentially it may be supposed that owing to perceived dangers, including terrorism associated with flying, regular line voyages may become feasible as a regular option in future. Plymouth, England, for example, had been a prominent liner port as it provided among others transatlantic passengers an access point to join the British Rail Network. This saved passengers time, by avoiding another day sailing to London or other UK ports. Plymouth was also a strategic mail distribution point from the beginning of the liner traffic at the start of the 20th century. It also became important as an emigration gateway and a popular call for French and German liners for many years (Kittridge 1993). At its peak in 1930 there were 744 liner calls at Plymouth that year. However, the trade dwindled to just 54 calls per year and Plymouth closed as a liner port in October 1963 (Kittridge 1993). Although cruise ships have been calling at Plymouth the yearly visits have been low in number despite the City’s promise as an excellent excursion port. Lack of a dedicated cruise ship dock facility is an inhibitor as passengers need tendering to shore similarly as they did during the liner era. This makes disembarking on excursions ashore less attractive to the physically challenged. Many seniors would perhaps prefer to relax and remain onboard their cruise ship. It also makes the port uncompetitive when compared to Southampton, UK, for example, which has dedicated passenger handling facilities.

5.4 Re-shaping the traditional cruise market Many seniors who are physically and mentally active retain a spirit of adventure. However, it is contended that many of these may still prefer a more traditional package of sea travel which has less brash forms of entertainment and a more formal style of service than that generally offered on modern large or mega-sized ships. The size of the senior market has been recognised for some time by, for example, medical drug companies (Block and Roering 1979). However, only more recently have some marketers realized the enormous potential the senior market has to offer (Solomon et al 1999). One of the inhibitors to promoting products among older consumers is a reluctance to associate them with ageing as this is likely to deter younger groups. The larger ocean cruise companies appear reluctant to promote their product to seniors and prefer to target middle aged groups (Solomon et al 1999). This may be partly explained through marketing experience which has proven evidence that some products targeted specifically at seniors have been unsuccessful as many older people prefer to perceive themselves as younger than they are or feel (Tréguer 2002). To better categorise this sector of the market senior consumers can be sub-segmented into four age groups as in Table 5a:

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Pre-Retirement/Retired (55-64 Years)

Retired Active (65-74 years)

Retired/Able (75-84 years)

Aged/Least Able (85+ years)

Sub-segmented Senior Age Groups Table 5a

Adapted from: (Solomon et al 1999)

It could be assumed someone at the lower end of this age range would be physically most able and likely to look upon themselves as part of an even younger group rather than be classified with the elderly, however this is untested presumption. Many in the younger group may prefer traditional cruising and further research work is necessary in order to understand the relationship of demography to the traditional cruise market consumer behaviour. It has been suggested that those aged over 50 prefer quality products as a preference to quantity (Tréguer 2002). If this proves to be the case in relation to the major corporation operated mega-ships there is a risk of failure in any attempt to attract a large sector of their potential market. The type of consumer experience implied in marketing promotion is therefore of particular significance to the provider. High quality of customer service is promoted as part of the marketing tool-kit by cruise and other companies to enable the management of consumer experiences (Armstrong and Kotler 2009). In a theatrical service context, companies also manage their employees by creating the script for their actors. Once in the role the actors are subject to pressures put upon them by the demands of the character. They may operate at the edge of their capability and not be able to deliver the services expected. The script may change, roles revised, and actors may find they are out of character. Prescriptive management can stifle creativity and innovative ideas. Re-organisation or re-structuring a company to stratify it in order to widen appeal offers the illusion of improvement, for example the introduction of successively bigger ships such as Cunard Company’s Queen Mary 2. However, this could lead to the negative re-shaping of the consumer experience. Pine and Gilmore (1999:81) suggest there could be ‘service-sacrifice’ with the customer having to settle for a compromise. Empowerment of the first line service provider allows the server the freedom to offer alternatives and thereby enhance the guest experience and not diminish it because choice is improved not depleted (Ryan 2002). For example, self-service restaurants, an idea developed by food chains, may appear to demand a service-sacrifice by making the customer work but is a popular option on cruise ships for those preferring casual rather than formal dining (Ritzer 1996). Whilst this sort of experience may be widely accepted on modern cruise ships choice rests with the purchaser. The provider having outlined the various services available, the consumer subsequently may not receive their perceived want or need if misled by marketing material (Lovelock and Wirtz, 2007). The material may direct the person to choose the ‘wrong’ (for them) segment of the organisation. In the case of an ocean cruise it could mean joining a ship with a theme aimed at a different demography or an unsuitable type of shore excursion. For example a trip involving terrain which might prove awkward for those with walking difficulty. In the theatrical context, as parts of the overall experience may be delivered by various companies of actors, poor performers in one of the productions could lead to disappointment with the show. Relationship marketing is therefore a vital component in order to avoid pitfalls and satisfy needs (Vargo and Lusch 2004). ‘Service-dominant logic,’ as proposed by Vargo and Lusch (2004), is the result of an evolutionary marketing trend leading to a service rather than goods focus. Transition of 84

