BREA. Contribution of Cruise Tourism to the Economies of Europe 2011 Country Report United Kingdom. The European Cruise Council. Business Research &

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1 BREA Business Research & Contribution of Cruise Tourism to the Economies of Europe 2011 Country Report Prepared for The European Cruise Council July 2012

2 The UK is the largest source market for cruise passengers in Europe with 1.7 million residents having purchased cruises in 2011, a 4.8% increase over The country participates in most aspects of the industry including crewing and serving as an embarkation market but with the notable exception of shipbuilding. However, with the large number of headquarters facilities of the European cruise lines located in the UK, together with the administrative offices of the North American lines operating in Europe, employee compensation and cruise line purchases accounted for 82% of the industry s direct economic impact in the UK. Quick Facts Major cruise ports-of-embarkation: Southampton, Dover, Harwich. Global cruise passengers sourced from the UK: 2006: 1,204, : 1,337, : 1,477, : 1,533, : 1,622, : 1,700,000 Cruise passengers embarking on cruises from UK ports: 2006: 576, : 591, : 714, : 733, : 837, : 878,000 Cruise passenger visits to UK ports-of-call: 2006: 382, : 365, : 420, : 448, : 541, : 648,000 Cruise industry direct expenditures in the UK: 2006: 1.8 billion 2007: 2.0 billion 2008: 2.3 billion 2009: 2.4 billion 2010: 2.6 billion 2011: 2.8 billion employment generated by the cruise industry: 2006: 39, : 43, : 49, : 55, : 58, : 63,834 1 These figures include an estimated 60,000 from the Republic of Ireland. employee remuneration generated by the cruise industry: 2006: 1.6 billion 2007: 1.7 billion 2008: 1.9 billion 2009: 2.0 billion 2010: 2.1 billion 2011: 2.3 billion Cruise Expenditures Cruise tourism generated 2.8 billion in direct expenditures in the UK in 2011, 19% of the industry s direct expenditures throughout Europe and a 10.2% increase over As indicated in the following figure, these expenditures were principally distributed across three of the major source segments: passengers, cruise line purchases and compensation of cruise line employees. Cruise Expenditures in the UK, Billion Cruise Line Purchases Cruise Line Purchases 1,792 63% Passengers & Crew % Emp. Comp % Ship Repair 121 4% Cruise lines spent an estimated 1.79 billion, 63% of the total, with UK businesses in support of their administrative and operating activities. As indicated in the following table expenditures by the cruise lines in 2011 increased by 10.5% from Cruise Line Expenditures by, 2010 and 2011 (Excluding Ship Repair) Expenditures Share of Agr., Min. & Construction % Manufacturing % Food & Tobacco % Other Nondurable Goods % Metals & Machinery % Other Durable Goods % Wholesale Trade % Transportation & Utilities % Finance & Business Services % Personal Services & Gov t % 1,622 1, % These purchases included a broad range of products and services and impacted most major industries in the country. Among the major industries that were impacted by cruise tourism expenditures were: G. P. Wild (international) Ltd. Page 1

3 Food and beverage manufacturers received 116 million in purchases for provisions consumed on board cruise ships. An estimated 212 million was spent on other nondurable goods, primarily bunker fuel, lubricants and other chemical products, such as paints and cleaning supplies. Another 222 million was spent for metal products and machinery such as fabricated sheet metal, hardware supplies, material handling equipment and computers. An estimated 377 million in commissions were paid to UK travel agents (included in Transportation and Utilities). The cruise industry spent 426 million on financial and business services including: insurance, advertising, engineering and other professional services, computer programming and support services and direct mail and market research. Cruise Passengers Passengers and crew spent an estimated 396 million at portsof-embarkation and call, accounting for 14% of total cruise industry expenditures in the UK. 878,000 cruise passengers embarked on their cruises from UK ports, with around 720,000 departing from Southampton, 100,000 from Dover and 44,000 from Harwich. Newcastle, Forth Ports, Greenock, London and Liverpool are included among the lesser homeports. These embarking passengers and the 1.70 million source passengers accounted for 88% of all passenger spending in the UK. They spent an estimated 344 million on airfares, port fees, lodging, food and beverages, excursions and other purchases in the UK, an increase of 5.8% from ,000 cruise passengers visited ports-of-call in the UK and its dependencies. These include: Forth Ports: 88,216* Invergordon71,325 St Peter Port (Channel Is): 63,134 Liverpool: 41,727* Belfast (NI): 40,000 Lerwick (Shetlands): 30,747 *Includes some embarking passengers. These visits generated an additional 45 million in expenditures for tours, souvenirs and other expenditures. Combining the 878,000 embarkations and the 648,000 portof-call visits and excluding airfares, each passenger visit at a UK port generated an average expenditure of approximately 95 per passenger visit. An estimated 664,000 crew arrived at UK ports in 2011 and spent an estimated 7.3 million. Compensation of Cruise Line Employees Cruise lines spent an estimated 520 million on compensation for employees who resided in the UK during These expenditures accounted for 18% of total cruise industry expenditures in the country. The cruise lines employed nearly 14,500 residents of the UK in their administrative offices and as crew onboard their ships. Shipbuilding The cruise industry spent an estimated 121 million at UK shipyards primarily for the maintenance of existing cruise ships, 4% of total cruise industry expenditures in the UK. The Economic Benefits of Cruise Tourism The 2.83 billion in direct cruise tourism expenditures in the UK during 2011 generated an estimated 63,834 jobs (direct, indirect and induced). This was a 9.0% increase over Employment Impact in the UK, ,834 12,744 20% Indirect 21,270 33% Economic Impacts 29,820 47% The direct economic impacts of the cruise industry in the UK are derived from a broad range of activities including: port services and cruise industry employment; transportation of cruise passengers from their place of residence to the ports-of-embarkation; travel agent commissions; spending for tours and pre- and post-cruise stays in UK port cities; passenger spending for retail goods in UK port cities; and purchases of supplies by the cruise lines from UK businesses. The 29,820 direct jobs that were generated by cruise-related expenditures paid 1,045 million in employee compensation. These jobs included the employees of the cruise lines, the direct suppliers to the cruise lines and the employees of those establishments that provide goods and services to cruise passengers. Relative to 2010 the direct employment increased by 6.7% and due to increases in labour productivity and a shift toward higher wage sectors, i.e., durables manufacturing and transportation services, the wage impacts increased by 8.5%. The direct jobs generated by the cruise industry are located on cruise ships, at manufacturing plants that provide goods consumed by passengers and crew on cruise ships and structural metal products and machinery used in ship building and repair, and tour operators that provide shore excursions purchased by cruise passengers. As indicated in the following table the direct employment impacts are broadly based and include the following. G. P. Wild (international) Ltd. Page 2

