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Prepared for: Cruise New Zealand
Date: August 2013 Status: Final
Economic Impact of the New Zealand Cruise Sector
Document reference: CNZ008.13
Date of this version: August 2013
Report authors: Thomas Worley, Greg Akehurst
Disclaimer
Although every effort has been made to ensure accuracy and reliability of the information contained in this report,
neither Market Economics Limited nor any of its employees shall be held liable for the information, opinions and
forecasts expressed in this report.
Market Economics Limited
Level 5, 507 Lake Road
PO Box 331 297, Takapuna
Auckland 0740, NZ
P 09 915 5510
www.me.co.nz
Economic Impact of the New Zealand Cruise Sector
Cruise New Zealand
Contents 1 EXECUTIVE SUMMARY ............................................................................... 1
2 INTRODUCTION ......................................................................................... 3
2.1 BACKGROUND AND SCOPE .................................................................................... 3
2.2 OBJECTIVES ....................................................................................................... 4
2.3 REPORT STRUCTURE ............................................................................................ 4
3 METHODOLOGY ......................................................................................... 6
3.1 CRUISE DATA COLLECTION .................................................................................... 6
3.2 SHIP, CREW AND PASSENGER EXPENDITURE .............................................................. 7
3.3 THE ECONOMIC MODEL ..................................................................................... 14
4 CRUISE SECTOR ACTIVITY ..........................................................................16
4.1 NATIONAL SUMMARY FOR 2012-13 SEASON.......................................................... 16
4.2 REGIONAL SUMMARY FOR 2012-13 SEASON .......................................................... 18
4.3 2013-14 CRUISE SEASON .................................................................................. 19
4.4 REGIONAL SUMMARY FOR 2013-14 SEASON .......................................................... 21
4.5 2014-15 SEASON OUTLOOK .............................................................................. 22
5 ECONOMIC IMPACT ANALYSIS ..................................................................23
5.1 ECONOMIC IMPACTS FOR THE 2012-13 SEASON ..................................................... 23
5.2 ECONOMIC IMPACTS FOR THE 2013-14 SEASON ..................................................... 27
6 ANNUAL TREND OF ECONOMIC IMPACTS .................................................30
7 GAPS AND FURTHER WORK ......................................................................31
7.1 CRUISE VESSEL ................................................................................................. 31
7.2 PASSENGER BEHAVIOUR ..................................................................................... 32
7.3 CREW BEHAVIOUR ............................................................................................ 32
8 CONCLUSIONS ..........................................................................................33
APPENDIX 1: ECONOMIC MODELS AND MULTIPLIER ANALYSIS ............................... 34
Figures FIGURE 4.1: CRUISE ACTIVITY FOR 2012-13................................................................................................ 16
FIGURE 4.2: NATIONAL PASSENGER ACTIVITY FOR 2012-13 ........................................................................... 16
FIGURE 4.3: CRUISE PASSENGER SOURCE MARKETS FOR 2012-13 .................................................................. 17
FIGURE 4.4: CREW ACTIVITY FOR 2012-13 ................................................................................................. 17
FIGURE 4.5: REGIONAL CRUISE ACTIVITY FOR 2012-13 ................................................................................. 18
FIGURE 4.6: CRUISE ACTIVITY FOR 2013-14................................................................................................ 19
FIGURE 4.7: NATIONAL PASSENGER ACTIVITY FOR 2013-14 ........................................................................... 19
FIGURE 4.8: CRUISE PASSENGER SOURCE MARKETS FOR 2013-14 .................................................................. 20
FIGURE 4.9: CREW ACTIVITY FOR 2012-13 ................................................................................................. 20
FIGURE 4.10: REGIONAL CRUISE ACTIVITY FOR 2013-14 ............................................................................... 21
FIGURE 5.1: TOTAL EXPENDITURE FOR 2012-13 .......................................................................................... 23
FIGURE 5.2: TOTAL NET EXPENDITURE FOR 2012-13 .................................................................................... 24
FIGURE 5.3: VALUE ADDED FOR 2012-13 .................................................................................................. 25
FIGURE 5.4: TOTAL EMPLOYMENT SUPPORTED BY CRUISE FOR 2012-13 .......................................................... 26
FIGURE 5.5: TOTAL EXPENDITURE FORECAST FOR 2013-14 ............................................................................ 27
FIGURE 5.6: TOTAL NET EXPENDITURE FORECAST FOR 2013-14 ..................................................................... 28
FIGURE 5.7: VALUE ADDED FORECAST FOR 2013-14 .................................................................................... 29
FIGURE 5.8: TOTAL EMPLOYMENT FORECAST FOR 2013-14 ........................................................................... 29
FIGURE 6.1: HISTORICAL COMPARISON OF CRUISE INDUSTRY IMPACTS .............................................................. 30
1
1 Executive Summary The cruise industry has firmly established itself in New Zealand as a major component of the tourism sector and contributor of economic value. More than just floating hotels, cruise ships have the unique ability to provide a town or city with anything from 100 to over 3,500 new tourists for a day (or more) in one visit. Many of these visitors come ashore with the intent to explore and experience the attractions, shopping and culture of that town, city or region, and are prepared to pay well to do so. This report discusses these economic impacts of the cruise industry on New Zealand regions for the recent 2012-13 season and provides estimates for the upcoming 2013-14 season. The key economic measure of concern is the industry’s contribution to value added (synonymous with GDP). Expenditure and total employment are also covered. This report also provides the base data and analysis for the separate “Economic Impact of the New Zealand Cruise Sector: Report Summary”.
The recent 2012-13 season saw 129 cruises bring 211,400 visitors to New Zealand. This
resulted in over 1.14 million passenger port days across the country and 68,200 exchanges. It
is also important to recognise that over 82,400 crew toured the country while working on-
board the cruise ships, spending 437,000 port days here. The total value added by the
industry across all New Zealand regions was $310m. Passenger related spend contributed
over $212m (68%), crew related spend contributed over $26m (9%) and vessel related spend
contributed almost $72m (23%).
Auckland had the largest value added component with over $116m. This was made up by
$66m from passengers related spend (including the majority of passenger exchanges), $7m
from crew related spend and $43m from vessel related spend. Auckland received over 60%
of the country’s value added from vessel related spend. Bay of Plenty ($37.4m), Wellington
($39.5m), Canterbury ($32.7m), Otago ($31.5m) and Hawke’s Bay ($22.2m) also generated
significant levels of value added. Northland and Southland both had value added from
cruises of over $12m. For all of these regions (excluding Auckland and Southland) passenger
related spend made up around 75% of each region’s total value added. This shows the
importance of making sure passenger demands are well catered for in each region, as this is
primarily where the value of the industry is coming from. For Auckland in particular, this also
means providing adequate infrastructure so that vessels are able to operate with easy access
to all the services required.
For the upcoming season, bookings indicate that 121 cruises will bring 200,000 passengers,
spending just over 1.1 million port days and 81,900 exchanges. There are also expected to be
79,100 crew coming into New Zealand during the season. Although passenger numbers and
cruise numbers are down slightly on the previous season, the total value added is expected
to rise by $1m to $311m. This is primarily due to an increase in the number of both
passenger and crew exchanges.
2
Auckland will see the largest value added impact with an expected $115m (down only $1m
from 2012-13). A decrease in vessel and crew related spend is likely to be almost completely
offset by an increase in passenger related spend, particularly during exchanges. Wellington
($36.1m), Marlborough ($4.2m) and Canterbury ($29.9m) are all expected to see a slight
decrease in activity of $2-3m each, although the value added from cruise remains significant.
Bay of Plenty ($37.0m) and Otago ($32.0m) remain at similar levels to 2012-13. Northland is
expected to see the biggest gain in value added, rising by $5m from last season to $17.1m
for the upcoming season, with a large increase in cruise visits and passenger and crew port
days contributing to this. Gisborne ($2.4m) and Southland ($14.2m) will also see a value
added increase of approximately $2m each.
Knowledge gaps identified in previous studies remain, with uncertainty in a few key areas,
particularly:
Crew spend while in port;
Pre- and post-cruise spend and behaviour by passengers;
Pre- and post-cruise spend and behaviour by crew;
Variance in passenger spend between regions.
These areas should form the focus of future research into the industry, so that the economic
impacts of the cruise industry can be better understood.
3
2 Introduction Globally the cruise industry is experiencing huge growth, with the amount of passengers carried more than doubling in the last decade to over 20 million in 2012. At present there are no signs of this growth slowing down. New ships being built have passenger capacities of over 4,000 and are now more like small cities than hotels, with a wide range of facilities and activities on board. This means the industry is able to cater for a diverse range of tourists on a range of budgets, and taking them around the world to visit different ports and cities.
Understanding the impacts of this developing industry is imperative to helping New Zealand
not only ensure the needs of the cruise industry are met, but also to maximise the value of
this unique form of tourism. The most recent cruise season in New Zealand saw 129 different
cruises bring 211,400 passengers, adding a total of $310m of value to the regional
economies.
As the industry grows in New Zealand, new activity and initiatives are constantly stimulated.
For example, some ports around the country are improving their facilities to handle cruise
ships such as the development of Shed 10 at the heart of Auckland’s waterfront on Queens
Wharf is currently undergoing extensive redevelopment in order to better handle cruise
ships visiting the city. Many businesses (more than just coach lines, airports and hotels) are
benefitting both directly and indirectly from the cruise industry, with space in and around
ports going for a premium, particularly during the summer months of the cruise season.
2.1 Background and Scope
The economic impact of the New Zealand cruise ship season has been assessed every year or
every second year since its inception in 1997. The first study involved an in-depth
investigation of the structure of the industry and the expenditure in the New Zealand
economy resulting from cruise ship activity. This enabled the development of a set of spend
ratios and economic multipliers that reflected the nature of the industry at that time. Those
ratios and multipliers were subsequently applied each year since 1997 – inflation adjusted –
to new cruise and passenger numbers.
In 2003, the ratios and multipliers were updated to reflect changes in the global cruise
industry (namely advancements in ship operation, ship capacity, ship technology and how
ships are serviced locally and globally), changes in the scale of the industry in New Zealand
(over time the number of cruises have increased but also the number and variety of
businesses involved with and servicing the cruise ships whilst in New Zealand ports has
increased), and as more up to date economic input-output tables became available from
Statistics New Zealand. This 2003 base model (with inflation adjustments) was applied up
until the 2007-08 update.