focus includes the recognition that service can be encapsulated within a product (Vargo and Lusch, 2004). This means the functionality of the product renders the consumer a service. It also ceases to be merely an object but something comprising the knowledge of the designer and builder. This knowledge, having been transferred from other sources, has been refined through experience and embedded ideas. The basic function becomes the foundation for additional satisfaction and products become ‘artefacts around which customers have experiences’ (Vargo and Lusch 2004:15). A technological example of this is the computer and the internet both of which provide added value in this way. Using the Worldwide Web for planning and or booking a trip can provide an absorbing and pleasurable experience which can be remembered after the holiday (Shaw and Williams 2002). Immersion in a virtual world is not confined to computers but also visitor attractions providing themed surroundings (Bryman 2004). Technology is not only used to provide elements of the themed experience but also to control it by influencing the imagination (Bryman 2004). Themed cruises, such as those offered by Disney, allow the cruise tourist to be escapist with the experience comprising play, self actualisation and social licence to relax in a fully ‘limonoid’ state (Ryan 2002;.3). The reach of companies to their customers has been electronically extended not only to market an experience but also to include gathering information about their needs (Sawhney 2004). Equally, technology advancement has placed pressure on traditional travel agents who have had to adapt their service to be able to compete with and also use the internet together with other electronic media such as booking search engines (Weber and Roehl 1999). Service becomes central in replacing goods as the dominant factor where specialised competences and performances create benefits for provider and consumer (Vargo and Lusch 2004). It is contended there has not been a clear indication by Pine and Gilmore (1999) of what element contained within a product constitutes a defined commercial experience. This could identify why that would give the product an advantage over similar offerings by competitors (Poulsson and Kale 2004). This is important because it also indicates areas of weakness regarding the social responsibility associated with that experience. It is suggested that consumers may choose a product which promises a particular experience and if that has clearly defined environmental impact ratings, this may prove a useful selling point. An example of this is shore excursions offered by cruise companies. Shore excursions are revenue generating and offer another dimension to the cruise experience (Gibson 2006). With careful management there are opportunities to increase their value monetarily for the provider and holistically to the consumer. The consumption of services aimed at offering extraordinary experiences for pleasure seekers is conceptualised as the ‘tourist gaze’ by Urry (2002). His adaptation of Foucault’s (1976) medical observation analogy to a tourism context can be related to the cruise tourist shore excursionists who are intent on viewing and photographically capturing new scenes. The provision of a shore excursion programme needs to include allowance for a safe environment or ‘bubble’ (Cohen 1979; Jaakson 2004) to provide a suitably secure platform from which to view the unfamiliar (Cartwright and Baird 1999). Whilst there is a charge for this particular experience opportunity in line with Pine and Gilmore’s (1999) ideal, early cruise excursionists were not widely welcomed because of their perceived impact on the local population (Douglas and Douglas 2004). Equally cruise tourists outside their ‘bubble’ can feel threatened by the ‘foreign’ environment including risks of crime or poor facilities for disabled passengers ashore (Douglas and Douglas 2004). Currently there is no reliable indicator of the likely 85

social impact of these tours on the host ports. It is not clear if modern cruise guests are aware of, or even consider, their own impact as there is no specific evidence tourists actively campaign for socially responsible tourism or environmental improvement (Johnson, 2002). Early cruise passengers were probably equally unconcerned about environmental issues as the social awareness profile would probably have been low compared to attention subsequently given to the topic in modern times. Cruise tourists in the 1960s were more used to being resourceful, adaptable and accepting of the limits of the traditional cruise ships at that time. However, the embedded social definitions of traditional cruising provided the foundation for what modern cruise product consumers experience today. The leisure package incorporates the promise of convenience, professionally delivered hospitality, entertainment and adventure (Crang 1997). The modern fleet of mega-sized cruise ships has proved popular with many consumers but bring with them social, health, welfare and environmental concerns (Weaver 2005). Designed as revenue capturing floating resorts the ships have become self-contained destinations with ports of call of largely secondary importance (Weaver, 2005; Dickinson and Vladimir 1997). The global ocean cruise market is dominated by three major corporations. Carnival is the largest, and together with Royal Caribbean International and Star Corporation of Malaysia, operates ships which, in 2006, comprised approximately 86% of the world cruise market (Page 2008). By virtue of the geographic spread, international customers and multi-national crew, cruise tourism can be considered as symbolic of a mass-tourist globalised industry. The globalisation phenomenon is complex, being multi-dimensional, but can be considered as a process of global economic, political and cultural imposition leading to partial re-shaping of local systems and networks (Wood 2000). A plethora of onboard attractions reduce the incentive for cruise tourists to spend ashore. There is nevertheless, competition to attract cruise ships by global ports of call as cruise tourists are perceived to be big spenders ashore (Klein 2008). This is challenged in studies of individual passenger spread and their expenditure away from their ship whilst ashore in Mexico, Jamaica and the Bahamas (Jaakson 2004; Henthorne 2000; Wilkinson 1999). Their dining, entertainment and accommodation are included in the cruise cost with other facilities such as beauty salons and fine dining, together with many other options available at extra cost (Weaver 2005). Operating ships in whichever region of the world they like provides structural mobility, economy of scale and flexibility to be able to tap new markets. Proactive management also adds to the reasons cited why cruise-lines outperform traditional shore-based facilities (Toh et al 2005). As a revenue centre a cruise ship can be viewed as a ‘tourism enclave’ which may offer some employment to a local community to which it touches through short visits but generally retains the bulk of generated wealth which is subsequently channelled to the international parent company Weaver (2005:166). In some cases cruise ships don’t call at ports at all but stop at islands or resort areas to which the cruise company has exclusive access through ownership or lease. In such instances there is no benefit to local communities as profits are exclusive to the cruise company (Wilkinson 1999; Wood 2006). Changes to the cruise product may be designed to optimise company revenues by maximising onboard spend by massive expansion of consumer facilities onboard the modern mega-ships. Unfortunately, the size of the ships passenger capacity brings pressure on the availability of these facilities leading to long queues onboard (Sunday Times 29 November 2009). This demeans the consumer experience and re-shapes it in ways which may prove economically counter-productive in the longer term. Those seeking a more personalised 86

