“Welcome to the vacation of a lifetime.”
“Smile, you’re taking the vacation of a lifetime.”
We had flown from frigid Washington, D.C., to Miami in the middle of December, the high season for Caribbean cruises, and by the time we’d reached our cabin, five different waiters and staff members had congratulated us on embarking on this “vacation of a lifetime.” We felt like we had won the lottery before we unpacked.
This was the first cruise for my husband Bill and me and we were both excited and wary. We’d heard such a mixed bag about cruises: from “The food is delicious, you’ll gain weight no matter what you do” to “Watch out for the crowds at night when they’ve had too much to drink.”
We had boarded at the pier marked Royal Caribbean in Miami, the mother node of a network of cruise ports that stretches up and down the east and west coasts and is invisible to those who have never taken a cruise vacation. Florida has three of the largest ports, all built with public money, like airports. Rising before us was our colossal ship The Navigator of the Seas. Weighing twice as much as the Titanic and measuring three times the length of a football field, it towered above us like a small skyscraper.
By taking this five-day cruise down the eastern coast of Mexico to Belize, I hoped to understand why vacation cruises are among the fastest-growing and most profitable segments of the tourism business. The marketing genius of the cruise was evident at security, where a man took our photographs for our official “SeaPass.” These identification cards were our room key, our credit card aboard ship and our identification card when we made port visits in foreign countries.
Tangy sea air hit us as we climbed the gangplank onto the deck. A calypso band played toned-down reggae in the afternoon sun; little children and their parents danced on the polished deck. Teens inspected the disco and video arcades. The twenty-somethings were already ensconced at the pool bar. The ship was near full capacity, only a few souls shy of its 3,200-passenger limit.
Our cabin was a pleasant surprise: a lounging area with a couch, the smallest of bathrooms with shower and toilet, and a sleeping area with a double bed. A sliding door opened onto our own private, very petite balcony. It was remarkably luxurious for the price: $1,200 for the two of us—that included the cabin, our meals and all the entertainment and activities we could squeeze into five days.
That works out to $240 a day, barely enough for a no-frills hotel room in Manhattan. The allure of these cruises was becoming obvious. At sunset, as the ship pulled away, Bill and I were leaning on the balcony railing, smiling.
It was time for entertainment. The boat was made to have fun. The gilded Casino Royale gambling hall opened for business three miles out from shore. Attractive young women hosted the gaming tables, offering special deals and running tabs for the habitués. Further down was the multistory atrium. This was the ship’s center and social hub, anchored by “The Royal Promenade,” a replication of a classic European city street with shops and arcades, pubs and wine bars.
We dressed for dinner and went to the ship’s masterpiece, a huge banquet hall designed in shades of red and cream to resemble a turn-of-the-century opera house, with a glittering crystal chandelier and a dramatic winding staircase connecting three levels. Glasses and goblets sparkled on the white linen tablecloths. Waiters in handsome uniforms crisscrossed the room in constant motion, serving plates of food and pouring wine. This was the pampering and luxury that the passengers had come to expect. Afterward the evening’s “Welcome Aboard Showtime” capped the first day. Simeon Baker, the wiry and indefatigable cruise director, sang and danced and clowned before a band in the five-story Metropolis Theater, welcoming everyone to “five days of fun and excitement.” Dancers, comedians and music followed to sustained applause.
Back in our cabin we found a card left on our pillows: “Sweet Dreams . . . . of Happy Shopping” with an invitation to a shopping seminar the next day. Shopping proved to be a major activity.
We explored the ship the next day; Bill settled on a routine of early exercise followed by reading on the balcony with his feet propped on the railing. We arrived late for lunch. Two waiters—Ercan from Turkey and Hagar from India—served us. (All the waiters and housekeepers on the ship wear pins stating their names and nationalities.) Soon they told us they were both college graduates, one with a degree in tourism. Hagar still lives with her parents back in India, and said she sees her job on the ship as an adventure. “I get bored after a month back home,” she said.
The food arrived and the conversation shifted. Ercan told us his seven-month work contract on the ship paid $50 a month with no days off. We thought we had misheard him.
“You mean fifty dollars a week,” we said, exchanging glances that said “I can’t believe this guy could make up such a story.”
No, he said, he had meant $50 a month. Hagar backed him up. Their work days routinely lasted twelve hours. They rarely leave the ship during those months and then for a few hours at most. In essence, they relied on tips from passengers for their wages, which was the whole point of this conversation. Trying not to sound too appalled, I said that they had free room and board, didn’t they? Yes, they said, they have free room and board, but they are required to pay their airfare to the ship and back home.
They explained they had to earn $1,500 in tips each month to cover expenses and earn a small living. We got the message. The passengers subsidized their salaries. Doubtful, I went to the information desk and asked the young Canadian woman on duty what the wait staff is paid by the month so I could tip proportionately. She answered: “Fifty dollars.”
Shopping seminars were the only lectures offered on the cruise—nothing on Mexico or Belize, our two ports of call. At the seminar, Wesley and Victoria, the shopping gurus, told us there were world-class bargains in the ports and passed out a free map with lists of reliable stores that they said had qualified to insert paid advertisements in the brochure. Cozumel was especially strong on diamonds, Wesley said, even though diamonds are not mined, polished or set in Mexico. He recommended Diamonds International for the best bargains “to round out your diamond wardrobe”; it had won the cruise line’s distinction as the best in diamonds. He asked who in the crowd wanted a diamond tennis bracelet and many yelled back “me, me.”
“Stick to the stores on the map,” said Wesley. “If you’re silly enough to buy something from a store not on the map, then my hands are tied when something goes wrong.”
Each cruise ship has a live production with dancers and singers. Ours began at five in the evening with an “Ice Dancing” performance starring Oleksander & Tettiana and an international ice skating cast on the ship’s rink. The skating, costumes and music were captivating. After dinner Tettiana was back, starring in “Ballroom Fever,” a musical production with the Royal Caribbean Singers and Dancers that tipped its hat to both Fred Astaire and John Travolta. Dancers switched from jazzy to period costumes, twirling, leaping and snaking across the stage.
Kathy Kaufmann, a professional dancer in New York and a friend, told me what it was like to be a member of a dance troupe aboard a cruise ship. She described it as something you do when you’re young, “a little like backpacking through Europe.” The work is demanding; the pay adequate. During a cruise on a Holland America ship, she danced in the two productions each night and then rehearsed from midnight to five in the morning, when the stages were empty. The artists slept through the day in cell-sized rooms well below sea level, “which is a little depressing but great for sleeping since there are no windows.” After a year, she said, “I couldn’t do that again.”
I thought of Kaufmann watching the dancers on our ship.
The next morning we docked at the island of Cozumel. We were part of a mini-armada of eight cruise ships that arrived the same day, each adorned with trademark funnels—Mickey ears on the Disney liner, a splayed red tail for Carnival—and each carrying at least 2,000 people. That meant at least 16,000 people were all getting off at the same time for an afternoon of fun.
A Native Mayan in a feathered headdress, his face and body painted in beguiling swirls, greeted us at the gangplank. Bill pulled out his camera to snap a photo of me with the Mayan when a ship photographer blocked him.
“We paid for the Indian to be here, only we can take his picture,” he said. “Ship rates at a hundred dollars for the first four copies; ten dollars a copy afterwards.”
“But we’re passengers on this ship,” said Bill, wondering why we had been put in the camp of “us versus them.”
At the cruise port of Puerto Maya Pier, there are no passport checks, thanks to a special arrangement with Mexico and other Caribbean countries. Instead, we walked into a special duty-free zone dominated by three Diamonds International shops.
Fifty years ago the French oceanographer Jacques Cousteau visited the then unknown and sparsely inhabited island of Cozumel and declared its clear waters among the best for scuba diving. Today, every year, 1 million cruise passengers visit the thirty-mile-long island with a population of 100,000 looking for a few hours of sightseeing and shopping in the now densely commercial strip of San Miguel, where, again, a Diamonds International store dominated.
We saw cruise passengers on excursions arranged by the ship, snorkeling near the shore, or swimming with dolphins. (Forty minutes for $122.) We walked past a thatched-roof al fresco bar where other passengers were clasping dripping cold beers. At the pier, buses were disgorging passengers who had taken tours of Mayan ruins. At 4:30 P.M. the “All aboard” signal rang. We had had five hours in Cozumel.
Walking back onto the ship, we went through a security check where the guards were largely concerned about hidden alcohol. No, Bill and I said, we did not buy any liquor. One of the most stringently applied policies of Royal Caribbean is the ban on bringing any beer, wine, or spirits on board. If passengers had purchased a bottle of tequila in Cozumel, they had to hand it over to security where it would be “sequestered” until the cruise was over and the ship docked in Miami.
The only alcohol passengers were allowed to drink had to be purchased at the ship’s bars or restaurants. The penalty for disobeying this policy is severe. In our rules book Royal Caribbean states that guests concealing alcohol “may be disembarked or not allowed to board, at their own expense, in accordance with our Guest Conduct Policy.”
Those drinks tabs added up. My husband and I were not reveling into the late hours, but our wine at dinner and occasional cocktails over five nights ran to several hundred dollars. When your key card is also your credit card, it is easy to lose track of what you’re spending. Essentially everyone has a rolling tab. We passengers were the ultimate captive audience, spending our time and money on that one ship for five days, watching our bargain vacation quickly spiral into a more expensive getaway. Temptation was everywhere. The Portofino Italian Restaurant and the Chops Grille required a surcharge of $25 a person. Massages cost as much as $238.