4 Cruise Economic Impacts by, 2010 and Agr., Min. & Constr Manufacturing 4, , Food & Tobacco Other Nondurable Gds Metals & Machinery 2, , Shipbuilding & Repair Other Durable Goods Wholesale & Retail Trd 1, , Transport & Util. 15, , Hospitality , Finance & Business Ser. 5, , All Other Sectors 1, , , ,820 1,045 Includes the UK employees of the cruise lines and their compensation. During 2011, UK manufacturers employed an estimated 4,620 workers, 15% of the direct jobs, to provide the cruise industry with a wide range of goods. These workers were paid 187 million in compensation which accounted for 18% of the direct compensation impacts Just under 470 jobs were generated in the food, beverage and tobacco industry which, in turn, produced 26 million in employee income. These workers produced food and beverage items consumed on cruise ships. 2,456 workers were employed in the metal and machinery industries to produce fabricated metal products, such as tanks and other sheet metal products, computers, material handling equipment, engine parts and communication equipment used in offices and cruise ships. These employees earned 82 million in compensation. The Wholesale and Retail Trade sector employed an estimated 1,035 workers, 3.5% of the direct employment impacts. These employees were paid wages and benefits of 29 million. The Transportation and Utilities sector employed 16,100 workers, 54% of the total direct jobs, in support of the cruise industry. These included employees of the cruise lines, truckers who deliver goods to cruise ships, and tour operators that provide onshore excursions for cruise passengers. Also included are employees in the power generation and communication industries. In aggregate, workers in this sector received 531 million in compensation, 51% of the direct compensation impacts in the UK. An estimated 5,596 persons were employed by financial and business service providers. These included employees of insurance companies and agencies, advertising and market research firms, computer programming companies, engineering and management consulting firms, law firms and accounting agencies. Their compensation totalled an estimated 242 million. An estimated 1,213 workers were employed in hotels, restaurants and amusement enterprises as a direct result of passenger spending as part of their cruise vacations. These workers were paid an estimated 25 million in wages and benefits. Finally, an estimated 1,256 jobs were generated elsewhere in the UK economy, principally personal services and government that yielded 31 million in income. These included photographers, health care employees and social service providers among others. Employment by Sector, ,820 1,213 4% 5,596 19% 16,100 54% 1,256 4% 4,620 16% 1,035 3% Manufacturing Wholesale & Retail Trade Transportation & Utilities Hospitality Financial & Business Services All Other Sectors Indirect and Economic Impacts The indirect economic benefits derived from the cruise industry result in part from the additional spending by the suppliers to the cruise industry. For example, food processors must purchase raw foodstuffs for processing; utility services, such as electricity and water, to run equipment and process raw materials; transportation services to deliver finished products to the cruise lines or wholesalers; and insurance for property and employees. Consequently, the indirect jobs are generated in virtually every industry with a concentration in those industries that produce goods and services for business enterprises. The induced economic benefits are derived from the spending activities of those directly and indirectly employed as a result of the European cruise industry. This spending supports jobs in retailing, the production of consumer goods, residential housing and personal and health services. As indicated in the table below, an estimated 30,414 indirect and induced jobs were generated throughout the UK by the cruise industry in These jobs generated 1.16 billion in employee compensation. Relative to 2010, the indirect and induced employment impacts fell by just under 1.0% while the compensation impacts increased by 11.3%. G. P. Wild (international) Ltd. Page 3