service may wish to patronise smaller vessels or be forced to stop cruising as less traditional sized ships are released by the major corporations. Eventually the existing, but ageing, traditional ships will have to be withdrawn as they become uneconomic to maintain. Replacements of similar but more environmentally compliant type will not be available as the re-use ships will comprise only larger vessels of the type not normally identified with traditional cruising. It is contended that this prospect is of concern as it has serious implications for the products offered in future and threatens sustainability of the traditional cruise market. The image of the traditional cruise package experience currently promised may become no longer valid. The cruise experience, whilst promised through marketing of the whole holiday product, is in fact an intangible element within it. It provides a demonstration of the marketing shift away from focus on tangibles as suggested by Vargo & Lusch (2004). The service to the consumer is therefore of paramount importance. It can be argued the experience itself becomes greater than the product and the way this is shaped can determine the traditional cruise market future. The theatrical play analogy identifies the need for good ‘actors’ or the employees of the company who make the initial contact with the prospective client. The contact with the company is often with those working at its lowest level and this introduces a potential failing (Baum 2002). Whilst Pine and Gilmore (1999) recognise the ‘actors’ role they focus on training but appear to ignore the variation of personality traits which are an inherent part of human nature. They also fail to acknowledge gender, cultural differences such as religious beliefs and service standard expectation which may vary internationally. Whilst training may be perceived as first class, any ambiguity in delivering the company ‘message’ owing to cultural or personality differences, as Pine and Gilmore (1999) recognise, could prove disastrous to the service experienced by the consumer. Services as part of the experience economy include a hedonistic spiritual dimension which requires additional skills to deliver expectations. Applying this need particularly to the hospitality sector, Baum (2006) suggests adding a new dimension, ‘Experiential Intelligence.’ This, he argues, recognises the wide variety of services and global variation within the hospitality industry. The strong North American focus implied by Pine and Gilmore (1999) overlooks international company ownership within which working conditions and ideals may vary globally. Unlike their counterparts in the USA or Europe, workers from less developed countries may not have had the opportunity to be a customer receiving similar services to those they provide (Baum 2006). This disadvantage leads to a particular knowledge deficiency requiring additional skills to address the problem and this may prove difficult to reconcile even with appropriate training. Cultural or political reasons could be a factor as could identification of the appropriate skills. The globalised nature of the cruise industry which relies heavily on hospitality staff from a range of economically challenged backgrounds provides an illustration of the broad skills requirement. Multi-national ship crews provide hospitality services to international cruise tourists. It is common for a gratuity to be included in the cruise price or implied as being expected in recognition of good service onboard. It could be argued that this gratuity is a tangible recognition by the consumer of intangible services received which draws the interaction between servant and guest into a two-way incentivised experience. Whilst cruise companies have a prescriptive approach to service employee behaviour this is not only designed to benefit consumer perception but a personalized approach encourages tourists to tip more freely. 87

