Economic Overview from a Resident’s Point of View

Bar Harbor – Minus Millions: The Rest of the World – Plus 20 Million

Thanks to Jim O’Connell for this careful analysis

8/23/17

                                                                  The Love Boats? Buyer beware! 

Recent economics studies mislead Bar Harbor voters on the impact of cruise ships on our town. Studies done show WORLDWIDE impact, NOT local impact.

• What I have tried to do here is to ascertain the 2016 net profit, in dollar figures, for Bar Harbor citizens from all the Cruise Ship money spent in Bar Harbor in 2016. How much ended up in their pockets from hosting this industry? The economic studies done so far have been irrelevant to this issue. They have been showing the economic impact on the rest of the world, not on Bar Harbor itself.
The economic IMPLAN Input Output cruise ship studies done by Jim McConnon and Todd Gabe for Bar Harbor and Portland are world wide economic impact studies. An IMPLAN study is used by Cruise Line International Associates (CLIA), because they want to dazzle the hosting communities with the dreams of $ Millions.
CLIA ‘s executive partners, Cruise Maine USA and the Maine Port Authority funded the study by McConnon and Gabe along with the Town of Bar Harbor, Harbor Place, the Bar Harbor Chamber of Commerce, and a USDA grant. Gabe and McConnon teach Economics at University of Maine at Orono. Their figure, 20.2 million dollars, is flashed in the newspaper headlines, reading like a huge amount of money is being made for Bar Harbor.
• 20.2 MILLION for 2016 is a very impressive number. It’s figured from using a survey model that can be purchased online, called an IMPLAN input output survey. IMPLAN is an acronym for Impact Analyses & Planning. http://www.implan.com

CLIA, together with its executive partners, uses this IMPLAN study around the world because it exaggerates the dollar spent by using multipliers  http://www.economicshelp.org/blog/1948/economics/the-multiplier-effect/

 A multiplier embellishes the final gross revenues by adding an additional round of spending dollars onto the total take. It gets multiplied as it is re-spent as far away as China.

The study Todd Gabe did was the job he was paid to do. He was paid to do an IMPLAN study of cruise ship spending impact on the larger region and, stated in small print, money that goes to, “the rest of the World.” (See p. 23) of the Economic Impact of Cruise Ship Passengers Visiting Bar Harbor (Maine) in 2016 http://barharbormaine.gov/DocumentCenter/View/2162

• This means it includes all the money paid for goods to be sold in Bar Harbor, like apparel and souvenirs, or anything for that matter that was produced in the larger region, including the rest of the world.
An IMPLAN survey is basically a derivation of a MI-REC IMPLAN. The people of Bar Harbor, had they known, would have been better served with a value-added MI-REC IMPLAN study. https://msu.edu/user/stynes/mirec/mi-rec.htm. The MI-Rec IMPLAN was developed to study the economic impact of recreational spending on a host community. It looks at the profits made and the jobs created for the people who actually reside in that town. It may seem miserly, but as the host port of call we are the ones carrying the brunt of all this activity and deserve a fair profit from this business. Instead, we end up making profits for, “the rest of the world.”
So if $20.2M is passing into town, how much of that stays in the hands of a Bar Harbor resident?

Search http://smallbusiness.chron.com/typical-net-profit-retail-companies-79287.html https://csimarket.com/Industry/industry_Profitability_Ratios.php?ind=1301 Apparel, like T-shirts nets a 6% profit. Restaurants net from 3 to 3.6 % profit.

• According to these cited net profit margins, for every $1.00 taken in on a T-shirt, $.06 is net profit and goes into the owner’s pocket. $.94 will go to business expenses.
••• For a dramatic, yet very relevant comparison, many owner-occupied Airbnb’s have sprouted in Bar Harbor. For every dollar spent at an Airbnb, using a resident’s spare bedroom, about $.90 stays in Bar Harbor and about $.10 cents goes out of town. $.90 is 15 times more valuable than $.06. 
• So, the Airbnb customer is 15 times more valuable than the cruise ship customer. It’s 90% right into the pocket of a community member, and likely will be spent in town. The overnight guest will eat several meals and may buy larger items to take home in their cars. It takes 15 cruise ship passengers to equal the value of one Airbnb customer.  
• Gabe’s IMPLAN study considers a multiplier in its equation which he figures equals 5.3 million dollars. That’s 5.3M over the actual gross spent in Bar Harbor. What concerns us is only the first round of profit taking, so 20.2 – 5.3 = 14.9 million dollars direct impact.

