Assessment of The Economic Impact of Cruise Tourism in Papua New Guinea & Solomon Islands

Assessment of the Economic Impact
of Cruise Tourism in Papua New Guinea

& Solomon Islands
JUNE 2016
©2016 International Finance Corporation.
Images used courtesy of Solomon Islands Visitor Bureau and Carnival Australia.
This report was prepared by ICF Consulting Services Hong Kong Limited in association with
TNS Australia and Seaport Group.
This study into the economic impact of cruise tourism in Papua New Guinea and Solomon Islands was
commissioned by the Australian Department of Foreign Affairs and Trade, Carnival Australia and the
International Finance Corporation, a member of the World Bank Group.
Conducted by ICF Consulting Services Hong Kong Ltd, the study utilizes the same methodology
undertaken in a commissioned study in Vanuatu in 2014; and similar methodology to studies
undertaken in Australia and the Caribbean on a regular basis.
Data for the study was provided by Carnival Australia.
About the Australian Aid Program

Australia’s aid program promotes Australia’s national interests by contributing to sustainable
economic growth and poverty reduction. The aid program focuses on two development outcomes:
supporting private sector development and strengthening human development. On 31 August 2015,
Australia’s Minister for Foreign Affairs launched the Ministerial Statement on engaging the private sector
in aid and development - Creating shared value through partnership which invites businesses to work
with the Australian Government to help solve our region’s development challenges. The Strategy
recognises the private sector as a driver of economic growth, incomes and jobs, and as a partner for
government to achieve more effective and sustainable aid outcomes. For more information, visit www.
dfat.gov.au.
About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused exclusively
on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, IFC
uses capital, expertise, and influence to create opportunity where it’s needed most. In FY15, IFC’s long-
term investments in developing countries rose to nearly $18 billion, helping the private sector play an
essential role in the global effort to end extreme poverty and boost shared prosperity.
IFC’s work in the Pacific is guided by the Pacific Partnership, through which IFC works with the
Australian and New Zealand governments to stimulate private sector investment and reduce poverty
in the region. For more information, visit www.ifc.org.
About Carnival Australia

Carnival Australia was formed in July 2004 to meet the growing demand for cruising and the number of
Carnival Corporation & plc cruise companies homeporting ships from Australia and New Zealand. Since
then, Carnival Australia has led the rapid expansion of the industry, which has tripled in the past five
years alone and now sees well over 700,000 Australians take a cruise holiday each year. Today, Carnival
Australia represents three homeported brands in Australia – Carnival Cruise Lines, P&O Cruises and
Princess Cruises – as well as another four international cruise brands that visit the region annually –
Cunard Line, Holland America Line, P&O Cruises World Cruising and Seabourn. For more information,
visit www.carnivalaustralia.com.
ECONOMIC IMPACT OF CRUISE TOURISM IN 2015 (AUD)
COUNTR COUNTR
ER ER
Y
P
P
DIRECT INDIRECT DIRECT INDIRECT

$
5,667,686 $
208,478 $
600,201 40,821
$
PAPUA NEW GUINEA SOLOMON ISLANDS

$
5,876,164 $
641,022
PER S HIP P E R S HIP
$
94,461 $
46,169
DIRECT DIRECT
PA
PA
PA
AY
AY
AY
SS SS SS
ENGER D ENGER D ENGER D
Alotau $47 Doini Is. $11 Kiriwina $9

DIRECT DIRECT DIRECT
TOURS TRANSPORT SOUVENIRS RETAIL FOOD & BEVERAGE OTHER

PER
PER
PER
Y
Y
Y
DA
DA
DA
AS R AS R AS R
SENGE SENGE SENGE
P
Kitava $7 Rabaul $76 Honiara $28

DIRECT DIRECT DIRECT
*FOR FIVE RESEARCHED PORTS IN PNG & ONE IN SI

Contents
GLOSSARY2
EXECUTIVE SUMMARY 3
1 INTRODUCTION 23
2 DIRECT ECONOMIC IMPACT 28
3 INDIRECT ECONOMIC IMPACT 50
4 TOTAL ECONOMIC IMPACT 51
5 OPPORTUNITIES FOR INCREASING THE ECONOMIC IMPACTS 58
6 COST BENEFIT ANALYSIS 67
ANNEX 1 METHODOLOGY 88
ANNEX 2 QUANTITATIVE ANALYSIS OF PASSENGERS’ SPENDING DRIVERS 91
ANNEX 3 COST STRUCTURES AND ASSUMPTIONS 92
ANNEX 4 ASSUMPTIONS FOR COST BENEFIT ANALYSIS 102

