No action on contentious cruise head tax

28th Oct 2003

During last weekå‘s meeting of the Caribbean Tourism Organization (CTO) in St. Thomas in the U.S. Virgin Islands (USVI), more than 600 delegates from throughout the region grappled with one of its most divisive issues: a proposal to fix the cruise ship head tax at $20 for all destinations.

On the eve of the meeting, President Simon Suarez of the San Juan-based Caribbean Hotel Association (CHA) called for the resignation of CTO Secretary-General Jean Holder. Obie Wilchcombe, the CTO chairman and Bahamas tourism minister, said the time had come to set aside differences.

The acrimony focused on the differences between the CHA, which represents the hotel sectors of the regional destinations, and the CTO, representing the head tourism officials in Caribbean governments. The CHA has been outspoken in its criticism of cruise tourism, while the attitudes of government officials have been influenced by the level of importance of the cruise business to their destinations.
The feud came to a head the week before the CTO meeting when Mickey Arison of Carnival bluntly charged that Holder “promotes taxation and division in the tourism sector in the Caribbean.” Arison is also chairman of the Florida-Caribbean Cruise Association (FCCA).
Arison questioned how the CTO head could be focusing on taxing the cruise industry instead of on investment, training, quality, and product. “That speaks very poorly of that organization, and I am disappointed,” he said. When Arison speaks, he is listened to because Carnival controls more than 40% of the cruise market since acquiring P&O Princess Cruises.
As predicted by CARIBBEAN BUSINESS (CB Sept. 11), Antigua & Barbuda Tourism Minister Molwyn Joseph announced at the meeting that “we [Antigua & Barbuda] aren’t convinced the $20 levy is in our interest at this time.” Dominica, which is facing major economic difficulties, is expected to back out of the plan as well, and there are indications other destinations will follow.

Since June, the CTO has been attempting to set the head tax on cruise passengers at $20. The proceeds would go to fund environmental projects and a sustainable marketing campaign for Caribbean tourism
`Divide & conquer-type strategy`

Some industry observers say some governments fear the cruise lines will retaliate against proponents of the plan by pulling their ships out or moving them to destinations that play ball with the FCCA. Some see it as the FCCA playing destinations against one another in a “divide and conquer-type strategy.” One observer views the relationship as mutually beneficial, though rocky at times.


“Let’s face it, the Caribbean accounts for more than 50% of the cruise market, and those destinations benefiting from that business like it, but others, naturally, don’t,” said one observer. “Given the overwhelming nature of the cruise industry, the destinations want some say in the matter, considering that the major profits from the business filter back to the continent where the ships are owned or based, and most of the goods and services are sourced.”

Peter Wild, a British expert on cruise tourism, made some interesting observations at the CTO meeting in St. Thomas. He cited four concerns about the cruise industry: consumers’ relative lack of confidence in the economy, consumers’ worries about the stock market, the effect of rising fuel costs, and the reluctance of Americans to fly.

Michael Ronan of Royal Caribbean noted that with the airlines in crisis after 9/11, many boosted fares to San Juan and back from US$200 to $500. In response, the largest cruise lines moved the homeports of vessels plying the Caribbean to more convenient locations along the Gulf Coast in Florida, Louisiana, and Texas. The downside of that strategy is that cruise ships from those ports concentrate on the western Caribbean because the eastern and southern Caribbean can’t be reached on one-week cruises.

Puerto Rico isn’t a party to the controversy because it routinely supports only those CTO agreements it likes and ignores the others. However, it has its own problem with the FCCA. When Puerto Rico decided to raise its head tax from $10.30 to $15.50 effective Jan. 1, 2004, the FCCA reacted with shock. The Ports Authority then acknowledged an old agreement and said the lower rate would remain in effect until June 2004 (CB Sept. 4).

Related story on CAribbean Weekly:
(07/08/03) Cruise Sector Boosts Jamaican Tourist Figures



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