Cruise Ships Financially Exploit Onshore Stores



http://www.huffingtonpost.com/nicole-glass/cruise-ships-financially-_b_1531590.html

Cruise Ships Financially Exploit Onshore Stores

A flock of three thousand tourists spill out of a cruise ship,
dispersing into Belize City, following a map given to them by the
industry that owns the port, the shops, and the economy. The
passengers are on a mission -- a mission to find the largest diamond,
a cheap designer watch, or a souvenir that represents the culture of
their "exotic" destination.

Convinced that the stores on their easy-to-follow map will lead them
to the greatest onshore deals, the eager tourists are unaware that the
cruise line's recommendations are driven solely by profit. They are
unaware that the maps are leading them to stores whose revenue goes
straight back to the ship. Their seemingly-cultural onshore excursions
are a product of the more than half a billion dollars their cruise
line pays on advertising each year. With shopping bags in hand, the
suntanned Caribbean vacationers return to the ship that their wallets
never parted from.

Before cruise passengers go onshore to one of their ship's
destinations, they are given shopping lectures and store maps with the
industry's recommendations for the best deals and the highest quality
products. But what the passengers aren't told is that these stores
have paid hundreds of thousands of dollars in annual fees to be
listed. Additionally, these businesses are required to pay the cruise
lines a percent of their revenue made from cruise passengers.
Customers are asked whether they came from a cruise ship, and their
cruise line's name is then printed on the receipt, used later to
calculate how much is owed to the cruise line.

Ross Klein, an expert on the cruise industry and owner of the site
cruisejunkie.com, has studied corruption in the industry for decades.
He was blacklisted from all cruise ships after years of research, and
now relies on information from other reporters to continue his
investigation. Klein witnessed the early stages of the port shopping
programs in the 1970s, when cruise directors personally collected cash
from onshore stores in return for bringing passengers.

"The cruise director would develop a relationship with the stores in
port, would advertise the stores on the ship and then at the end of
the cruise, you could watch the cruise director go into the stores and
collect their commissions for the sales from the passengers from the
ship," Klein said.

In the late 1980s and early 1990s, companies including Onboard Media
and the PPI Group took this idea and turned it into a business, Klein
said. They created port shopping programs, complete with onboard
shopping lectures, advertising, catalogs and store maps. To be
included in these shopping programs, stores have to pay the companies,
who then pay the cruise lines.

While the Caribbean may draw the most money out of "local" shops, this
cruise ship business tactic is widespread. Distinctive Gemstones, a
small store in Skagway, Alaska, was told by Onboard Media in 2001 that
it would have to pay $20,000 per year to be a recommended store
listing by the company's cruise lines. Skagway, a population 862 small
town that was once a popular Gold Rush destination, is the 16th most
visited cruise destination in the world with nearly 450 cruise calls
and 750,000 visitors each year.

But stores who refuse to pay cruise lines to be included in their port
shopping programs often lose customers to those who can afford the
advertising fees. In a small Alaskan town whose economy relies on
tourism, this can be financially devastating for the businesses that
opt out of participating. Skagway storeowner Eileen Hunter said
without cruise line advertising, her art store, which is difficult to
find, would have no business.

"People are very influenced by what they hear on board," Skagway
resident and former Princess cruise ship employee Allison Wilson told
the Associated Press. "I fought against it on board. There's no
discrimination. They don't pick the best stores. They pick the stores
that will pay the money."

These recommended listings have not been proven to sell higher quality
products than any other stores. Carol Wilkins visited St. Maarten in
2008 and found better deals at onshore stores that her cruise line did
not advertise.

"Once I abandoned shopping at the 'approved' locations, I found true
deals," she said. "Another thing you will not hear from the cruise
shopping director is that the stores who are on the 'approved' list
are higher priced and less likely to give you deals."

Skagway City Manager Bob Ward wrote a letter to a Norwegian cruise
line in 1998, stating his opposition to the port shopping program
which had not yet been implemented in his Alaskan town. The program
was misleading, he said, because it causes passengers to assume the
recommendations were selected on the basis of quality and price.

Although cruise line passengers may be vital for the industries of
small towns like Skagway, the amount of money the cruise lines demand
is alarming. Stores at several Alaskan ports told Klein that in
addition to the annual membership fee, stores paid cruise lines about
40 percent of their gross receipt from cruise passengers. Klein
calculated that if the stores keep 60 percent of the gross receipt and
40 percent of this goes to the cost of the products, stores only make
a profit of 20 percent of the revenue -- half of the amount that the
cruise lines keep.

"They're not earning as much as they rightfully should, but they're
certainly making a small amount," Klein said. "The issue from the
cruise passenger perspective is the lack of awareness that part of
what they're spending at the store is going back to the cruise line."

The numbers in Alaska may sound high, but those in the Caribbean are
higher.

"We don't gouge people like in the Caribbean," said Onboard Media
representative David Mardini, who advertises port shopping programs.
The extent of this "gouging" is unknown, but given the larger number
of tourists in countries with fewer financial regulations, the numbers
must be significant.

A Royal Caribbean map of Cabo San Lucas lists several retailers as
part of its port shopping program. Among them are Diamonds
International, Tanzanite International, Milano Diamond Gallery and
other diamond, watch and jewelry retailers - large corporations whose
incomes are greater than small jewelry shops in Alaska.

Mardini said the annual flat rate that cruise lines charge stores is
dependent upon how much each store typically earns. Given the expense
of diamonds and watches, cruise lines are likely charging the stores
higher annual listing fees and making larger sums of money from stores
whose items are so costly.

And while other tourist-driven business -- like hotels -- are often
known to overcharge their guests and local tour groups in similar
ways, it's the cruise lines that pay little to no taxes. Sixty percent
of cruise ships are registered in either the Bahamas, Panama, or
Liberia -- countries who do not charge them income taxes or require
them to abide by national labor laws.

Rather than following a map of "recommended" stores, passengers may
find better deals exploring stores on their own.



Follow Nicole Glass on Twitter: www.twitter.com/NicoleSGlass

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