A sharp 50 per cent jump in tariffs at Port Sultan Qaboos that came into force on November 1 has local ground handling and shipping agencies fretting that the spike will hurt the Sultanate’s burgeoning cruise tourism industry – a key source of income for Muscat port, as well as the local economy.
Tariffs have been dramatically ramped up across the board for vessels calling at the port, as well as for services provided by Port Services Corporation — the operator and manager of PSQ — with effect from the start of November. But the increase, coming as it does, at the start of the winter cruise season, is particularly disconcerting for ground handlers and shipping agencies representing the record numbers of cruise calls scheduled at Muscat Port through March-end 2018.
“The tariff increase caught all of us by surprise because we barely received notice of a couple of weeks from PSC. Considering that the scheduling of cruise calls typically happens at least two years before the call, enough notice of this change should have been given,” said Gautam Broota, CEO — Zahara Tours, one of Oman’s largest and most prominent tour operators and ground handlers for cruise lines.
Under the revised tariffs, 4WD vehicles that drive cruise passengers on city excursions and other ground tours are now levied a fee of RO 3 per vehicle per day when they enter the port. For tour coaches and buses, the corresponding fee is RO 5 per vehicle per day. While seemingly modest, these levies – introduced for the first time by the port management – can be potentially burdensome for many of the small Omani-owned transport operators and small businesses, says Broota.
“When you consider a modern cruise ship carrying some 3,000 passengers, the fleets deployed by these transport operators can comprise around 25 coaches in addition to 50 — 60 4WD cars. A daily entry fee on each of these vehicles effectively places a steep burden on these small operators per call. If they refuse to pick up this tab, then it will be passed it on to us ground handlers and we will be left shouldering this cost, because it would be unreasonable to ask the cruise operator to bear this last-minute levy.”
The 11th hour revision in tariffs also has the industry agonising over the likely adverse consequences of this measure on the Sultanate’s growing international appeal as a destination for cruise ships.
“Oman has already made a name for itself as a popular cruising destination. In fact, we were the first in the region to introduce free 96-hour visa for cruise tourists – a move that was enthusiastically welcomed by cruise operators. Cruise calls have jumped from around per year at one point to nearly 200-plus calls presently.
impressive growth, what message are we sending out to the industry through the sudden increase in tariffs just weeks before the start of the season?” the tour industry veteran remarked.
Concerned that they will be unable to recoup the new levies from the cruise operators at least until contractual terms are renegotiated, a number of ground handlers and shipping agencies have appealed to PSC to defer the application of the revised tariffs to the start of the next cruise season.
“I think it would be in everyone’s interest, particularly that of the domestic cruise industry, to hold off from enforcing the new tariffs for at a year,” said M C Jose, Chief Executive Officer, Projects & Logistics Group — Khimji Ramdas, the largest player in the passenger cruise business. “This grace period would allow us enough time to work with our principals to seamlessly incorporate the new levies into their costing. Getting the cruise operators to shell out the extra costs at short distance is not only challenging, but discourteous to say the least.”
Khimji Ramdas represents the vast majority of cruise ships calling Omani ports during the 2017/2018 cruise season, accounting for 116 of the estimated 175 port calls scheduled during this period. The agency has succeeded in bringing some of the world’s most prestigious cruise ships to the Sultanate.
The cruise tourism sector, according to Jose, is an important pillar of Oman’s hugely promising tourism and hospitality industry with the potential to unleash new synergies for investment and growth if suitably developed. Part of this potential can be uncorked by incorporating home-porting capabilities at Muscat Port – an advantageous feature that will enable cruise liners to commence and terminate their voyages in Muscat.
As a home port for cruise liners, passengers will necessarily have to be flown in by scheduled or charter flights ahead of the voyage, and flown out at the end of their cruise. As is the nature of home-port based cruise services, most passengers invariably arrive in the city a couple of days before embarking on their cruises.
Alternatively, they may choose to stay back at the end of the cruise. Either way, they contribute to the local tourism and hospitality industry.
They stay in local hotels, patronise local eateries and souvenir stores, and utilise car rentals, taxi services and tour guide — activities that pump tourist dollars into the local industry. Dubai’s position as the Middle East hub for the passenger cruise industry is underpinned by its status as the region’s only home port.
“Given ongoing challenges elsewhere in the region, the Sultanate is in advantageous position to attract more ships to its ports, while building the infrastructure necessary to cater to the growth,” said Jose.
“Muscat will need additional berth capacity — over and above the three berths currently available. Moreover, ship sizes and passenger capacities are growing as well, as is evident from recent announcements by leading liners AIDA and Costa, which are looking at revolutionary green-ships that can accommodate as many as 5200 passengers per vessel.
MSC is also looking to introduce a Vista-class series capable of carrying 5700 passengers, while Royal Caribbean has already placed orders for mega-ships. The promoters of the new waterfront at Mina Sultan Qaboos would need to keep these trends and developments in mind when designing the revamped port.”
Jose is also keen to dispel what he describes as a “misconception” that revenues accruing to the port and local economy from cruise calls are paltry.
Citing a study conducted by the Ministry of Tourism, the veteran shipping executive said that the average spend by a passenger during their brief foray ashore is RO 13.5. Thus, for a ship arriving with around 2500 passengers, the contribution to the local economy averages RO 33,750 per call. This is in addition to port dues of RO 2,753 per ship, passenger levy of RO 10,105, and shore excursion revenue of RO 20,390.
Revenues earned by the port and injected into the local economy aggregate RO 66,700 per call. This equates to RO 11.725 million per season for Muscat alone.
“The revenue earning potential will be dramatically higher if we can entice ships into staying overnight at Muscat Port. That can happen only when we develop the infrastructure and services to develop Mina Sultan Qaboos as a home port for cruise liners. At present, ships arrive at dawn and depart just before sunset, with the result that the revenue generating potential from these calls is limited.”
According to Jose, the cruise tourism industry represents a promising economic opportunity waiting to be fully unlocked, as demonstrated by the Tourism Ministry survey.
An impressive 45 per cent of cruise passengers covered in the survey said they would definitely return to Oman on a second cruise, while 31 per cent said they would come on a shore visit. 45 per cent said they would have considered extending their stay in the Sultanate had they prior knowledge of the country. 49 per cent said they would recommend Oman to friends and relatives.
These findings, he stressed, underscore the growing charm of the Sultanate to international cruise passengers — an appeal that could potentially be marred by the increase in tariffs.
“It is imperative that PSC and the authorities rethink this increase at this juncture, and consider holding it in abeyance for a year. This gesture will be well-received by the cruise liners and will go a long way in cementing the close relationship that Oman has built with international liner operators,” he said.