PORT PRICING AND REVENUE ESTIMATES: THE CASE OF GREECE’S

REGIONAL CRUISE PORTS OF CALL

Spyros TROUMPETAS

PhD Candidate

Hellenic Open University

School of Social Sciences

Email: spytro@gmail.com

Dimitrios GIANNIAS

Professor

Hellenic Open University

School of Social Sciences

Email: dgiannias@gmail.com

Christina BENEKI

Associate Professor

Technological Educational Institute of Ionian Islands

School of Business and Economics

Department of Business Administration

Email: benekic@teiion.gr

Abstract Several different approaches have been explored in the port pricing theory literature.

Despite this, empirical research on pricing policies of regional cruise ports in Greece

remains very limited.

Cruise industry is a fast growing tourism sector and a key component of the local and

national economy. Greek ports are key players in a competitive environment throughout

the Mediterranean basin. Competitiveness in these ports depends on a number of factors

such as port and terminal charges, location, services and most importantly, cruise-oriented

attractions.

This paper examines the governance model and pricing policy of 22 Greek ports and its

significance to cruise-related economic impact for the state. Furthermore, by using public

records for two of the busiest cruise ports in Greece, our results showed that perhaps there

are limits to the effects of pricing policy as a tool for revenue improvement.

Keywords: cruise industry, Greek ports, port pricing, revenue estimation

PORT PRICING AND REVENUE ESTIMATES: THE CASE OF GREECE’S

REGIONAL CRUISE PORTS OF CALL

1. INTRODUCTION

1.1 Cruise Industry Overview

Cruises have become one of the most dynamic and fastest growing segments of the

international tourist industry in terms of passenger demand and vessel supply. Cruise

ships are constantly growing in size, expanding their range of activities on-board in order

to satisfy the complex demands of both first time and returning passengers (Castillo-

Manzano et al. 2014). Cruise tourism can benefit a destination by increasing foreign

exchange earnings, profit, taxes, employment, positive externalities and economies of

scale (Brida 2014; Pratt and Blake 2009). In addition, cruise tourism requires less

infrastructure compared to stopover tourism at a tourist destination (Andriotis and

Agiomirgianakis 2010).

The Caribbean has been the dominant deployment market of the cruise industry since its

inception, but the Mediterranean cruise market has grown substantially in recent years

(Rodrigue and Notteboom 2012). According to the Cruise Lines International Association

(CLIA), the Caribbean accounts for more than a third of the global deployment capacity

market share in 2015, while it is considered complimentary to the Mediterranean in the

sense that Caribbean is dominantly serviced during the winter, while the Mediterranean

experiences summer peak season (Rodrigue and Notteboom 2012).

During the last five years, the cruise industry has felt the impact of the financial crisis, but

unlike many other industries, it had the advantage of several counter-crisis options, such

as its ability to move ships and switch itineraries, to quickly adapt to the evolving demand

and to enjoy a high perceived value for money spent (Brida et al. 2014). Cruise market

remains an oligopoly that through a process of consolidations and mergers is dominated

by three groups of companies (Carnival Group, Royal Caribbean and Norwegian Cruise

Lines) which hold a cumulative 81.6% market share compared to 75% in 2008 (Lekakou

et al. 2010; Cruise Market Watch 2015). According to the CLIA’s annual State of the

Cruise Industry Report (CLIA 2015), 23 million passengers are expected to sail in 2015 to

nearly 1,000 ports of call in new exotic locations, especially in the fast growing Asian

market. CLIA members also announced 22 new cruise ships in 2015 for a total investment

of $4 billion. In 2013, the global economic output of the cruise industry was more than

$117 billion, supporting 900.000 jobs generating $38 billion in wages.

1.2 The Case of Greece

Cruising activity in Greece began at 1930s, at a time when the first Greek cruise firms

inaugurated cruises in the Aegean sea and the greater area of the Mediterranean Basin

(Diakomihalis et. al. 2009)

The cruise ship industry is currently undergoing a period of rapid expansion at a time

when the Greek islands are included among the top most popular destinations worldwide.

