Preliminary Economic Impact Assessment Route 10: The ... · Inside Passage Summer Day Cruise Service Profile The Inside Passage summer day cruise service typically operates between

Preliminary Economic Impact Assessment Route 10: The Inside Passage Summer Day Cruise

British Columbia Ferry Corporation – September 2002

Preliminary Economic Impact Assessment Route 10: The Inside Passage Summer Day Cruise Grant Thornton LLP - September 2002

Contents

Executive Summary 1

Introduction 1

1.1 Project Background and Purpose 1

1.2 Report Structure 2

1.3 Study Area 2

1.4 Methodology 3

Situational Analysis 4

2.1 Socio-Economic Profiles 4

2.2 Socio-Economic Summary 7

2.3 Status of Tourism in the Study Area 8

2.4 Tourism Outlook 11

2.5 Summary of Tourism in the Study Area 13

Inside Passage Summer Day Cruise Service and Passenger Profile 14

3.1 Description of Inside Passage Summer Day Cruise Service 14

3.2 Inside Passage Summer Day Cruise Passenger/Vehicle Volumes 14

3.3 Inside Passage Summer Day Cruise Passenger Profile 18

Preliminary Economic Impacts of 20

The Inside Passage Summer Day Cruise 20

4.1 Inside Passage Summer Day Cruise Operational Impacts 20

4.2 Inside Passage Summer Day Cruise Tourism Spending Impacts 22

4.3 Conclusion 30

Appendices 31

A. Project Information Sources 31

B. Economic Impact of Route 10 Service Modification Profiles 31

Preliminary Economic Impact Assessment Route 10: Inside Passage Summer Day Cruise Grant Thornton LLP - September 2002

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Executive Summary

The British Columbia Ferry Corporation’s (BCFC) Inside Passage Route (Route 10) between Port Hardy and Prince Rupert was initiated in May 1966 and has provided a popular tourist service for the past 36 years. The service operates everyday during the summer and approximately once per week during the winter. Since 1980, the vessel used on this route during the summer operating season (which is the focus of this assessment) has been the Queen of the North which can accommodate between 100 and 110 vehicles and 650 passengers. During the summer 2001 operating season, the route generated revenues of $8.71 million and had expenditures of $9.22 million resulting in an operating loss of $505,000. Scope and Purpose of Assessment BCFC is in the process of evaluating their three northern service ferry routes. As part of this evaluation, they wish to understand the range and significance of the economic impacts associated with the summer season operations of the northern service routes including Routes 10 (Inside Passage Summer Day Cruise), 11 (Prince Rupert to Skidegate) and 40 (Port Hardy to Bella Coola). In order to assist with the assessment of the economic impacts of the Inside Passage summer day cruise service, BCFC retained the services of Grant Thornton LLP Chartered Accountants and Management Consultants. Assessments of Routes 40 and 11 have been prepared separately. Community Profiles In order to provide a context for the economic analysis component of this study, Section 2 includes brief socio-economic profiles of the City of Prince Rupert and the District of Port Hardy. Combined, these communities have a population of just over 20,000 of which almost three-quarters (14,643) live in Prince Rupert. The populations of Prince Rupert and Port Hardy fell by 12.4% and 13.4% respectively between 1996 and 2001 largely due to declines in the resource-based economies of the area. Although tourism and service based industries are becoming increasingly important to the economies of these communities, less than 8% of the labour force in the study area is currently employed in the tourism sector.


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State of Tourism Activity During the past few years, both Prince Rupert and Port Hardy have been making concerted efforts to develop the tourism industry in their respective areas. In Prince Rupert this has included branding the city as a “Gateway” and developing ecotourism/adventure and cruise terminal facilities. In Port Hardy this has included joining with other communities on the north island to brand the area as “North Vancouver Island” and implementing a tourism development strategy for the area. Both the Prince Rupert and Port Hardy areas have been experiencing growth in demand for ecotourism/adventure services such as wildlife viewing, whale watching, caving, diving, hiking and kayaking and future growth potential is believed to be heavily linked to these activities. In addition, Prince Rupert is developing a new cruise ship terminal which is expected to make a significant economic contribution to the city. The key issues facing tourism in these communities revolve around the ferry schedule, the seasonality of the industry due to winter weather conditions, lack of product/service packaging (although this is changing), geographic isolation and shortages of skilled labour. In addition, the tourism sector of Port Hardy is challenged by the lack of higher quality accommodation facilities as well as a shortage of accommodation on the nights prior to the ferry run. Inside Passage Summer Day Cruise Service Profile The Inside Passage summer day cruise service typically operates between mid-May and late September or early October. The ferry travels north between Port Hardy and Prince Rupert one day and south between Prince Rupert and Port Hardy the next day. On a few of the north- and southbound trips, the ferry also stops at Bella Bella. During the six-year period between 1996 and 2001, summer passenger traffic on this route ranged from 45,408 to 52,516 while vehicle traffic ranged from 11,492 to 12,456. Passenger capacity utilization during this same period ranged from 49% to 64% while vehicle capacity utilization ranged from 74% to 90%. For the past three years, both summer passenger counts and tour bus counts on the route have declined. The latter trend is consistent with industry wide declines in organized tour bus travel. During the winter months, the Queen of Prince Rupert provides weekly ferry service between Port Hardy and Prince Rupert. Estimated Impacts of the Current Service The following table provides a summary of the estimated economic impacts associated with the Inside Passage summer day cruise service. For the purposes of this assessment, these impacts have been grouped into two categories, namely the general economic impacts associated with the expenditures made by BC Ferries in operating the route and the impacts associated with ferry passenger spending in Prince Rupert and Port Hardy.


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Description of Impact Total Regional Impact

Port Hardy Impact

Prince Rupert Impact

Operations Impacts

Operations impacts:

• Total direct jobs (FTEs) • Total indirect/induced jobs (FTEs) • Direct Expenditures (in study area) • Employment income • Income tax

19.0 1.3 – 3.8

$3.04 mil. $1.17 mil. $316,878

1.8 --

$1.85 mil. $80,000

--

17.2 --

$1.19 mil. $1.09 mil.

--

Ferry Passenger Spending Impacts

Total annual ferry passenger spending

$6.81 mil.

$3.0 mil.

$3.81 mil.

Total ferry passenger spending by sector:

• Food and beverage • Accommodation • Transportation • Souvenirs/gifts • Outdoor activities • Attractions/culture • Other expenses

$2,073,329 $1,255,985 $1,370,413

$476,784 $408,672 $340,560 $847,313

$929,048 $569,416 $569,416 $209,785 $179,816 $149,846 $389,601

$1,144,282 $686,569 $800,997 $266,999 $228,856 $190,714 $457,713

Tourism visitor days generated by ferry passengers in the study area

113,520 49,949 63,571

Employment impacts of ferry passenger spending to:

• Total direct jobs (FTEs) • Indirect and induced jobs (FTEs) • Person-hours of employment • Percent of total tourism

employment • Tourism wages

125 20.4

243,750 12.2%

$2.68 mil.

55 9.0

107,250 18.6%

$1.18 mil.

70 11.4

136,500 9.6%

$1.5 mil.

Employment income generated by the ferry as a percentage of total employment income in the study area.

0.7%

1.2%

0.5%

Tax Impacts:

• Income tax • Hotel tax • Hotel room tax

$408,857 $100,479 $13,731

$179,897 $45,553

n/a

$228,960 $54,926 $13,731

Provincial Tourism Revenue Impacts $44 - $55 mil.

n/a n/a


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Methodology This study was largely conducted as a desktop review of secondary sources supplemented by interviews with representatives of key tourism and economic development organizations in Port Hardy and Prince Rupert. Secondary source information was used to prepare the socio-economic and tourism profiles of Port Hardy and Prince Rupert, as well as the profile of the Inside Passage ferry service. In turn, this profile information was used as the basis for assessing the economic impacts of this service. As this assessment was intended to provide order-of-magnitude estimates, the results are subject to a degree of uncertainty.


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Introduction

1.1 Project Background and Purpose

Route 10 (Inside Passage) was initiated 36 years ago in May 1966 and provides year-round ferry service between Port Hardy and Prince Rupert. The winter service runs approximately weekly while the summer service (the focus of this assessment) runs alternate days from each terminus community. For the first 13 years of operation, the service ran from Kelsey Bay to Prince Rupert using the MV Queen of Prince Rupert. In May 1979, the Vancouver Island terminus of the route was moved to Port Hardy and in May 1980, the Queen of Prince Rupert was replaced with the MV Queen of the North. For a brief period during the late 1970s and early 1980s, the route was extended south to Tsawwassen during the winter. The Queen of the North continues to service this route during the summer and can accommodate between 100 and 110 vehicles and 650 passengers. The most recent significant capital changes to the Inside Passage Service were the construction of a new terminal building in Prince Rupert in June 1993 and upgrades to the Queen of the North in 2001. Many travellers use the Inside Passage summer day cruise as part of a popular circle tour through BC and Alberta, or as part of their journey to Alaska or the Yukon. Over the past six years (1996 – 2001), passenger loads have ranged from 45,408 to 52,516 over summer operating seasons that have ranged from 124 days to 160 days in length. The increase in the length of the summer operating season coincided with a decrease in capacity utilization rates. In addition, passenger volumes have declined for the past three years falling by almost 7,100 between 1999 and 20011. The Inside Passage summer day cruise service almost broke even in the summer of 2001 as it generated revenue of $8.71 million and had expenditures of $9.22 million resulting in an operating loss of $505,000.