Our next and last stop was Belize, due south of Cozumel on the Atlantic side of the Yucatan Peninsula. Belize is an English-speaking former British colony that once supplied London with logs and dyes and now relies on agriculture as well as nature tourism. The Belize Barrier Reef is the longest in the western hemisphere and among the country’s protected wilderness areas of beaches, coastal regions and untouched expanses of tropical forests.
Landing in Belize, we had to walk through a Diamonds International store to enter the country. The ship again offered excursions: a helicopter tour of the coast for $259 a person, a two-hour walk through a rainforest for $89, scuba diving for $115 or a two-hour boat ride down tropical rivers for $82. Bill and I decided to walk around Belize City. We crossed the narrow Swing Bridge and stepped into a crowd of local Belize shoppers filling the sidewalks of this old colonial capital. Vintage Christmas decorations were strung over streets lined with concrete shops and wooden inns painted soft pastel colors. We stopped at the Medina & Medina jewelry shop in a half-empty department store. A handsome silver necklace made by local artisans cost $100. I asked Mr. Medina how many foreign tourists bought from his store during the year. Very few, he said. The tourists only buy at the duty-free shops on the pier. “And I can’t get a permit to sell inside the Tourist Village,” he said.
With five thousand tourists landing in Belize on that day, we had expected business to be booming all over the city. But the tourists were off on excursions or were shopping at the pier, following the warning that anything at local stores not approved by the ship would be sketchy.
After five hours we were back on the ship, attending the “Grand Finale Champagne Art Preview” at the Ixtapa Lounge, a warm-up for an auction offering pieces by Pablo Picasso, Salvador Dalí and Henri Matisse. Derek, the auctioneer, taught us how to bid with a paddle and quizzed us on our general art knowledge. He represented Park West Gallery, headquartered in Southfield, Michigan, which advertised itself as one of the biggest art galleries in the world. The next day, at the actual auction, the first art up for bid were serigraphs and hand-embellished graphic works by lesser-known artists. Those were followed by more pieces by artists we had never heard of. Puzzled by the selection, we left before it was over. Back in our cabin, Bill calculated tips for the waiters and housekeeper. Royal Caribbean made it clear that passengers were expected to pay tips or gratuities to “thank those who have made your cruise vacation better than you could have imagined” and had left envelopes in our room with forms listing the rates we were expected to pay: $5.75 a day per person to our housekeeper, $3.50 a day per person to our dining room waiter, $2.00 a day per person to the assistant waiter and $0.75 cents a day per person to the headwaiter, or maître d’hôtel.
We understood this was the basic wage for all of them. Bill wasn’t pleased by this sleight of hand, having passengers pay salaries disguised as tips; his revenge was to pay nearly twice as much as suggested.
The Last Night; we could choose from the Final Jackpot Royal Bingo, the Farewell Variety Showtime, the Farewell Dance Party, the Farewell Pajama Party, the Finish That Lyric Game Show, or the final Holiday Street Parade. It was fun, but was this foreign travel?
Just before dozing off that night we got news of a snowstorm moving up the east coast, threatening Washington, D.C. By the time we got home, the Christmas blizzard had dropped more than 16 inches of snow. Once home, I realized the one thing I missed on our cruise was the touch of the ocean: perched so high above the water, you never felt the spray of a wave, could never jump into the water for a swim.
Now I had a sense of the appeal of cruises. It is effortless travel aboard these ships, taking all of the risk out of foreign travel. Once you buy that single ticket, you don’t have to lift a finger again. No planning, no moving from one hotel to another, no navigating buses or taxis to find a café that proves to be a disappointment. The excursions on land are tightly programmed, requiring no understanding of foreign languages or cultures. You unpack your suitcase once, sleep in the same bed, and read an activities bulletin each morning to decide whether you want to enter the “Men’s Sexy Legs Competition,” attend a complimentary slot machine lesson or take a merengue dance lesson for “fun fitness,” which were all offerings on our second day at sea. It is the ultimate package tour.
How the cruises made their profit was less obvious: onboard sales of everything from photographs to Internet service to yoga classes was the cash cow. But a lot didn’t add up: these are American cruise line companies, but we didn’t meet any American employees. And the wages paid were definitely below the American minimum.
• • •
Behind the carefree holiday of a cruise—the dancing waiters, the constant shows and events, the spreads of great food and the escape from daily drudgery—is a serious industry that has changed what people expect out of a vacation. It was built by several entrepreneurs who took advantage of changes in American lifestyles, married the design of a resort with the rhythm of a theme park, put it on a boat and won sweet deals through giant loopholes in American laws.
Understanding how these businessmen cobbled together the new industry—where they bent the rules, how they designed a ship to match social behavior—goes a long way toward explaining why the cruise industry is both admired and reviled today and why it is considered a harbinger of where mass tourism is headed.
The 2012 disaster of the Costa Concordia, an Italian cruise ship, brought some of these issues to light. The pilot ran the ship aground off Italy’s coast, capsizing it, killing 32 people and destroying the 54,000-ton vessel. The Italian line Costa Cruises is owned by the Carnival Corporation, headquartered in Miami, where multimillion-dollar lawsuits have been filed. The U.S. Congress held hearings questioning the overall safety of cruise ships and decided nothing more needed to be done. The most lasting impact was on the public. The photographs of the downed ship brought immediate comparisons to the Titanic, and sales for Carnival cruises immediately dropped.
The creation story of modern cruise companies begins with Ted Arison, the founder of Carnival Cruise Lines. His is an outsize personality, and he lived an astonishing life that contains all the incongruities of the cruise industry. His struggles have been diminished into a soothing legend: Arison built his empire with one dollar; his first big launch was a memorable disaster when the first Carnival Cruise ship went aground on Miami’s beach in front of gawking tourists; and yet out of these confused beginnings Arison used his fierce determination to build a success that is “a classic tale of the American dream.”
That last line is part of the official Carnival history and its up-from-ashes narrative. Like most sanitized stories, the Carnival rendition diverges dramatically from the real man. Arison was not born poor; his well-to-do family has a long history in maritime shipping. He invested millions in Carnival Cruise Lines over several years before turning a profit, leaning on wealthy friends to come up with the money. But he was bold and brash and imaginative as he redefined what it meant to take a cruise, filling ever-larger ships with thousands of fun-seeking passengers and giving them nonstop entertainment sailing the seas. He decided port visits should be almost incidental, offering a few hours on foreign soil before returning to the real pleasure of eating, drinking and playing on board.
As an industrialist, he did what all embryonic businesses require: cut costs in order to sell his ocean voyages at very low prices and bring in the customers. Under his watch, cruises went from an elite pleasure to a mass market rite of passage. And that is where the story becomes interesting. Arison saw the Wild West nature of late-twentieth-century globalization before the term was invented. He understood the moment. He figured out how to circumvent American laws and regulations—to become global—by claiming the ocean as his home and then selecting an exotic nationality that fit his purposes to make a healthy profit. It was the equivalent of outsourcing without borders. He made Miami the home base of Carnival Cruises, where it remains today, with full access to the American market and use of American infrastructure. His cruise line made the Port of Miami the cruise capital of the world. And yet he accomplished these seismic changes without having to follow American laws and regulations that govern everything from pollution to minimum wages.
As a business model, the cruise industry has been phenomenal, a $40 billion industry in the United States alone, and the fastest-growing segment of the global tourist industry. Cruises are the future.
But cutting corners and avoiding laws have had serious downsides. Cruise ships are not subject to the requirement for federal permits covering sewer and waste disposal systems that are de rigueur for the resorts and hotels on land. As a result, all of those millions of passengers and crew members dining and defecating and showering on the oceans have left filthy discharges in their wake. On land, the cruise crowds streaming into foreign ports by the thousands have disfigured beaches and plazas, building resentment among many locals. Cozumel isn’t the only port that has taken on the life of a strip mall. St. Mark’s Square in Venice is now a field of kiosks selling cheap imports and lines of tourists waiting to visit the basilica.
This business model was a smashing success for Arison; he died in 1999 one of the world’s wealthiest men, with a fortune estimated at $5.6 billion. His heirs have stayed wealthy: his son Micky runs Carnival and is a power broker both in the business and in southern Florida. He is worth over $4 billion and is the owner of the Miami Heat professional basketball team. Arison’s daughter Shari is the fourth-wealthiest person in Israel.
The various owners of Royal Caribbean have done just as well: Sammy Ofer was one of the wealthiest men in Israel with assets worth $4 billion before he died in 2011; members of the Pritzker family, who were billionaires before they bought into Royal Caribbean, are permanent fixtures on the Forbes list of wealthiest Americans. (Penny Pritzker, a high-profile member of the Chicago family, was a chief campaign fundraiser for President Barack Obama.)
Once realized, Arison’s vision of the cruise industry ultimately supported some of the most handsome family fortunes in Florida and Israel.