The majority of cruise programs for Greece include multiple island destinations with an

average visiting duration ranging from 5 to 10 hours or more.

Although Greece is an attractive cruise tourist destination, it fails to absorb its full

potential in terms of revenues, accordingly. One of the main reasons for this

ineffectiveness is the lack of sufficient number of homeports for cruise. According to

Hellenic Ports Association, only three of the 41 registered cruise ports serve both as home

and stopover (hybrid) ports. This is of major importance for the economic impact on a

destination. The average expenditure per passenger is estimated at 600€ in a home port

and at 80€ in a port of call. In addition, only 16% of the cruise passengers visiting Greece

in 2011 started their cruise from a Greek port (Mylonas 2012).

Cruise industry, especially in Greece remains an under-researched academic field in

maritime economics. In the past few years, the industry has attracted few researchers from

various fields investigating the complexity of its operational and commercial dynamics

(Pallis et al. 2010).

2. LITERATURE REVIEW

The discussion on port pricing and its impact on maritime economics began in 1982,

when Janson and Schneerson highlighted the complexity of pricing practices at the time.

References to the relation between port charges and port costs are also present in the

seminal work of Thomas Thorburn in 1960. Palis et al. (2010) analyzed 395 papers

published between 1997 and 2008, highlighting how contributions in the area of policy

and regulation have remained rather fragmented as attested by the few influential articles

in terms of citations (Acciaro 2013). From the port economics point of view, cruise sector

seems to be neglected. Palis et al. (2010) identified only four papers (Baird 1997;

McCalla 1998; Butt 2007; Guerrero et al., 2008) dealing with cruise terminals (Lekakou

2010).

The vast majority of research papers examining port pricing and policies mainly focus on

cargo ships and port infrastructures dedicated to host this type of vessels. Goulielmos

(1999) addressed port deregulation issues in major Greek ports, while Psaraftis (2005)

discussed practical approached in tariff reforms for the port of Pireaus. One year later

Palis (2006) examined forms of port governance in Greece. The national port policy

reforms that have been underway since the late 1990s have resulted in the conversion of

12 ports of national interest to government-owned port corporations, thus directing the

analysis into a devolution context. Pardali et al. (2008), suggested a model for port

business positioning in a defined, competitive market based on the benchmarking

technique for the port of Piraeus. Vaggelas and Palis (2010) conducted a survey in twenty

major European passenger ports leading to the identification and classification of the

different services provided. Sambracosa and Maniatia (2012) compared the economics of

road and sea transport with reference to the connection of the port of Patras (the main

western freight gate of Greece) with West Attica (the biggest Greek industrial centre),

aiming at providing a viable solution towards the promotion of short sea shipping in the

transport chain between mainland ports.

The most common types of charges discussed in the literature are port dues known as

harbor or tonnage dues and berthing charges which are present both in container ships and

cruise ships. Container ships are additionally charged with dues related to terminal

handling and cargo charges. There might be further charges common to all ships, for

pilotage, mooring, waste disposal, passenger taxes, but few papers present or evaluate

these ancillary charges (Pinto et al. 2010).

Cruise industry sells itineraries, not destinations, underlining the core importance in the

selection of a sequence of ports of call. The challenge for the cruise operators is to

develop competitive packages that optimize the deployment of their fleet in terms of

operating cost minimization (Mylonas 2012). According to their use by cruise companies,

cruise ports are commonly classified in three categories: Home ports, ports of call and

hybrid ports (Lekakou et al. 2010). Home ports are the starting and ending point of a

cruise, ports of call are stopover ports. Hybrid ports are both home and stopover ports.

Our survey shows that only 7% of cruise ports reviewed in Greece serve as hybrid ports.

Famous and major in terms of cruise traffic ports (Rhodes, Myconos) which also have

sufficient port infrastructures, remain ports of call up to date.