4
The 2011-12 study presented the first look at the regional impacts of the cruise sector across
New Zealand. The study involved in-depth investigation of the structure of the industry and
the expenditure in the New Zealand economy resulting from the cruise ship activity. Many
of the key players in the industry, including providores, ground handlers, air services (airport
and airlines), marine engineers and shipping agents contributed to this study. These
companies provided both financial (actual) and anecdotal (based on experience) data for the
2011-12 cruise season. The data collected in this study (updated where possible) and other
relevant data have been used in the economic modelling of this study to determine the value
of the cruise industry to New Zealand’s regions for the past 2012-13 season and to provide
estimates for the upcoming 2013-14 season.
2.2 Objectives
This report has two main objectives and a number of related secondary objectives. The first
is to establish the size and nature of the cruise industry in New Zealand for the 2012-13
season by collating the number of passengers, ships, and cruises that visited New Zealand,
and to estimate the economic impact the industry has on New Zealand’s regional economies.
This has involved the following:
Estimating the total direct spend generated by ship visits;
Calculating the value added (synonymous with GDP);
Estimating the effective employment generated, as employment counts (ECs);
A second key objective involves providing some estimates of economic impact for the
upcoming 2013-14 season based on pre-bookings and current expenditure ratios. This is to
provide guidance and information to port authorities, local authorities and Cruise New
Zealand who are seeking to secure cooperation and consideration of the needs of this sector
of the tourism industry.
This analysis will be based on the models developed and data gathered for the 2011-12
study, and updated where possible and/or appropriate to do so.
2.3 Report Structure
Section 3 of the report details the methodology used, data collection, industry direct
spend and economic impact.
Section 4 reports on the cruise industry activity for the recent 2012-13 season and
expected activity for the upcoming 2013-14 season. Expectations for the 2014-15
season are also mentioned.
Section 5 presents the economic impact analysis at a regional level for the past
2012-13 season and estimates the economic impact of the upcoming 2013-14
season
Section 6 compares the economic impact results with previous seasons
5
Section 7 discusses the strengths and weaknesses of data used and makes
suggestions on how the modelling can be improved
Section 8 provides a brief summary of the findings of this study.
6
3 Methodology An economic model was specifically developed for this study to measure the impact of the industry on the New Zealand national and regional economies for the past and coming season. The model relies on the Cruise New Zealand industry activity dataset which records passenger numbers, crew, voyages and port calls (see subsection 3.1) for the past seasons. The future season is estimated using future bookings and average occupancy rates from the 2012-13 season.
There are two main steps in assessing the economic impacts. First the direct expenditure is estimated by applying industry expenditure data ratios from 2011-12 season (see subsection 3.2) to activity levels recorded in the past season and forecast activity levels. The second step takes this direct expenditure and applies an Economic Input Output model (2007, inflation adjusted) that calculates the flow on effects of direct expenditure generated by the cruise lines, their passengers and crew whilst in New Zealand. The model is generated at both national and regional level and therefore generates estimates for New Zealand as a whole, as well as for each cruise region.
3.1 Cruise Data Collection
A schedule of all port arrivals by date and vessel was provided by Cruise New Zealand for the
2012-13 season. This dataset includes port visits, ship size, ship class, passenger numbers by
country of origin, crew numbers and exchange numbers (embarking/disembarking and
crew/passengers). Cruise New Zealand was also able to provide detailed forward bookings
for the next season and a directory of the ships which includes vital characteristics (i.e.
Gross Registered Tonnage, passenger capacity, crew capacity). The future season forecast is
determined by combining the passenger and crew capacity per ship from the 2012-13 season
with the forward bookings schedule and the directory of the future ships’ characteristics.
This data provides us with the following information, which feeds into the modelling of
economic impacts:
Passenger port days: This data is split by each port by class of ship and country of
origin. The data is used to estimate passenger spend during a voyage.
Passenger Exchange: This data is used to estimate pre- and post-cruise spend. The
data provides an estimate of the passenger exchanges in each port by class of ship
and country of origin. It also allows an estimate of the current and future demand
for air travel by origin.
Crew port days: This data provides a count of the number of crew days in each port.
Nearly all crew are internationals.
7
Crew exchange by port: This data provides a count of the number of crew
exchanges in each port.
Ship Visits: This data shows the number of ship visits to each port. The data is used
to estimate vessel related spend in each port.
The cruise data described above represents the general activity measures, or the scale of the
industry.
3.2 Ship, Crew and Passenger Expenditure
Having established the scale of the industry in terms of numbers of vessels, cruises, crew and
passengers, the next step is to quantify their impacts on New Zealand’s economy.
Direct expenditure from the cruise industry has been classified into its component parts:
Cruise Vessel related: This covers all expenditure related to the cruise and the
operation of the cruise vessel. It includes ship specific expenses such as; port costs,
marine expenses, bunkering and maintenance, re-provisioning costs, and various
crew related expenses such as crew exchanges, crew accommodation and re-
positioning flights.
Cruise Passenger related: This covers all incidental expenditure that occurs as a
result of a cruise but is not necessarily part of the cruise itself. It includes items such
as; all retail expenditure on shore, all café and restaurant expenditure on shore,
sightseeing day trips (excursions) whilst in port (booked through the ship and
independently) and other services such as visits to doctors. Also included are
expenses relating to passenger flights to join the cruise, pre- and post-cruise
packages booked with the cruise.
Cruise Crew related: This includes all staff spending whilst in port – except that
related to crew changes that are paid for by the cruise lines. It includes spend on:
food, retail goods, personal services, casinos, recreational activities and transport.
Cruise vessels, their crews and passengers spend money on a wide range of goods and
services in the New Zealand economy. It is beyond the scope of this report to investigate the
details of every transaction that has occurred. By necessity averages have been applied and
the spend data has been combined with the activity data to establish per unit average spend.
These averages vary depending on the costs which are measured. The averages used in this
study include per season, per cruise, per port, per GRT, per crew, per passenger, per
exchange and combinations (i.e. average per port by GRT).
The modelling also excludes some ports and stops in the estimation of certain spend types
because these activities cannot occur at the port or stop. As an example, each of the ports
and stops are coded as either having retail opportunity (shopping available) or not, this
avoids impossible outcomes such as passengers or crew spending in stops such as Fiordland,
Kawau Island or Mercury Island where no retail exists. This method also applies to some
cruise related spend which will only occur in certain ports.
8
All the averages are then combined with forward bookings for the next two seasons to
forecast industry activity and output.
3.2.1 Cruise Vessel Related Data
The majority of cruise vessel related spend is well known and robust. Most of the spend by
vessels is recorded directly in financial accounts of shipping agents, bunkering companies,
providores, marine engineers and container handlers.
During the course of this research access was given to financial accounts and data which
records in detail the amount of spend by port and ship for the 2011-12 season. In the
following section four spend categories were defined, Bunkering, Providoring, Crew
Exchange and Other Vessel Spend.
Bunkering
The largest single expenditure by vessels is the associated spend on fuel and bunkering. For
this study a bi-weekly US dollar price per tonne for IFO180 and AGO at Auckland and
Tauranga (April 2009 to April 2010) was used. Cruise New Zealand conducted an email
survey of fuel tonnage taken on board by port for the 2009-10 season. Combining the
tonnage of fuel with the known ship it was possible to estimate the average fuel per GRT by
port. The average price over the season allows an estimation of the fuel value taken on
board per ship per port. This has been adjusted to reflect the current value.
In the modelling, the portion of bunkering expenditure that is related to imports was
removed. Previous work and interviews of bunkering companies have been used to identify
a breakdown of expenditure between domestic products, company margins, operating costs
(wages) and the imported component – i.e. the fuel itself. The money spent on imports was
excluded from the analysis as this money flows offshore resulting in no impact on the New
Zealand economy. As is common in the petrochemical industry, the majority of the sales
value is used to purchase imports (fuel) from overseas. The interviews indicate that a small
proportion of the bunkering (around 10%) stays within the New Zealand economy in the
form of domestic products, company margins and operating costs.
This spend category is significant in terms of the analysis which means that the results from
the model will be sensitive to this data. Around 17% of industry spend is related to
bunkering. While the estimate is based on robust data it is noted that past Cruise New
Zealand data indicates that bunkering expenditure was significantly higher in previous
seasons.
It is likely that bunkering expenditure varies significantly from year to year depending on
where the Australian (swing) and round the world voyages choose to bunker. It is suggested
that further analysis of this spend category be undertaken. As the industry grows and the
type of cruises change, the amount of bunkering in New Zealand is also likely to chang. The
2009-10 report suggested that the global economic recession resulted in altered cruise
itineraries, the outcome of which was a reduced bunkering requirement in New Zealand.
9
Providoring
The centralised global buying policies of cruise lines and the relatively high New Zealand
dollar in relation to the US dollar restricts the ability of New Zealand to supply a wider range
of goods to cruise lines. The majority of food stuffs are freighted into New Zealand in
climate controlled containers and loaded aboard straight off the wharf. This ensures
consistency of product and often ensures that the tastes of passengers are met.
Given that cruise lines are extremely price conscious they are often buying product globally
at specific price points. For example, many are reluctant to pay more than $US3-$US5 for a
bottle of wine. They, in some instances, also require the wine to be available globally. Many
New Zealand suppliers simply cannot meet these requirements and therefore do not get the
opportunity to supply the sector. Often the only time significant volumes of product is used
is when a ship has a specific “New Zealand” night in the dining halls. The value of the New
Zealand dollar also has a significant impact on demand for products through New Zealand
providores, as a higher dollar means it is cheaper to buy product elsewhere.
This has led to a reduction in the volume of product sourced locally and intense pressure on
New Zealand based suppliers to offer the most cost effective options. The economic impact
of this is a reduction overall in the amounts being spent locally and an increase in the
amount of product shipped into New Zealand to meet the needs of cruise passengers and
ships.
The New Zealand providores are primarily asked to provide fresh fruit and vegetables as well
as some dairy and meat products for cruise vessels rather than providing a comprehensive
range of food lines, although any product can be sourced if required. New Zealand
providores also transfer food to cruise ships up in the Pacific Islands. However, these are
supplied to vessels internationally through New Zealand exporters’ distribution channels and
are not included in this study.
This study has used a range of data collected from financial records and anecdotal evidence
from providores and ground handlers from this and previous reports. This data indicates
that providoring is a relatively minor part of the industry within New Zealand. The modelling
shows that providoring makes up less than 1.2% of expenditure in the industry. It would be
desirable to undertake further analysis of providoring activity to confirm and update these
figures with some accuracy. Almost all those interviewed with regards to providoring noted
that the volumes and types of product lines can change drastically from season to season
and is very hard to predict.