• How many jobs were created, paid solely by Cruise ship activity and not from passenger fees or port development fees? How many were jobs for workers living in Bar Harbor? Gabe counted 329 part time and full time jobs, but once again, they include the region and the rest of the world. I don’t believe any full time jobs have been created for Bar Harbor residents, and any part time seasonal jobs for the residents are few and far between, since cruise ship passengers represent only a 5% increase in tourist numbers. Much of the 3.8 M attributed to jobs is going out of town and wasn’t included in the 20.2, it has little to no relevance to Bar Harbor. All queueing and tendering operations are handled by the crew from the ships.
• Now, 90% of 4.7M in tour bus money also goes out of town to Lewiston and Bangor, $470,000. stays with local tour operators. 90% of 4.7M equals 4.23M. So 14.9M – 4.23M = 10.67M. This 10.67M is what we need to know to figure out the net profit for Bar Harbor. It is the money that is purported to be spent in Bar Harbor?
• Next, we have to figure out how much of the 10.67M was spent at restaurants [whose owners make 3.5% profit] and how much of it was spent for retail merchandisers [who make 6% profit] and then add the two together for the total net profit for Bar Harbor’s businesses.
• Going on Gabe’s assertion that 1/3 of the 10.67M is spent on food and 2/3 of the 10.67M on merchandise, we must divide the 10.67M into thirds so we can apply the different percentages to the two different businesses. So, 1/3 of 10.67M = $3,52,000 x 3.5 % and that equals $123,238. net profit for restaurants. Now for merchandise, 2/3 of 10.67M = 7,042,000 x 6% equals $422,520. net profit. Adding this number to $123,238 gives you the net profit of $545,758. This number is the high end estimate that uses Gabe’s mail-in survey estimation that every man, woman, and child aboard these ships, that disembarked, spent an average of $108. apiece. Keep in mind this survey was only filled out by 1.6% of the passengers and the survey didn’t necessarily ask that you answer for yourself but some versions asked about the “money that you and others in your group spent” (p.27 of the 2/2017 report). It does not ask how big a group you’re answering for, so $108. may be representing 2 or more people. This inconsistent survey questionnaire could be exaggerating the final figure by 50%. This is probably why the bag count data, listed below, does not represent, anything near what the passengers should have been carrying back out to the ship.
Did all the passengers really spend $108.00 each?

An observation, done by myself, of the different shopping bags and the number of them being carried by the passengers, down the ramp to the tenders and back out to the ship, should be looked at. A 6 hour passenger – bag count observation on the 4/26/17 Veendam visit, and the same method for 6 hrs. on the 6/28/17 Anthem visit, shows an average of 1 person out of 5.8 carrying a shopping bag back out to the ship. 4,950 passengers were in these two passenger bag counts. Every one of those passengers is supposed to spend $50. on retail, and $24. on food. [The remaining $34, spent on tour buses, was subtracted above.] If only one out of 5.8 or 17% of passengers spent $50.00 on merchandise the average per passenger would be worth $8.60. That would take the final net profit on merchandise to $72,673, which is (17.2 % x $422,520.). With food calculated at $24 per passenger, worth a net profit of $83,160, the total net profit for food and merchandise would be $155,833. Not $545,760.