Born in British-controlled Palestine in 1924, Arison was the son of a multimillionaire shipping magnate. Merchant shipping in the area was built on the proud legacy of the Phoenicians. The young Arison came of age in a time of war, of the unspeakable bloodshed of the Holocaust in Europe and unrest in Palestine. He rose to the occasion in both instances, showing physical courage and a maturity beyond his years. He volunteered in the Jewish brigade of the British army during World War II, an unsung unit that fought against the Fascists in Italy. After the Allied victory he returned to Palestine and within a few years was fighting again, this time against the British as a member of the Israeli army in that country’s war for independence from Britain and against Arab neighbors.
With independence, Arison threw himself into building the new state of Israel, imbued as Israelis all were with patriotism for the new country and its people. But Arison was a merchant at heart, and he began to sour on Israel when the new government issued laws and drafted economic programs that he considered obstructions of free enterprise.
Unhappy, he liquidated the family business and immigrated to the United States, where he started a cargo shipping line in New York. When that business flopped, he bought an air transportation company. Still restless, he sold that company in 1966, saying he was retiring, and headed to Miami, where the holiday cruise story begins.
Southern Florida was beginning its explosive tourist boom. The region was the petri dish for developing mass tourism, just as Silicon Valley in northern California gave birth to Internet technology decades later. The Florida state government was bending over backward to support new business that would bring tourists to the state, especially ones that enticed America’s newly thriving middle class to take winter vacations in the sun. Cruise ships appealed immediately to the retired folks in Miami who had moved south from the snowy north. They had time on their hands and money to spend, and they filled the first cruise ships, creating the impression that cruises were vacations for old fogies.
Arison first tried charter cruises, but they did poorly. He changed course and started a vacation cruise business with a new partner, using remodeled ferries sailing from Florida to Jamaica. The firm advertised their Caribbean cruises nationally, betting that they could fill their 3,000 berths every week by convincing Americans that a Caribbean cruise was a natural part of the American lifestyle. Things went well until Arison’s partnership exploded in mutual incriminations and lawsuits.
Once again he was on his own, but this time he had salvaged 1 million dollars from that blow-up. He turned to Meshulam Riklis, an old friend from Israel who had become a successful and wealthy businessman. Together they created a very small business in 1972 and named it Carnival Cruise Lines. Arison then bought an old passenger liner that had been dry-docked after airlines took over the role of carrying passengers across the Atlantic. Arison, former owner of two shipping companies, saw the opportunity in these sidelined ocean liners. He refitted the old Canadian passenger liner and rechristened it the Mardi Gras to remain true to the carnival spirit.
This was the ship that ran aground on the tip of Miami Beach. It recovered, and sailed on that maiden voyage. After two years the fledgling Carnival company was $5 million in debt. Riklis bailed out. He sold his share of the company, and the debt, to Arison for one dollar—the second event in the legend.
From this rough beginning, Arison took the company from debt to profits in five years. He practiced tight cost controls and economy of scale, packing as many people as possible into a ship. He had two basic and radical concepts: redesign a cruise ship to become a vessel of entertainment, rather than a form of transportation; and achieve his high volume at low cost by operating inside the United States as a foreign company, thereby skirting many of the rules, laws and regulations that applied to his land-based competition. Arison played the game that Asians describe as “neither tiger nor horse.” By shape-shifting, claiming in one instance to be a resort and in another a ship, the new floating hotels escaped paying billions of dollars in taxes and wages and implementing systems required under environmental regulations.
These ideas evolved slowly. Arison’s Carnival Cruise and his chief competitor, Royal Caribbean, were retrofitting cruise ships for Caribbean cruises to include space for shows: live entertainment with comedians; live musical productions; movies; bands playing in the ballroom for late-night dancing; and game shows with audience participation. Food and drink were heavily promoted. The decks became adult playgrounds. Activity schedules promoted nonstop fun.
The Mardi Gras was not large enough to accommodate all this entertainment, so Arison bought its sister ship and named it Carnivale. This time Arison had his model ready and Carnivale turned a profit its first year. By then the company had discovered its theme.
In his book Selling the Sea, coauthored with Andy Vladimir, Bob Dickinson wrote that when he joined Carnival Cruise Lines in 1973 the firm fixed on the term “fun ship” to describe their cruises. “The ship itself became a destination and the ports of call became green stamps [extra bonus]. This was a total reversal of previous cruise marketing. Up to that time, cruise promotion had been destination driven,” he wrote.
“By focusing on the ship rather than the ports of call, Carnival could communicate to the public what the experience of the ship and cruising on her was all about.”
Popular culture caught on to the potential romantic appeal of cruises. Hollywood veteran Aaron Spelling created a television series that starred one of these new cruise ships as the locale of romance and glamour. The Love Boat went on air in 1977 and was a Saturday night staple for a decade. Shot aboard ships from the Princess line, now part of Carnival Cruise Lines, the show featured new passengers sorting out their love lives with the help of the sympathetic captain and crew and a bevy of ship dancers known as the “Love Boat Mermaids.”
Each episode opened with the lush and pounding theme song: “Love—exciting and new—Come aboard, we’re expecting you,” followed by shots of the jazzy guest stars who romanced each other while sailing from California to Mexico and back. No public relations campaign could have done a better job of wiping away the old cruise image of the aged playing shuffleboard and comparing stock tips. These cruises were for the young, the dynamic and, yes, the middle class. It was a floating party.
Enter Kathie Lee Gifford, the entertainer hired by Carnival Cruise Lines to sing a company jingle that lodged permanently into American culture. While the camera followed her around a cruise ship, jumping down a water slide, having her nails done, lifting a glass at dinner and posing with show girls, Gifford sang a tweaked version of “Ain’t We Got Fun,” the paean to the poor from the golden age of the flapper and the very wealthy. The original lyrics were:
Every morning, every evening, ain’t we got fun?
Not much money, Oh, but honey, ain’t we got fun?
The rent’s unpaid dear, we haven’t a bus.
But smiles were made dear, for people like us.
For the Carnival commercial, the stanza was transformed from happy commiseration to a pitch for cruises for the spending classes.
Every morning, every evening, ain’t we got fun?
Not much money, Oh, but honey, ain’t we got fun?
The food is great here, there’s never a bill.
We’ll stay up late, dear, let’s not miss a thrill.
But having fun on a ship sailing in the middle of the ocean requires prosaic essentials re-creating all of the systems hotels on land take for granted as well as the underpinnings of the ship: the navigation system, engines, power plant, water filtration and purification plants, sewage plants, photography plants, laundry and dry-cleaning facilities, kitchen galleys, a morgue, and storage lockers for the 100,000 pounds of food required to feed 3,000 people every day on a cruise. Also hidden from view are the below-sea-level accommodations for the 1,200 crew members.
These fun ships grew ever larger to incorporate all the services necessary to run a miniature town, becoming megaships with space for elaborate playthings like the skating rinks and climbing walls. And the passengers kept coming.
The jingle promising fun remains the basic appeal of a vacation cruise, along with that inexpensive ticket price. Those bargain prices are possible because of Arison’s second innovation—avoiding American laws and regulations.
It is no anomaly that cruises singularly turned a profit in the recent Great Recession of 2008. While Las Vegas and its casinos suffered and the airline industry went into the doldrums, the cruises were the financial rock star of the tourism industry, remaining the most profitable sector of tourism.
One key is the very cheap wages cruise ships pay.
In the nineteenth century, British fishermen rebelled against their government’s restrictions on how many fish they could catch. They turned to an obscure maritime practice known as flying the flag of convenience. They pulled down their Union Jack flags and registered their boats in Norway and even in France, their perennial competitor, flying their flags, escaping the British limits and fishing as much as they wished.
After World War II, when the American shipping industry was hobbling back to life, American companies grabbed on to that same antiquated practice of flying foreign flags and registering in foreign lands. They saw it as a lifeline for becoming competitive again not by avoiding fishing limits but by circumventing American minimum wages, which meant paying their sailors far less money. Under strong pressure from the shipping industry and its friends, the U.S. Congress upheld the legality of foreign registration and flying flags of convenience.
Former Secretary of State Edward Stettinius helped put this new system into play by assisting the African nation of Liberia in setting up a ship registry program in 1948. The offices were in New York, not in Monrovia, the Liberian capital, to make it easy for American ships to register as Liberian. Another office was added later in the Washington suburbs. American shipping firms replaced the Stars and Stripes with the unfamiliar flags of Liberia and later the Bahamas and Panama.
This supposedly temporary fix to reduce labor costs and avoid expensive regulations became a fixture in the world of maritime transportation. Today the majority of shipowners are based in wealthy maritime nations like the United States, Great Britain, Norway, Greece and Japan, but their ships are registered and flagged in foreign countries with “open registries”—that essentially have no minimum wages, labor standards, corporate taxes or environmental regulations and only a flimsy authority over the ships flying their flags. All these countries require is that ship lines pay a handsome registration fee.
These fat maritime loopholes caught the eye of Arison and the other leaders of the leisure cruise industry. So what if these maritime rules were meant for ships transporting goods, not floating hotels. A ship is a ship. Even though Carnival was an American corporation headquartered in Miami with an American client base, Carnival decided to register and flag its ships in foreign countries that had nothing to do with their business. It didn’t matter where the ships traveled or where they established home ports. Cruise companies could register and flag their ships wherever it was best for their bottom lines.
Dickinson wrote in his book that the reason cruise ships adopted this practice was simple: following the rules and laws of the United States meant paying minimum wages.
