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.

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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

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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.

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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.

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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.

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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.

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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.

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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.

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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

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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.

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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

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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.

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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