Crew Exchange
The exchange of crew occurs predominantly in Auckland with 4,300 crew exchanging during
the 2012-13 season. The spend surrounding this activity includes accommodation, flights,
transport and meals. There is no hard data to establish the exact nature and quantity of this
spend. In this study we have used average airline ticket prices, room prices and average
food and transport expenditure (assuming one night stayed). The model predicts that the
cruise industry will be paying around $1,850 per crew personnel exchanged. The majority of
10
the crew exchange expenditure flows directly offshore as it is associated with airline
transport. It is also worth noting that some crew members undertake pre- and post-cruise
holidays. This additional spend is discussed in the crew spend category (see page 13).
Other Vessel Spend
This category of spend includes most of the spend which is undertaken on behalf of the
cruise vessels by shipping agents and represents about 10% of cruise industry spend in any
one year. This study draws heavily from a large financial data set from the main shipping
agent in New Zealand. The dataset is a financial record of actual spend by cruise ships in
New Zealand waters, which covers over 90 spend categories and over 5,000 data points. The
data is a reasonable sample from which to estimate Other Vessel related spend as it covered
the vast majority of cruise ships. The data set covered berth hire, customs, towage, utilities,
vessel survey, government fees, transport of crew and passengers, baggage handling,
communications and security.
We note that there are three issues with this dataset with respect to coverage. First the
data set does not cover or capture the full spend with respect to repairs, ship equipment and
container handling. Additional meetings were undertaken with some of the businesses
involved, to attempt to fill this gap as detailed below.
The repairs and ship equipment spend was estimated using data from the shipping agent
and anecdotal information from marine engineers. The repairs and ship equipment spend is
an estimate only. As this spend is only a small fraction of overall activity in the industry
(around 0.5%) inaccuracies in the data are unlikely to impact significantly on the results from
the model.
The second data issue relates to container handling, the shipping agents believe that around
75% of handling is managed by the ship. Investigation and interviews of container handlers
confirms this belief and the modelling has been modified to include this accordingly. The
expenditure on container handling is very small relative to the total spend by the industry
(only 0.2%). There is little need to study this spend in detail as it will have little to no impact
on the final result.
The third data issue relates to maintenance expenditures which occur infrequently between
the seasons. Discussions with shipping agents and marine engineers indicates that this could
be up to one million dollars per season or as little as a few hundred thousand dollars. For
the purposes of this study the spend has been estimated using the shipping agent data and
marine engineers anecdotal information. The maintenance spend represents a small
proportion of total spend (only 0.1%).
3.2.2 Cruise Passenger Related Data
Cruise passenger related expenditure is that spent directly by the passenger whilst in port or
on shore based excursions. This covers the excursions themselves and retail expenditure by
passengers on food, entertainment and souvenirs. It also includes spend by passengers or
on their behalf on pre and post cruise activities, which includes exchange activity.
11
Passenger Spend in Port and Pre/Post Cruise: Passenger spend is the most
significant spend category, in the 2012-13 season 51% of total industry direct
expenditure was related to passenger activity in ports or pre/post cruise. This
means that assumptions surrounding passenger spend are critical to the modelling.
The best method of estimation would be to undertake a comprehensive regional
survey of passenger spend behaviour. As this is beyond the scope of this study,
three sources of information have been relied upon to estimate the passenger
spend; New Zealand survey data, international survey data and information from
ground handlers.
New Zealand Survey data: There have been four surveys of cruise passenger
behaviour conducted in New Zealand. The most recent survey was “Cruise Ship
Tourism in Akaroa” run by Lincoln University and published in May 2013. The study
conducted interviews with 433 passengers and local businesses and asked questions
about passenger and crew behaviour and expenditure while in Akaroa Port during
the 2012-13 season. Another significant survey was conducted during the 2006-07
season by Tourism New Zealand. This survey asked a range of questions relating to
activity, experiences and satisfaction whilst cruising in New Zealand and questions
about expenditure. The survey represented a snapshot of a portion of the industry,
as the majority of respondents originated from two vessels (Statendam and the
Sapphire Princess made up around 92% of the 550 responses). The survey,
‘Understanding the Value Created by Cruise Tourism’ (Covec 2012), was conducted
as part of the Economic Value of Tourism (EVT) project for the Ministry of Business,
Innovation and Employment. This surveyed 703 passengers about their spend while
travelling on cruise ships in New Zealand. Spend was reported for different
categories for transit and exchange passengers. The fourth survey of cruise
passengers was conducted for Auckland Regional Council in 2008-09 season. This
survey covered five ships, Aurora, Millennium, Volendam, Seven Seas Mariner and
Silver Shadow which accounts for about 35% of passengers in the season. This
survey was focused on the need for a cruise ship terminal and questioned some 241
passengers. While all of these surveys are useful they do not present a full picture of
the passenger spend geographically or by ship type, and the sample sizes may result
in biased results. This data, along with anecdotal evidence from industry operators
has been used to estimate the length of stay pre- and post-cruise by international
passengers and crew, although this is still an area of reasonable uncertainty for the
industry. It is estimated that the majority of overnight stays between seaport and
airport exchanges are spent in Auckland hotels.
International Surveys: In addition to these domestic surveys there have been many
studies overseas. As many of these studies as possible has been used in this study to
allow better understanding of passenger activity and spend behaviour. The
international studies used in this research include studies from most of the large
cruise markets, including Australia, Florida-Caribbean, Mediterranean, North
America, Pacific Islands and South East Asia cruise markets (see references).
Ground Handlers: Previous studies’ interviews with the main ground handlers
provided information about excursion expenditure. The ground handlers are the
12
largest suppliers of shore excursions to passengers. In the past nearly all passengers
undertook tours from the ground handlers. Over the last few seasons the passenger
behaviour changed markedly. There has since been a large increase in Free
Independent Travellers (FIT). While the ground handlers are the single largest
supplier of shore excursions for cruise passengers, in total, FITs make up slightly
more than two thirds, at present. This change in behaviour creates issues for
suppliers as demand has become less predictable. From the researchers’ point of
view the increase in FIT cruise passengers means that data from the ground handlers
has become less useful for assessing passenger activity and it is anticipated that i-
SITES will become more important as a source of data. However, there is anecdotal
evidence that passenger behaviour varies in each port. The ground handlers believe
that in some ports the majority of passengers undertake organised activities, while
in other ports such as Auckland the majority undertake activities independent of the
cruise or ground handlers. Estimates on organised excursions are robust as they are
based on strong financial data provided by ground handlers.
The model relies on spend assumptions drawn from all three sources and applies different
spend averages by origin of passenger and class of cruise. The model applies spend
behaviour for passengers by seven countries of origin, Australia, Canada, Japan, Germany,
United Kingdom, America and Other (rest of the world). Spend by passengers is then split by
class of ship, where higher class ship passengers are assumed to spend more on average
than passengers of the same origin on a lower class ship. Average spend for the 2012-13
season is estimated at around $130 per port day, which includes retail spend, transport,
café/restaurant, excursion spend and a small amount of overland tours. This spend is
consistent across recent domestic survey data and comparable to international surveys
which indicates that spend per passenger port day is around $168.
It is noted that as this is the most significant spend category the robustness and reliability of
the results could be greatly improved if research time was invested in a survey of passenger
spend and behaviour, particularly between regions.
Passenger Exchange
The passenger exchange spend is predominantly air transport with small spend on land
based exchange (transport, hospitality and other). The passenger exchange spend category
is around 22% of total industry spend in the 2012-13 season although most of the spend
does not stay within the New Zealand economy, because a large proportion of international
airfares flow offshore.
In studies prior to 2009 the flights associated with passenger exchanges had been coded as
industry related spend. The shift in passenger behaviour from organised tours to FIT
behaviour has meant that the majority of flights are now booked independently of the cruise
booking. To reflect the reality of this change in passenger behaviour half of this spend has
been re-coded to cruise passenger expenditure, while the remaining half is accounted for in
the cruise industry expenditure, staying consistent with the past reports.
13
The passenger exchange spend category relies directly on assumptions about spend per
passenger. The ground handlers recently provided some financial and anecdotal information
about the land side exchange costs. Ground handlers suggest that land exchange costs are
around $65 per passenger (transport, hospitality and other costs). As this spend represents
less than 0.2% of total industry spend (when grossed up) there is little chance that these
assumptions will reduce the robustness of the model and the results. The cruise passengers
also spend money on retail, day trips, food and accommodation during the period between
the voyage and entering/leaving the country. This spend is estimated in the model and is
defined as pre/post-cruise expenditure (see page 11).
The cruise passenger expenditure on international airfares was calculated using airline
expenditure, average airfares and market share data collected directly from one of the major
airline operators for previous reports. This data indicates average ticket price by route and
expenditure by route. Combined with the market share it was possible to estimate the
amount of spend that stays in New Zealand. The process required two steps.
First, the proportion of each expenditure type likely to be spent in New Zealand was
estimated for the national flag carrier and overseas airlines, with most expenditure
categories having the opposite assumption for the national flag carrier when
compared to overseas airlines. For example, it was assumed that all airline ticket
value that relates to maintenance, crew wages and overheads is spent in the home
country of each airline. This means that 100% of spend (in these categories) by the
national flag carrier stays within New Zealand, while none of the overseas carriers
spend stays in New Zealand (0%). Fuel spend is the only category where this method
is not applied. It was also assumed that all of the fuel expenditure by airlines is
either spent overseas or flows offshore to purchase imports (0% stays in the New
Zealand economy).
The second step is applying the market share by route to establish the proportion of
tickets purchased on international carriers and domestic carriers that stays in New
Zealand. The proportion of expenditure that stays in New Zealand varies by route
and by the airline home country (i.e. New Zealand national flag carrier and overseas
airlines).
3.2.3 Cruise Crew Related Data
Crew related expenditure is spent directly by the crew whilst in port or on shore based
excursions. This covers the excursions themselves and retail expenditure on food,
entertainment and souvenirs. It also includes crew spend on pre and post cruise activities.
The New Zealand crew related expenditure and activity has not been investigated with great
detail. The crew related expenditure figures reported are estimates and do not have the
rigour that would come from a structured survey of spending habits.