Pricing policies in Greek ports are highly dependent on their governance model. With the

possible exception of terminals dedicated to the needs of specific private or state-owned

industrial enterprises (mainly in the oil, cement, grain and ore businesses), all general-use

ports in Greece are under the control of the state (Psaraftis 2007). Two port Authorities

(Pireaus Port Authority S.A. and Thessaloniki Port Authority S.A.) are listed in Athens

Stock Exchange, while a number of Greek ports are under the managerial jurisdiction of

the respective local municipalities.

3. DATA

The distinction between a Port Authority (port corporation) and a Municipal Port Fund is

crucial to the amount of information accessible for research. A Port Authority is obliged

by law to publish its pricing policy and its balance sheets in order to be accessible to all

stakeholders. On the other hand, data from a Municipal Port Fund can be collected either

directly from its personnel or through its website. However, nearly 60% of the Municipal

Port Funds reviewed in our research, do not publish their pricing policies. Meanwhile,

first evaluations of our findings revealed that there is no common methodology of

monitoring and documenting cruise traffic data such as number of ships, number of

passengers, vessels’ characteristics, etc. Each port monitors a different range of cruise

traffic data, although number of calls and passengers are monitored to all ports.

The survey was carried out on February 2015 initially aiming at including 38 regional

ports of call in Greece. The Hellenic Ports Association monitors 41 ports but ports of

Piraeus, Thessaloniki and Patras were excluded from our data set. The Municipal Port

Fund personnel were contacted by telephone and were asked for data on the port dues per

ton, the berth dues per meter, the passenger dues per passenger on-board, the waste

disposal dues, the mooring dues, the pilotage dues and other ancillary dues. The telephone

survey achieved a response rate of 50%. Overall, we collected information for 22 regional

ports. More specifically, our sample consists of six Port Authorities and the rest are

Municipal Port Funds. In fact, it represents 75% of the overall cruise traffic in terms of

passenger volume, while the six regional Port Authorities represent approximately 20% of

cruise passenger traffic in Greece.

4. PRICING POLICIES AND TARIFFS ON GREECE’S REGIONAL PORTS OF

CALL

Looking at the sources of revenue for ports occurs that on the one hand consist of Port

dues ( dP ), Berth dues ( dB ) and Passenger dues ( dPax ), named Common Dues and on the

other hand consist of ancillary charges that differ along ports like Waste Disposal dues (

dW ), Mooring dues ( dM ), Pilotage dues (dP ) and other dues. The Common Dues are

described as follows:

PaxxLxGTxPaxBPDuesCommon ddd 321 ,

wheredP is expressed as the product of the charge in euros per ton (

1x ) by the Gross

Tonnage of the vessel (GT ), dB is expressed as the product of the charge in euros per

meter (2x ) by the overall length of the vessel ( L ) and dPax is expressed as the product

of due per passenger on-board ( 3x ) by the number of passengers on-board ( Pax ).

In Greek ports, every cruise ship calling is obliged to pay the port dues. The berth dues

are paid in case a ship uses a pier. The usage of port’s infrastructure (pier) is not

mandatory. It depends on many factors like the weather conditions, captain’s decisions,

cruise company policy or congestion of vessels in the same harbor during summer peak

season. dB equals zero at ports with no such infrastructure (e.g. Santorini Island). The

passenger dues are paid in any case.

The rates of the Common Dues in Municipal Port Funds are given in Table 1. The

calculation of the port dues is carried out with application of coefficient 0.0095162 (as

amended by Government Gazette dated 11/02/2004 No310/B). In particular, to calculate

the port dues for a cruise ship with a Gross Tonnage of more than 500GT, it is considered

equal to 3,20€+1)500( xGT . The calculation of the birth dues is carried out with

application of coefficient 0.2984901 (as amended by Government Gazette dated

11/02/2004 No310/B), except for one port. Personnel we contacted reported slight

variations in the fifth decimal places of the coefficients among the Municipal Port Funds.

Coefficient 0.35 is applied to on-board passengers at fifteen ports, except for one. A

further investigation is necessary to identify this difference.