“Many countries, including the United States, Norway, and Britain, have strict regulations concerning unionized labor which severely constrain the ability of a ship to staff with an optimal crew mix, and almost invariably create a higher labor cost than a free-market environment. Other countries, so-called flag of convenience countries, do not have these constraints. . . . ”
Carnival registered its fleet in Panama. Royal Caribbean registered its ships in Liberia. (During its two-decades-long civil war, Liberia earned at least $20 million every year by acting as the off-shore registry for foreign ships.)
Cruise lines gain another enormous advantage by registering as a foreign corporation. The Internal Revenue Code exempts any income from airlines or ships from taxation as long as the foreign nation gives the same benefit to American corporations. Neither Liberia nor Panama nor any other open-registry country levies a corporate income tax.
In a symbolic gesture to its original Norwegian owners, Royal Caribbean flew the Norwegian flag on a few of its ships, but in 2005 the firm announced that all of its ships would fly the flag of the Bahamas. Richard Fain, the chairman of Royal Caribbean, said this was necessary because “the competitive nature of the cruise industry is intense, and we must ensure our competitiveness throughout the business.”
It was now free to follow the industry leader, Carnival Cruise Lines, and pay third-world wages with no paid vacations or overtime pay while charging first-world prices for the journeys. With some 44,600 crew members on its ships, that amounts to an annual savings of millions of dollars for Royal Caribbean. That’s how their waiters could be paid $50 a month with no days off for up to seven months.
This business model is every corporation’s dream. Indeed it has been so successful that Carnival and Royal Caribbean have been able to buy out their smaller competitors while expanding their fleets with new ships. Today the two firms account for 66 percent of the global market; Carnival at 45 percent and Royal Caribbean at 21 percent.
As the American lines expanded to the United Kingdom and the rest of Europe and then into Asia, annual passenger load tripled from 500,000 in 1970 to 1.5 million in 1980, and then grew exponentially to 4 million in 1990 to over 13 million in 2010. Passengers came from every economic class and every level of sophistication from people who had never seen the sea before to people who had seen everything and wanted an easy way to travel. They helped propel the cruise industry to reach the phenomenal growth rate of 1,000 percent in four decades.
After his company had made him a billionaire, Ted Arison returned to Israel, leaving behind his son Micky to take over Carnival Cruise and a solid record of promoting the arts through his own foundation and sports by bringing a top-flight professional basketball team to Miami. In Israel he set up Arison Investments and again spent millions on philanthropy. His prize project was the Arison School of Business, which he founded at the Interdisciplinary Center in Herzliya, a well-regarded institute with strong ties to the government and conservative parties. He died in 1999 a very wealthy and happy man. Yet it is hard to square Arison’s strong attachment to the special land and people of Israel with his cruise line’s business practices that have helped erase what is distinctive in so many other spots on the globe.
American unions fought back against cruise line practices in the 1960s and 1970s, but they were on the wrong side of history. The battle was joined just as globalization took off, opening up previously sheltered markets around the world, Communist and non-Communist. Manufacturing was moving out of Europe and the United States and into South America, Africa and Asia, where China became one great factory employing very cheap labor. In this new atmosphere, trade agreements centered on opening new markets and protecting investments. Negotiators rarely discussed labor protections or environmental regulations.
American unions and international labor organizations were blocked. They opposed the use of flags of convenience and foreign registries; the International Transport Workers’ Federation launched its first campaign against flags of convenience in Oslo, Norway, in 1948. But that and every subsequent campaign has failed, in part because there is no enforceable law in international waters and secondly because unions have fared so badly in globalization.
Still, with a fleet of over three hundred ships, the cruise industry employed a lot of waiters, busboys, housekeepers and laundry workers. When they weren’t happy with the working conditions, crew members jumped ship and told their stories at American ports.
Eventually, Congress held hearings on cruise ship labor issues.
Representative William Clay, Sr., then serving as a Democrat from Missouri, introduced legislation in the early 1990s to require cruise ships to pay minimum wages and provide other U.S. labor protections to workers on cruise ships operating out of American ports.
Lawmakers heard testimony from cruise ship crew members that was considered explosive at the time: crew members working ten-to-twelve-hour days with no overtime pay and no days off for months; hourly wages as low as 53 cents; waiters living on tips because their monthly salaries were a token $50. During hearings Mr. Clay asked why cruise companies headquartered in the United States and operating out of American ports should be allowed to ignore labor laws that had been won at a heavy social price.
The bill stalled in subcommittee and in 1993 Mr. Clay gave up. He had been stymied by the classic alliance of power and money against the measure and little public demonstration in its favor. This was no accident. The cruise industry had courted politicians since its inception, creating its own trade association, now known as Cruise Lines International Association or CLIA, in 1975. They made strategic campaign contributions to important allies in Washington and the coastal states—in ten years the industry gave away $16,953,807 in direct and indirect payments to national political campaigns and locally in Hawaii, Alaska, California, Oregon, Washington and Florida.
The industry won the war over labor handily. Congress even helped the industry’s bottom line by reducing fees paid to the Immigration and Naturalization Service. The industry also blocked early bipartisan opposition to cruise companies avoiding corporate income taxes. Representative John Duncan, Republican from Tennessee, argued that “it is totally unfair to let Carnival Cruise Lines pay nothing on profits just because it was incorporated in Panama. . . . Foreign flag lines are, in effect, getting an indirect subsidy from the U.S. government.”
The industry refuted those charges, saying it pumped billions of dollars into the American economy—upward of $40 billion in 2010—and created thousands of jobs in the United States.
The unions haven’t given up, though. The International Transport Workers’ Federation recently launched a campaign against what it called “sweat-ship” conditions on many cruise ships, raising the issue of Dickensian wages, months without days off, inadequate accommodations and routine exhaustion. But the cruise lines are more than happy to refute these charges.
Adam M. Goldstein is the president and CEO of Royal Caribbean International. He is a slight man with a quick, dry sense of humor and a résumé that includes a degree with honors from Princeton, a law degree from Harvard and a master’s degree in business administration with distinction from a top European business school.
Three months after my cruise aboard the Navigator of the Seas, he agreed to a rare interview at his Miami headquarters, next to the pier where Royal Caribbean cruise ships are docked. We talked for more than an hour in his sunny, relaxed executive suite. It was March and the weather was ideal; he planned to go running once the interview was over.
He answered the industry’s critics with ease, once accusing them of snobbery. His main defense was the popularity of cruises. “The single most important driver of our success is how happy we make our customer. So you can talk about other things, you can talk about legal or tax regimes and you can have that conversation, but if we didn’t make our customers really happy on a regular basis at the highest level that we know of in travel and leisure, none of the rest of it would matter.”
To accommodate everyone—families, teenagers, party-hearty couples and singles, retired people and the multigenerational groups—modern cruise ships are designed to create “zones.” Like Disneyland, the layout of the ship considers moving traffic at meal times, or through high-volume shopping and gaming areas, theaters and sports areas.
Goldstein used the image of an accordion when describing how every taste and age is considered on the ship. For example, this is how a cruise works well for a family reunion.
“The family stretches out during the day, the grandparents doing what they like, the parents do what they like, the children doing what they like, and then they all get together at dinner,” he said. “They talk about what they did today and what they are going to do tomorrow and they talk about whatever else they talk about, and then when the dinner is over, the accordion stretches out again and they go off to their respective pursuits again . . . . And that only works if each generation is constantly finding some programming that they like.”
That level of service and entertainment at such low prices explains the success, and those low prices depend on paying very low wages to crew members.
Goldstein said that it was wrong to compare cruise wages to American pay. Rather, he said, the pay should be compared to what crew members would receive in their home countries—the Philippines, Turkey, Serbia or India.
“We do have a different wage scale,” he said. “Wherever you are on the land, the employees are sourced from that country, they live there. And in our case, what we are able to do is, we are able to generate fantastic opportunities for people from a variety of countries around the world.
“Typically what they are able to earn from us is significantly greater than what they are earning if they would have stayed where they were,” Goldstein said. “So our view, not surprisingly, is that we provide fantastic employment opportunities to people from around the world that would not otherwise exist.”
Goldstein’s argument is what academics call the “race to the bottom” justification, a throwback to the early twentieth century before societies mandated minimum wages, improved labor conditions and the right to collective bargaining. While those rights were codified in national laws and are enforced within national boundaries, they are laws that the cruise companies can ignore.
Twenty years ago cruise ship wages would have been a decent sum, especially for highly motivated people trying to escape abject poverty. Today, though, the wage gap is disappearing and the average monthly income in India is between $60 and $100. And a junior waiter in Singapore can earn $591 with free accommodations as well as tips. Meanwhile, wages for low-level crew members have barely risen since the 1993 congressional hearings.
The result is an ever-higher rate of turnover, with the average length of service for cruise ship employees dropping from five years in 1970 to nine months in 2000, the latest statistics available.
Mr. Goldstein, whose annual salary and compensation ranged from $2.7 million to $3 million in 2008 and 2009, argued that the statistics on wages and days off looked deceptively bad because they didn’t calculate the long breaks for workers between contracts.