Crew Port Spend
International literature indicates that crew spend anything up to $200 per port day,
averaging around $100. We note that crew may tend to spend more in major ports which
14
means that the average spend in New Zealand is likely to be lower than that shown in the
international studies. The expenditure patterns applied are based on the AEC survey (2007)
and Lincoln University study (2013) and local anecdotal evidence, as these are believed to
provide the closest approximation of the New Zealand situation. The average spend per
crew port day is $57 for the 2012-13 season which represents 5% of total industry spend.
Crew spend estimation is the least robust section of the model, a more accurate result would
be obtained if a survey was undertaken. The decrease in average crew spend from the
previous report (2011-12) is the main reason that the results for the 2012-13 season do not
match the forecasts from that report.
It is also important to note that crew spend averages used in this study may result in an
undercount when measuring the impact in Auckland. The ground handlers and shipping
agents have indicated that much of the crew spend is focused on Auckland, as this port has
retail and shopping facilities that are close to the port as well as a major casino.
Crew Pre and Post Cruise Activities
Crew also undertake pre and post tours around New Zealand. Cruise New Zealand has
previously provided estimates of this spend which is still applied in this study. The model
may be underestimating the size of the pre and post tours as the number of exchanging crew
that undertake these tours may be significantly larger. Currently it is assumed that 3% of
exchanging crew undertake pre and post tours, it is conceivable that the rate could be
significantly higher. In the 2012-13 season 129 crew are assumed to undertake pre or post
cruise tours. These crew members spend on average almost $1,900, which includes spend
on flights, land transport, accommodation, food and retail. The pre and post cruise activity
by crew represents a small fraction of the total spend by the industry (<0.1%) so there is
little point in attempting to measure this category of spend in a more robust way.
3.3 The Economic Model
Market Economics apply a set of Input Output models to the direct expenditure to assess the
indirect and induced effects of spend to produce a total economic impact at both the
national and regional level. Put simply “an input-output model consists of a system of linear
equations, each one of which describes the distribution of an industry’s product throughout
the economy.” (Miller 2009). This branch of modelling is concerned with flows of products
between industrial sectors and consumers (which includes households, government, foreign
trade and intermediate goods for production).
This technique is applied to expenditure estimates for the past and coming season. The
results are adjusted for inflation (real terms), with 2012 used as the base year or year of
comparison (i.e. 2012 dollars).
It is important to note that in studies prior to 2009 the assessment split total expenditure
between cruise related (for which specific cruise industry multipliers have been calculated)
and passenger and crew related (which are passed through standard economic multipliers).
In this study (like 2009-10) the economic impact did not rely on separate multipliers for the
15
industry spend. See Appendix 1 for the details of the model used to calculate the flow on
effects of the cruise industry.
16
4 Cruise Sector Activity This chapter provides an analysis of the cruise sector activity for the previous 2012-13 season and upcoming 2013-14 season. The outlook for the 2014-15 season is also briefly discussed. This chapter covers all information on vessels, passengers and crew.
4.1 National Summary for 2012-13 Season
4.1.1 National Cruise Activity
The 2012-13 cruise season saw 37 different ships visit New Zealand over 129 different
cruises. There were a total of 763 port days across New Zealand, see Figure 4.1.
Figure 4.1: Cruise Activity for 2012-13
Season Cruises Unique Ships Port Days (Vessel)
2012-13 129 37 763
4.1.2 National Passenger Activity
During the 2012-13 season there were a total of 194,000 international passengers on tour
and 17,400 domestic passengers, making up a total of 211,400 passengers. International
passengers spent over 1.1 million port days1 in New Zealand with domestic passengers
spending over 42,000 port days while on tour. This season saw a total of 68,200 passenger
exchanges, most of which were in Auckland, although other regions, such as Southland, saw
a number of exchanges take place. In total, 39,000 passengers embarked on a cruise from
New Zealand, 29,400 disembarked and 143,000 passengers went through New Zealand by
transit, see Figure 4.2.
Figure 4.2: National Passenger Activity for 2012-13
Passenger Origin
Total Passengers
Embark Disembark Transit Exchange Total Port
Days
International 194,000 26,500 26,100 141,400 52,400 1,101,000
Domestic 17,400 12,500 3,300 1,600 15,800 42,000
Total 211,400 39,000 29,400 143,000 68,000 1,143,000
1 A port day is counts individual passenger port day visits, e.g. one passenger that visits 7 ports over 7 days will
count as 7 port days.
17
Australia continues to be the largest source market for cruise passengers visiting New
Zealand, making up 112,500 (or 53%) of total passengers. This is followed by the USA with
17% and the UK making up 8% of passengers. Domestic passengers also make up 8% of the
total, see Figure 4.3.
Figure 4.3: Cruise Passenger Source Markets for 2012-13
Passenger Country of
Origin Number
Proportion of Total
Australia 112,500 53%
Canada 8,100 4%
Germany 4,400 2%
UK 16,800 8%
Japan 1,400 1%
New Zealand 17,400 8%
USA 36,500 17%
Others 14,300 7%
Total 211,400 100%
4.1.3 Crew Activity for 2012-13
There were 82,400 crew in total during the 2012-13 season, resulting in 437,000 crew port
days. Most crew members were on transit while on tour through the country. However there
were 4,300 crew exchanges during the season. See Figure 4.4.
Figure 4.4: Crew Activity for 2012-13
Season Total Crew Embark Disembark Transit Exchange Total Port
Days
2012-13 82,400 2,100 2,200 78,100 4,300 437,000
18
4.2 Regional Summary for 2012-13 Season
At a regional level Auckland saw the most cruises (102) and vessel, passenger and crew port
days for the 2012-13 season. Southland, Wellington, Canterbury, Bay of Plenty and Otago all
had between 82 and 88 cruises visit during the season. This resulted in each of these regions
accommodating between 149,000-165,000 passenger port days and 54,000-61,000 crew
port days. Hawke’s Bay also had a significant level of cruise activity with 61 cruises visiting
the region, leading to just under 100,000 passenger port days and 40,000 crew port days.
There were also several cruises that incorporated Sub-Antarctic islands into their voyage,
while Gisborne and Nelson both received a small number of cruise visits. See Figure 4.5.
Figure 4.5: Regional Cruise Activity for 2012-13
Region Cruises Unique Ships Vessel Port Days Passenger Port Days Crew Port Days
Northland 36 21 38 52,600 23,400
Auckland 102 37 117 179,800 67,900
Bay of Plenty 87 26 93 160,600 59,900
Gisborne 4 1 4 200 100
Hawke's Bay 61 21 62 97,200 40,200
Wellington 88 29 90 164,000 60,900
Nelson 2 2 2 500 400
Marlborough 25 14 31 32,000 11,400
Canterbury 87 24 104 150,200 57,700
Otago 82 24 83 148,800 54,200
Southland 88 26 124 156,000 60,000
Other 6 3 14 1,100 700
19
4.3 2013-14 Cruise Season
4.3.1 National Cruise Activity
The current forecast for the 2013-14 cruise season anticipates that 33 ships will make 121
cruise voyages to and/or around New Zealand. This is expected to result in 739 vessel port
days, see Figure 4.6. This is slightly less than the 129 cruises and 763 vessel port days in New
Zealand that occurred in the 2012-13 season.
Figure 4.6: Cruise Activity for 2013-14
Season Cruises Unique Ships Port Days (Vessel)
2013-14f 121 33 739
4.3.2 National Passenger Activity
For the 2013-14 season there are expected to be 184,300 international passengers on tour
and 15,700 domestic passengers, making up a total of 200,000 passengers. This is
approximately 11,000 less than the past 2012-13 season, and most of this difference comes
from a decrease in international visitor numbers. However, the number of passenger
exchanges is expected to increase by 14,000 to 81,900 total exchanges, with international
visitors accounting for 12,000 of these. International passengers will spend 1.06 million port
days in New Zealand and domestic passengers will spend over 49,000 port days on tour here
in 2013-14. See Figure 4.7.
Figure 4.7: National Passenger Activity for 2013-14
Passenger Origin
Total Passengers Embark Disembark Transit Exchange Total Port
Days
International 184,300 30,500 32,800 121,000 63,300 1,056,000
Domestic* 15,700* 11,100 7,400 2,700 18,600 49,000
Total 200,000 41,600 40,200 123,700 81,900 1,105,000
*Represents NZ passengers that actually cruise around NZ. Does not equal the sum of exchange and transit as some NZ passengers embark or disembark international cruises from/to NZ without travelling around NZ
For the upcoming season American passengers are expected to increase both by total
number and by proportion of visitors from 36,500 (17%) last season to over 38,000 (19%) for
the 2013-14 season. Although there are expected to be less Australian cruise visitors, they
will still account for over half of all cruise passengers with 101,200. The United Kingdom also
continues to be an important source market with 16,900 visitors expected, see Figure 4.8.
20
Figure 4.8: Cruise Passenger Source Markets for 2013-14
Passenger Country of
Origin Number
Proportion of Total
Australia 101,200 51%
Canada 8,200 4%
Germany 4,300 2%
UK 16,900 9%
Japan 700 0.4%
New Zealand 15,700 8%
USA 37,700 19%
Others 15,200 8%
Total 200,000 100%
4.3.3 Crew Activity for 2013-14
It is anticipated that there will be 79,100 crew visit (while working) during the 2013-14 cruise
season, resulting in 444,000 crew port days. Like last season, most crew members will be on
transit during their cruise through the country. It is expected however that there will be
4,500 crew exchanges during the season, which is slightly up on the 2012-13 season. See
Figure 4.9.
Figure 4.9: Crew Activity for 2012-13
Season Total Crew Embark Disembark Transit Exchange Total Port
Days
2013-14f 79,100 2,100 2,400 74,600 4,500 444,000
21
4.4 Regional Summary for 2013-14 Season
Although Auckland is expected to see less cruise activity for the upcoming season than it did
last season, it is still the busiest region for cruise activity. There are currently a total of 89
cruise visits booked to come into Auckland (down 13) and this will result in 162,000
passenger port days and 62,000 crew port days, down by 18,000 and 6,000 each
respectively. Southland is expected to be the next busiest region for cruise, also with 89
cruise visits (up one from the past season). This will bring an expected 157,000 passenger
port days and 63,000 passenger days, both of which are up from the previous season.
Compared to last season Northland can expect to see the largest increase in activity of all the
regions, as eight extra cruises will visit the region. This will bring in over 24,000 extra
passenger port days and 8,600 extra crew port days. Bay of Plenty, Wellington, Canterbury
and Otago all remain important destinations for cruise ships and passengers. However, with
the exception of Otago, these regions (along with Hawke’s Bay) will see a slight decrease in
cruise activity from last season. The addition of five extra cruises to Gisborne will result in a
jump in cruise activity for the region. See Figure 4.10.