North Americans commonly accept that gratuities are necessary and accepted as a usual when associated with service (Douglas and Douglas 2004). It is perceived incentives improve the likelihood of good service. This is not quite so common among the British and many other nationalities who find the issue embarrassing as they are unsure how to value a service financially and prefer a more discretionary approach to tipping (Douglas and Douglas 2004). Cruise companies have recognised this issue and many have moved to automatically adding a percentage charge to bar tariffs. They also add a gratuity for other services per passenger each day. Although this may be adjusted on request some consumers find this extra charge on their bill objectionable (Douglas and Douglas 2004). It is not transparent that the gratuities reach specific individuals the consumer wishes to personally reward for exceptional service. Another system offered by some companies presents a package inclusive of all gratuities within the cruise offer price. Gratuities are distributed to all the crew and even tour coach drivers and guides thereby completely removing any consumer concern as the actual value of service reward is not indicated. Cruise ship workers completing mundane duties can boost their basic income considerably with gratuities. With any system of service charging in place cruise companies benefit by continuing to pay basic rates to crew whilst retaining the power to dismiss employees who receive poor comments on comment cards they hand out to passengers (Weaver 2005), or if workers challenge their working conditions (Klein 2002). With increasing sized ships the gratuity potential rises together with that of revenue. It also raises the profile of other concerns including environmental, social impact and safety issues. Potentially the current threat of terrorism has influenced passengers toward a preference of no-fly cruises. It is likely this type of cruise may be particularly popular with less able people because flying adds unwelcome stress to taking what may be considered an otherwise relaxing break. Issues associated with baggage weight when flying are also avoided and this is important particularly for those packing formal clothing for the cruise. It is possible the surge in new-build mega-ships, some of which are entering service during a period of world economic stress, questions whether cruise corporations have over-estimated their likely popularity, particularly among the older demography. Well educated, affluent, senior groups are likely to be attracted by ‘green’ marketing but those who prefer smaller, more intimate cruising may wish to ignore their ship’s emission levels. Older ships are less likely to be environmentally friendly because of dated design features including less fuel-efficient engines. The introduction tighter pollution controls such as waste water and garbage disposal have been forced through maritime legislation (MARPOL). These have been embraced by the introduction of advanced waste re-cycling systems on new build ships (Cudahy 2001). Advanced computerised safety systems are installed as standard plus improved disabled facilities (CLIA 2009). Older ships need to be expensively converted to take account of such changes but this is not necessarily economic and is likely to result in their withdrawal from service earlier than may have been expected. This could leave a gap unlikely to be filled by ageing mega-ships. The actual building of ships offers employment opportunities ahead of staffing the finished vessel with international employees. This has benefits for the local economy as does construction work associated with new passenger terminal facilities at various international locations. It can be argued that proportional to the size of the oceans of the world cruise ships have minimal presence and their impact is insignificant in relation to global pollution (Klein 2008). However, this ignores supply chain provisioning associated 88

with servicing the ship and aircraft emission pollution whilst facilitating passengers joining a cruise on air-inclusive packages. This may be mitigated by the number of cruises sailing on round trips from ports accessible easily without flying. The number of cruises departing from British ports for example, increased by 23% in 2008 compared to a 4% increase in flycruise packages (Passenger Shipping Association 2009). This is clearly an indicator that there is no diminishing interest in cruising although many larger ships have difficulty docking at smaller ports which opens the field for smaller vessels with special interest themes. These are popular with older cruise tourists who may be less interested in famous brand ships because of market segmentation which is designed to attract younger cruisers.

5.5 Conclusion This work has highlighted some of the issues associated with the traditional cruise market consumer. The evolution and exponential growth of the cruise trade from the 1960s to present has seen technological advances such as ship design and safety and pollution standard enhancement. As ships have grown in size to cater for the transition to masstourism globalised status they have begun to marginalise what can be considered as the traditional cruise market consumer, many of whom are likely to be in the senior sector. It has been suggested that whilst some big ships offer a version of traditional cruise ideals they may at best be pseudo-authentic representations of a past liner era. This may present opportunities for marketing in order to invoke feelings of nostalgia to attract consumers. However, many consumers may have experienced pre-mass market traditional cruises or liner voyages and would possibly prefer a more relaxed offering irrespective of ‘neonostalgia.’ Whilst some may be prepared to accept the re-shaping of their experience to a modern approach, the mega-ships can be overwhelming. Modern entertainment features may become neutralised by numbers too great to be accommodated without queues. This makes them less attractive as has been discussed in this work even the dining experience has been ‘McDonaldised’ (Ritzer 2000). The part played by technology in re-shaping cruise experience has been reviewed. The importance of service delivery to consumer experience has also been explored together with its relationship to the ‘experience economy’ Pine and Gilmore (1999) and ‘service dominant logic’ Vargo & Lusch (2004). As traditional style cruise ships leave service in future the question needing further research is: can the traditional cruise experience remain viable when succeeding vessels are likely to be much larger and impersonal? The sustainability of the traditional market is not to be underestimated as with forecast changes in demographic segmentation the senior market cannot be ignored. If the traditional cruise experience is re-shaped to the point of pseudoexperience this could risk alienation of an economically important sector for cruise tourism. Further research should provide the opportunity to offer tentative suggestions which may lead to an assured sustainability of the traditional cruise market.