“The majority of people who work on board work anywhere from between four and eight months at a time. Then they have a break—a significant break—which needs to be factored into the regime because those are the kind of breaks that Lyan and I can only dream of,” he said, smiling at Lyan Sierra-Caro, a senior communications executive at Royal Caribbean who sat in on the interview.
I asked if crew members enjoyed paid vacations as he and Ms. Sierra-Caro do.
“No, they aren’t paid on their breaks, so they have to have money from the time they worked so it works for them,” he said. “But we are proud of what they do. We think they deliver better service on the ship than on the land almost anywhere.”
It seemed a slip of the tongue: comparing his crew’s service favorably to land-based waiters and housekeepers but not their pay.
Ross A. Klein, a Canadian professor at Memorial University in St. John’s, Newfoundland, and the author of several books on the cruise industry, said that while these near-servitude wages form the backbone of the profits of the cruise business by keeping ticket prices low, the growing source of profits is onboard sales.
“Onboard spending is becoming more profitable than ticket sales. On average, each passenger provides forty-three dollars in profits each day to the big cruise companies,” he said. “If you include all the onboard spending, it is now less expensive to stay in an upscale Caribbean resort than to sail there on a cruise ship.”
That onboard revenue translates, roughly, into at least 24 percent of all cruise revenue. Along the U.S.–Caribbean routes it can jump to more than 30 percent, according to UNWTO. Booze is one of the biggest earners. In the earliest days of modern cruises, ships served some of the best and most inexpensive drinks around, passing on the savings from buying alcohol at duty-free prices, often in the country where it was produced.
Nowadays, those savings stay with the cruise lines and drinks are at least as expensive as they are on land. And ships are designed to encourage drinking, scattering bars and serving stations throughout, according to Bob Dickinson, formerly of Carnival, who said “the idea is that you should be able to get a drink wherever and whenever you want it.
“In a well-executed ship design, the most convenient way to go from your cabin to the dining room should take you past a lounge,” he said. “And because most ships sail in warm waters, you also need a highly visible bar by the pool—or even in it!”
Gambling brings in nearly as much profits. Spas, Internet fees, extra costs for fancier restaurants, fees for sports and exercise classes, photographs and a DVD of the cruise—that DVD can earn at least $100,000 in revenue on a short cruise—and souvenirs all bring in money. As Mr. Dickinson wrote, “Everyone has already prepaid for their ticket and the only variable left that will determine the overall revenue (and ultimately the overall profitability) of a voyage is how much is spent on board.
“The truth is that selling goes on all of the time all over the ship,” he said, “and it makes all the difference in the world when it comes to the bottom line.”
Convincing passengers to spend is part of the theater of a cruise, conjuring up “the vacation of a lifetime” with unique flashy shows. This is especially true for the third big profit center for cruises: art sales.
Even though art auctions are relative newcomers to cruises, begun in the mid-1990s, they are now big business and a serious source of money. The king of the cruise art auctions is the previously mentioned Park West, a privately held Michigan firm with $300 million in sales each year. Cruise lines receive at least a 35 percent cut of every piece of that artwork. Until 2010 Park West had something of a monopoly, selling aboard Carnival Cruise, Royal Caribbean, Norwegian, Holland America, Regent and Oceania lines.
Enthusiasm is whipped up with flyers tucked into cabins, by announcements on the in-house television channel and by lectures on how to buy art. At the auction we attended, the salesman spoke convincingly about the quality of the paintings and artworks, the high reputation of the artists, and the long-term investment value of the pieces. And everything, he said, was guaranteed with appraisals of the fair market price and a generous return policy.
But over the years hundreds of customers have complained that those guarantees are sketchy. And they have tried to bring legal cases against Park West, but the gallery argued that since the sales were made in international waters, the gallery was outside the jurisdiction of the American legal system.
The customers felt cheated and started writing letters to their members of Congress and their hometown newspapers. The narrative of the complaints was always the same: back home the customers discover that the art they purchased was worth far less than they had paid and, at times, wasn’t even authentic. But when they complained, the return policy evaporated and Park West refused to refund the purchase.
Those stories caught the eye of an art expert who registers and tracks artwork. Theresa Franks, the owner of Fine Art Registry website, said she published an article about Park West in 2007 and afterward her website received over four hundred complaints from other unhappy clients of Park West. Those stories, in turn, got the attention of mainstream media including CBS and the New York Times. In some instances, the gallery refunded money to people mentioned in those articles.
But Park West sued Ms. Franks and her company for defamation, and after a six-week trial in 2010 the gallery lost the case in federal court. On appeal, a retrial is pending. Ms. Franks also won her appeal to the World Intellectual Property Organization in Geneva to stop Park West from creating a copycat website with an almost identical name.
Eventually, some of the customers banded together and sued Park West in federal court in eastern Michigan for fraud, breach of contract, misrepresenting the value of artwork and unfair trade practices. Park West argued that the case should be dismissed because art sales on a cruise ship fell under admiralty law or the law of the sea. The court disagreed and accepted the case.
“We got standing. The court said that Michigan common law applies, not admiralty law,” said Donald L. Payton, their attorney. He said all but two of the plaintiffs reached cash settlements with Park West Gallery before trial. Payton, though, is forbidden to say how much money they were paid.
Significantly, the plaintiffs also sued Royal Caribbean for its close relationship with Park West. Adam Goldstein told me in our interview that he could not comment because of the ongoing litigation. However, two months later, Goldstein wrote in his company blog that Royal Caribbean decided not to renew its contract with Park West.
Here is where the drive to increase onboard revenue collides with the theme of having the time of your life aboard a cruise. Most art buyers haven’t sued Park West Gallery, as the owner points out. Passengers on vacation feel free to try things they rarely do at home—like attend an art auction. They trust the cruise line, they feel they can let their hair down and splurge.
Therein lies the easy mark. If this is a vacation of a lifetime, this is a special occasion that deserves a little extra spending, like a graduation, birthday or wedding. In that mood passengers pay as much for photographs as they would spend for a digital camera. They go to spas as expensive as a fancy resort. It’s one great memorable experience.
This is what they spend beyond the price of their ticket: on average, passengers younger than 45 years old spend $357 on a Caribbean cruise of three to seven days; passengers between 45 and 65 spend nearly as much at $345, while those over 65 watch their budgets and spend only $242 on average. And cruise lines and concessionaires have come up with ever-more-profitable ways to make money, like those Park West art auctions with their fine-print disclaimers. This helps explain how Carnival Cruise Lines could report $13 billion in revenue in 2009 during the Great Recession.
Then there are the diamonds. I was perplexed by the diamond-shopping seminars and the ubiquitous presence of Diamonds International stores, even though diamonds and other precious jewels are not mined, cut, polished or set in the Caribbean. Diamonds International stores cluster like barnacles along the cruise path, offering the same jewelry whether the stop is Cozumel, St. Maarten, Cabo San Lucas or even Juneau, Alaska. This is all calculated. The chain of Diamonds International stores was created specifically for the Caribbean to service cruise lines.
Diamonds International was founded by David Gad, an émigré who found work in the diamond trade in New York City. Eventually he was able to start his own business with an unnamed private partner and quickly opened his first retail store in the Caribbean in 1988. Its market was the emerging cruise industry. In partnership with Caribbean governments and, often, with the cruise lines, Diamonds International established their shops on piers that ensured cruise passengers would become customers on their way to the mainland. And those cruise ships heavily promote Diamonds International.
Today the chain has more than 125 stores from Key West to Aruba in the Caribbean, including four on the Pacific coast of Mexico, and 3 in Alaska. In the space of two decades this small, privately held company grew into a powerhouse and in 2007 won status on the exclusive Diamond Trading Company list as a sightholder authorized to buy bulk rough diamonds in Namibia, where the firm built a large gem-polishing factory.
The base of this phenomenal growth is Diamonds International’s position as the jeweler of choice for both Royal Caribbean and Carnival Cruise lines. Each line hosts “shopping seminars” onboard, where jewelry from Diamonds International is praised for its high quality, low prices and great guarantees—all the promises Bill and I heard on our cruise. It is the only retailer that receives this blue-ribbon endorsement and exclusive publicity onboard for its jewelry and those of its subsidiaries, such as Tanzanite International.
When I asked Adam Goldstein of Royal Caribbean about the business relationship with Diamonds International, he said theirs was an “arms-length, third-party relationship.
“We don’t have any stake in them and they don’t have any stake in us,” he said.
But, Royal Caribbean owns several ports with Diamonds International, including those in Belize and Aruba. In an interview Jane Semeleer, the president of Aruba’s Central Bank, told me that her government was negotiating with Royal Caribbean and Diamonds International to upgrade the pier that the two companies own jointly in her country.
When I brought this up, Mr. Goldstein acknowledged that yes, Royal Caribbean has some partnerships with Diamonds International. Overall, he said, theirs was “an advertising, promotional relationship with us, so they are paying us effectively, without going into the details of how it is structured.”
He did say that Diamonds International had won this lucrative monopoly because “customers know they can go and shop there and know that if for any reason they don’t like what they bought, they get their money back. . . . In the end, they are paying us to be advertising their stores to our guests onboard. And in return for that they make a promise to our guests . . . you can get your money back.”
A perusal of the Internet reveals hundreds of complaints that Diamonds International does not automatically refund money for jewelry that is appraised back home at less than what was guaranteed at the ports or onboard. It is hard to say whether Diamonds International is any worse than any other jewelry chain.