1 Some of the decline in passenger traffic experienced by the Inside Passage summer day cruise in

2001 may have been due to the events of September 11th. However, it should be noted that

passenger counts for June, July and August 2001 were also down relative to 1999 and 2000. It is

more likely that these declines are due to annual reductions in tour bus traffic over the past four

years.


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The BC Ferry Corporation (BCFC) is in the process of evaluating their three northern service ferry routes in order to determine appropriate service profile modifications. The three routes currently operating along the northern and central coast areas of B.C. include Route 10 (Inside Passage between Port Hardy and Prince Rupert), Route 11 (Prince Rupert to the Queen Charlotte Islands) and Route 40 (Port Hardy to Bella Coola). The financial viability of these routes varies and BCFC is considering a variety of options for addressing related performance and service issues. In order to understand the potential economic implications of various service scenarios, BCFC retained Grant Thornton LLP to prepare this preliminary economic impact assessment of the current Inside Passage summer day cruise service. The economic impact of Route 40 and Route 11 are addressed in separate documents2. BCFC will consider the results of these assessments in their deliberations regarding the future of ferry services along the northern BC coast. 1.2 Report Structure

This report is comprised of four sections. This first section provides information on the background of the project, the report structure, the study area, and study methodology. The second section provides a profile of existing socio-economic and tourism conditions in the study area communities of Prince Rupert and Port Hardy. The third section provides a description of the current Inside Passage summer day cruise service, including a summary of utilization information and a profile of passengers. The economic impact assessment provided in the fourth section focuses primarily on the direct employment and income impacts attributable to the operation of the service, as well as the tourism spending impacts associated with passengers who use the service. 1.3 Study Area

The travel route of the Inside Passage service is illustrated on the following map. For all but 12 days of the service’s operating season (May 18 to September 30) the service travels between Port Hardy and Prince Rupert without stopping. However, on several occasions over the summer season, the ferry stops at McLoughlin Bay near Bella Bella. Based on this routing, the geographic scope of this assessment focuses largely on the communities of Port Hardy and Prince Rupert.

2 These documents include Preliminary Economic Impact Assessment Bella Coola and Port Hardy

Service (May 2002) and Preliminary Economic Impact Assessment Route 11: Prince Rupert to

Skidegate Service (July 2002)


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Inside Passage Route

1.4 Methodology

This study was largely conducted as a desktop review of secondary sources supplemented by interviews with representatives of key tourism and economic development organizations in Port Hardy and Prince Rupert (see Appendix A for a list of the people/organizations that were contacted). Secondary source information was used to prepare the socio-economic and tourism profiles of Port Hardy and Prince Rupert, as well as the profile of the Inside Passage ferry service. In turn, this profile information was used as the basis for assessing the economic impacts of this service. As this assessment was intended to provide order-of-magnitude estimates, the results are subject to a degree of uncertainty.

McLoughlin Bay


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Situational Analysis

2.1 Socio-Economic Profiles

This section provides an overview of existing socio-economic and tourism conditions in the study area focusing on the Inside Passage summer day cruise terminus communities of Prince Rupert and Port Hardy. 2.1.2 Prince Rupert Area

The City of Prince Rupert is located on Kaien Island on the northwest coast of BC approximately 770 km north of Vancouver. The mouth of the Skeena River separates the island from the mainland of the province. The closest First Nation community to Prince Rupert are the Metlakatla who have a population of about 130 and live about five kilometres by boat from Prince Rupert. The history of Prince Rupert is closely tied to its coastal location. It is one of the largest natural and ice-free harbours in the world and serves as the terminus for freighters, BC Ferries (Routes 10 – Inside Passage and Route 11 – Prince Rupert to the Queen Charlotte Islands), cruise ships, fishing vessels and pleasure vessels. The city has significant multi-modal capabilities due to its linkages with the CN Rail line and the Northwest Transportation and Trade Corridor. In the early part of the century, the City’s key economic strength focused on its fishing industry. By the middle of the century, the forestry industry played a significant role in the economy and by the early 1970s, the City had established its reputation as a deep-sea port. At present, the community is working on the development of a new cruise ship terminal which is believed to hold significant economic development potential for the City. For example, Don Krusel of the Prince Rupert Port Authority has indicated that Prince Rupert is expecting a 50% increase in pocket cruise ship traffic this year with 30 ships carrying a potential 2300 passengers scheduled to visit3. Once the new Northland Terminal comes online in 2004, these numbers will likely increase significantly as the City will be able to accommodate large cruise ships. According to a background document produced by the Canada/British Columbia Western Economic Partnership Agreement, four cruise lines have indicated that they will make a total of 39 visits to Prince Rupert bringing 4,300

3 Canadian Tourism Commission. Tourism – Canada’s Tourism Monthly (June 2002), Page 17.


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passengers if there is a commitment in place to build a proper cruise dock in time for the 2004 season. Although the current economy of Prince Rupert is quite diversified, like many areas of the province, recent challenges to primary resource sectors have had a direct impact on the City. These impacts are reflected in both population and employment statistics for the area. Between 1996 and 2001, the population of Prince Rupert declined by 12.4% falling by more than 2000 residents from 16,714 to 14,643. While this population decline is significantly different from the 4.9% growth rate experienced by the province as a whole, it is consistent with the population declines recorded in other northern communities during this Census period and is believed to be a direct reflection of declines in primary resource sector employment opportunities. Despite its population decline, Prince Rupert remains the largest community in both the Skeena-Queen Charlotte Regional District and in the northwest region as a whole. As such, it has become a service and supply centre for a number of surrounding communities and provides a reasonably broad range of educational, health, social, shopping and other services. Unfortunately, labour force information from the 2001 Census has not yet been released. Due to the nature and scope of recent economic changes experienced in the area, it is likely that the labour force profile reflected in the 1996 data has changed. This data indicates that Prince Rupert had a labour force of 8,900 people in 1996. More than one-fifth (21.9%) of these people were employed by the manufacturing sector (i.e., mostly mills), while the next largest employment categories were retail trade (12.2%), transportation and communication (10.3%), health and social services (7.9%), accommodation, food and beverage (8.2%) and government services (8.0%). The remaining labour force was fairly evenly divided among other industry categories. The labour force profile of the Metlakatla First Nation is different from that of Prince Rupert as the band’s economy (according to 1997 data) is based primarily on public services (employing 38% of the labour force) and fishing (employment 30% of the labour force) as well as some tourism, transportation and forestry activity. According to Human Resources Development Canada (HRDC), the unemployment rate for the Northcoast Nechako Development Region was 16.1%4 in May 2002. This compares to 9.2% for the province as a whole. The unemployment rate for the Development Region was below 10% between January 1999 and July 2000. However, during the last two years, the rate has only been below 10% for two months and since September 2001 has been both above 10% and rising steadily. If we assume that the current size of the Prince Rupert labour force is approximately 7,7965, this means that

4 Current unemployment data is not available at the community level. The data quoted here was obtained from the Labour Force Survey prepared by Human Resources Development Canada. 5 8900 (1996 labour force) less 12.4% (1996 to 2001 population decline) = 7796.


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there are about 1,2556 people unemployed in the City. This estimate can be used to determine the potential incremental impact of any employment changes resulting from modifications to the service profile of the Inside Passage summer day cruise service. 2.1.3 Port Hardy Area

Port Hardy is located at the north end of Vancouver Island at the terminus of Highway 19 (the Island Highway) and is an important commercial and transportation hub for the communities of the North Island. There are several First Nations communities located near Port Hardy including the Gwa’Sala-Nakwasda’xw, the Kwakiutl and the Tlatlasikwala. Port Hardy is surrounded by numerous forestry roads and is well served by its all-weather airport and regular scheduled flights to many coastal and western BC communities. The town is also serviced by BC Ferries and operates as the terminus for both the Inside Passage Route (Route 10) to Prince Rupert and the summer Discovery Coast Passage Route (Route 40) between Bella Coola and Port Hardy. Between 1996 and 2001, the population of Port Hardy declined by 13.4%, falling from almost 5,300 to 4,574. This decline was consistent with that experienced by the north island as a whole and, like Prince Rupert, likely reflects recent employment losses in primary industry sectors such as forestry and fishing. Despite its population decline, Port Hardy is the largest community in the Mount Waddington Regional District and supports an extensive infrastructure that services most north island residents and visitors to the area. The completion of the Vancouver Island highway in 1979 and the relocation of the ferry terminal to Port Hardy have encouraged tourism growth in the area over the last two decades. However, at the time of the 1996 Census, most of the Mt. Waddington labour force was still employed in the resource industries. In 1996, the total labour force in the area was approximately 8,400, of which almost one in five (18.6%) were employed by the logging and forestry sector. The next two most significant sectors were manufacturing (12.9% of the labour force) and retail and wholesale trade (12.6% of the labour force). The remainder of the labour force was employed in government services such as education, health, and government administration (19% of the labour force), transportation and construction activities (9.2%), fishing and trapping (5.2%), and agriculture and communications (2.3%). Only 7.4% of the labour force was employed by the accommodation and food and beverage sectors. Although current unemployment data for Port Hardy is not available, a review of five years worth of data relating to the number of people receiving employment insurance by quarter in the area reflects a history of seasonal dips and peaks in terms of the number of people claiming EI benefits. In general, the data reviewed indicates that the employment

6 7796 (est. 2002 labour force) x 16.1% (May 2002 unemployment rate).