Table 1. Rates of the Common Dues in Municipal Port Funds (n=16)

1x -coefficient 2x -coefficient 3x -coefficient

0.0095162 0.2984901 at fifteen ports

dB equals zero at one port

0.35€ at fifteen ports

1.75€ at one port

The calculation of the Common Dues is carried out not considering the same coefficients

among the six regional Port Authorities in our sample. The port tariff of charges differs

substantially. Table 2 shows the corresponding pricing formation at the Port Authorities

of our sample. Compared to a Municipal Port Fund, a Port Authority is far more flexible

to choose its optimal pricing policy for the provision of services and infrastructure (piers,

terminals, security, passenger facilities, etc).

Table 2. Rates of the Common Dues in Port Authorities (n=6)

Port 1x - coefficient 2x - coefficient 3x - coefficient

1 0.0125 0.42 2

2 0.02 0.40 0.50

3 0.40 0.37 1

4 0.012 0.40 1.95

5,6 0.009430 0.03074480 0.35

As far as ancillary charges are concerned (Waste Disposal dues, Mooring dues, Pilotage

dues, etc), it appears that there is not a coordinated tariff policy; thus both Port

Authorities and Municipal Port Funds have been pretty much independent of one another.

Data require further investigation and will be presented in a future survey.

Discounts are offered in all ports reviewed. They are applied mostly in two cases: Either

when the ship operator deposits all dues before the ship’s arrival or when a cruise ship

calling a port frequently.

5. PORT REVENUE ESTIMATES: A PRELIMINARY RESEARCH OF THE

HERAKLION PORT

Due to the lack of detailed data from all ports in our sample, an accurate estimate of the

ports’ revenues is difficult. In this paper we attempted to estimate the revenues of

Heraklion Port, one of the major regional ports in Greece. The choice of this port was

based on the extent of cruise traffic data provided and the well-documented port policy.

Our future work will focus on integrating and exploiting data from more ports.

The port is located in the middle of the north side of Heraklion, next to the city. The port

is using specific land and marine zone for maritime operations and has a history of about

5,000 years. The port maintains the initial port facilities which are used up to date

(Venetian Harbor) and are over 700 years old. In addition, the port authority has made

large investments to the port’s infrastructure. The port of Heraklion serves the needs of

ferries connecting the entire eastern Crete with Piraeus and the Aegean islands and the

transportation of goods to and from Crete. Over the last ten years, following the

development of the cruise in the eastern Mediterranean, the port has become an important

starting node or transit for cruise ships. It is notable that in 2012, the Heraklion Port

Authority came 2nd in the Port of the Year Awards. The three ports selected as finalists

along with Heraklion Port were the harbor of New York (NY Cruise port, USA) and the

port of Cartagena, Spain.

First, we identified the number of calls and passengers by using the records of the cruise

traffic data in the Heraklion port in 2013 and 2014. The list provided by the authorities

was restrained, monitoring ship names and number of passengers only. Hence the values

of the overall length and gross tonnage required for the estimation of revenues were

obtained from the ship operators’ websites. Also, the port’s balance sheet of the fiscal

year 2014 was not available by the time of our research.

As shown in Figure 1, the port has seen increased number of cruise ship visits up to

October. In fact, during the period of peak demand (April to October) the Heraklion port

attracted a significant proportion (83% in 2013; 80% in 2014) of the annual cruise ship

visits.

Figure 1. Monthly cruise ships arrivals at Heraklion Port (2013 & 2014)

Our analysis on the cruise traffic records revealed that three cruise operators dominate the

number of calls both for 2013 and 2014 as presented in the Figure below.

Figure 2. Major Cruise Operators calling at Heraklion port (2013 and 2014)

Pireaus Port consists one of the biggest Mediterranean home ports. Table 3 presents

cruise traffic data and the average gross tonnage, overall length and number of on-board

passengers from the two ports, both of Piraeus and Heraklion. Data of cruise traffic in the

port of Piraeus for 2013 was unavailable by the time of our research.