Figure 4.10: Regional Cruise Activity for 2013-14
Region Cruises Unique Ships Vessel Port
Days Passenger Port
Days Crew Port
Days
Northland 44 21 46 77,000 32,000
Auckland 89 33 102 162,000 62,000
Bay of Plenty 82 25 84 153,000 60,000
Gisborne 9 2 9 13,000 4,000
Hawke's Bay 53 18 55 97,000 44,000
Wellington 78 22 80 143,000 59,000
Nelson 2 2 3 1,200 1,000
Marlborough 23 10 29 19,000 8,000
Canterbury 78 22 96 134,000 53,000
Otago 87 24 88 147,000 58,000
Southland 89 25 127 157,000 63,000
Other 9 3 20 1,500 800
22
4.5 2014-15 Season Outlook
Cruise industry sources indicate that the outlook for 2014-15 currently is similar to that of
the upcoming 2013-14 season. Early cruise booking information suggests that New Zealand
can expect over 200,000 visitors during the season. It is interesting to note continued growth
of the American passenger market (who are regarded as large spenders while on tour
compared to other source markets) with close to 40,000 expected for the season, almost
15,000 more than the 2011-12 season.
With a significant period of time between now and when the 2014-15 season begins and the
uncertainty around final booking numbers, a full economic impact assessment is not
considered to be of great value at this stage. However, based on early signs, the industry
shows no sign of slowing down and is expected to continue at a similar activity level to what
we are currently seeing. With this in mind, we can expect similar economic benefits that
New Zealand is currently seeing to continue in the short-term. The challenge of growing the
industry becomes about maximising the passenger and crew experience while they are here
and understanding the different demographics of visitors.
23
5 Economic Impact Analysis This chapter presents finding of key economic measures2 for the 2012-13 and 2013-14 cruise seasons, at the regional level. These are expenditure, value added, and GDP.
5.1 Economic Impacts for the 2012-13 Season
5.1.1 Expenditure
Expenditure data is reported in two parts, firstly as ‘Total Expenditure’ which incorporates
the total amount spent on ship fuel and international airfares. The expenditure on airfares,
fuel and imorts is then removed as the money typically does not stick to the New Zealand
economy and goes straight overseas. The expenditure that sticks to New Zealand is then
presented as ‘Total Net Expenditure’ and is the more relevant measure in terms of impact on
New Zealand and its regions.
Total expenditure for 2012-13 was $550.7m. This was comprised of $283.1m from passenger
spend, $24.1m from crew spend and $243.5m from vessel spend. At the regional level
Auckland was responsible for $369.7m of this direct spend with $153m related to passenger
spend, $6.8m related to crew spend and $209.9m related to vessel spend. The majority of
vessel spend occurred in Auckland. Bay of Plenty accounted for the second highest total
direct expenditure with $42.7m ($24.7m passenger related, $3.3m crew related and $14.6
vessel related). For the remaining regions (with Southland being an exception) passenger
spend contributed the vast majority of total expenditure. See Figure 5.1.
Figure 5.1: Total Expenditure for 2012-13
Total Expenditure* Passenger Related Crew Related Cruise Vessel
Related Total
Northland $ 8.7 $ 1.3 $ 0.7 $ 10.7
Auckland $ 153.0 $ 6.8 $ 209.9 $ 369.7
Bay of Plenty $ 24.7 $ 3.3 $ 14.6 $ 42.7
Gisborne $ 0.0 $ 0.0 $ 0.0 $ 0.0
Hawke’s Bay $ 15.0 $ 2.3 $ 2.5 $ 19.8
Wellington $ 27.4 $ 3.5 $ 4.0 $ 35.0
Nelson $ 0.1 $ 0.0 $ 0.0 $ 0.1
Marlborough $ 3.9 $ 0.6 $ 0.9 $ 5.5
Canterbury $ 23.1 $ 3.3 $ 2.4 $ 28.8
Otago $ 20.6 $ 3.1 $ 3.9 $ 27.6
Southland $ 6.6 -$ 0.2 $ 4.5 $ 10.8
Total $ 283.1 $ 24.1 $ 243.5 $ 550.7 *Incorporates total amount spent on ship fuel and International airfares
2 Values reported in $2007, as per the latest available regional Input-Output economic data from Statistics NZ.
24
The total net expenditure for the 2012-13 season was $273.8m. This was made up of
$185.2m of passenger spend, $22.3m of crew spend and $66.13m of vessel spend. Auckland
region accounted for $110.5m of this, over 3 times the amount of any other region. This is
due to Auckland not only having the highest level of passenger and vessel visits, but also
where the most exchanges and vessel related purchasing takes place. Auckland’s total
passenger related net expenditure was $61.5m (56% of net expenditure in the region), crew
related net expenditure totalled $6.6m (6% of net expenditure in the region) and vessel
related net expenditure came to $42.4m (38% of expenditure in the region). Bay of Plenty,
Wellington, Canterbury and Otago all have total net expenditure of between $26m and
$32m. Passenger related net expenditure typically accounted for around 75% of the
expenditure in these regions. See Figure 5.2.
Figure 5.2: Total Net Expenditure for 2012-13
Total Net Expenditure*
Passenger Related Crew Related Cruise Vessel
Related Total
Northland $ 8.2 $ 1.2 $ 0.7 $ 10.1
Auckland $ 61.5 $ 6.6 $ 42.4 $ 110.5
Bay of Plenty $ 23.5 $ 3.0 $ 5.3 $ 31.9
Gisborne $ 0.0 $ 0.0 $ 0.0 $ 0.0
Hawke's Bay $ 14.2 $ 2.1 $ 2.5 $ 18.8
Wellington $ 26.1 $ 3.2 $ 4.0 $ 33.3
Nelson $ 0.1 $ 0.0 $ 0.0 $ 0.1
Marlborough $ 3.7 $ 0.6 $ 0.9 $ 5.2
Canterbury $ 21.9 $ 3.0 $ 2.4 $ 27.3
Otago $ 19.5 $ 2.8 $ 3.9 $ 26.2
Southland $ 6.5 -$ 0.3 $ 4.1 $ 10.4
Total $ 185.2 $ 22.3 $ 66.3 $ 273.8 *For the purposes of an Economic Impact Assessment the majority of direct expenditure on airfares and ship fuel are excluded.
5.1.2 Value Added
The total value added3 to the economy (synonymous with GDP contribution) by the cruise
industry for the 2012-13 season was over $310m. Passenger spend contributed over $212m
(68%), crew spend over $26m (9%) and vessel spend contributing almost $72m (23%).
Auckland had a total value added component of $116m, made up by $66m from passenger
related spend, $7m from crew related spend and almost $43m from vessel related spend.
Wellington and Bay of Plenty were the next largest regions with a value added total of $39m
and $37m each respectively. Passenger related spend contributed almost $31m for
Wellington and $28m for Bay of Plenty. Crew related spend contributed just under $4m for
each region and Vessel related spend contributed $6m in Bay of Plenty and $5m in
3 The national total presented is the sum of the regional totals. In some instances this may lead to double
counting of impacts due to shared services between regions. However we estimate the difference to be <2% of
the reported value.
25
Wellington. Canterbury and Otago both had total value added of over $30m and Hawke’s
Bay had over $22m. Passenger spend was the most important factor for these regions.
Southland and Northland both had value added of over $12m, however Southland had a
much higher component of vessel related spend with $5m, compared to Northland’s $0.8m.
This is due to the number of turnarounds that happen in Southland, with several ships
loading supplies before heading on to sub-Antarctic islands. See Figure 5.3.
Figure 5.3: Value Added for 2012-13
Value Added Passenger Related Crew Related Cruise Vessel
Related Total
Northland $ 9.8 $ 1.5 $ 0.8 $ 12.1
Auckland $ 66.3 $ 7.3 $ 42.7 $ 116.3
Bay of Plenty $ 27.7 $ 3.7 $ 6.1 $ 37.4
Gisborne $ 0.0 $ 0.0 $ 0.0 $ 0.1
Hawke's Bay $ 16.6 $ 2.5 $ 3.1 $ 22.2
Wellington $ 30.7 $ 3.9 $ 5.0 $ 39.5
Nelson $ 0.1 $ 0.0 $ 0.0 $ 0.1
Marlborough $ 4.3 $ 0.7 $ 1.1 $ 6.1
Canterbury $ 26.1 $ 3.7 $ 3.0 $ 32.7
Otago $ 23.3 $ 3.5 $ 4.8 $ 31.5
Southland $ 7.6 -$ 0.3 $ 5.0 $ 12.3
Total $ 212.4 $ 26.3 $ 71.6 $ 310.3 *For the purposes of an Economic Impact Assessment the majority of direct expenditure on airfares and ship fuel are excluded.
5.1.3 Total Employment
The total direct and indirect employment supported by the cruise industry for the 2012-13
season was 5,330 jobs. As Auckland had the highest spend, it too had the most jobs
supported with 1,7234. Wellington was next with 737, followed by Bay of Plenty (684),
Canterbury (614) and Otago (614). Northland, Hawke’s Bay, Marlborough and Southland all
had over 100 jobs supported by the cruise industry. See Figure 5.4.
4 This figure is lower than that forecast in the 2012 report, that although value added was slightly higher (by
approx. $1m), it was across different spend structures, where spend in different industries have different impacts
on the level of supported employment.
26
Figure 5.4: Total Employment Supported by Cruise for 2012-13
Total Employment
Total
Northland 237
Auckland 1,723
Bay of Plenty 684
Gisborne 1
Hawke's Bay 415
Wellington 737
Nelson 2
Marlborough 111
Canterbury 614
Otago 583
Southland 223
Total 5,330
27
5.2 Economic Impacts for the 2013-14 Season
5.2.1 Expenditure
Total expenditure for the 2013-14 season is expected to be $548m. This figure is $3m down
on what was seen for the past season. The big contributor to this difference is a decrease in
vessel related spend, down $25m overall to $219m. However, both passenger and crew total
direct expenditure are up, by $20m and $1m each respectively. While this decrease in
expenditure is shared across several regions, with Auckland seeing the largest decrease
overall of $7m, other regions are expected to see an increase such as Northland and Bay of
Plenty. This will be discussed in more detail during the total expenditure analysis. See Figure
5.5.