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situation on the North Island is considerably stronger during the summer (tourist) season (when the number of EI claimants drop significantly) than it is during the winter (when the number of EI claimants increase).

2.1.4 McLoughlin Bay

McLoughlin Bay on Campbell Island started out in the 1830s as a Hudson’s Bay trading post known as Fort McLoughlin. It now serves as the BC Ferry dock for the nearby community of Waglisla (also known as Bella Bella) and the fort no longer exists. A Native interpretive centre and big house explaining the history of the Heiltsuk peoples are currently located in McLoughlin Bay. With 1,500 full-time residents, Bella Bella is one of the largest First Nations communities along the coast. Home of the Heiltsuk Indian Band, this town is the source of many services for surrounding communities. The key economic activities of this band include the Bella Bella Shipyard, Heiltsuk Cable TV, Band store, a contracting company, a fuel company, the airport, a hotel, commercial fishing, a fish processing plant, a salmon hatchery, and some forestry activities (logging, small scale timber processing, silver culture/watershed restoration). 2.2 Socio-Economic Summary

In summary, the most important points to note for this project with regards to the socio-economic status of the study area are as follows:

• Most economic activity is still centred around resource industries, specifically forestry and fishing.

• The economy of the region is gradually shifting to service-based industries, such as tourism, as the natural resources that have traditionally supported the economy are depleted and increasingly regulated.

• According to the 2001 Census, both of the major communities in the study area, Port Hardy and Prince Rupert, have experienced population declines since the 1996 Census. This drop is most likely caused by the reduction in available forestry and fishing employment in the area.

• Labour market statistics show that unemployment in the Northcoast Nechako Development Region (including Prince Rupert) was 16.1%7 in May 2002 as compared to the provincial total unemployment figure of 9.2%. Data for the Port Hardy area indicates that employment peaks during the summer tourist season and drops during the off-season.

7 Current unemployment data is not available at the community level. The data quoted here was

obtained from the Labour Force Survey prepared by Human Resources Development Canada.


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• Port Hardy and Prince Rupert are both easily accessible via a variety of transportation modes including ferry, air and highway. Prince Rupert is also accessible via train. Both towns are viewed as transportation hubs for their region and their respective economies are quite reliant on the availability of transportation services.

Overall, the study area possesses significant potential for economic development in tourism and other service industries, specifically by taking advantage of the surrounding marine and natural environment. Prince Rupert will continue to benefit from the economic opportunities offered by its excellent deep-sea port facilities, while Port Hardy will need to continue making a concerted effort to build and market its tourism product in order to facilitate a smooth transition from its current resource based economy.

2.3 Status of Tourism in the Study Area

2.3.1 Prince Rupert

Although it is apparent that the economy of the Prince Rupert area is still overwhelmingly based on the primary resource industries and port services as noted earlier, tourism is becoming an increasingly important sector of the City’s economy. The tourism industry in Prince Rupert is supported by the internationally renowned scenery of the north coast, excellent wildlife viewing and outdoor recreation opportunities, the abundance of sheltered waters, the many heritage and cultural attractions, and the variety of access opportunities – including BC Ferries.

The 1996 Census indicates that 8.2% of the labour force of Prince Rupert (730 out of 8,900 people) was employed by the accommodation and food and beverage service sector – the sector that typically accounts for a high proportion of tourism employment. Anecdotal information from community representatives suggests that there are between 100 and 200 operators that provide charter services to visitors (e.g., fishing, whalewatching). These people should also be considered part of the tourism “labour force”. One of the background documents prepared as part of the North Coast LRMP8 suggests that up to 15% of employment (including direct and indirect employment) in the North Coast LRMP area relies on the tourism industry for employment and that 8% of after-tax income is attributable to this industry. In 2001, the North Coast region accounted for 1.3% ($18.7 million) of the provincial room revenue of $1.47 billion9, which represents a decline of 2% over 2000 (after a 7% increase between 1999 and 2000). Of this total, $7.2 million (a decline of 9.7% over

8 Tamblyn, Greg C. and Horn, Hannah. Current Conditions Report: North Coast Land and

Resource Management Plan. (March 2001). P. 12. 9 $18,652,000 of $1,472,288,000


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2000) was generated by accommodation facilities in Prince Rupert. From this revenue, the City generated approximately $143,580 through the application of the 2% Hotel Room Tax. Prince Rupert offers a variety of accommodation facilities and currently has adequate capacity for visitors to the area in all seasons although accommodation becomes tight during summer nights when the ferry is in town. According to the Ministry of Finance Room Revenue Report, there were 17 accommodation properties providing 787 accommodation units in Prince Rupert in 2001. Additional accommodation is provided by nearly campgrounds that contain about 138 campsites. The city has over 40 dining establishments, from coffee shops to gourmet seafood and ethnic restaurants. The City of Prince Rupert is easily accessed via many modes of transportation and is known as a transportation hub city and tourism “Gateway” for the northern and interior parts of the province, as well as for Alaska and the Yukon. Transportation in and out of the area is provided by Air Canada, Harbour Air, Inland Air, Hawkair, BC Bus Transit, Farwest Bus Lines, Greyhound Bus Lines, Alaska Marine Highway System, BC Ferries, and Via Rail. Through these various modes of transportation, Prince Rupert provides access to a number of very desirable tourist destinations in the northwest such as the Queen Charlotte Islands and the Alaska Panhandle. Small, pocket cruise ships often take advantage of Prince Rupert’s excellent port facilities, bringing anywhere from 25 to 100 visitors per sailing into the city. The popularity of the city as a stopover encouraged Prince Rupert to invest in the construction of the Atlin dock, a larger dock to accommodate vessels up to 107 metres in length. Furthermore, full-size cruise ships will soon also be able to dock in Prince Rupert as a result of a $1.4 million funding announcement under the federal-provincial Western Economic Partnership Agreement to develop a suitable dock at the Northland Terminal. The Northland Terminal development will allow Prince Rupert to capture some of the ships that would normally travel to Juneau, Ketchikan, Sitka and Skagway, Alaska -- communities that have reached saturation levels in terms of their capability to accommodate visitors each season. As noted earlier, a backgrounder document released by the Canada/British Columbia Western Economic Partnership says that four cruise lines have indicated that they will make a total of 30 visits to Prince Rupert in 2003 bringing up to 54,300 visitors if there is a commitment in place to build a proper cruise dock in time for the 2004 season. Average cruise passenger spending in Prince Rupert is estimated at between $65 and $80 during the first year the dock is operational increasing to $120 per passenger by year 10. The area’s quality scenery and wildlife viewing have resulted in increased awareness of eco- and adventure tourism business opportunities. Prince Rupert also benefits from the


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cultural resources of area First Nations. Visitors to the area, who travel there primarily for leisure and recreation purposes (in 1995/96 86% of BC residents and 81% of non-BC residents visited the northwest area of the province for leisure as opposed to business reasons), enjoy a variety of activities including sport fishing, wildlife viewing, ocean kayaking, scuba diving, whale watching, and sailing. The key tourism development objectives of the region, as identified by Tourism Prince Rupert’s Business Plan are to:

• Increase awareness of Prince Rupert as a travel destination and as a key gateway to Northwest BC, the Queen Charlotte Island, Alaska and, to a lesser extent, Vancouver Island.

• Increase the length of visitors stay. • Extend the length of the peak tourist season through promotion of shoulder season

products. • Extend the off-peak tourist season through in-region promotion. • Establish viable off-season products. • Increase tourism revenues throughout the year.

2.3.2 Port Hardy

The tourism industry on the north island employs just over 7% of the total labour force in this area, with much of this employment being generated during the short summer season. Although the north island region experiences the lowest levels of visitation relative to Vancouver Island as a whole, it was still a destination of choice for 18% each of all visitors from Europe and the regional US in 1998. Tourism offerings in the area revolve around adventure and eco-tours (especially wildlife viewing and whale watching), sport fishing lodges and resorts, diving, ocean kayaking, pocket cruise ships and touring yachts. Port Hardy possesses tourism infrastructure that, for the most part, supports current visitor levels. According to the Ministry of Finance 2001 Room Revenue Report, there are 24 accommodation facilities in the Mount Waddington Regional District providing 686 rooms. Based on the listings in the 2002 BC Accommodation Guide, approximately 255 of these units, as well as 167 campsites, are located in the Port Hardy area. These units generated an estimated $1.96 million in room revenue in 200110. Note that the listings in the Accommodation Guide do not include all available accommodation facilities in Port Hardy as there are quite a few facilities in the community that are not approved (e.g., casual B&B operations) and do not collect room tax. Unfortunately, the town experiences severe accommodation capacity issues every second day in peak tourist season due to the overlapping schedules of the Inside Passage summer

10 Total Mt. Waddington room revenue in 2001 was $5,305,000. Port Hardy has 37% of the area’s

accommodation inventory – 255/686 – therefore, $5,305,000 million x 37% = $1.96 million.