On the cruise, this emphasis on buying diamonds felt out of synch with the idea of a carefree vacation. The pep-rally shopping lectures in the ship’s huge auditorium added to the sense of a trip aboard a shopping mall—destination nowhere.
For all those reasons, though, cruise ships are the face of modern mass tourism. The industry has turned travel into a shopping spree. Airports have resembled shopping malls for several decades. The most glorious cathedrals and monuments are surrounded by high-end luxury stores with the same brands for sale whether in Europe, the United States or Asia.
You won’t find spokesmen extolling cruise vacations as the chance to shop until you drop. More common is this description by Terry Dale, the former president and CEO of the Cruise Lines International Association, the trade group, who told me in a telephone interview that “we have passengers, customers who have wanderlust and a desire to see and experience. That is part of what we’re providing them—intellectual and spiritual enrichment.”
There is one more profit center for onboard revenue that seems counterintuitive. Cruise lines make significant money from what the passengers do when they leave the ship and go ashore on those excursion trips.
Cruise lines essentially apply the same system to excursion trips as they do to diamonds and artwork. The ship sells the excursions onboard, offering guarantees and then warning against taking competing excursions. Then the ship takes a nice cut from every excursion sold. On average, the cruise lines collect a commission or fee from the local tour agency as great as 50 percent of the price of the tour. In one year, Royal Caribbean earned a third of its profits from selling shore excursions.
Excursion might be a misnomer. They are designed by the hour. On a Caribbean stop, you can choose to take a bus tour of an island’s beaches and historic sites or go snorkeling near coral reefs. At ports near cities like Florence and Rome, the passengers are bused to the cities for a visit to a museum or a walking tour, always with great guides and time to eat and shop before returning to the ship.
This is a complete reversal of the original idea of the passenger liners, when the voyage itself was the excursion.
Then ships docked for days at a time; in Hawaii they were met by young boys swimming alongside the hull, waiting to catch coins tossed overboard by passengers. There were days to stroll along the beach, swim in the surf, visit memorials and forests before the ship turned around to return home. Tourists cruising to Alaska in the early 1950s spent two days in Ketchikan, three days in Juneau and five days in Seward. In those days a cruise was truly a rare, once-in-a-lifetime occasion and passengers expected to spend far more time on land, exploring.
Today’s cruise excursions are miserly in comparison. What do passengers actually see, understand and appreciate after a few hours whizzing past masterpiece paintings or strolling through an old European capitol with a guide reciting details of an unfamiliar history that will be forgotten by the next morning.
The advantage of these excursions, said Adam Goldstein of Royal Caribbean, was that cruise ships allow tourists to visit so many cities in such a short time, albeit for mostly half-day stops.
“On a cruise ship you can see Tallinn, Estonia, and two days and a night in St. Petersburg, and you can see Helsinki and Oslo,” he said, describing a seven- or twelve-day cruise. “It’s really not feasible to do that many flights in a two-week period.”
This is true and many tourists find a day in Tallinn and another in Oslo more than enough. However, the people of Tallinn and Oslo are having second thoughts about seeing hordes of people descending on their cities at once. Thousands of cruise passengers herded into a few well-known waterfronts or museums do earn bragging rights about seeing the windmills of Mykonos or the Hermitage in St. Petersburg. The regular appearance of these crowds are transforming the cities and ports, helping push out locals and alter the culture and sense of place that drew tourists in the first place.
“Cruise ships have changed the face of tourism in the last ten years, and not for the better,” said Paul Bennett, founder and head of Context Travel in Philadelphia. “They’re like portable low-rent Hiltons that go everywhere with little concern for the garbage they leave behind or the havoc they make in the short time they invade a place. See Rome—the Vatican and the Coliseum—in a few hours and then take a bus back to the ship. We call it ‘drive-by tourism.’ ”
Venetians call it a crisis. And Venice isn’t the only port where the locals feel cruise ships have gotten out of hand. The town of Bar Harbor, Maine, decided in 2009 to restrict the number of cruise passengers allowed in a day. A few years earlier Key West, Florida, did the same thing. And the people of Moloka’i, Hawaii, effectively banned all cruise ships from calling on their port.
This antipathy derives not only from the frustration of seeing your city overrun on a regular basis but also knowing that there is little profit in welcoming them. In Venice the city spends more to cover the services used by the ships—water, electricity, cleaning—and their passengers than it receives in the taxes paid per passenger to the port. (Given Italy’s murky political system, it is impossible to find out what that per passenger fee is and whether it goes into the city treasury.)
In a study with the Center on Ecotourism and Sustainable Development, the Belize tourism board found that cruise ship passengers spent an average of $44 on land, not the $100 average cited by the cruise industry. The tourism board commissioned the study out of disappointment that passengers on the cruise ships were not helping the economy as promised. The study warned of an “inherent tension between the objectives of the cruise industry and those of Belize.”
By contrast, tourists who came by land to Belize spent at least $96 a day and $653 per visit. Costa Rica’s figure for cruise passengers was similar to that of Belize, with an average of $44.90. In Europe, an impartial study found passenger spending in Croatia averaged about $60 in 2007.
After our cruise I spoke to Anna Dominguez-Hoare, the executive director of the Belize Audubon Society, who worries about the effect of cruise ship excursions on the fragile ecosystems of the country. Belize has one of the region’s most diverse populations of birds, many of which spend the winter months in Belize’s tropical forests before returning north in the summertime to the backyards of many of the visiting tourists. And while she welcomes tourism, Ms. Dominguez-Hoare says that cruise tourism has presented more problems than it is worth. She said that the small head tax paid by cruise ships doesn’t begin to cover the damage that cruise passengers cause during their short stay.
“Goff’s Caye has really been trampled now. Locals avoid it,” she said, describing an island near the Belize port where tourists can snorkel and then feast on barbecue. “Most of the wildlife has fled [from Goff’s Caye], but that is fine because these cruise tourists are less sensitive to protecting habitat of birds or monkeys, or protecting coral reef. If there is garbage strewn everywhere, you know the tourists came from cruise ships.”
To her mind and those of other conservationists, keeping cruise ship passengers restricted to a few areas—sacrifice zones—could prevent irreversible damage. Ms. Dominguez-Hoare said she isn’t opposed to cruise ships in theory but that the numbers are getting out of hand. Excursions of several hundred people descending on a wildlife preserve for a few hours can be disastrous. “Our parks weren’t made for that kind of an invasion and the guides can’t control the tourists.
“Is there some port, some destination, where they were able to find a balance?” she asked.
When I put that question to James Sweeting, the Royal Caribbean vice president for environmental stewardship, he said, “That is a very good question.
“That is the biggest challenge of my job,” he said in an interview, “to convince destinations to make long-term investment in their destinations. I know a lot of government people see us as a problem, which is ironic since they are beating down our doors to get the cruise ships coming.”
Both Sweeting and his boss, Adam Goldstein, said the best destinations are the tourism villages that Royal Caribbean creates itself, where passengers swim, eat and play in an artificial environment not knowing if they are in Haiti or another Caribbean nation. Also appreciated are tourism villages near a better-known area like Montego Bay in Jamaica, where passengers can bus in and out of the real country from their base camp.
Places like Cozumel become tourism villages once they open up to mass tourism from cruise ships. Ports, cities, beaches, promenades are now seen as “destinations” and rated as enjoyable if passengers can spend five hours and feel they have had a memorable “experience” captured in photos and remembered with souvenirs. The goal for the cruise lines is to shuttle tourists in and out with the help of local charter buses and tour agencies with the greatest efficiency and assured profits. For instance, our cruise offered us fifty-seven options for excursions to Cozumel, averaging from $50 to $150 per person, and all payable to the cruise ship. Local businesses on the list pay a percentage of their fee to the cruise ship—often as much as 50 percent. Moreover, as in Venice, citizen groups question what happens to the fees cruise ships pay political leaders for permission to dock.
“No Caribbean country has survived intact from the cruise ships. I think that is the worst thing they do, flooding the ports and beaches with crowds of people,” said Jonathan Tourtellot, director of the National Geographic’s Center for Sustainable Destinations. “You should see what they do to the old square in Dubrovnik.”
To Adam Goldstein of Royal Caribbean, these complaints sound like snobbery.
“There is a wish, a nostalgic kind of wish in certain quarters for the days when relatively few people had the wherewithal to go and see places like Dubrovnik for one. It was small numbers of people staying in small hospitality establishments with zero congestion, no crowds, not many people there. Which would have been a really, really nice experience for those few people who had access to that opportunity,” he said.
“But in the world where many, many, many millions of people, tens of millions of people, maybe hundreds of millions of people in number, when you bring China and other countries into the mix, really want to explore the world—the idea that you can keep a few places to a few people wandering through the streets with a tour guide is not realistic.”
That means ports will have to figure out how to manage the congestion from thousands of cruise passengers arriving in a single day, said Mr. Goldstein. “Our goal is to bring volumes of people in an environmentally responsible way where congestion is manageable. There is no interest on our part to have unmanageable congestions.”
Manageable congestion to one man is a nightmare to another. Mr. Tourtellot disagreed with cruise companies taking credit for allowing millions of people to explore the world. “They barely have time to get off the ship, go to a museum or a beach, before they’re back on board speaking English to the waiter at their assigned dining table,” he said.