Figure 5.5: Total Expenditure Forecast for 2013-14
Total Expenditure* Passenger Related Crew Related Cruise Vessel
Related Total
Northland $ 12.3 $ 1.8 $ 0.9 $ 15.1
Auckland $ 173.8 $ 6.3 $ 182.4 $ 362.4
Bay of Plenty $ 24.0 $ 3.4 $ 18.2 $ 45.6
Gisborne $ 1.7 $ 0.2 $ 0.2 $ 2.1
Hawke's Bay $ 15.0 $ 2.5 $ 2.5 $ 20.0
Wellington $ 25.0 $ 3.4 $ 3.6 $ 31.9
Nelson $ 0.2 $ 0.0 $ 0.0 $ 0.2
Marlborough $ 2.7 $ 0.4 $ 0.6 $ 3.7
Canterbury $ 21.1 $ 3.0 $ 2.2 $ 26.3
Otago $ 20.8 $ 3.3 $ 3.9 $ 28.0
Southland $ 7.0 $ 1.1 $ 4.3 $ 12.4
Total $ 303.4 $ 25.6 $ 218.8 $ 547.8 *Incorporates total amount spent on ship fuel and International airfares
Although total expenditure for 2013-14 is expected to be down on 2012-13, the total net expenditure
that sticks to New Zealand is actually expected to increase slightly, by around $300,000. This is due in
part to the majority of the decrease in total direct expenditure (such as on fuel) not sticking to the New
Zealand economy anyway (i.e. there will be less money going off-shore), and also from the increase in
passenger exchanges. Both passenger and crew related total net expenditure are expected to increase
by $4m and $1m each respectively, while vessel related net expenditure will decrease by $5m. This is a
result of fewer cruises visiting New Zealand, but an increase in passenger exchanges and crew port
days. Auckland was expected to have a total net expenditure of just under $110m, an overall decrease
of $1m due to vessel related net expenditure decreasing by $5m and passenger related net expenditure
increasing by $4m. Northland is expected to see the largest rise in total net expenditure, up $4m to over
$14m. This comes from a significant increase in cruise visits and particularly passenger port days. Other
regions forecasted to see an increase include Gisborne and Southland with an additional $2m each. See
Figure 5.6.
28
Figure 5.6: Total Net Expenditure Forecast for 2013-14
Total Net Expenditure*
Passenger Related Crew Related Cruise Vessel
Related Total
Northland $ 11.7 $ 1.7 $ 0.9 $ 14.3
Auckland $ 65.9 $ 6.1 $ 37.6 $ 109.6
Bay of Plenty $ 22.9 $ 3.1 $ 5.6 $ 31.6
Gisborne $ 1.6 $ 0.2 $ 0.2 $ 2.0
Hawke's Bay $ 14.2 $ 2.3 $ 2.5 $ 19.0
Wellington $ 23.7 $ 3.1 $ 3.6 $ 30.4
Nelson $ 0.2 $ 0.0 $ 0.0 $ 0.2
Marlborough $ 2.5 $ 0.4 $ 0.6 $ 3.6
Canterbury $ 20.0 $ 2.8 $ 2.2 $ 24.9
Otago $ 19.6 $ 3.0 $ 3.9 $ 26.6
Southland $ 6.9 $ 1.1 $ 4.1 $ 12.0
Total $ 189.2 $ 23.7 $ 61.2 $ 274.1 *For the purposes of an Economic Impact Assessment the majority of direct expenditure on airfares and ship fuel are excluded.
5.2.2 Value Added
Overall, the total value added from the cruise industry is expected to increase by $1m for the
2013-14 season to $311m. Passenger related value added is expected to increase by $4m,
crew related value added by $2m, and vessel related value added decreasing by $5m. Again
Auckland has the highest value added of any region with almost $116m, however this is
down by $1m compared to the 2012-13 season, with a $4m increase in passenger related
value added not quite offsetting a decrease in value added from both crew and vessel
related activities. Bay of Plenty, Wellington, Otago and Canterbury continue to be important
regions for the cruise industry, all contributing $30m or more to the overall value added
figure, most of which is passenger related. All of these regions however (except Otago) are
expected to have a slightly lower (from$1m-$3m) value added component than the 2012-13
season. Northland is expected to see the largest increase (both proportionally and absolute
value) in value added, increasing overall by $5m, $4m from passenger related spend and
$1m from crew related spend. Increased passenger spend in Gisborne is expected to
increase the value added to the region by $2m. See Figure 5.7.
29
Figure 5.7: Value Added Forecast for 2013-14
Value Added Passenger Related Crew Related Cruise Vessel
Related Total
Northland $ 13.9 $ 2.0 $ 1.2 $ 17.1
Auckland $ 70.7 $ 6.7 $ 38.1 $ 115.5
Bay of Plenty $ 27.0 $ 3.8 $ 6.2 $ 37.0
Gisborne $ 1.9 $ 0.3 $ 0.2 $ 2.4
Hawke's Bay $ 16.5 $ 2.7 $ 3.1 $ 22.4
Wellington $ 28.0 $ 3.7 $ 4.4 $ 36.1
Nelson $ 0.2 $ 0.1 $ 0.0 $ 0.2
Marlborough $ 2.9 $ 0.5 $ 0.8 $ 4.2
Canterbury $ 23.8 $ 3.4 $ 2.7 $ 29.9
Otago $ 23.4 $ 3.7 $ 4.9 $ 32.0
Southland $ 8.0 $ 1.2 $ 4.9 $ 14.2
Total $ 216.3 $ 28.0 $ 66.5 $ 310.8 *For the purposes of an Economic Impact Assessment the majority of direct expenditure on airfares and ship fuel are excluded.
5.2.3 Total Employment
The cruise sector is expected to directly and indirectly support a total of 5,361 jobs for the
upcoming 2013-14 season. This is an increase of 32 jobs over the 2012-13 season. Auckland
still has the highest number of jobs supported with 1,714 which is a decrease of 9 from last
season. Northland will have 334 jobs supported, with an increase of 97 jobs over the
previous season, the largest of all the regions. Gisborne and Southland are also expected to
see significant increases in employment support with 47 and 40 supported jobs respectively.
Other significant changes from the 2012-13 season include expected decreases of 59 from
Wellington, 52 from Canterbury and 35 from Nelson. See Figure 5.8.
Figure 5.8: Total Employment Forecast for 2013-14
Total Employment
Total
Northland 334
Auckland 1,714
Bay of Plenty 672
Gisborne 48
Hawke's Bay 419
Wellington 678
Nelson 5
Marlborough 76
Canterbury 562
Otago 591
Southland 263
Total 5,361
30
6 Annual Trend of Economic Impacts Looking at the impact of the cruise industry over the previous ten seasons (see Figure 6.1), it
can be seen that after significant growth in the early 2000’s, and continued steady growth in
recent years, the industry has established itself as an important contributor to the New
Zealand economy, with recent studies showing the importance at both a national and
regional level. Due to methodology adjustments, changing data sources and data availability
over the years, results between reports are not directly comparable. However what can be
seen is general growth of the industry and how over the last few season it has remained a
strong contributor to the economy.
Figure 6.1: Historical Comparison of Cruise Industry Impacts
Season* Total Net
Expenditure** Value Added Employment***
2002-2003 125 114 1,856
2003-2004(e) 93 86 1,389
2004-2005 91 82 1,256
2005-2006 160 151 2,367
2006-2007 136 121 1,856
2007-2008 223 199 3,100
2008-2009(e) 262 239 3,579
2009-2010 169 191 3,093
2010-2011 196 223 3,606
2011-2012 251 289 4,961
2012-2013 274 310 5,330
2013-2014(f) 274 311 5,361 *This table is presented for trend purposes only. Changing data sources and methodology adjustments over time mean that the annual impacts are not directly comparable. **2007 $M, previous results converted from historic values using CPI. *** FTE 2002-2014 converted to EC
31
7 Gaps and Further Work During this study and previous studies on the New Zealand cruise industry a few key data gaps continually emerge. This section discusses these data gaps and suggests possible further work that would help with a better overall understanding of this industry.
7.1 Cruise Vessel
Cruise vessel activity is the most well understood part of the industry. There are however
two key areas of concern: providoring and irregular spend.
Providoring: The providoring spend has been estimated using financial data and
anecdotal evidence from past interviews with a number of providores. The data
used in this model indicates that providores provide approximately $5m worth of
product to cruise ships over the course of a season. It was noted by all providores
interviewed that this figure and the volume of different products supplied changes
season to season, and that they face a high level uncertainty about future sales. It
was noted that there is negative impact of having a high New Zealand dollar, where
it becomes more economically viable for ships to import more of their product needs
from the cruise ship operating hubs (typically in Miami, USA), rather than purchase
locally.
Irregular spend: The industry provided detailed and robust financial information for
the 2011-12 season, where the ratios developed then were used again in this study.
However there is a concern that some spend by the industry is lumpy in nature and
the reliance on a single year of data may create artificial results. It is recommended
that the study uses a time series of data (multiple years of financial accounts) to
smooth out irregular spend patterns.
There are also several small spend categories (maintenance, container handling etc.) which
are based on assumptions and anecdotal data from the industry. However as these spend
categories are small (less than 0.5%) relative to the total spend in the cruise industry the
overall findings are not sensitive to these assumptions. It is recommended that the existing
estimation is sufficient and further analysis of these costs would provide little to no
improvement to the modelling.
The study has identified two streams of research that can be undertaken to improve the
modelling and understanding of the cruise vessel spend. First the survey of providores
suggested would be relatively easy to undertake and could be completed in less than a week.
The second research stream would be more difficult as the creation of a historic time series
is likely to be time consuming with much of the burden falling on the shipping agents and
port authorities.
32
7.2 Passenger Behaviour
The spend related to passenger activity is the largest industry spend and as such, requires
the most research as the results from the model are sensitive to assumptions about
passenger spend. There are two data gaps, non-excursion port spend per region, and
pre/post cruise activity. Note that for the 2011-12 report robust data and detailed financial
information was supplied by ground handlers, giving an accurate representation of
passenger excursion spend, which was also used for this study. However this will need to be
updated for future studies.
Non-excursion port spend: The model relies on a national level survey of cruise
passengers (Covec 2012), a Canterbury region specific survey (Lincoln University
2013), anecdotal information from Regional Tourism Operators and international
literature for the setting of port spend. Averages applied per passenger and port day
may not be truly representative of actual spend in each region. The model is
sensitive to this spend category and further research will increase the robustness of
the model. The best technique for understanding passenger spend is either a
national survey which covers significant numbers of passengers from all different
types of ship, what regions this money was spent in, and what types of products, or;
multiple regional specific surveys undertaken when ships are in port, which may help
to give a clearer picture on what is happening in different ports & regions across the
country.