• Was there even $50.00 in that one bag? Most bags appeared to have apparel like T-shirts or sweatshirts. There were quite a few bags the size of calendars and some people were only carrying a gallon of water back out to the ship. As outrageous as it may seem, that one bag’s value may equal two T-shirts for $13.00? If so, $13.00 divided by 5.8 = $2.25. Six percent profit on 138,285 passengers x $2.25 = $18,742. Add a 3.5 % profit on an average 24.00 food purchase for the 138,285 passengers equaling $116,159 and you have a total of $134,901 in net profits for Bar Harbor for 2016.  That’s a far cry from north of $20 million!
• Todd Gabe’s estimate of $24.44 for food and beverage for every man, woman and child, when the average visit is only 4-5 hours, is very high. Since all the food you can eat is all paid for and the dining is exquisite onboard, especially the formal dinner, then not many cruise passengers are stuffing themselves onshore. Many will pack food from the buffets so they have something to eat while on-shore. After all, they have already paid for that food. The Holland American Cruise Line, maybe Bar Harbor’s most frequent visitor, offers free meals any time of the day to its passengers. Other lines schedule their free meals, dinner usually starts at 5:30PM, and all passengers are back on the ship by 4:30PM.
• A land based overnight lodging guest, will very likely eat out several times and buy souvenirs and larger items. They are about 15 times more valuable to Bar Harbor, yet they are being pushed out of downtown Bar Harbor on cruise ship days by the intense wave of people coming off the ship(s). Trip Advisor and other information outlets are telling people to stay out of Bar Harbor. https://www.tripadvisor.com/Travel-g60709-s208/Bar-Harbor:Mount-Desert-Island:Weather.And.When.To.Go.html . “Stay out of Bar Harbor until 4:00 and avoid the Park Loop Road”. The words are out there and are having negative effects on our high quality businesses downtown, including motels and restaurants. Negative comments are heard up and down the coast and cruise ship moratoriums are quickly being put in place.
• Many people have criticized Gabe’s mail in survey. The survey was handed out to over 4000 people, and 2,200 replied. That’s 1.6% of 138,000 passengers. That’s about the minimum amount of people you could use to conduct a survey. Why didn’t Gabe just ask some people how much they spent as they queued in line to go back out to the ship? This is something that needs to be done. For all we know, the 2000+ passengers who didn’t fill out the survey didn’t spend anything here in Bar Harbor.
• Here are the several different bag value estimates and what the net profit would have been:
Bag value average @$50.00, plus food @$24.00 = net profit $545,760

Gabe’s mail in survey Bag value average @$8.20, plus food @$24.00 = net profit $155,833.

Visual survey Bag value average = 2.25, plus food @$24.00 = net profit $134,495
Visual survey With food expenditure adjusted to an average of $10.00 per passenger
Bag value @$50.00 plus food @$10.00 = $463,254. = 46 bedrooms at an Airbnb, 100 day season

Bag value @ $8.20 plus food@ $10.00 = $119,794. = 12 bedrooms at an Airbnb, 100 day season

Bag value @$2.25 plus food@ $10.00 = $66,735. = 6.7 bedrooms at an Airbnb, 100 day season

• Nobody is coming to Bar Harbor to see cruise ships dotting pristine Frenchman Bay. As a matter of fact, many people may avoid Bar Harbor. The smell of diesel and the industrial look of cruise ships in the bay is the antithesis of the pristine beauty that people come here for, not to mention why we live here. Air, water, and visual pollution are devaluing this and other towns surrounding Frenchman Bay.
See if you don’t come up with MINUS MILLIONS by the time you subtract all negative impacts. It appears the sidewalks and park improvements paid for by cruise ship passenger fees may be a Trojan Horse and we are being invaded and exploited by CLIA and their exploding cruise ship industry.

Observations and Data I Used
The following observations of the tenders arrivals and departures were made from the Bar Harbor Town Pier, in clear sight of the passenger ramp, less than 75 feet from where the passengers were coming in and going out.

Veendam April 26, 2017
Wed. Veendam in at 8:00am, recorded from 11:39 am to 4:32 pm at which point activity died out. Here is a list of the times and numbers. Also all those who carried shopping bags are also recorded. (“in” is coming in to shore, “out” is leaving shore going back to the ship)

11:39 in 28, out 37 bags 4
11:57 in 12 out 24          9

12:02 in 3 out 13            3

12:11 in 13 out 31         11

12:30 in 6 out 59           15

12:45 in 20 out 25          6

1:00 in 5 out 37              9

1:13 in 10 out 56          10

1:23 in 7 out 45             11

1:45 in 15 out 54            6

1:52 in 0 out 27              6

2:00 in 2 out 30           13

2:08 in 4 out 24            6

2:27 in 0 out 30            4

2:40 in 10 out 17         10

2:46 in 7 out 42            12

3:04 in 0 out 24              7

3:31 in 4 out 21             3

3:44 in 0 out 23             6

4:02 in 0 out 21            10

4:20 in 0 out 4                1

No more ship tenders, and the Miss Samantha stands by for stragglers and remaining crew.