5.6 References x

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Jefkins, F. (1993). Modern Marketing, Pitman, London. Johnson, D. (2002). Environmentally sustainable cruise tourism: a reality check, Marine Policy 26 261-270. Kittridge,A. (1993). Plymouth-Ocean Liner Port of Call, Twelveheads Press, Truro. Klein, R.A. (2002). Cruise Ship Blues, the Underside of the Cruise Industry, New Society, Gabriola Island, B.C. Klein, R.E. (2008). Paradise Lost at Sea, Rethinking Cruise Vacations, Fernwood, Halifax, Nova Scotia. Lovelock, C.H. (1995). Managing Services: The Human Factor, In: Understanding Services Management, Prentice-Hall, New Delhi. Lovelock, C., Wirtz, J. (2007). Services Marketing; People, Technology, Strategy, Pearson, MacCannell, D. (1999). The Tourist-A new theory of the leisure class, University of California Press, London. Maxtone-Graham,J. (2004). Queen Mary 2, Bulfinch Press, New York. Mowen, J.C., (1995). Consumer Behaviour, Prentice-Hall, New Jersey. Olins, W. (2004). On Brand, Thames & Hudson, London. Page, S. (2008). Book Review: The Future of Cruising – Boom or Bust, Peisley, T., Seatrade Report, In: Tourism Management 29, 821-830. Papatheodorou, A. (2006). The Cruise Industry : An Industrial Organization Perspective. In Cruise Ship Tourism CABI, Wallingford. Passenger Shipping Association (2009). The Annual Cruise Review 2008, the psa.co.uk. Accessed 03/01/10. Pine 11, J., Gilmore, J.H. (1999). The Experience Economy, Harvard Business School Press, Boston. Poulsson, H.G., Kale, S.H. (2004). The Experience economy and commercial experiences, The Marketing Review, 4, 267-277. Ritzer, G. (1996). The McDonaldization of Society, Pine Forge Press, Thousand Oaks, California. Ritzer, G. (2000). Sociological Theory, McGraw-Hill, New York. Ryan, C. (2002). The Tourist Experience (2nd Edition), Continuum, London. Sawhney, M. (2004). Going Beyond the Product: Defining, Designing, and Delivering Customer Solutions, In Vargo, S.L., Lusch, R.F.(Eds) The Service –Dominant Logic of Marketing,(Eastern Economy Edition), Prentice-Hall, New Delhi. Sharpley,R. (1999). Tourism, Tourists and Society, Elm, Huntingdon. Shaw, G., Williams, A.M. (2002). Critical Issues in Tourism –A Geographical Perspective, Blackwell, Oxford. Shaw, G., Williams, A.M. (2004). Tourism and Tourism Spaces, Sage, London. Solomon, M., Bamossy, G., Askegaard, S. (1999). Consumer Behaviour, A European Perspective, Prentice Hall, New Jersey. Slattery, M. (2003). Key Ideas in Sociology, Nelson Thornes, Cheltenham. Sunday Times (2009). Mega-Cruising Has Arrived, Times Newspapers, London. Telegraph 3 October 2009. The Importance of being Frank, Telegraph Newspapers Ltd. The Oldie Annual (2008). Swansong- all aboard the Oldie cruise, Oldie Publications, London. Toh, R.S., Rivers,, M.J., Ling, T.W. (2005). Room occupancies: cruise lines out-do the hotels, International Journal of Hospitality Management 24, 121-135. Tréguer, J-P., (2002). 50+ Marketing, Palgrave, Basingstoke. 91

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Urry, J. (2002). The Tourist Gaze (2nd Edition), Sage, London. Vargo, S.L., Lusch, R.F. (2004). The Service –Dominant Logic of Marketing, (Eastern Economy Edition), Prentice-Hall, New Delhi. Weber, K., Roehl, W.S. (1999). Profiling people searching for and purchasing travel products on the world wide web, Journal of Travel Research, Vol. 37, 291-298. Weaver, A. (2005). Interactive service work and performative metaphors, the case of the cruise industry, Tourist Studies, Vol. 5(1) 5-7. Weaver, A. (2005). Spaces of containment and revenue capture: ‘super-sized’ cruise ships as mobile tourism enclaves, Tourism Geographies, Vol.7, No.2, 165-184. Wilkinson, P.F. (1999). Caribbean cruise tourism: delusion? Illusion? Tourism Geographies 1(3), 261-282). Wood, R.E. (2000). Caribbean cruise tourism, globalization at sea, Annals of Tourism Research, Vol. 27, No. 2, pp.345-370. Wood, R.E. (2006). Cruise Tourism: A Paradigmatic Case of Globalization? In: Cruise Ship Tourism, CABI, Wallingford.