Pre/post cruise activity: The model relies on anecdotal evidence and the previous
Tourism New Zealand survey to establish pre and post cruise activity. It is of concern
that the small sample size in that survey may have biased the results, as well as
being slightly outdated now as the cruise industry has changed significantly since. An
extensive survey of passenger activity would provide more robust data on which to
base the estimation of pre and post cruise activity.
It is believed that both these studies will be relatively expensive and time consuming,
particularly at the national level. Regional councils and tourism operators may be better
placed to get a picture of their specific region, slowly building up a national picture.
7.3 Crew Behaviour
The crew expenditure and exchange behaviour in New Zealand has not been studied in great
detail at any point in time. Crew related expenditure figures are estimates and do not have
the robustness that would come from a structured survey into their spending habits. It is
suggested that this part of the industry deserves some investigation and a survey of crew
would be the best way forward. The survey could be undertaken using an internet portal to
reduce the cost and would not need to cover as many ships types as crew activity in each
ship is expected to be similar.
33
8 Conclusions The recent 2012-13 season saw 129 cruises bring 211,400 passengers into and/or through
New Zealand. There were also 82,400 crew on tour during the season. This resulted in a total
value added to the New Zealand economy of $310m. Of this figure, $212m (68%) was related
to passenger spend, $26m (9%) was related to crew spend and $72m (23%) was related to
cruise vessel spend. Total employment supported by the industry was 5,330 jobs.
At the regional level Auckland received the highest contribution to the economy with $116m
in total. This was in part due to it having the highest level of cruise activity but also in part to
Auckland alone benefitting from almost 65% of cruise vessel related total net expenditure.
Other regions that saw significant value added benefits from the cruise industry included Bay
of Plenty with $37m, Wellington with over $39m, Canterbury with almost $33m, Otago with
over $31m and Hawke’s Bay with over $22m. For these regions passenger related spend
made up around 75% of the economic impact, crew around 11% and vessel related making
up the balance (these figures are approximate and each region is slightly different).
Northland and Southland both received over $12m in value added, although for Northland
the majority of that came from passenger related spend, while for Southland vessel related
spend had a large part (41%) to do with its economic impact.
For the upcoming 2013-14 season a drop in the number of cruises from 129 to 121 cruises is
expected to reduce the number of passenger arrivals 200,000 and 79,100 crew. A higher
number of turnarounds are however expected resulting in a higher expected value added
economic impact of $1m to $311m. The number of jobs supported by the industry is
expected to increase by 31 to 5,631.
At the regional level Auckland will still see the largest value added impact with $115m. A
decrease in vessel related spend is expected to be offset by an increase in passenger related
spend. Wellington, Marlborough and Canterbury are all expected to see a slight decrease in
activity of $2-3m each. Northland is expected to see the biggest gain in value added
economic impact, rising by $5m from last season to $17m for the upcoming season, with a
large increase in cruise visits and passenger and crew port days. Gisborne and Southland will
also see a value added increase of $2m each.
Issues such as crew spend, pre- and post-cruise passenger spend and behaviour and how
passenger spend varies throughout the different regions continue to be points of uncertainty
in the data and modelling process. Two recent studies have attempted to close knowledge
gaps around passenger spend while in port, however it is important further studies continue
to be undertaken, especially around these problem areas identified where little is known, as
the more is understood about the industry, the better equipped stakeholders around New
Zealand regions are able to provide for the cruise industry and maximise the value they are
able to make from this important tourism sector.
34
Appendix 1: Economic Models and Multiplier Analysis
The basis of this study is a multiplier analysis of the flow on effects arising from direct expenditure
generated by cruise ships, passengers and crew. A national level 88 sector Input Output model of the
New Zealand economy has been applied. The model is based on Statistics New Zealand’s Inter-Industry
Study carried out in 1995-96. M.E updated the model using Supply Use tables from 2002/3 and 2006/7.
The inter industry study collected transaction information between different sectors of the economy so
that it is possible to tell how much one sector purchases from another in order to produce final outputs.
This study collected information across 88 sectors of the economy allowing multipliers to be calculated
at the 88 sector level across regions.
INPUT-OUTPUT MODELLING
The origins of input-output modelling may be traced back to the Physiocrats of the 18th Century.
Francois Quesnay’s Tableau Economique of 1758 traced successive rounds of wealth generated by
agricultural expenditure. While the Tableau Economique investigated the concepts of circular flow and
general equilibrium, it was not until another Frenchman, Leon Walrus in his Elements d’Economie
Politique Pure of 1874, that a detailed theoretical framework for analysing economic interdependence
was created. Contemporary input-output economics is attributed to Wassily Leontief, a Noble prize
winning American economist, who in 1936 published an input-output table for the American economy.
Leontief simplified the Walrus model to develop a theory of production based on the general
equilibrium concept of economic inter-dependence.
The Input-Output Table
An input-output table describes inter-industry linkages in an economy for a given period. Information
on such linkages is normally obtained from national economic accounts, which are, in turn, derived
from a national census of production. Information on final demand consumption and expenditure on
primary inputs is also included. Input-output tables share an intimate relationship with the national
accounts and as such allow the derivation of standard economic indicators such as Balance of Trade,
Gross Domestic Product (GDP), contribution to GNP by sector, and gross output by sector.
Conventionally, an input-output table is presented in a matrix format, with each industry assigned a row
and column. The element xij in row i column j indicates the volume of goods flowing from industry to
be used as inputs in industry . In other words, each row indicates the flow from each industry to all
other industries and to final demand, while each column indicates the purchasing pattern of each
industry.
An input-output table may be divided vertically into two parts: the part on the left represents the inputs
into the production process of the productive industries, while the part on the right represents the sales
to the final disposal sectors. Each part may further be subdivided horizontally into two sections so as to
distinguish between intermediate inputs and primary inputs. The resulting input-output table consists
of four quadrants (labelled I to IV) (
Figure A 2).
i
j
35
Figure A 1: An Input-Output Table
Quadrant I, known as the processing or intermediate demand quadrant, represents the flows of
transactions between industries used in the intermediate stages of production. A key characteristic of
the intermediate demand quadrant is that there must be the same number of rows as columns.
Furthermore, the total value of output of each intermediate industry must always be equal to its total
expenditure on inputs.
Quadrant III displays the sales by each sector to final demand, i.e. the part of an industry’s output not
used by another industry as an input. This quadrant describes the consumer behaviour of a number of
important markets including household consumption, government consumption, increases in stock,
capital formation, and exports.
Quadrant II describes the primary inputs used in each industry. These inputs are described as ‘primary’
because they do not form part of the output of intermediate production as defined by the rows forming
quadrants I and III. The following primary input categories are typically included: subsidies5, indirect
taxes, depreciation, wages and salaries, gross operating surplus and imports. The total of the primary
inputs for each industry less imports represents the value added to commodities consumed in the
production process ie. the contribution made by that sector to GDP.
Quadrant IV displays the primary inputs that are directly used by final demand sectors. This includes
non-market transfers such as benefits and pensions as well as imports of commodities for consumption
by households and investors.
Input-output tables are often converted into technical coefficient format that more clearly represents
the purchasing patterns of industries. This is undertaken by dividing column elements by their
respective column totals. Such coefficients represent the first round inputs from each row industry i
following a unit increase in output of any row industry i per unit of output produced by column industry
j.
Assumptions of Input-Output Modelling
5 Subsidies are entered with a negative sign as they represent receipts, not expenses.
Industry Industry Industry Sub House Govt. Other Exports Sub Total
1 ... j ... n Total -holds Expen- Final Total Gross
diture Demands Output
Industry 1
Industry ... i ...Quadrant I
x ijQuadrant III X i
Industry n
Sub Total
Labour
Value Added Quadrant II Quadrant IV
Other Primary Inputs
Imports
Sub Total
Total Gross Input X j
36
Four major assumptions make the derivation of input-output tables feasible:
Homogeneity. This states that each industry in an input-output table produces only
one output. Implicit in this assumption is the notion that all businesses that
constitute an industry use the same product mix in production of this one output.
Additivity. This states that the total effect of carrying out several types of
production is the sum of the separate effects. This implies the absence of any
synergistic effects and external economies (or diseconomies) of scale.
Linearity. This presumes that the ratio of inputs to outputs decreases and increases
in a linear nature. This also infers that there are no external economies (or
diseconomies) of scale.
Fixed coefficients of production. This states that inputs are required in fixed
proportions to outputs in each industry. Inherently this assumes that there are
constant returns to scale in production and that the elasticity of substitution
between inputs is zero.
Multipliers
Multipliers measure the flow on effects of direct expenditure in the economy. They measure two things
specifically;
The Indirect effect of direct spending. The indirect effect occurs when suppliers to
the cruise industry increase their demands for goods and services from their
suppliers in order to meet the increased demand from the cruise industry. For
example, a providoring company receives an order for $20,000 worth of fresh fruit
and vegetables from a cruise line. They immediately place orders with a range of
suppliers for the goods. These suppliers in turn, purchase more seed, fertiliser and
machinery in response to the increased sales they are making. The indirect or Type I
multiplier attempts to capture all these transactions in a single “multiple”. In effect
it measures how many times a single dollar of increased demand is multiplied
through the economy.
The Induced effect of direct and indirect spending. The induced effect captures
increased spending due to increases in wages and salaries paid to workers and
owners indirectly, and indirectly affected sectors. As people earn more money for
the additional work they do, they spend more. The induced multiplier attempts to
capture this round of increased economic activity. The induced multiplier is usually
added to the indirect multiplier to produce a Type II multiplier that measures the
total economic effect of additional spend.
Economic impacts can be measured a number of ways, therefore multipliers have been calculated for
three different aspects of economic activity;
Gross Output. Gross output measures the total activity within the economy. It is
the broadest measure of economic activity and does not necessarily provide an
accurate measure of economic benefits. For example, if an economy has a very high
import component then a gross output measure might be high, however as most of
37
the goods are not produced locally the economy is creating very little internal
wealth.
Value Added. Value added is the most appropriate measure of economic impact. It
measures the level of value that is generated within an economy. It is closely related
to GDP, the standard measure of economic performance of an economy.
Employment. This is measured in employment count (EC).