The fundamental issue, though, is the cruise company’s claim that protests against crowds that are ruining a spot is somehow “elitist.” Mr. Tourtellot has toured the beaches that have been trashed and have little chance of recovery. He has watched as centuries-old historic sites are now threatened by regular visits of “managed congestion” of tour buses from cruise ships that are making billions of dollars of business.
“Since when is it elitist to show respect for a beautiful square or beach and for the people who live there and want to protect the beauty that brought the tourists in the first place,” he asked.
• • •
Cruise ships do pollute the ocean.
Human activity has damaged the seas by overfishing, polluting, dumping garbage and sewage, spilling oil. The huge maritime transport industry—oil tankers, fishing fleets and recreational vessels, including cruise ships—are some of the culprits. Popular and scientific reports have chronicled the drastic reduction of the fish, shellfish and marine mammal populations. Underwater habitats and coastal vegetation are under stress or are disappearing altogether. The pollution has created dead zones in oceans around the world. Global warming has added the coup de grâce by raising water temperatures that bleach coral reefs and force species to seek new feeding grounds.
Against this bleak picture, cruise ships could seem insignificant; there are some four hundred cruise ships, compared to a global fleet of tens of thousands of commercial vessels. And these few cruise ships sail across vast oceans. Yet their contribution to the fouling of the seas is considerable. While the oceans are large, these cruise ships stick to a standard path whether in the Caribbean or the Baltic, disposing of their considerable waste at roughly the same stretch at the same time, year in and year out.
According to the Environmental Protection Agency, in the course of one day the average cruise ship produces: 21,000 gallons of human sewage, one ton of solid waste garbage, 170,000 gallons of wastewater from showers, sinks and laundry, 6,400 gallons of oily bilge water from the massive engines, 25 pounds of batteries, fluorescent lights, medical wastes and expired chemicals, and 8,500 plastic bottles.
Multiply this by those 400 ships cruising year-round and you have a sense of the magnitude of the problem. But there are no accurate studies of how well that waste is disposed of because the ships are not required to follow any state or national laws once in international waters.
Cruise companies won an exemption from the Clean Water Act’s requirement for waste disposal discharge permits that apply to the resorts and hotels. Waste disposal discharge permits are given out by the Environmental Protection Agency, which decides what waste they can discharge and the sewage treatment required to limit and reduce the damage of pollution to water. That permit information for each hotel and resort is public, so any new pollution in a stream or coastline can be traced to the offender.
Cruise companies got their exemption by arguing they fell under the category of commercial maritime vessels, like container ships or fishing boats, where “waste discharges are incidental to the operation of the ship.” In fact, they are floating hotels where waste discharge is essential to their industry. As James Sweeting, the Royal Caribbean environmental officer told me, “A cruise ship is not a form of transportation, but a form of vacation that happens to transport you at the same time.”
Instead, cruise lines say they follow international standards in disposing of their waste water from toilets, showers and sinks, restaurants, spas and beauty parlors, into the oceans, or at least 12 nautical miles off the U.S. coastline. Those international standards do list environmental-safety and pollution-prevention measures, but they lack the authority of national law and are essentially unenforceable. They are issued by organizations under the loose umbrella of the United Nations, which has no navy to inspect ships or enforce the standards. Responsibility for enforcement of standards falls on the flag states like Liberia, Panama and the Bahamas, and they routinely fail to fulfill that responsibility.
Significantly, cruise lines are not required to monitor or report what they release. As a result, neither the government nor the public know how much pollution is released at sea.
• • •
International standards were devised to reign in the worst side of maritime shipping when it underwent a rapid revolution. In the 1960s new construction methods allowed ships to grow larger to take advantage of scale, which led to the invention of the cargo container. With the advent of satellite navigation and radio communication, the revolution was complete. Ships became the giants of commerce, carrying 80 percent of the world’s freight and clogging the harbors. The last fifty years brought about more changes in maritime shipping than at any time in history, according to the United Nations’ International Maritime Organization.
With such a dramatic increase in commercial shipping, accidents and disasters at sea multiplied, especially those involving oil tankers. In 1967 the Torrey Canyon spilled its entire cargo of oil in the sea off the coast of Cornwall, England, sparking the adoption of a United Nations convention to mitigate pollution from ships spilling oil or chemicals or discharging sewage and garbage into the ocean. The resulting International Convention for the Prevention of Pollution from Ships, or MARPOL, covers all ships at sea, including leisure cruises.
In general, MARPOL prohibits the dumping of oil or plastic anywhere at sea. Otherwise, ships can dump whatever they want in international waters. Once a ship is within twelve miles of the coast, it must obey local or national laws covering discharges. Only national navies and coast guards have the authority and wherewithal to enforce antipollution standards or laws.
Disasters continued. The Exxon Valdez spilled 32 million gallons of oil in Prince William Sound, Alaska, in 1989. The Prestige, a Greek ship registered in the Bahamas and Liberia, spilled 77,000 tons of fuel off the Galician coast of northwestern Spain in 2002. Despite the MARPOL convention, the owners of the Prestige escaped responsibility. Furious, the Europeans sharpened their own laws and stepped up surveillance of the coast.
Against this backdrop, cruise ships were largely ignored, considered harmless for carrying tourists rather than oil. The awakening came in Alaska ten years after the Exxon Valdez spill. The guilty party was Royal Caribbean. Their cruise ships, which sailed through some of Alaska’s most sensitive harbors and coastal waterways, including the Inside Passage, were caught illegally dumping bilge water containing waste oil and hazardous chemicals. The bilge water routinely dumped by the cruise ships was sufficiently toxic that the U.S. Clean Water Act forbids its discharge within 200 miles of the coast because it endangers fish and wildlife and the habitat they depend on.
Royal Caribbean was convicted in 1999 of a “fleet-wide conspiracy” to rig their ship’s piping system to avoid using pollution treatment equipment and then lying to the Coast Guard about it. The cruise line pled guilty to twenty-one felony counts and paid $18 million in criminal fines, entering plea agreements with the Justice Department in Miami, Los Angeles, New York, Anchorage, St. Thomas in the U.S. Virgin Islands, and San Juan, Puerto Rico.
The company was put under a five-year court-surveillance environmental compliance program. Royal Caribbean denied that this was a company policy and instead blamed the rogue employees who, the company said, “knowingly violated environmental laws and our own company policy.” But in a statement following the 1999 ruling, then–Attorney General Janet Reno said that “Royal Caribbean used our nation’s waters as its dumping ground even as it promoted itself as an environmentally ‘green’ company.”
Sweeting, the Royal Caribbean environmental officer who once worked for Conservation International, said the cruise industry has poured millions of dollars into solving most of these problems, something many activists fail to acknowledge. He said he is genuinely convinced that the cruise line was unaware of the illegal dumping in Alaska and “were so devastatingly shocked by what happened.”
The government made new efforts to police the industry. In 2003 the Carnival Corporation pled guilty to illegally discharging oily waste from its ships, paying a $9 million fine and agreeing to pay another $9 million to environmental projects.
Environmentalists lobbied for new legislation in Congress and in state legislatures to strictly regulate the discharge of ships refuse and regularly monitor that discharge. The cruise line industry pushed back, saying they were making voluntary improvements in their waste disposal systems.
The clash between these approaches played out in Alaska, one of the oldest and most popular cruise destinations. Citizen activists there said they were tired of the ever-growing size of cruise ships, the noisy crowds filling their ports, the pollution, the dumping and Alaska’s ever-shrinking share of the proceeds.
After the Royal Caribbean convictions a group of Alaskans lobbied their state government to hold cruise lines responsible for the damage they caused. Juneau, the state capital, imposed a $5-per-passenger head tax to cover costs of cleaning up after those cruise tourists. Governor Tony Knowles convened a state panel in 2000 to monitor the waste produced by cruise ships during that summer season. One of the members appointed was Gershon Cohen, a scientist and environmentalist who lives in the small port town of Haines, which limits the number of ships allowed to dock there.
As Cohen describes it, the panel tested cruise ship waste for evidence of hazardous material. What they found, instead, was untreated human sewage. “That shocked the hell out of us,” he said. “We found the cruise ships were floating poop producers.”
The raw sewage came from inadequate “marine sanitation devices” that were designed to treat the refuse from a few dozen people but were installed on ships to treat the waste from thousands. Cohen said the samples testing fecal coliform bacteria from the ships’ human sewage were unbelievable: “One ship tested out at nine million fecal coliform bacteria counts per sample. Another tested at fourteen million, another at twenty-four million. These samples to be healthy are supposed to be at 200 or less.”
Those pollutants from human sewage were threatening Alaska’s marine life, its fish, coral reefs, oyster beds, and sea mammals. Since the Alaskan economy depends mightily on fishing, recreation and other land-based tourism, those findings alarmed the state leaders. The Alaskan legislature passed laws requiring that cruise ships routinely be tested to meet the state’s clean-air and -water standards and levying a $1 tax on each passenger to pay for the program.
In Congress, Senator Frank Murkowski, Republican from Alaska, won passage of a law to allow Alaska to set standards and regulate “black water” waste that contains human sewage. No other state had these laws.
The cruise industry pushed back again, and convinced Senator Murkowski to win approval from the Secretary of Interior to nearly double the number of cruise ships allowed in Glacier Bay National Park during the high summer season over the strong objections of park officials.