6.0

Assessing the environmental impact of anchoring cruise liners in Falmouth bay

Sarah Tuck, John Dinwoodie, Harriet Knowles & James Benhin International Shipping and Logistics Group School of Management Plymouth Business School University of Plymouth Plymouth, UK

Abstract Ports are coming under increasing pressure to manage their operations in an environmentally sustainable manner. This pressure comes from legal requirements, national agencies, planning inquiries and local activists (Wooldridge et al 1999). Ports have tended to react to such demands by making environmental policies and audits, always playing catch-up to the latest problem. An alternative approach is to be pro-active in seeking out environmental concerns at an early stage, assessing the scientific evidence of harm in the context of the specific port, and taking mitigating action according to the evidence. This is the basis of a Knowledge Transfer Partnership between the University of Plymouth and Falmouth Harbour Commissioners (FHC), who run a small trust port in South West England. The Port of Falmouth enjoys over thirty cruise calls a year. Smaller cruise liners can berth within the docks, but larger ships must anchor in Falmouth Bay, a Marine Special Area of Conservation, and tender their passengers ashore. Anchoring directly affects the benthic habitat through smothering, abrasion and disturbance. The noise and visual intrusion of vessels create an indirect impact. Studies into anchoring activities in fragile habitats such as eelgrass beds have led to the strict management of anchoring (Milazzo et al 2002). Falmouth Bay has a rare dead maerl habitat. This paper presents the on-going study, which is assessing the potential environmental impacts of anchoring in the Falmouth bay area. The steps include synthesising existing data on the nature of the seabed, recording actual anchor locations within the bay to identify areas of high anchoring density and identifying the threat that anchoring poses to the species in the maerl habitat. It is know that there are bivalves that live below the surface, so comparative core samples will be air lifted from high and low anchoring density areas.

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P. Gibson et al. (Eds.), Cruise Sector Challenges, DOI 10.1007/978-3-8349-6871-5_6, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

6.1 Introduction Ports are coming under increasing pressure to manage their operations in an environmentally sustainable manner. This pressure comes from legal requirements, national agencies, planning inquiries and local activists (Wooldridge et al 1999). This exploratory case presents a methodology, based on a study currently in progress, for assessing the environmental impact of anchoring cruise liners at a particular port. As the paper will demonstrate, the actual environmental impact (as distinct from the presumed harm), will be different for each port. It varies with the nature of the seabed, with the importance and with the fragility of the underwater habitat in the anchored area. All of these factors can generally be assessed from existing data, but the data need to be drawn together in a systematic manner. The study applies a systems approach to maritime operations that is more fully reported in Dinwoodie et al (2010).

6.2 The Port of Falmouth The port of Falmouth is in Cornwall on the South West peninsula of England. It is an Area of Outstanding Natural Beauty (AONB) and the Fal estuary and bay is a Special Area of Conservation (SAC) under the EU Habitats Directive. The harbour is said to be the third largest in the world. Falmouth itself is a town of great charm and interest. It is not only strategically placed for various cruise itineraries, but also surrounded by towns, gardens, great houses and world-renowned heritage sites that make ideal excursions from the town. It is marketed as a cruise destination via the marketing partnership of Destination South West (2010). Falmouth received 32 calls by cruise ships in 2009 (Falmouth Harbour Commissioners 2010). Falmouth Harbour Commissioners (FHC) is the statutory port authority responsible for the regulation of much of Falmouth Harbour and Falmouth Bay. FHC operate within a demanding framework of national and EU legislation to ensure the economic and environmental sustainability of the port. Like many other ports around the world, they are active in addressing the need for commercial change, such as the joint proposal for a Cruise Terminal with the Falmouth Docks & Engineering Co. Ltd (FDEC), whilst tending only to react to environmental drivers. This leads to a situation where the port is often left reacting to an environmental initiative instead of engaging and adding value to the initiative from its conception. The designation of the port area as a SAC in 1998 made the constraints exceptionally severe, as these are strictly protected sites (McLeod et al 2005). In 2008, FHC decided to take a new approach. They would take the initiative by seeking out environmental concerns at an early stage, assessing the scientific evidence (and if necessary commissioning new research), and then take mitigating action as required, based on the evidence. The port is seeking to work in partnership with the statutory environmental bodies such as Natural England. Such an ambition would normally be beyond the resources of a 94

small organisation, but through the part-funded UK Government’s Knowledge Transfer Partnerships (KTP) programme, they are able to tap directly into the specialist environmental, maritime and economic expertise of the University of Plymouth for a 30month project.