The balance of this appendix describes the derivation of regional input-output models, and multipliers
developed for impact analysis. It outlines the fundamentals of input-output modelling, including
definitions and structures and the methodology that generates sub-national economic accounts
through a series of mechanical steps. Finally, the key aspects of multiplier analysis are described.
Regionalisation Methodology
The various approaches available for generating regional input-output tables are usually categorised as
‘survey’ or ‘non-survey’. In survey methods, the elements which make up the transactions table are
generated from primary data gathered through the use of various survey techniques and are often
considered the most attractive in theoretical terms. In non-survey methods, transactions table
elements are derived from other tables by various adjustment techniques. These methods are
employed when data is unavailable and/or time and cost constraints exist.
The economic accounts used for this study have been derived using a non-survey approach. This
approach employs a series of mechanical steps to reduce national coefficients to regional equivalents,
but also provides opportunities for insertion of superior data. The economic account construction
methodology is shown in
Figure A 2.
38
Figure A 2: The Economic Account Methodology
Phase I: Adjustments to the National Table
In this phase an appropriate national input-output table is chosen and adjustments for aggregation bias,
inflation, price changes and international trade are made.
Step 1: Select a National Input-Output Table
The economic accounts were generated from the 1995/96 Inter-Industry Study of the New Zealand
Economy published by Statistics New Zealand (SNZ). This study has been updated by Market Economics
using employment and output information collected by SNZ to 2003/04. This study covered 126
sectors, with 9 primary input and 7 final demand categories. All sector definitions are compatible with
the New Zealand Standard Industrial Classification (NZSIC) system.
Step 2: Adjustment for Aggregation Bias, Inflation and Price Changes
Reduction of national coefficients to form regional equivalents almost always results in aggregation
bias. This occurs because the constituent businesses that form a sector do not have homogenous
output, even though they are classified in the same sector. Thus the more aggregated an industry, the
PHASE I ADJUSTMENTS TO THE NATIONAL TABLE
Step 1: Select a National Input-Output Table
Step 2: Adjustments for Aggregation Bias, Inflationand Price Changes
Step 3: Adjustment for International Trade
PHASE II ADJUSTMENTS FOR REGIONAL IMPORTS
Step 4: Calculation of Non-Competitive Imports
Step 6: Definition of Regional Sectors
Step 5: Calculation of Competitive Imports
PHASE III DERIVATION OF TRANSACTIONS TABLE
Step 7: Derivation of Intermediate Demands
Step 8: Derivation of Final Demands
39
greater the over-estimation of self-sufficiency. While aggregation bias cannot be eliminated, it may be
partially overcome by sector disaggregation.
This adjustment was undertaken using SNZ’s 1995/96 Inter-Industry Study of the New Zealand
Economy, which allowed for a 126 sector breakdown. Specifically:
The 126 sectors for 1995/96 were aggregated to form 123 sectors that, in turn, could be uniquely
aggregated to form the 88 sectors for 2001/02.
To obtain a national input-output table by 123 industries for 2001/02 the following simple extrapolation
method was used:
Productivity estimates (output per employment count (EC)) were calculated for the years 1995/96,
1997/98, 2000/01 and 2001/02.
For each of these years the Producers’ Price Index (PPI) was used to convert sector output, at the 123
sector level, into constant dollars. This allowed for changes in inflation and prices.
These output estimates were then aggregated and compared with Statistics New Zealand’s SNA figures,
and adjustments were made where deemed appropriate.
Final demand and primary input totals for 2001/02 were obtained from Statistics New Zealand.
Components of final demand for aggregated sectors were applied to the 123 sectors, assuming equal
splits across like sectors, to determine estimates of primary inputs for each sector.
Step 3: Adjustment for International Trade
Adjustments are made for international trade using Statistics New Zealand’s Harmonised System, which
disaggregates physical imports and exports into 10,000 commodities. As exports are coded by sector it
is possible to obtain an exact match with the 123 sectors used at the national level. Matrix
manipulations allow categorisation of the imports as sector inputs.
Phase II: Adjustment for Regional Imports
In this phase approximations of regional coefficients were produced through the calculation of non-
competitive and competitive imports.
Step 4: Calculation of Non-Competitive Imports
Where production in sector i does not occur within a region then any inputs from sector i into sector j
are treated as regional imports. Therefore the regional technical coefficient is set to zero, and its value
in the national table is added to imports.
Step 5: Calculation of Competitive Imports
Following the calculation of non-competitive imports, it is necessary to adjust the national coefficients
for sectors known to exist in each region. This is accomplished by determining the component of the
national coefficients allocated to competitive imports. The Simple Location Quotient (SLQ) may be used
to achieve this.
40
The SLQ is a measure which compares the relative importance of output or employment of a sector in a
region to its relative importance in the nation. Mathematically, this may be modelled as,
SLQj = (Xrj/Xr)/(Xnj/Xn)
Where X represents employment and the superscripts r and n respectively the region and nation, and j
row sector. Operationally, the regional coefficients for row sector j are estimated by multiplying the
national coefficient by SLQj, and apportioning the difference to imports, that is,
rij = aijSLQj where SLQj <= 1
This means that the region produces less than its share of national output in industry j and imports are
therefore required. If the SLQ for an industry exceeds 1 then the size of the regional industry is greater
in relative terms than its national equivalent, and is assumed to be capable of satisfying local demand.
The SLQ technique assumes that national and regional technologies are identical, and that there are no
product or sector mix problems. The SLQ technique allow national coefficients only to be revised
downwards but not upwards.
The SLQs for Auckland were calculated using 2001 ECs from Statistics New Zealand Business Directory.
Step 6: Definitions of Regional Sectors
A total of 88 sectors were used to represent economic transactions in the model. Inputs into
production not covered by the 88 sectors were described by the following primary input categories:
compensation of employees, operating surplus, indirect taxes, subsidies, consumption of fixed capital,
imports and import duties and other primary inputs. Similarly, consumption of commodities not
covered by the 88 sectors was described by the following final demand categories: household
consumption, local and central government consumption, and other final demands (exports, net
increases in stocks and capital formation).
Phase III: Derivation of Transactions Tables
In this phase transactions tables were derived for the region. Two functions were required: (1) the
derivation of the intermediate demand transactions, and (2) the completion of the final demand
quadrants.
Step 7 Derivation of Intermediate Demands
This involved the conversion of regional coefficients to transactions by multiplying the elements of each
column sector by estimates of that sectors’ share of total gross output. Shares were derived by
calculating the regional (or TLA) share of national employment. This resulted in the intermediate
demand and primary input quadrants of the regional transactions table.
41
Step 8 Derivation of Final Demands
This involved the generation of estimates for the final demand quadrants of the transactions table.
Household consumption is particularly important as it is necessary for the calculation of multipliers.
Local and central government consumption were also calculated. Other final demands were calculated
as the residual achieving the necessary row and column consistencies.
Household consumption along with local and central government consumption were estimated by
applying a population index (for example):
Population of region 404,200
Population of New Zealand 3,454,900
Population index : 404,200/3,454,900 = 0.1170 (4 d.p.)
In turn, estimates of household consumption for each regional sector were obtained by multiplying the
population index by the national output for each sector. For example, if the national household
consumption for the other farming sector was $241 million, then for the region this was estimated as:
Other farming: 241 * 0.1170 = $28.20 million.
42
References
Access Economics (2009) The Australian cruise sector
AECgroup (2006) Economic Impact Assessment of the Cruise Shipping Industry in Australia, 2004-05
AECgroup (2007) Economic Impact Assessment of the Cruise Shipping Industry in Australia, 2006-07
AECgroup (2009) Economic Impact Assessment of the Cruise Shipping Industry in Australia, 2008-09
Auckland Regional Council (2009) Auckland Cruise Terminal Project
BREA & PWC (2001) Cruise Industry’s Economic Impact on the Caribbean
BREA (2008) Contribution of Cruise Tourism to the Economies of Europe
BREA (2009) Economic Contribution of Cruise Tourism to the Destination Economies
CESD (2006) Cruise Tourism in Belize: Perceptions of Economic, Social & Environmental Impact
Covec (2012) Understanding the Value Created by Cruise Tourism
Department of Resources, Energy and Tourism (2009) Darwin cruise ship research
Florida-Caribbean Cruise Association (2010) Cruise Industry Overview
ICF International (2008) Hawai‘i Cruise Study
Lincoln University (2013) Cruise Ship Tourism in Akaroa
Martin Associates (2011) The Economic Impacts of the Port of Baltimore 2010
MEL (2001) The Economic Impacts of Cruise Ship Visits; 2000/01 Season
MEL (2003) Economic Impacts of the 2002-2003 New Zealand Cruise Ship Season
MEL (2005) Economic Impacts of the 2004-2005 New Zealand Cruise Ship Season
MEL (2006) Economic Impacts of the 2005-2006 New Zealand Cruise Ship Season
MEL (2007) Economic Impacts of the 2006-2007 New Zealand Cruise Ship Season
MEL (2008) Economic Impacts of the 2007-2008 New Zealand Cruise Ship Season
MEL (2010) New Zealand Cruise Industry Study
Miller Ronald .E and Blair Peter . D (2009) Input-Output Analysis Foundations and Extensions
Seatrade (2003) Global Changes in the Cruise Industry 2003-2010
TNZ (2007) Cruise Research 2006/07
TTC International & Roger Tym & Partners (2005) Southampton Cruise Tourism
Venice Project Center (2010) Cruise Ships: Influencing the City of Venice
43
Data Sources and Interviews
Auckland Regional Council/Auckland Council*
AIMECS Engineering*
Air New Zealand*
Auckland International Airport*
Auckland Tourism, Events and Economic Development (ATEED)*
Bidvest*
Chevalier Wholesale Produce*
Christchurch and Canterbury Tourism*
Cruise New Zealand*
Destination Northland*
Dunedin Shipping Supplies Ltd*
Environment Southland*
Hawke’s Bay Tourism*
ID New Zealand*
Independent Provedoring Co. Ltd*
Pacific Journeys Ltd*
Bunkering Operators (Auckland, Tauranga, Napier, Lyttelton, Wellington, Nelson, Picton, Dunedin)*
McKay Shipping Limited*
Renaissance Tours*
Sea Services New Zealand Limited*
Sea Stores Ltd.*
Statistics New Zealand*
Titan Marine Engineering Limited*
Tourism New Zealand*
Turners & Growers*
Whiting Power Systems Limited*
* Interviewed during previous studies