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day cruise and Route 40 – both of which originate from this town. However, overall annual occupancy is not adequate to provide the revenue stream needed to invest in upgrading so a number of the facilities are dated and/or require improvements. Although the existence of the BCFC terminal in Port Hardy brings a number of visitors to the area who may not otherwise travel there, the late arrival and early departure times of the ferry limits the ability of tourists to access area businesses during operating hours (i.e., many ferry passengers arrive in the evening after businesses are closed and leave early in the morning before they are open). Most ferry passengers stay for only one night and consider Port Hardy an overnight staging ground rather than a destination. Changing this travel behaviour would likely require a concerted marketing effort on behalf of north island communities in order to convince visitors to stay in the region for more than one night. Historically, the most successful tourism communities around BC are those that attract rubber tire traffic. Tourism BC indicates that 47.8% of BC’s visitors come from within the province, and it is safe to assume that many of these visitors drive to their destination. The completion of the Island Highway to Port Hardy greatly enhanced the accessibility of the North Island and encouraged increased tourist visitation. Most of those visitors who do not drive arrive via one of the regularly scheduled flights on regional airlines. Air traffic in and out of Port Hardy is heavily influenced by the high-end fishing resorts located in the region. Marine activity is also an important source of tourism to the North Island as there are excellent fishing as well as other marine-based activity opportunities in the area. However, marine activities are limited not only by the short season, but also by the discomfort of many boaters in navigating the unfamiliar, and sometimes treacherous, north island waters. Port Hardy is in the process of implementing a tourism development strategy for the north island region. This strategy involves, among other things, the establishment and promotion of the North Island “brand” (which includes the use of a common logo on highway signage and tourism material) and the development of packaging opportunities aimed at encouraging visitors to stay longer in the region. 2.4 Tourism Outlook

Tourism is becoming increasingly important to both Prince Rupert and Port Hardy as the economies of both these towns gradually shift from a purely resource-based focus, to one that is more tourism service-oriented. Development of the tourism industry will likely largely revolve around the ecotourism/adventure opportunities associated with the coastal marine environment, as well as the cultural heritage characteristics that make these areas


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unique. In both regions, the Inside Passage summer day cruise service is believed to be the linchpin for the future growth of the tourism sector. Globally, current tourism trends indicate that tourists are interested in diverse, unusual and educational experiences when travelling. Both Port Hardy and Prince Rupert are well situated to provide these experiences through the development of a variety of products that will allow travellers to observe, learn, and be adventurous in high quality natural settings. The key to tourism success for these areas will likely be linked to a combination of secure transportation services and the expansion of current ecotourism products that provide further incentives for visitors to make Port Hardy and Prince Rupert a travel destination. Many challenges face the development of tourism in both Port Hardy and Prince Rupert. Although transportation and access is generally good, both of these communities are affected by their distant locations from large population bases. This fact is evidenced in a comparison of the rapid growth rate of tourism in a town such as Tofino which is much closer to the large population centres of Victoria and Vancouver, to that of Port Hardy or Prince Rupert where tourism growth has been relatively slow. Both Port Hardy and Prince Rupert are also affected by the extreme seasonality of many regional tourism product offerings. The winter climate does not allow for participation in the outdoor activities around which many of the regions’ visitors base their stay. Furthermore, winter conditions make travel to these areas more difficult and less reliable. As such, most tourism activity occurs between the months of May and October. Until recently, lack of marketing and information sharing was another key challenge facing Port Hardy and Prince Rupert. Although the level of cooperative marketing and other activities has been improving in the region, many of the operators in the area, especially in Prince Rupert, would benefit from increased partnering/packaging of complementary services that would allow for greater breadth in advertising and increase exposure of the area to travellers. As noted earlier, tourism businesses in Port Hardy have already taken a number of steps towards packaging available tourism products and services in order to help entice visitors to extend their stay in the area. Finally, Port Hardy and Prince Rupert, like the rest of global tourism industry, both experience challenges due to the inadequate supply of appropriately skilled labour. Specifically, there is a shortage of skilled labour for tourism operators who often have difficulty recruiting and retaining employees. Remote communities, such as Port Hardy and Prince Rupert, must work diligently to ensure a continued supply of well-trained, knowledgeable employees who can contribute to the success and future growth of tourism in the area.


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2.5 Summary of Tourism in the Study Area The tourism industry in both Port Hardy and Prince Rupert has historically been largely dependent on the BC Ferries Inside Passage summer day cruise schedule and routing which creates an appealing circle tour opportunity for visitors. However, both areas are becoming increasingly well known for the quality and range of available ecotourism/ adventure activities options. As a result, the area is seeing a gradual increase in the number of destination and “two-day stay” visitors. Key tourism activities include the following:

• boat/fishing charters and fishing lodges

• sport fishing

• eco-tours including kayaking, canoeing, sailing and scuba diving

• whale watching

• wildlife viewing

• heritage and cultural attractions

• cruise ship travel Prince Rupert benefits from an excellent deep-sea port and extensive port facilities that attract passenger ships looking for alternate stopovers to the over-saturated Alaskan ports. Funding has recently been approved to support construction of a dock that can accommodate larger cruise ships. This development will greatly enhance Prince Rupert’s tourism industry, bringing thousands more people each year into the area. Prince Rupert is considered to be the transportation gateway providing access, via many modes of travel, to northern BC, Alaska, the Yukon, and the interior of the province. Port Hardy is a transportation hub for the northern Vancouver Island and Central Coast regions and has branded itself as “Northern Vancouver Island”. Although road and marine access has improved greatly in the last few years, Port Hardy does not experience the traffic that Prince Rupert does and most visitors view the town as a convenient lay-over point, rather than a destination. Port Hardy also experiences some accommodation capacity issues during the busy summer season. Both Port Hardy and Prince Rupert are facing several challenges with regards to continued development of tourism. These challenges include the following:

• distant location from large population centres • seasonality of products • lack of marketing and information • labour shortages

As the economy of the study area shifts from a manufacturing/resource base to a tourism/service industry focus, these challenges will need to be addressed if tourism is to prosper and play a greater role in the economy of the region.


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Inside Passage Summer Day Cruise Service and Passenger Profile

3.1 Description of Inside Passage Summer Day Cruise Service

As noted earlier, the Inside Passage summer day cruise service was initiated in May 1966 and has operated as a summer tourist service continuously over the last 36 years. The season of operation generally runs from mid-May to late September or early October. Typically, the ferry travels north from Port Hardy to Prince Rupert one day and south from Prince Rupert to Port Hardy the next day without stopping enroute. However, on a number of the north- and southbound voyages, the ferry stops at McLoughlin Bay (Waglisla/Bella Bella). In 2002, the Inside Passage summer day cruise schedule extends from May 18th to September 30th with stops at McLoughlin Bay occurring twice each in June and September and four times each in July and August. The ferry used for the Inside Passage summer day cruise service is the Queen of the North which has a vehicle capacity of between 100 and 110 and a passenger capacity of 650. The non-stop Inside Passage summer day cruise voyage takes 15 hours while the voyage that stop at McLoughlin Bay takes 15.5 hours. More than 70% of passengers who take this route are undertaking a circle tour of the province or of Western Canada and an almost comparable number are attracted by the Inside Passage scenery11. 3.2 Inside Passage Summer Day Cruise Passenger/Vehicle Volumes

3.2.1 Passenger and Vehicle Summary

Table 3-1 provides a summary of passenger and vehicle load and capacity figures for the Inside Passage summer day cruise service for the six-year period 1996 to 2001. During this period, passenger traffic ranged from 45,408 to 52,516 while vehicle traffic ranged from 11,492 to 12,456. Capacity utilization figures for this same period show a gradual decline with passenger capacity falling from 64% in 1996 (when the operating season was only 124 days long) to 49% in 2001 (based on an average of capacity 650 passengers)

11 IBI Group. Northern Routes’ Research Routes 10, 11, 40. Technical Report. (December 20, 2000). P. 11.


15

when the operating season was 144 days in length. Likewise, vehicle capacity utilization (based on a average capacity of 105 vehicles) fell from 90% in 1996 to 79% in 2001.

One way of viewing the contribution of the Inside Passage summer day cruise ferry service relative to overall tourist traffic in the study area (focusing on Prince Rupert) is to compare ferry traffic against Summer Average Daily Traffic (SADT) highway count information. According to the Ministry of Transportation and Highways, there is a traffic counter station located 0.3 km east of Port Edward Road on Highway 16 approximately 10.5 km east of Prince Rupert that measures both east and west bound traffic. In 2000 (most recent figures available), it was estimated that approximately 498,722 vehicle traffic movements took place at this traffic counter. The SADT count, which reflects the 92-day period between June and August, was 880 (east) and 891 (west) while the AADT count (Average Annual Daily Traffic), which reflects the 273-day period between September and May, was 608 (east) and 616 (west). This means that over the 152-day operating period of Inside Passage summer day cruise in 2000, a total of approximately 236,73212 vehicle movements took place on Highway 16 at this traffic counter. Using Inside Passage summer day cruise year 2000 vehicle traffic count data from Table 3-1 (less 8% local residents13) suggests that average daily vehicle traffic on Highway 16

12 (92 days x 1771 vehicles) + (60 days x 1224 vehicles) = 236,372 vehicles. 13 See Section 3.3 re: passenger profile information.

1996 1997 1998 1999 2000 2001

Passengers 51,904 49,920 50,124 52,516 51,261 45,408

% Change -4% 0% 5% -2% -13%

Vehicles 11,679 11,492 12,051 12,456 12,345 11,897

% Change -2% 5% 3% -1% -4%

Operating Days 124 138 152 160 152 144

% Change 10% 9% 5% -5% -6%

Passenger CapacityUtilization (based on 650 pass.) 64% 56% 51% 50% 52% 49%

Vehicle CapacityUtilization (based on 105 veh.) 90% 79% 76% 74% 77% 79%

Table 3-1Route 10 - Inside Passage

Total Two-Way Traffic Summary, 1996-2001

Source: BC Ferries, Marketing and Business Development


16

generated by the ferry service is between 70 and 75 vehicles per day14. Based on this data, it is estimated that 5.3% of May, September and October highway traffic, and 4.6% of June, July and August highway traffic, is due to the ferry15. In addition, it is estimated that 15% of the difference between the AADT and SADT counts (i.e., 15% of summer tourist traffic) can be attributed to the ferry service16.