Then Gershon Cohen and an Alaska attorney won a petition drive that placed an initiative on the 2006 ballot requiring cruise ships to apply for official waste permits with strict limits on sewage disposal. The initiative also created an ocean rangers program of marine engineers who would ride cruise ships to monitor the discharge and that would be underwritten by a new $50 passenger head tax. Despite predictions to the contrary, the voter initiative passed. Some of the requirements were later eased by Sean Parnell, the new governor, including cutting in half the passenger head tax in order to head off a lawsuit filed against the tax by Carnival and Royal Caribbean.
Maine joined Alaska in passing state laws curbing cruise ship pollution. California, with its long, varied coastline and strong environmental movement, has passed the strictest rules against any waste discharge by cruise ships. The laws were sparked in part by a Crystal Cruises ship that dumped 36,000 gallons of gray water and sewage in Monterey Bay. The cruise line was able to claim, rightly, that it hadn’t broken any rules. So the town banned the Crystal Cruises ship from the bay in 2005. The California state legislature then passed a law forbidding discharge of any waste whatsoever—treated or untreated, black water or gray water, sewage waste or garbage waste, into California’s coast waters by cruise ships or other large vessels. The federal government through the EPA endorsed the law in 2010, which gives the Coast Guard authority to enforce it.
Sweeting of the Royal Caribbean said the company’s ships are being outfitted with advanced waste treatment systems that transform human waste into watery discharge that is “as good as or better than municipalities.” At the same time, the industry has forcefully opposed the Clean Cruise Ship Act, sponsored by Senator Richard Durbin, Democrat of Illinois, which would require sewage and gray water discharges to be controlled by the Clean Water Act. The legislation would also require cruise ships to use advanced treatment systems and to sail beyond the current 12-mile limit before discharging treated sewage.
The U.S. Coast Guard is charged with enforcing existing laws and standards in American waters, but it has done a lackluster job, largely because inspecting sewage from cruise ships is close to the bottom of its to-do list. After the 9/11 attacks, when the Coast Guard was absorbed into the new Homeland Security Department, its mission has been insistently focused on “antiterrorism.” In theory, complaints about ships’ discharge in international waters are investigated by flag states like Liberia, Panama and the Bahamas, but they rarely follow up. The Congressional Research Service study of cruise ship pollution rated overall enforcement as “poor.”
That leaves the industry as its own enforcer. Terry Dale, of the cruise ship industry group, said cruise companies obey laws and standards, often exceeding requirements, and that they “fully respect our role as environmental stewards, otherwise the future of our industry would be in jeopardy. I would take issue with those detractors who say we aren’t taking it seriously,” he said in a telephone interview.
In some countries, cruise ships pose such an immediate danger they are under tight restriction. Antarctica has banned large cruise ships outright, beginning in 2011. The cruise ships’ heavy fuel oils were causing serious air pollution and, when spilled in an accident, causing irreparable damage. In 2007 the cruise ship Explorer capsized in an ice field, dumping 50,000 gallons of marine diesel fuel, 6,300 gallons of lubricant and 260 gallons of gasoline into the ocean where it rests at a depth of 5,000 feet. Cleaning up in those remote, freezing waters was close to impossible. With tourism quadrupling in the past decade to 46,000 visitors every year, the Antarctica authority decided these heavy fuel oils are too great a risk to the fragile environment.
“Without regulations, we are going to have a disaster where a lot of lives are lost and where oil spills out into the environment, and we see penguins being smothered and poisoned by fuel oil in their rookeries,” said Trevor Hughes, New Zealand’s head of Antarctic policy in the Foreign Ministry.
The Antarctic Treaty members are reducing the number of ships and landings allowed, imposing a ban on building tourist hotels and mandating strict rules on waste discharges from ships. Ultimately, officials and scientists said they hoped to protect the few remaining seas in the Antarctic where there was no pollution, no toxic “red tides,” no alien species, no dead zones, no invasions of jellyfish, no control by humans.
But these uninhabited dramatic landscapes are catnip to tourists looking for a new experience. The demand to visit the poles has been so great that at the other end of the globe Norway enacted a similar ban in 2007 for the east coast of the Svalbard Archipelago in the Arctic Circle. The Norwegian environment minister, Helen Bjørnøy, said any ship using heavy fuel oils was forbidden to visit the area; only ships using a very high quality of light fuel oil are permitted to sail inside the nature reserves of eastern Svalbard.
“Tourism has become a big industry,” she said in the announcement. “Tourism brings jobs and opportunities to people all over the world—including Norway, including the Polar regions. But tourism—especially the large-scale global tourism—is also producing growing pressures on resources, nature areas and ecosystems.”
• • •
Air pollution from the ships’ high-sulfur-diesel-fueled engines is a separate problem. Arriving, departing and idling in ports, the ships’ fuel exhaust releases carbon monoxide, sulfur dioxide and nitrogen oxide that the Environmental Protection Agency considers human carcinogens. As previously mentioned, one ship’s engine idling at the dock released diesel exhaust into the air equivalent to 12,000 cars each day. Part of the problem is the cheap, heavy diesel fuel that ships burn rather than cleaner, more expensive fuel.
Sweeting of Royal Caribbean said comparing the air pollution from cruise ships to either automobiles or airplanes was mixing apples and oranges because cruise ships are not modes of transportation.
For the 2010 Winter Olympics, city officials of Vancouver, British Columbia, required all cruise ships idling at their port to shut off their engines. Citing “cruise ship haze,” the city said the ships had to use electricity when they docked, hooking up to the hydroelectric power grid to operate as hotels during the games. The Canadians did not want their games spoiled by cruise ship pollution, much like Beijing officials who ordered factories closed weeks in advance of the 2008 Summer Olympics to cut back on pollution during that competition.
The United Nations Environment Programme helped broker that compromise with Vancouver in its assignment to “green” the games. Amy Frankel, head of the UNEP office in Washington, said it was a good story. “There were no unwanted air emissions, which made sense for the environment, and the electricity should have cost less, which made sense for the bottom line.”
Responding to the growing evidence of air pollution from cruise ships and large marine vessels, the Environmental Protection Agency passed a new rule that took effect in August 2012, to establish a 200-mile buffer zone around the coasts of the United States, including Alaska and the main Hawaiian Islands. Within that zone, which was initially adopted by the International Maritime Organization, these ships are required to burn cleaner fuel to reduce their nitrogen oxides and sulfur oxides that pollute the air. The EPA estimates that a cruise ship carrying 2,000 passengers on the open sea will pollute the air with the same amount of sulfur dioxide as 31.1 million automobiles every day. The new rule will prevent as many as 31,000 premature deaths every year, according to the EPA.
The cruise industry opposed the new standards, saying it would drive up fuel costs by 40 percent. Terry Dale of the cruise trade group said that cruise lines were already investing millions to improve air emissions with new exhaust scrubbers, some using seawater as well as equipping ships to plug into electric outlets while in port, which has all been voluntary. The industry will continue fighting mandatory national pollution standards and laws.
Besides renewing the national debate over cruise ship pollution, Congress also passed a law in 2010 requiring cruise ships that dock in the United States to tighten their security for passengers through the entire journey. After rising reports of mysterious deaths and injuries on board cruise ships, Congress mandated higher guardrails, and peepholes on cabin doors, on the ships and ordered that all crimes onboard be reported to the FBI. It was a rare instance in which cruise lines were held responsible under American laws for behavior in international waters rather than under those of one of the countries where the ships are registered.
Business analysts warn that things could be getting out of hand. In a recent assessment Lloyds Cruise International said that the industry’s “strategy of gigantism” risked undermining the cruise experience on and off the ship. The report said that megaships “with 5,400 passengers may cut the operating cost per passenger but is too large for most ports, and arguably too sizeable to provide a personal experience or to offer either a tranquil or an adventurous holiday.”
Little of this criticism leaks out. The cruise industry watches its reputation carefully with multimillion-dollar advertising campaigns, a ubiquitous presence on the Internet and underwriting the expenses of the travel press who are largely mute about the effect of the industry on the environment or the ports they visit.
The industry also has made friends in the nonprofit media, think tanks and organizations by offering them fundraisers aboard cruise ships at special prices. These cruises offer fans and donors the chance to spend up to a week listening to their favorite personalities. At the same time, the price they pay for the cruise fills the organization’s coffers with tens of thousands of dollars. Nonprofits from across the political spectrum take advantage of these offers. Media stars like Diane Rehm of National Public Radio, Katrina vanden Heuvel of The Nation magazine and Gwen Ifill of public television’s News Hour, have hosted cruises to the Caribbean and Europe for their organizations. More than one critic has asked if it wasn’t hypocritical for organizations to blithely make hundreds of thousands of dollars on cruise ships that pay poor wages and routinely dump pollutants, the exact practices they deplore.
On the conservative side, the Weekly Standard and the National Review magazines famously made history when their fundraising cruise docked in Juneau, Alaska, in 2007. The top staff and donors were welcomed by then-Governor Sarah Palin, who swept them off their feet. When they returned to Washington, some of the editors, like Fred Barnes of the Standard, promoted this fledgling politician as a bright new face of the Republican Party. One year later Governor Palin was the Republican nominee for vice president.