5 Indirect and Economic Impacts by, 2010 and 2011 Indirect & Indirect & Indirect & Indirect & Agric., Min. & Constr. 1, , Manufacturing 8, , Food & Tobacco Other Nondurable Gds 2, , Metals & Machinery 3, , Transportation Eq Other Durable Goods 1, , Wholesale & Retail Trd Transportation & Util. 3, , Hospitality 4, , Finance & Business Ser. 8, , All Other Sectors 3, , ,668 1,155 34,014 1,285 Transportation equipment includes shipbuilding, but also the manufacture of other transportation equipment, such as automobiles, buses, trucks, airplanes, railroad stock, etc. The indirect and induced impacts of cruise industry spending generated just over 9,400 jobs within the Manufacturing sector during 2011, 28% of the total indirect and induced employment impacts. Approximately 44% of these jobs were in the food and beverage and other nondurable goods industries, highlighting the importance of induced consumer demand as a component of the cruise industry s economic impact in the UK. Impacted manufacturing employees were paid an estimated 368 million in compensation. The Finance and Business Services sector accounted for 28% of the indirect and induced employment impacts and 27% of the compensation impacts with 9,661 jobs and 350 million in wages and benefits. The indirect impacts measured in this sector are primarily concentrated in the insurance, legal, accounting and professional services industries. The Transportation & Utilities sector in the UK benefited from an estimated 3,691 indirect and induced jobs, 11% of the total indirect and induced employment impacts. This reflects the strong inter-industry linkages within the transportation sector, as well as the heavy usage of a variety of transportation services to supply businesses with their inputs and to deliver consumer goods to retail outlets. These workers were paid an estimated 204 million in compensation. Indirect and Employment by Sector, ,014 3,841 11% 9,661 28% 1,469 4% 5,034 15% 9,408 28% 3,691 11% 910 3% Manufacturing Wholesale & Retail Trade Transportation & Utilities Hospitality Financial & Business Services Personal Services & Govt Combined, the Trade and Hospitality sectors benefited from some 5,944 indirect and induced jobs, 17% of the indirect and induced employment impacts. The trade jobs were primarily among wholesale trade establishments, while the hospitality jobs were concentrated among hotels and eating and drinking establishments. Compensation of these workers totaled 149 million. The remaining industries, which include Agriculture, Mining, Construction, Personal Services and Government benefited with an estimated 5,310 jobs and 203 million in employee compensation. Employment Impacts As indicated in the following table an estimated 63,834 total jobs, comprising direct, indirect and induced employment, were generated throughout the UK by the cruise industry in The workers who held these jobs earned 2.33 billion in employee compensation. The total employment impact increased by 8.9% in 2011 while the total compensation impact increased by 10.0%. Manufacturers in the UK employed an estimated 14,028 workers, 22% of the total jobs, and paid them 555 million in wages and benefits. Finance and Business Services accounted for 24% of the total employment impacts with an estimated 15,257 jobs and 592 million in compensation. Combined, the Trade and Hospitality sectors accounted for 13% of the total employment impacts with 8,192 total jobs and 214 million in employee income. Transportation & Utilities accounted for 31% of the total employment impacts with an estimated 19,791 jobs, including the administrative staff and crew of the cruise lines that reside in the UK. These workers received 735 million in remuneration. Cruise Economic Impacts by, 2010 and Agric., Min. & Constr. 1, , Manufacturing 12, , Food & Tobacco 1, , Other Nondurable Gds 3, , Metals & Machinery 5, , Transportation Eq. 1, , Other Durable Goods 1, , Wholesale & Retail 1, , Trd. Transportation & Util. 18, , Hospitality 5, , Finance & Business 13, , Ser. All Other Sectors 4, , ,604 2,118 63,834 2,330 Includes the UK employees of the cruise lines and their compensation. Transportation equipment includes shipbuilding, but also the manufacture of other transportation equipment, such as automobiles, buses, trucks, airplanes, railroad stock, etc. An estimated 6,566 total jobs, amounting to 10% of the total employment impacts were generated in the remaining sectors of the UK economy. These jobs were concentrated in the personal services and construction industries. These workers were paid 234 million in wages and benefits. G. P. Wild (international) Ltd. Page 4

6 Employment by Sector, ,834 1,519 2% 15,257 5,047 8% 14,028 22% 1,945 24% 3% 6,247 10% 19,791 31% Manufacturing Wholesale & Retail Trade Transportation & Utilities Hospitality Financial & Business Services Personal Services & Govt All Other Sectors Thus, in the UK just under 23 jobs were generated for every 1 million in direct cruise industry expenditures. Furthermore, the average job generated by the cruise industry paid slightly more than 36,500 in employee compensation. Given the direct impacts of 29,820 jobs and 1,045 million in employee compensation, the effective economic multipliers for the cruise industry in the UK were 2.14 for employment and 2.23 for compensation. G. P. Wild (international) Ltd. Page 5