Glossary
AUD Australian Dollar
BREA Business Research and Economic Advisors
DFAT Australian Department of Foreign Affairs and Trade
FTE Full-time equivalent
IALA International Association of Lighthouse Authorities
IFC International Finance Corporation, a member of the World Bank Group
IMO SOLAS International Maritime Organization Safety of Life at Sea
NMSA National Maritime Safety Authority, Papua New Guinea
NSO National Statistical Office, Papua New Guinea
PHAMA Pacific Horticultural and Agricultural Market Access Program
PNG Papua New Guinea
SCM Standard cost model
SI Solomon Islands
SIMSA Solomon Islands Maritime Safety Administration
SINSO Solomon Islands National Statistics Office
SIPA Solomon Islands Port Authority
TPA Papua New Guinea Tourism Promotion Authority
WHO World Health Organization
ECONOMIC IMPACT OF CRUISE TOURISM IN PAPUA NEW GUINEA & SOLOMON ISLANDS
EXECUTIVE SUMMARY
Executive Summary JUNE 2016
Executive summary
In recent years cruising has become one of the fastest growing segments of the
tourism industry. Globally, the Pacific Islands account for a small fraction of the
cruise industry (around two per cent in 2015)1, but expected growth in the coming
years is high. Given their geographic proximity, Australia and New Zealand are the
most important source markets for the region.
The Australian Department of Foreign Affairs and Trade (DFAT), the International
Finance Corporation (IFC) and Carnival Australia have partnered in an effort to
provide baseline data on the cruise sector’s impact on the economies of Pacific
Island Countries (PICs). Given the importance of tourism to the economies of
many Pacific Islands and the growth of cruise tourism, there is an opportunity
to support further strategic, targeted development of the sector to increase its
positive impact on local economies.
The focus of this study is on the cruise tourism sector in Papua New Guinea (PNG)
and Solomon Islands (SI). PNG received 136 cruise ship calls at various ports in
2015, (which is similar to 137 in 2007). However, whereas the average passenger
capacity of cruise ships in 2007 was 347 passengers, in 2015 average passenger
capacity was 705 passengers. This trend indicates an increase in large cruise ships
in recent years. While SI received a lower number of cruises, it displayed an upward
growth projection.
The study contributes to a wide body of evidence on the tourism sector in the
Pacific Islands and builds on the strategies and initiative proposed to support
growth. To enable comparison of results between parallel studies, this study has
taken into account the methodological approach adopted in earlier studies, in
particular the 2015 study on the cruise tourism sector in Vanuatu2.
1 Cruise Line International Association (CLIA) 2014 Deployed Survey among 18 international brands shows 6 per cent of the global capacity was
deployed in Australia/New Zealand and Pacific. CLIA 2014 Australia Cruise Industry Source Market Report shows 39 per cent of the Australian
cruise market is in South Pacific.
2 Assessment of the Economic Impact of Cruise Ships to Vanuatu, International Finance Corporation, August 2014
PAGE 3
EXECUTIVE SUMMARY
KEY DEFINITIONS
Direct economic impact is the revenue

government and businesses receive from
cruise ship tourism in each country. This Cruise Cruise Cruise
passengers spend members spend operators spend
includes revenue from the expenditure of
cruise passengers, crew members and cruise
ship operators on goods, services, taxes
Government Tour operators Souvenir sellers F&B businesses
and port fees. Data was gathered through revenue revenue revenue revenue
passenger and crew surveys, provided by
cruise operators (i.e. Carnival Australia).
Retail stores Transport Other
revenue providers revenue revenue
Indirect economic impact is the revenue