3.2.2 Passenger and Vehicle Traffic by Year and Month

Tables 3-2 and 3-3 summarize information on the total number of passengers and vehicles travelling on the Inside Passage summer day cruise service by month for the period 1996 to 2001. These figures indicate that July and August are the busiest months for both vehicle and passenger traffic as just under 50% of total May to October traffic occurs during these two months. However, both June and September are also quite busy and account for another 40% of total seasonal traffic. For the year 2001, vehicle capacity utilization was high for the June to September period (i.e., 76% to 90%) but was relatively low in May (33%) and October (45%). Likewise, passenger capacity utilization was quite strong in July and August (56% and 58% respectively) dropping off somewhat in June and September (44% and 49% respectively) and even further in May and October (20% and 23% respectively. A review of monthly vehicle capacity utilization for the six-year period shown in the tables indicates a gradual decline in utilization during May, June and August, mixed utilization in June and September and increased utilization in October. Monthly utilization rates for passengers also vary with May, June and August showing a gradual decline, July and September showing mixed rates, and October showing steady growth in utilization. The data in the tables further indicate that the total number of passengers and vehicles have both declined over the last three years. It is believed that the reason the rate of decline for passengers is greater than the rate of decline for vehicles over this period is due to a decrease in the number of tour buses which declined from 268 to 171 during this period.

14 12,512 less 8% = 11,511/152 = 75.7 (formula example for year 2000) 15 3926 (May, Sept. Oct. ferry traffic less 8% locals) / 60 days = 65 vehicles/day. 7585 (June, July

and August ferry traffic less 8% locals) / 92 days = 82 vehicles/day. 65 vehicles/1224 AADT =

5.3%. 82 vehicles/1771 (SADT) = 4.6%. 16 1771 SADT – 1224 AADT = 541. 82 ferry vehicles/541 = 15%.


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1996 1997 1998 1999 2000 2001

May 396 - 811 972 863 844

Utilization 47% 0% 59% 51% 51% 33%

June 2,610 2,590 2,373 2,521 2,363 2,380

Utilization 83% 82% 75% 80% 75% 76%

July 3,145 3,091 2,981 2,896 2,965 2,917

Utilization 97% 95% 92% 89% 91% 90%

August 3,226 3,082 3,002 2,908 2,914 2,890

Utilization 99% 95% 92% 89% 90% 89%

September 2,302 2,423 2,370 2,538 2,604 2,490

Utilization 84% 77% 75% 81% 83% 79%

October - 306 514 621 636 376

Utilization 0% 18% 29% 30% 43% 45%

Total Vehicles 11,679 11,492 12,051 12,456 12,345 11,897

% Change -1.6% 4.6% 3.3% -0.9% -3.8%

Route 10 - Inside PassageTotal Two-Way Monthly Vehicle Traffic Volumes, 1996-2001


Table 3-2

1996 1997 1998 1999 2000 2001

May 1,629 - 3,286 3,706 3,325 3,092

Utilization 31% 0% 39% 32% 32% 20%

June 11,452 10,694 9,821 10,364 9,359 8,553

Utilization 59% 55% 50% 53% 48% 44%

July 13,849 14,455 12,284 12,415 12,852 11,326

Utilization 69% 72% 61% 62% 64% 56%

August 14,640 13,654 13,398 13,239 12,803 11,720

Utilization 73% 68% 66% 66% 64% 58%

September 10,334 10,206 9,725 10,668 10,728 9,524

Utilization 61% 52% 50% 55% 55% 49%

October - 911 1,610 2,124 2,194 1,193

Utilization 9% 15% 16% 24% 23%

Total Passengers 51,904 49,920 50,124 52,516 51,261 45,408

% Change -4.0% 0.4% 4.6% -2.4% -12.9%

Route 10 - Inside PassageTotal Two-Way Monthly Passenger Traffic Summary, 1996-2001


Table 3-3


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3.3 Inside Passage Summer Day Cruise Passenger Profile

Fairly detailed information on the market profile of Inside Passage summer day cruise passengers is available from the Northern Routes Research17 reports that were produced in December 2000 and January 2002. The following table summarizes key information on these passengers for each year the survey was done.

Survey Results Characteristic 2000 2001

Trip Purpose: - Vacation - Other

84% 16%

81% 19%

Party Composition: - Organized Group - Couples or Families - Friends - Other

13% 58% 16% 13%

8%

52% 30% 10%

Average Trip Length 21.5 Days N/A

Median Age 49 43

Median Household Income $77,000 N/A

Employment: - In Labour Force - Retired - Student/Homemaker

73% 20% 7%

68% 22% 10%

Origin: - Service Area - Rest of BC - Rest of Canada - USA - International

8%

20% 10% 18% 44%

9%

22% 12% 18% 39%

Vehicle: - Car/Pickup/Van - RV - Other

71% 21% 8%

N/A

Although there are some modest differences in the profile information summarized above, it suggests that the average Inside Passage summer day cruise passenger is on a relatively long vacation with a spouse or family. They tend to be middle aged and have a fairly high household income. Almost three-quarters are in the labour force. A high proportion of

17 Op. Cit. plus Inside Passage Route 10 Market Research: Final Report (January 2002).


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passengers are visiting from overseas and the total proportion of non-BC resident passengers (72% and 69%) is much higher than is typical for the province as a whole where non-resident visitors are estimated to comprise about 45% of total travellers. Just over seven out of ten passengers are travelling by car or other smaller vehicle while one-fifth of passengers are travelling by RV. The Inside Passage route is popular with group tour operators since it forms the marine leg of a large circle tour of BC or of BC/Alberta (the latter tour route is known by many as the Totem Circle Tour), although the proportion of ferry passengers travelling with an organized group declined between the 2000 and 2001 surveys falling from 13% to 8% and the number of tour buses on the ferry dropped from 242 in 2000 to 171 in 2001.


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Preliminary Economic Impacts of The Inside Passage Summer Day Cruise

This chapter provides a preliminary assessment of the nature and significance of potential economic impacts associated with the operation of the Inside Passage summer day cruise service. For the purposes of this report, these impacts are grouped into two categories. These categories include the general economic impacts associated with the expenditures made by BCFC in operating the Inside Passage summer day cruise as a marine transportation link, and the tourism revenue and employment impacts that are generated by ferry passenger spending in the Prince Rupert and Port Hardy areas, as well as in the province as a whole.

4.1 Inside Passage Summer Day Cruise Operational Impacts

When evaluating the economic impacts associated with the operation of a business or service it is typical to examine direct, indirect and induced employment impacts, government revenue impacts, total economic output and Gross Domestic Product (“GDP”) impacts. For the purposes of this assessment, direct employment impacts include hiring of labour associated with operating the vessel and terminals, while indirect employment impacts are created as a result of the purchase of goods and services for the purposes of operating the vessel and terminals. Induced impacts are generated, in turn, through the spending of employee earnings. A review of fiscal 2001/2002 financial data for the Inside Passage summer day cruise indicates that the service had total operating expenses of $9.22 million on revenue of $8.71 million for an operating loss of $505,000. Operating expenses go to the payment of ships wages, the purchase of fuel, ship refit and maintenance, terminal operations and maintenance, and regional management. A review of these expenditures indicates that approximately 34.9% ($3.04 million) of this operational spending took place within the study area while the remaining 65.1% ($5.67 million) occurred outside the study area. Of the $3.04 million spent within the study area, $1.17 million was spent on wages and $1.87 million was spent on the purchase of fuel and other supplies. Of the $1.17 million spent on wages, $1.09 million was spent in Prince Rupert while $80,000 was spent in Port


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Hardy. Of the $1.87 million spent on the purchase of fuel and other supplies, $97,000 was spent in Prince Rupert and $1.77 million (mostly for fuel) was spent in Port Hardy. Employment Impacts The Inside Passage summer day cruise service provides a total of 49 ship’s crew full-time equivalent (FTEs) positions18. Of these on-ship employees, 25%, or 12.2 FTEs, live in the Prince Rupert and Port Hardy areas while 75%, or 38.6 FTEs, live onboard the ship during the operating season and make their permanent home elsewhere in the province or elsewhere in Canada. In addition to this on-ship employment, the Inside Passage service provides 6.8 on-shore summer FTE positions. Combined, the 12.2 ship-based FTEs and the 6.8 shore-based FTEs (19 FTEs in total) that live in the study area earned $1.17 million during the summer 2001 operating season.

The B.C. Ministry of Finance and Corporate Relations has developed indirect and induced employment impact ratios for 63 local areas or communities around the province and for nine economic sectors19. The employment ratios for the tourism sector in Prince Rupert are 1.07 (assuming no migration – that is, new jobs are filled from within the community and not by people moving to the community) and 1.20 (assuming migration – that is, new jobs are filled by people moving from outside the community). Thus, the total annual indirect and induced employment impacts associated with the operation of the Inside Passage summer day cruise service using these ratios, is estimated at between 1.3 and 3.820 FTEs (these are the jobs created through the purchase of fuel and supplies for the ferry and through spending of wages by ferry passengers). Government Revenue Impacts Although a detailed breakdown of income tax impacts on a per employee basis has not been done, it is estimated that the total $1.17 local million payroll results in an annual federal and provincial income tax payment of $316,878 (of which about 67% accrues to the federal government and 33% accrues to the provincial government)21.