6.3 Anchoring by cruise ships at Falmouth Cruise ships that visit Falmouth prefer to berth alongside the wharves within Falmouth Docks, close to the town centre. However, vessels over 230m in length or 8m in draft must anchor in Falmouth Bay or Carrick Roads, and then tender their passengers to the Docks. This is not an uncommon situation in the cruise industry. Ships have been anchoring off landing places for as long as they have been going to sea (McGrail 1992). The very nature of anchoring creates a physical impact on the ocean floor and benthic environment (the flora and fauna at the bottom of the sea), as well as the wider environment. Possible impacts that have been identified are: x x x x x x x

Physical loss of or damage to habitats and species through: smothering (from sediment transportation) surface abrasion and disturbance by anchor chains, leading to visible anchor scars the deeper impact of a sea anchor as it falls to the sea bottom and then digs in to the holding ground, or drags through it Noise generated by ship manoeuvring and anchoring activities ‘Visual intrusion’ of anchored vessels in an area of natural beauty (Milazzo et al 2004, The Green Blue 2008)

The purpose of this exploratory case is to discuss the evidence-based investigation of the physical impacts of anchoring. Investigations of noise and visual impacts are also on-going but these are beyond the scope of this paper. As the world gets richer, there are more commercial ships, more cruise liners and more leisure craft, all of which contribute to an increased intensity of anchoring activities. There is also a growing demand for environmental stewardship of fragile benthic environments such as coral and eelgrass (Milazzo et al 2002, Milazzo et al 2004, Walker et al 1989). These demands have led to bans on activities such as dredging, and the strict management of anchoring in some places. Concerns have been raised about the potential damage caused by anchoring in the Fal and Helford SAC, and especially by the anchoring of large ships in Falmouth Bay (Solandt 2009, Lockley 2009). The Fal & Helford SAC is designated under the EU Habitats Directive which requires that the SAC’s interest features (those habitats and species for which it is an important area), be 95

protected. The Directive specifically mentions the need to avoid the deterioration of habitats and the disturbance to species by whatever means necessary, including the establishment of management schemes. In particular, the management scheme for the Fal & Helford SAC aims to maintain the features of the site whilst enabling its continued and diverse human use. The features of European importance include the sub littoral sandbanks, eelgrass beds, living maerl beds (maerl is commonly known as calcified seaweed) and extensive areas of dead maerl gravel. It was known at the commencement of the project that dead maerl gravel was present in significant quantities in Falmouth Bay where cruise ship anchoring takes place (McLeod et al 2005). Anchoring in the ordinary course of navigation is a component of public navigation. As this public right of navigation is based on common law and not statutory law, it can be overridden by Parliament in any local or general act. Port authorities such as Falmouth Harbour Commissioners have regulatory powers to override the common law public right of navigation (Falmouth Harbour (amendment) By-laws 1996). However, FHC has a duty to protect Public Navigation whilst at the same time regulating it for port operations. In short, FHC can regulate and restrict public navigation by putting in place voluntary or byelaw enforced anchorage restrictions (The Green Blue, 2008) but not prohibit it entirely (private communication from M. Williams, 2009). A prohibition on anchoring would lead to economic loss for FHC as it earns significant income from services such as pilotage, which are supplied to ships that anchor for cruise calls, bunkering, refuge from bad weather, awaiting high tide etc. As a not-for-profit organisation, all income is re-invested in improving services for stakeholders. In December 2000, IMO adopted an amendment to the Safety of Life At Sea (SOLAS) Convention that makes it possible for countries to establish No-Anchoring Areas (NAA) for ships (SOLAS 1974 Chapter V regulation 10). Such areas may, after submission to IMO, be established by a country in areas where anchoring is dangerous or where it could result in severe environmental damage. Typically, these will be areas of coral reef. No anchoring areas are routing measures, similar to traffic separation schemes, and after adoption they are added to all official charts, thus giving them the force of international law rather than purely domestic law or regulation (IMO 2002a).

6.4 The investigation As part of the wider KTP project at Falmouth, in 2009 a study to evaluate the environmental impacts of anchoring activities on the maerl habitats of Falmouth Bay was instigated. The objectives of the study were to: x

96

Draw together current literature and evidence on anchoring impacts in order to scope the project

x x x

Map the areas where dead maerl is the dominant sediment on the seabed (at least 50%), using existing data Map the actual anchoring sites of commercial vessels Commission further research into the actual impact of commercial anchoring on the benthic species that exist in the maerl habitat