The first tender arrived at approximately 9:00 am. It’s doubtful if very many passengers left Bar Harbor to go back out after only 2 1/2 hours so I think most of them were still onshore at 11:39 when this data was started to be recorded. Therefore this data should be a fairly close count of the total passengers who came ashore.
Passengers landed equals 677
164 shopping bags

Less than 1/4 of the passengers carried a shopping bag.

Most carried one bag several carried 3 bags.

Nothing appeared to be heavy. One person carried a six pack of beer.

Some bags were as big as a large shopping bag and some as small as a pharmacy bag, most were medium size. Some were paper, most were plastic.

Bad day for taking a tour bus ride, there was windswept fog and rain showers all day, making it difficult to see. One of three tour buses was observed returning around 12:30. 40 passengers disembarked and were helped across the street by Bar Harbors finest, all proceeded into Harbor Place and to the tenders. No one was seen going up town and none of these 40 carried shopping bags. Maybe they stashed them in Harbor Place? The next tender took them and 19 others, a total of 59, and the one bag for every 4 passengers still held. These people might have been shopping before their bus tour. The tour bus was a CYR’s bus. Three small white custom cruise ship tour vans did not seem to do very much after 11:39.

The Veendam passengers were in on what otherwise would have been a pretty dead day. The road was all ripped up, it was only April, there were occasional rain showers, and it was windy. Being early in the year, regular tourism hadn’t kicked in, so the passengers must have represented 90% of the potential customers that day. They say people shop and dine more on rainy days in Bar Harbor. This would be the perfect time for the businesses who took in the money on that day to figure out the average gross per customer. This would answer a very difficult and valuable question. How much does the average passenger spend in Bar Harbor? What is the value per bag? A possible way to find the answer would be for business owners to look at your records and see what your average sale was on 4/26/17? The rest of the town would like to know how much profit the business community makes. We need an economic impact study that’s specific to Bar Harbor only, not “the rest of the world” like McConnon and Gabe gave us.
 

Anthem June 28 2017
1st column tender departure time, 2nd column amount of passengers, 3rd column shopping bags carried out.
depart pass. bags

11:45    29         5

11:52    17          2

12:12    54        11

12:24    61        19

12:38    74        10

12:49    96        16

1:06     176       20

1:15      62        13

1:19     209       25

1:32      96       17

1:44     335      40

2:04      62       23

2:20    120      21

2:45    303     53

2:57    123     18

3:02      53     11

3:17    268     52

3:26    150     34

3:27    351     71

3:45    59       7

4:02     49      11

4:17    352     51

4:32   113       15

4:47   348       25

4:44    50       8

5:06   350     50

5:11   100     21

5:14    55     13

5:25   148     26

4,273 passengers is about 200 over the lower berth capacity so the ship saved on those fees that are based on the lower berth capacity by $860.00.
Budget ship, lots of families and kids are free! 16% carried a shopping bag. That’s 1 bag per 6.2 passengers. Only 2 identifiable crew members came ashore.

The 3 tenders used, and aptly compensated for, were owned by Walsh’s concerns, plus the Acadian Sightseer. The Anthem did not use its tenders.

Rotterdam August 3, 2017
A quick look at the Rotterdam on 8/3/17 is almost identical to the 4/26/17 Veendam

Veendam’s bag count was 1 bag per 4.1 Rotterdam is 1 bag per 4.3

time   out    in      bags

2:25   72    15      16

2:41  73      5       16

2:49  57      0        13

3:00  76      0        16

3:10  42      11       7

3:18  51      4       10

3:26   25      0        7

3:35   72      4      17

3:49   55      1      19

3:54   21      0       7

4:04   54      2      10

4:15   48      0        8

The three ships’ ratio of bags to passengers:
Anthem 1/6.2

Veendam 1/4.1

Rotterdam 1/4.3

By averaging out the count of people and bags you get 1 in 5.8 carried a shopping bag.
Jim O’Connell

Bar Harbor resident for 40 years

Many thanks to Jim for all his hard work and dedication. Much appreciated!