18 This figure reflects a total of 130 term employees who work for approximately 4.5 months out of

12. 4.5/12 = 37.5%. 130 x 37.5% = 48.8 (rounded to 49). 19 BC Stats, Ministry of Finance and Corporate Relations. British Columbia Local Area Economic

Dependencies and Impact Ratios – 1996. (May 1999). 20 49 ship-based FTEs x 25% (who reside in Prince Rupert and Port Hardy) = 12.2 FTEs + 6.8

shore-based FTEs = 19 FTEs. 19 FTEs x 1.07 (tourism indirect and induced employment ratio

with no migration for PR) = 20.3 for an additional FTE of 1.3 (20.3 less 19). Likewise, 19 x 1.20

(ratio with migration) = 22.8 for 3.8 additional FTEs (22.8 less 19). 21 $1,173,000 local payroll / 19 FTEs = average wage of $61,737. $61.737 less $7,412 Basic

Personal Tax Exemption = $54,325. $54,325 x 19 employees = $1,032,175 taxable income

(assuming no other exemptions) x 30.7% tax rate = $316,878 tax payable.


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4.2 Inside Passage Summer Day Cruise Tourism Spending Impacts

In addition to the economic impacts that are generated in the study area as a result of the operation of the Inside Passage summer day cruise service, the area also experiences economic impacts as a result of tourism spending by ferry passengers. These impacts are the focus of the remainder of this assessment. As indicated in Table 3-3, the Inside Passage summer day cruise service carried 45,408 passengers between Port Hardy and Prince Rupert in 2001. The money spent by these passengers (most of whom are tourists) while in these communities generated a range of economic impacts. In order to understand the scope and nature of these impacts, the objectives of this section are to:

• Quantify ferry passenger spending in Port Hardy and Prince Rupert;

• Estimate ferry passenger spending by sector (e.g., accommodation, food and beverage, retail purchases);

• Estimate the number of tourism jobs in the region attributable to ferry passenger spending;

• Estimate the relative contribution of ferry passenger spending on the overall economy of the area (using total income as a proxy);

• Estimate income tax, hotel tax (8%) and hotel room tax (2%) impacts associated with ferry passenger spending; and,

• Estimate the impacts of ferry passenger spending on provincial tourism revenues.

In general, tourism spending in Prince Rupert and Port Hardy occurs whenever visitors purchase travel related products and services such as overnight accommodation, restaurant meals, groceries, recreation services, vehicle fuel, entertainment and souvenirs. In order to determine this value, the total number of visitor days in the study region generated by this service had to be derived along with average daily spending per visitor and the proportion of tourism spending by sector. Focusing on the fiscal year 2000/2001, the following sections describe how these figures were calculated. Ferry Passenger Spending by Port The logistics of traveling on the Inside Passage summer day cruise service between Port Hardy and Prince Rupert (i.e., late arrival and early departure times) often involve the need for passengers to stay overnight in one or both of the terminus communities. Information from the 2000 Northern Routes Research Report indicates the following lengths of stay by port.


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None 1 Night 2 Nights 3 Nights 4+ Nights Local

Port Hardy 5.8% 80.4% 9.6% 2.1% 0.5% 1.6%

Prince Rupert 5.5% 57.9% 25.2% 3.6% 4.3% 3.5%

Table 4-1Number of Nights Spent by Port

Source: BC Ferries, Northern Routes Research Technical Report

Using the data in the above table, the weighted average length of stay for each port has been calculated as follows:

• Port Hardy: 1.1 nights • Prince Rupert: 1.4 nights

Note that these weighted averages encompass all passengers including those persons who did not stay overnight but does not include local residents. These average length of stay figures form part of the formula used to calculate tourism spending impacts. The amount spent by ferry passengers while in the region is different for fully independent vehicle travelers, recreational vehicle users and tour passengers. This is because independent vehicle travelers and tour patrons typically spend more than people visiting by recreational vehicle. However, in the absence of precise spending statistics, an average daily expenditure has been applied to all passengers for analytical purposes. This average figure was drawn from the Northern Region regional report of the 1996 Tourism BC Visitor Survey and, using an inflation factor of 10%, amounts to approximately $60 per day per person for northern travelers22. Based upon these assumptions, estimates of tourism spending impacts were derived for both the Port Hardy and Prince Rupert areas. These estimates are summarized in Table 4-2 and were calculated by multiplying passenger totals by nights in the area and per-diem spending.

22 During the seven-year period between 1995 and 2001, the Consumer Price Index for B.C.

increased by 8.9%. As such, applying a 10% increase to the 1995/96 Visitor Survey spending

figures in order to estimate 2001 visitor per diems is considered reasonable.


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Route SegmentsPassengers

(2001)Nights in

Port HardyPort HardyPer Diem

Port HardySpending

Nights in Prince Rupert

Prince RupertPer Diem

Prince RupertSpending

TotalSpending

Total Passengers 45,408 1.1 $60 $2,996,928 1.4 $60 $3,814,272 $6,811,200

Table 4-2Estimated Economic Impact of Tourist Spending in

Route 10 Communities

The figures in Table 4-2 indicate that estimated tourist spending by passengers traveling between Port Hardy and Prince Rupert totalled just over $6.8 million in fiscal 2000/2001. Approximately 44% of this amount, or just under $3.0 million was spent in the Port Hardy area while approximately 56%, or just over $3.8 million, was spent in Prince Rupert. Although not included in this analysis, some additional economic impacts occur from persons embarking and disembarking at McLoughlin Bay. In the year 2001, only a few dozen individuals embarked/disembarked at this port, and it is assumed that most of these individuals are community residents so the economic impact associated with tourist spending would be very modest. It should also be noted that residents of Waglisla/Bella Bella use the southbound ferry service to make shopping trips to Port Hardy which benefits grocery, salon, pharmacy and other business operations in the community. Ferry Passenger Spending By Sector The $6.8 million spent by ferry passengers in Port Hardy and Prince Rupert goes toward the purchase of a variety of products and services. Using spending allocation data obtained from surveys conducted by Tourism BC of visitors to Northern BC and Vancouver Island (BC Visitors Survey – Northern BC and Vancouver Island regions), the following table provides estimates of passenger spending impacts by category for the Port Hardy and Prince Rupert areas.


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Tourism Jobs Associated with Ferry Passenger Spending Ratios produced by the Ministry of Finance and Corporate Relations suggest that 11.85 direct tourism jobs are created in the Prince Rupert area and 9.84 direct tourism jobs are created in the Port Hardy area for every 10,000 tourist days spent in these communities23. It is estimated that in 2001, the Inside Passage summer day cruise service generated a total of 113,520 visitor days in the study area24. If this total number of visitors days is divided by 10,000 and then multiplied by an average of 11 jobs for the two communities, this suggests that a total of 125 direct tourism jobs25 in the study area are likely attributable to the Inside Passage summer day cruise service. Individually, Port Hardy accounts for 55 of these jobs while Prince Rupert accounts for 70 of them. Most of these jobs would accrue to the accommodation and food and beverage sectors although a portion of job impacts would likely also accrue to transportation, retail and tour (e.g., charter) operators. These employment impacts can be put into context by comparing the Inside Passage summer day cruise service tourism job creation impacts with overall labour force data for the region. According to Census information, there were a total of 730 people in Prince Rupert and 295 people in Port Hardy, employed in the accommodation and food and beverage sectors in 1996 (most recent information available). As such, the tourism

23 BC Stats Ministry of Finance and Corporation Relations. British Columbia Local Area

Economic Dependencies and Impact Ratios. Page 49. While there are some methodological issues

with these ratios, they are currently the only ones available. 24Port Hardy[45,408 passengers x 1.1 average length of stay] + Prince Rupert [45,408 passengers x

1.4 average length of stay] = 113,520 total visitor days. 25 [113,520/10000] x 11 = 124.9 (rounded to 125 jobs)

Port Hardy Proportion Prince Rupert Total Study

Area Prince Rupert Area Area

Food & Beverage 31% 929,048$ 30% 1,144,282$ 2,073,329$

Accommodation 19% 569,416$ 18% 686,569$ 1,255,985$

Transportation 19% 569,416$ 21% 800,997$ 1,370,413$

Souvenirs/Gifts 7% 209,785$ 7% 266,999$ 476,784$

Outdoor Activities 6% 179,816$ 6% 228,856$ 408,672$

Attractions/Culture 5% 149,846$ 5% 190,714$ 340,560$

Other Expenses 13% 389,601$ 12% 457,713$ 847,313$

Total 100% $2,996,928 99% $3,814,272 $ 6,811,200

CategoryProportionPort Hardy

Table 4-3Tourist Expenditures by Category


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employment generated by the Inside Passage summer day cruise service represents approximately 12.2% of total tourism employment in the study area (i.e., 125/1025). At the community level these figures are 18.6% for Port Hardy (55/295) and 9.6% for Prince Rupert (70/730). The actual percentages are likely a bit lower as the Census figures do not include people involved in such activities as charter fishing, ecotourism services, etc. The indirect and induced employment impact associated with this direct employment is estimated at 20.4 FTEs (9 FTEs in Port Hardy and 11.4 FTEs in Prince Rupert) based on total tourism employment ratios (i.e., direct, indirect and induced) of 11.06 and 14.19 tourism jobs per 10,000 visitors days for Port Hardy and Prince Rupert respectively26. Contribution of Ferry Passenger Spending to the Regional Economy As information on the total value of the study area economy is not readily available, it is not possible to assess the relative economic contribution of the Inside Passage summer day cruise service to the overall economy of the area. However, it is possible to provide a “bigger picture” context for the economic impact of the service by using employment income as a proxy for total economic impact. This involves comparing the estimated employment income associated with passenger spending in the study area, with total employment income in the study area. While this calculation reflects a number of assumptions, it provides a reasonable estimate of the relative contribution of the Inside Passage summer day cruise service to the overall economy of the study area. As noted above, the total number of visitor days generated by ferry passengers is believed to support an estimated 125 direct FTE tourism jobs in the study area. As the greatest percentage of these jobs are in the accommodation and food services sector27, hourly wages likely range between $8.00 and $14.00/hour (assume $11.00 on average). Based on a total of 243,75028 person-hours of employment, it is estimated that total employment income in the study area resulting from ferry passenger spending is $2.68 million29. Of this total employment income, an estimated $1.18 million accrues to Port Hardy which supports 55 (44%) of the 125 FTE jobs created by ferry passenger spending, while the remaining $1.5 million accrues to Prince Rupert which supports the other 70 (56%) FTE jobs.