Table 3. Traffic Cruise Data and Cruise Ships’ Characteristics (Heraklion 2013,

2014; Piraeus 2014)

Port No. of ships No. of ship arrivals _

GT _

L _

Pax

Piraeus 97 599 56,964 222 1,746

Heraklion (2013) 35 178 47,562 221 1,934

Heraklion (2014) 42 165 51,255 223 1,928

0

5

10

15

20

25

30 N

o. o

f C

ruis

e S

hip

s

2013

2014

12,12%

11,80%

18,18%

13,48%

39,39%

48,31%

30,30%

26,40%

0,00% 20,00% 40,00% 60,00% 80,00% 100,00%

2013

2014

AIDA CRUISES

COSTA CROCIERE

LOUIS CRUISES

OTHER

Compared to the Pireaus port, it seems that Heraklion port attracted more cruise travelers

per ship and larger cruise ships.

Using data from Heraklion Port’s pricing policy (as amended by Government Gazette

dated 27-4-2007 No 654/B) concerning port tariffs, Common Dues equation is modified

as follows.

PaxLGTDuesCommon 5.04.002.0

With regards to the equation above, port revenues were estimated at 342.830€ for the

fiscal year 2014, showing a decrease of 4,2% compared to the revenues of 2013

(357.192€). Our revenue estimations for 2013 represent nearly 6% of the annual turnover

stated in the port’s balance sheet for the same year.

In the previous section of this paper we observed that Port Authorities have the flexibility

to choose their optimal pricing policy. Next, an interesting question emerged: What if

Port Authority of Heraklion could charge the exact same dues as the port of Piraeus?

Using Port of Piraeus pricing policy, we estimated the revenues for the Port of Heraklion

cruise traffic. Our results showed that Port Authority of Heraklion would realize almost

1,4 million Euros in revenues just by using Piraeus Port charges. It seems that Port of

Piraeus capitalizes on its unique position and hence it charges dues more than all other

regional ports observed.

The per passenger revenue for each port is 1.15€ for Port of Heraklion and almost 5€ for

the Port of Piraeus. The Port of Heraklion Authority’s competitive pricing policy is

among the employed methods in the effort to attract more cruise traffic to the port. The

higher average passenger count indicates that probably this policy pays off.

6. CONCLUSIONS

The port governance model is of vital importance as far as information available to a

researcher is concerned. The Port Authorities are obliged to publish certain indexes of

economic nature mainly, municipal port funds are not. There is no common framework of

information. The way in which cruise ship traffic and cruise ship characteristics are

registered differs depending on the port. Even at the level of a Port Authority, information

is not uniform or adequate.

As far as basic services are concerned, the pricing policies that have been observed are

almost common at Municipal Port Funds, with the exception of passenger charges which

differ at a certain port, perhaps due to its investments and infrastructure. On the other

hand, pricing policies of Port Authorities are published either in Government Gazettes or

in the Decisions of the Board of Directors and can readjust frequently. Our research has

shown that there are differences in pricing.

Ancillary charges cannot be evaluated in our sample. At certain ports services leading to

extra charges are of vital importance, at some other ones they are not offered. As a result,

a comparative analysis of these charges is rather difficult.

We started applying our findings with a regional port of reference, namely that of

Heraklion, Crete. We tried to explain part of the annual turnover based on its pricing

policy and the available statistical data. It seems that the revenues generated from the

calls made by cruise ships and their being in berth constitutes approximately 6% of the

turnover. What is more, it is possible for these revenues to be higher as we haven’t

included the pilotage and waste disposal service (port’s policy on the specific charge was

not available by the time of our study). We compared our findings to those of the

country’s central port, and we are directed towards the conclusion that the pricing policy

can be, among other things, a differential advantage in attracting cruise ships both on the

level of homeport and on the level of port of call.

In our future studies we will extend the statistical data on arrivals to include other major

ports also on a longitudinal basis, so that, along with the pricing data, we can reach more

conclusions as to revenue estimates. We will also examine their potential relationship to

the current infrastructure and investment, as well as their role in the selection of ports of

call by the cruise operators.

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