6.5 Anchoring impacts Marine ecology and conservation literature contains reports of research into anchoring impacts carried out in areas such as the Mediterranean and Australia. All existing evidence suggests that the significance of the impact depends on the intensity and regulation of any anchoring activities (Milazzo et al., 2002). Vessel size, frequency of anchoring, the weather conditions and substrate firmness may also all affect the extent of anchor damage (Walker at al., 1989; Francour at al., 1999) and damage to benthic habitats varies according to anchor type (Milazzo et al., 2004). Studies in an intensively used anchorage site in New Zealand show that anchoring scars, that is, the visible mark left on the seabed from chain abrasion, persist for up to 3 months; however they diminish in area and depth after one month (Backhurst and Cole, 2000). The level of impact (environmental damage) to a habitat has been linked to the rugosity (bumpiness) of the habitat (Friedlander and Parrish 1998). For instance a coral environment would see a high level of visual impact or damage caused by an anchor. It has been suggested that in live benthic habitats such as seagrass, recovery rates from both direct and indirect consequences of boat anchoring may be long term as they are slow growing (Milazzo et al., 2004). The dead maerl habitats are of course non-living in Falmouth Bay so that that the habitat recovery rate can be expected to be less severe. However, intense anchoring reduces habitat structural complexity and therefore species richness (Hemming and Duarte, 2000). Technical literature on anchors used by large commercial ships was found in marine technology sources, where research has been conducted on the holding properties of anchors. An anchoring system consists of the anchor, the mooring line that transmits forces from moored vessels or pulling systems to the anchor, and an attachment point or tensioning system on the moored vessel (Rocker, 1985). The anchor line usually consists of chain, wire rope, or some combination of the two, however it may include fiber line or rigid elements. The anchor provides the majority of the resistance to motion, (which is known as holding capacity) although the contribution of portions of the anchor line lying on the seafloor may be significant, especially with chain (Rocker, 1985).

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Figure 6a: A commercial stockless anchor, walked out and ready to drop. Source: FHC undated. Vessels anchoring on both a commercial and recreational scale use drag embedment anchors or drag anchors which are generally known by manufacturers’ trade names such as Danforth (common on small boats) and Hall’s Patent Stockless anchor (see figure 6a). Research is extensive into maximizing the efficiency of anchors (particularly by the U.S. Navy) as well as investigations into the potential for anchors to uproot underwater cables. Burial of submarine cables on the continental shelf began in the 1970s as a result of problems that were caused by seabed fishing gear. Cable installers were then asked to guarantee a set depth of burial, even though that depth might not be optimum for the prevailing level of risk. Typically, the specified burial depth is now one metre, and sometimes deeper than 1.5 metres (Allan and Comrie 2001). Fishing and anchoring are the main threats to cables. During anchoring operations, a drag anchor is ‘walked out’ to just above the water line and then dropped to the seafloor. It generally lands upright, then the base is ‘tripped’ and the arms rotate until the flukes embed themselves into the seabed and maximum holding capacity develops. Generally anchors get more efficient at holding the vessel in place, the softer the bottom material and thus the deeper the burial depth into the seabed (Danton 98

1985, Rocker, 1985). Very deep penetration is not desirable for commercial shipping, as it becomes more difficult to recover the anchor. Therefore, anchors are designed to lie on the surface of the seabed, supported by the shank, with only the flukes penetrating the holding ground (Allan and Comrie 2001). Only in soft soils is there a tendency for the anchor to penetrate to deep depths (Allan 1998). The stockless anchor is not the most efficient design and in fact dates back to 1840. More modern types are more efficient at penetrating to greater depths due to their geometry, for example, the AC14 or Admiralty pattern anchor has a holding power of two and a half times that of a patent stockless anchor. However, stockless anchors are the most common choice for commercial ships, with the advantage of easy stowage and having a reasonable holding power to weight ratio of roughly three to four times (Danton 1985, Allan 1998). Burial protection index (BPI) is defined thus: “Concept relating depth of burial to the level of protection achieved taking into account the strength of the material into which the cable is buried. The objective of the concept is to provide the optimum economic level of burial protection” (SCIG undated page 3). The BPI suggests depths at which to safely burial the cables adding a 33% safety factor onto that for any anomalies. These depths are dependent on the threat present, ranging from cable damage caused by normal fishing gear to ship anchors. Based on these figures table 1 shows the level that it is suitable to bury a cable in safety so that it will not be damaged by anchors and therefore provides port managers with the information regarding the maximum penetration depth of an anchor (Mole et al, 1997). The anchor and anchor chain weight, size and mass has little correlation to the anchor penetration burial depth. Instead the anchor geometry (type of anchor) and the sediment type are the influencing factors, with sediment type being the greatest variable of the two. Falmouth seabed sediment would likely fall into the middle column of Table 6a called ‘softfirm soils, sand, gravel and medium clay, (Birkett et al, 1998; Jones et al, 2000). As the table provides a 33% safety factor on actual threat from anchor penetration, it can be seen that the actual threat is 0.957m penetration from 95% of all commercial anchors (derived from the figure in bold in table 6a). In the context of the marine environment a study conducted by Hall-Spencer and Atkinson (1999) demonstrated that macrofauna burrows to depths up to, and likely over 72cm, where the majority of recorded species existed at depths between 20cm- 40cm in a maerl habitat. Therefore, maximum anchor penetration depths are likely to correspond with these species’ living depths. However as Backhurst & Cole (2000) suggest, ship anchoring has been intense for centuries in Falmouth Bay, in which case any effects on the more fragile benthic species have already occurred. 99

Hard ground Soft to firm soils Very soft to soft (hard clay and (sand, gravel, soils (mud, silt and rock) medium clay) soft clay)

Threat Trawl boards, beam trawls, 0.5m

2.0m