26 Op. Cit. BC Stats. P. 49. (49,949 PH visitor days / 10,000) x 11.06 total employment ratio =

55.2 FTEs. (63,571 PR visitor days / 10,000) x 14.19 total employment ratio = 90.2 FTEs. 55.2 +

90.2 = 145.4 FTEs. 145.4 – 125 direct FTEs = 20.4 indirect/induced FTEs. 27 At the provincial level, tourism employment by sector is broken down as follows:

accommodation and food (51.5%), wholesale and retail trade (19.7%), transportation and

communication (15.1%), other services (6.7%), amusement and recreation (4.6%), public service

(2.0%), finance, insurance and real estate (0.5%) and leisure and personal services (0.4%). 28 125 jobs x 1,950 hours/year per job = 243,750 person hours 29 243,750 person-hours x $11/hour = $2,681,250 wages


27

In order to put this tourism employment income impact into broader economic context, we can compare it to overall employment income in Port Hardy and Prince Rupert. According to Revenue Canada (and as reported by BC Stats), total income in Port Hardy and Prince Rupert in 1999 (most recent data available) is estimated at $384.8 million. As such, the employment income generated by the ferry represents 0.7%30 of the total employment income in the study area. At the community level these figures are 1.2%31 for Port Hardy and 0.5%32 for Prince Rupert. Tax Impacts Associated with Ferry Passenger Spending Ferry passenger spending will generate income tax, hotel tax, hotel room tax and corporate/business tax revenue. As the latter is very difficult to estimate, the focus of this assessment is on the other three taxes. Income Tax – As noted above, total employment income generated by ferry passenger spending is estimated at $2.68 million. As most of these employees will earn less than $30,000 per year, they will fall into the lowest tax bracket and pay approximately 23.3% of their income in taxes (16% federal and 7.3% provincial based on 2001 rates). Based on an average annual salary of $21,45033, the total income tax paid by these employees is estimated at a maximum of $408,85734 of which approximately $273,934 (67%) will accrue to the federal government and $134,923 (33%) will accrue to the provincial government. Hotel Tax – Tourist accommodation properties (e.g., hotels, motels) must charge their guests an 8% hotel tax. As a result, the estimated $1,255,985 spent by ferry passengers on accommodation (see Table 4-3) would include up to $100,479 that is collected as hotel tax and submitted to the provincial government. The actual number is likely somewhat less as some accommodation spending would accrue to campgrounds which do not collect the hotel tax. Hotel Room Tax – A number of municipalities in BC, including Prince Rupert, have chosen to apply the discretionary 2% Hotel Room Tax to room tariffs as a way of raising revenue for local tourism marketing and other activities. In fiscal 2000/2001, the estimated $686,569 in accommodation revenue generated as a result of ferry passenger

30 $2.68 million/$384.8 million = 0.7% 31 $1.18 million/$96.6 million = 1.2% 32 $1.5 million/$288.1 million = 0.5% 33 1950 hours per year x $11/hour = $21,450 34 $21,450 average wage less Basic Personal Exemption of $7,412 = $14,038. $14,038 x

125 FTEs = $1,754,750 taxable income (assuming no other exemptions) x 23.3% tax rate

= $408,857.


28

spending in Prince Rupert would have included approximately $13,731 in Hotel Room Tax35 (9.6% of the total room tax collected in 2001). Provincial Tourism Revenue Impacts of the Inside Passage Summer Day Cruise

Passenger surveys indicate that while most Inside Passage summer day cruise ferry passengers are spending only a couple of days in Port Hardy and Prince Rupert, their total travel time is 21.5 days. As such, the total tourism revenue generated by these passengers based on 2001 passenger counts is roughly estimated at $73.2 million36 of which about 60% to 75% (or $44 million to $55 million) is spent in BC.

4.3 Summary of Tourism Impacts Table 4-5 provides a summary of the estimated economic impacts associated with tourism spending by passengers using the Inside Passage summer day cruise service.

35 $705,817 x 2% = $14,116 36 45,408 passengers (2001) x 21.5 days (average trip length) x $75/day (average spending (median

spending between $60 and $87/day) = $73.2 million. The proportion of spending that accrues to

BC is an estimate based on the traveller origin data and information on other cities visited by Route

10 passengers.


30

4.3 Conclusion

The results of the economic impact assessment of the Inside Passage summer day cruise ferry service indicate that it generates both operational expenditure and tourist spending impacts in the study area. In fiscal 2000/01, the service cost approximately $9.22 million to operate and incurred a $505,000 operating loss on revenues of $8.71 million. Spending by BCFC to operate the service generates economic benefits to business and government in the form of purchases of goods and services, employment of labour and tax payments. Of the $5.25 million spent to operate the ferry (excluding wages), $1.87 million (35.6%) is spent in the region – largely on fuel.

A total of 55.8 FTE positions (49 ship-based and 6.8 shore-based FTEs) are supported by the operation of the ferry but the permanent home of 75% of the ship-based employees is outside the region so the benefits associated with the spending of wages and payment of local taxes is limited to the 19 FTEs that reside in the study area. These direct wage impacts are approximately $1.17 million.

The most significant economic impact accruing to the study area as a result of the Inside Passage summer day cruise service results from spending by passengers on accommodation, food and other services or products. These passengers generate about 113,520 visitor days in the region and the $6.81 million they spend supports approximately 125 tourism FTE positions or about 12.2% of total tourism employment in Prince Rupert and Port Hardy. These spending and employment impacts are somewhat greater in Port Hardy than in Prince Rupert. Passenger surveys indicate that while most Inside Passage summer day cruise passengers are spending only a couple of days in Port Hardy and Prince Rupert, their total travel time is 21.5 days. As such, the total tourism revenue generated by these passengers based on 2001 passenger counts is roughly estimated at $73.2 million of which about 60% to 75% (or $44 million to $55 million) is spent in BC.

Appendices

A. Project Information Sources B. Economic Impact of Route 10 Service Modification Profiles

Appendix A Project Information Sources

BC Stats. Community Profiles (City of Prince Rupert and Port Hardy District Municipality) BC Stats. All Individual Returns by Income Group – 1999 (Source: Canada Customs and Revenue Agency). February 2002. Canadian Tourism Commission. Tourism – Canada’s Tourism Monthly (June 2002) Cloverpoint Cartographics, et. al. Forest and Fisheries Tourism Opportunities Study of the Northcoast Forest District. Project Report. (March 2000). IBI Group. Northern Routes’ Research Routes 10, 11, 40. Technical Report. (December 20, 2000). IBI Group. Inside Passage Route 10 Market Research: Final Report. (January 2002). Indian and Northern Affairs Canada. First Nations Profiles. Website: http://esd.inac.gc.ca/fnprofiles/

Tamblyn, Greg C. and Horn, Hannah. Current Conditions Report: North Coast Land and Resource Management Plan (Prince Rupert Interagency Management Committee). March 2001. Tourism British Columbia. B.C. Visitor Study: The Report on Visitors to Northern British Columbia Tourism Region. (1998) Tourism British Columbia. B.C. Visitor Study: The Report on Visitors to Vancouver Island Tourism Region. (1998) Interview Contacts:

• Julia Ferguson, Executive Director, Tourism Prince Rupert • Brenda Etherington, Secretary, Vancouver Island North Visitors Association • Jennifer Case, Coordinator, Vancouver Island North Visitors Association • Steven Smith, Past Chair Tourism Prince Rupert and Past BCFC Board Member

Appendix B Economic Impacts of Route 10 Service Modification Profiles

Impacts of Service Modifications

In addition to quantifying the economic impacts of the existing Inside Passage summer day cruise service, BCFC is interested in understanding the potential economic implications associated with two Route 10 schedule profiles. These profiles include:

• Reducing the current service by one day per week. One of the service options being considered by the summer of 2004 involves reducing Queen of the North trips on Route 10 by one day per week. In 2002, the service runs from May 18th to September 30th with sailings heading northbound one day and southbound the next day. Reducing the service one day per week would mean that a total of 19 sailings would be eliminated over the summer operating season in 2004.

• The reduction in the length of the 2002 operating season by eight days (or four return trips) so that it ends on September 30th rather than October 8th.

Impact Assessment of Weekly Sailing Reductions Reducing the Route 10 service by one day per week starting in 2004 is one of the service options being considered for the northern service routes because it would enable two ferries to service all three routes (i.e., 10, 11 and 40). Under the scenario, potential direct tourism spending losses in the study area are estimated to range from a low, under a best-case scenario, of $0 to a high, under a worst-case scenario, of $1.03 million. Under the best case scenario, it is assumed that the operating season would be reduced from 144 days (2001) to 135 days (2004) and that associated vehicle capacity would fall from 15,120 (144 days x 105 vehicles) to 14,175 (135 days x 105 vehicles) – a loss of 945 vehicle spaces over the operating season. In 2001, vehicle capacity utilization was 79% meaning that an average of 22 vehicle spaces were left available each sailing (105 spaces x 79% utilization). On a 135-day sailing schedule, this translates into 2,970 available spaces. An estimated total of 6,01637 people would possibly travel on the 19 sailings in question spread over the operating season. If all of these people chose to reschedule their travels to take the ferry on a day when it was operating, and if an average of three people per vehicle is assumed, then the 2,970 spaces available could accommodate the additional 2,005 vehicle spaces required (6,016/3) and no visitors or associated spending would be lost.

37 Using 2001 monthly passenger counts, this total was estimated as follows: May (2 sailings x 129

passengers) + June (4 sailings x 285 passengers) + July (4 sailings x 365 passengers) + August (5

sailings x 378 passengers) + September (4 sailings x 317 passengers) = 6,016.

Under the worst-case scenario, it is assumed that none of the passengers that currently travel on the 19 days removed from the schedule would opt to travel on another day. In this case, the direct spending impacts associated with a total of 6,016 passengers would be lost. Resulting spending losses in Port Hardy and Prince Rupert are estimated at $902,40038. Realistically, the direct spending impacts resulting from this scenario will be somewhere between $0 and $902,400. Some people are on set travel schedules and if they are unable to reserve a vehicle space on the ferry when they want it, it is not a given that they will just select another day. Instead they may opt to change their travel route either partially or completely. Similarly, however, there are some travellers for whom the Inside Passage route is a primary travel objective and who will arrange their travel schedules around available space. The average Inside Service summer day cruise traveller spends $150 in the study area (2.5 days average length of stay x $60/day) so the direct spending impacts of various scenarios can be determined by multiplying this figure by passenger loss estimates. Although the precise impact of this scenario on direct wage and operational spending is difficult to estimate, the removal of 19 days from the schedule is not expected to have any noticeable impact on operational costs as the ferry and staff would work on the Route 11 (Prince Rupert to the Queen Charlotte Islands) service on the days removed from the Inside Passage summer day cruise schedule. In addition to the direct wage and operational spending impacts associated with this scenario, a reduction in the number of sailings could also have an effect on the employment and taxes resulting from spending by Inside Passage summer day cruise passengers. While these impacts are also difficult to calculate, the potential maximum spending loss of $902,400 represents approximately 13.2% of the estimated total $6.81 million spent by ferry passengers in 2001. Therefore, maximum employment and tax losses associated with passenger spending can be roughly calculated as follows:

• 16.5 FTEs (13.2 % of 125 FTEs) • $54,000 in lost income taxes (13.2% of $408,857) • $13,300 in lost Hotel Tax revenue (13.2% of $100,479) • $1,800 in lost Hotel Room Tax revenue (13.2% of $13,731)

Trying to determine the potential impact of this scenario on provincial tourism revenues is, at best, an educated guess. As noted earlier, the total estimated economic contribution of Inside Passage summer day cruise ferry passengers to provincial tourism revenues is between $44 and $55 million. Based on the same assumptions made regarding regional tourism sector impacts of this scenario, the potential direct tourism spending losses to the

38 6,016 passengers x 2.5 days (average length of stay in Port Hardy and Prince Rupert combined)

x $60 (average per diem for Port Hardy and Prince Rupert combined) = $902,400.

province are estimated to range from a low, under a best-case scenario, of $0, to a high, under a worst-case scenario, of $4.19 million39. Under the best-case scenario it is assumed that visitors to the province make no changes to their travel plans as a result of modifications to the ferry’s operating schedule. Under the worst case scenario, it is assumed that all of the non-BC visitors (80% of total passengers) that would have used the ferry on the 19 days that the ferry would no longer run, change their travel plans completely and do not come to the province. This latter scenario is considered very unlikely as the Inside Passage summer day cruise is only one component of what attracts non-BC visitors to the province.

Impact Assessment of 2002 Schedule Reduction

Evaluating the potential impact of reducing the Route 10 service by eight days at the end of the season has been included in this assessment in order to understand the impact of the reduction in the length of the 2002 season announced by BCFC earlier this year. As this service reduction has already been implemented, 2002 summer passenger count figures will be available by the end of the season to determine the actual implication of this scenario on passenger counts and associated tourism spending. As can be seen from a review of the passenger and utilization count figures in Table 3-1, increases or decreases in the number of sailings over the six-year period shown have not always resulted in corresponding increases or decreases in passenger counts. In fact, when the number of sailings increased by 14 between 1996 and 1997, and by 14 between 1997 and 1998, the number of passengers relative to the previous year declined. Furthermore, there is some belief that North America travel patterns have changed since September 11th, 2001 with a greater proportion of Canadians and Americans opting to travel within North America rather than overseas. As such, it will be difficult to determine the extent to which variations in passenger counts during the 2002 Inside Passage summer day cruise season are due to a shortened season versus this significant international event. However, similar to the weekly sailing reduction scenario, it is likely valid to assess the potential economic impacts of the 2002 schedule changes from a best and worst case perspective. Under a best case scenario, it is assumed that no potential passengers are lost as all of those that would have traveled the first week of October simply modify their travel plans to take the trip earlier in the season. As only 1,193 people took the ferry in October 2001, there is easily adequate available capacity earlier in the season to accommodate these people, even if they all chose to travel the last week of September. This scenario is considered to be somewhat unlikely as there will always be some portion of travellers that choose to travel in October or later in order to take advantage of off-season rates which are typically introduced at the beginning of October.

39 6016 passengers less 20% BC Residents = 4813. 4813 x 14.5 days (70% of total travel time of 21.5 days – represents average length of total 21.5 day trip spent in BC) x $60 = $4.19 million.

Under a worst-case scenario, it is assumed that all passengers who would have taken the October sailings opt to travel elsewhere rather than sail earlier in the season. In this case, the region would lose the spending impacts associated with 1,193 passengers -- estimated at $178,95040 or $150 per person. When considering this assessment it should be remembered that once the Inside Passage summer day cruise service ends, weekly winter service begins. Therefore, visitors would still be able to travel on the ferry one day in each direction during the first week of October. Although the precise impact of the 2002 schedule change on direct wage and operational spending is difficult to estimate, the removal of eight days from the schedule reflects a 5% decline relative to the length of the 2001 schedule. If there were a direct correlation between the decline in the length of the operating season and operating spending, then total study area wages and supply purchase spending would decline to $1.11 million ($1.173 million less 5%) and $1.32 million ($1.87 million less 5%) respectively. In addition to the direct spending impacts associated with the 2002 schedule change, a reduction in the number of sailings could also have an effect on the employment and taxes generated by the Inside Passage summer day cruise service. As noted above, the potential maximum spending loss of $178,950 represents approximately 2.6% of the estimated total $6.18 million spent by ferry passengers in 2001. Therefore, maximum employment and tax losses can be roughly calculated as follows:

• 3.25 FTEs (2.6% of 125 FTEs) • $10,630 in lost income taxes (2.6% of $408,857) • $2,610 in lost Hotel Tax revenue (2.6% of $100,479) • $360 in lost Hotel Room Tax revenue (2.6% of $13,731)

As with the weekly sailing reduction scenario, trying to determine the potential impact of the 2002 schedule change on provincial tourism revenues is, at best, an educated guess. However, based on the same assumptions made regarding regional tourism sector impacts of these changes, the potential direct tourism spending losses in the province are estimated to range from a low, under a best-case scenario, of $0, to a high under a worst-case scenario of $830,00041. It should be noted that these impact calculations are based on the market data summarized in Section 3.3 which reflects high season traveller profiles (e.g., a high percentage of international and American travellers). However, an analysis of the origin of October passengers indicates a much higher percentage of B.C. (70%) and local (20%) travellers than is the case in the peak summer period. As the average trip length and average spending of British Columbians is typically lower than that of international and American travellers, the maximum total potential spending losses associated with the eight day schedule reduction is likely much less than $830,000.

40 1,193 passengers x 2.5 days (average stay in Port Hardy and Prince Rupert) x $60 (average per diem in region) = $178,950. 41 1,193 passengers less 20% residents of BC = 954. 954 x 14.5 (70% of total travel time of 21.5 days – represents average length of total 21.5 day trip spent in BC) x $60 = $829,980.

Under the best-case scenario it is assumed that visitors to the province make no changes in their travel plans as a result of changes to the ferry’s operating schedule. Under the worst case scenario, it is assumed that all of the non-BC visitors (80% of total passengers – based on peak travel season market profile information) that would have used the ferry on the eight days that the ferry would no longer run, change their travel plans completely and do not come to the province. As with the weekly sailing reduction scenario, this latter situation is considered very unlikely as the Inside Passage summer day cruise is only one component of what attracts non-BC visitors to the province.

Documents

Preliminary Economic Impact Assessment Route 10: The ... · Inside Passage Summer Day Cruise Service Profile The Inside Passage summer day cruise service typically operates between