received by local businesses that supply
goods and services to businesses benefiting
from direct economic impact. It is the second
round impact of cruise tourism. Data was
Transport Retail stores Other
collected through face-to-face interviews providers revenue revenue revenue
with businesses in six visited ports where
questions were asked about their cost
structure and main suppliers.
Total economic impact is the direct economic impact plus the indirect economic impact
of each country. It is a measure of the total economic activity generated by cruise tourism. For
the purpose of this study the final total economic impact is broken down by sector and by final
beneficiary (i.e. government, private beneficiaries and leakage).
Added value is the contribution of total economic impact to GDP. It is calculated as a sum of
wages and profits generated from cruise tourism.
Employment impact is the total economic impact on employment in the country. Calculations
are based on the ratio of reported employment (full-time and part-time employment) to revenue by
sector. This ratio is then multiplied by revenue from cruise tourism in each sector to estimate the
final employment impact. The data was collected through face-to-face interviews with businesses
in six visited ports by asking questions about their total revenues and the number of people they
employ. For example, if the businesses noted they employ two workers and had AUD 20,000 of
revenue in 2015, then AUD 10,000 of total economic impact from cruise tourism generates one job
in this sector. Due to low business acumen some businesses could not provide full-time equivalent
figures, so instead reported on the number of people that worked in the business on the day of the
cruise. As a result we refer to employment impact as employment opportunities.
Throughout the study, monetary values are reported in Australian Dollars (AUD) unless
otherwise stated.
PAGE 4
EXECUTIVE SUMMARY
Methodology
This study is based on primary quantitative and qualitative data gathered from the passengers and crew
on two cruises in November 2015 and January 2016:
Cruise 1: November 2015 - Pacific Dawn with 2020 passengers and 690 crew capacity visited five ports
in PNG (Alotau, Kitava, Rabaul, Kiriwina and Doini Island)
Cruise 2: January 2016 - Sea Princess with 2272 passengers and 875 crew capacity visited five ports in
PNG (Alotau, Doini Island, Kiriwina, Kitava, and Rabaul), one port in SI (Honiara) and one port in Vanuatu
(Port Villa)
The study also used interviews conducted with businesses serving the cruise tourism sector at the visited
ports, as well as data provided by cruise companies handling cruise ships in PNG and SI. The methodology
is closely aligned to the approaches adopted in earlier studies, in particular the 2014 study on the cruise
tourism sector in Vanuatu3. The four core tasks completed as part of this study were:
Direct economic impact analysis based on the expenditure data of 2,254 cruise passengers who
completed a short survey at five PNG ports4 and one SI port5, and gathered administrative data
Indirect economic impact analysis pertaining to the cost structure of business beneficiaries (and their
suppliers) using information collected from face-to-face interviews with businesses, and the inputs of
in-country experts
A list of opportunities to develop cruise tourism in PNG and SI based on qualitative research (focus
groups, face-to-face interviews) with passengers at surveyed ports and businesses, cruise lines, ship
agents and in-country workshops with local stakeholders. Participants were asked to provide personal
views on the current barriers and future opportunities to cruise tourism at particular ports, or in PNG
and SI in general
A Cost Benefit Analysis (CBA) of a shortlist of opportunities to help prioritise future actions to improve
the impact of cruise tourism in the relevant economies
Economic impacts of cruise tourism expenditure

This summary presents two estimates of cruise tourism expenditure:
The economic impact on the researched ports in PNG (Alotau, Rabaul, Kiriwina, Kitava and Doini
Island) and SI (Honiara). These estimates are based on the data obtained from the two cruises
and scaled up by the number of times cruise ships of similar size are scheduled to visit these
ports in 2016
The economic impact on the whole of PNG and SI accounts for the fact that mainly smaller
cruise ships call at the researched ports and at other ports in PNG and SI. Assumptions were
revised to reflect the lower port fees paid by smaller ships, the lower number of passengers
per ship arriving in each port and the frequency of port calls. Extrapolation using cruise ship
schedules for 2015 then took place to provide a first estimate of the total economic impact of
cruise tourism on each country’s economy
Unless otherwise stated, the impact reported is based on the economic impact of the researched
ports. Insufficient data was available to estimate the country level impacts other than in aggregate.
4 Alotau, Rabaul, Kitava, Kiriwina, Doini Islands
5 Honiara
PAGE 5
EXECUTIVE SUMMARY
PAPUA NEW GUINEA

(Alotau, Rabaul, Doini Island, Kitava and Kiriwina)
Direct economic impact AUD 5.7 million Other 5%, AUD 294,652
in 2015 was AUD 5.7 million at the
Transport businesses 2%, AUD 123,197
five researched ports. Fifty-four per Cruise passengers F&B businesses 3%, AUD 203,993
cent was generated from spending AUD 2.5million 43% Retail stores 3%, AUD 176,383
Souvenir sellers 6%, AUD 340,223
by cruise operators (mainly through
Crew members Tour operators
port fees), 43 per cent was generated
AUD 0.2million 3% 30% AUD 1.7million
by passengers, and three per cent by
crew members purchasing goods and
services from local businesses. The
Cruise operators Government
majority (50 per cent) of this revenue
AUD 3million 54% 30% AUD 2.8million
went to the government through
the collection of port fees and tour
operators (30 per cent).
Indirect economic impact

The supply chain of local businesses AUD 0.2 million
serving cruise tourism is short as a high
Retail Stores
proportion of businesses operate in the 42% AUD 0.08million
informal economy. The main sources
of indirect impacts are: tour operators
purchasing transport services, food
and beverage businesses and general 58% AUD 0.12million
Transport Providers
retail stores purchasing their goods
from local suppliers.
Total economic impact

is AUD 5.9 million. Forty-three per
6%
Leakage
AUD 0.4 million 43%

Private beneficiaries
cent of the total economic impact
AUD 2.5 million
of cruise tourism benefits private
beneficiaries (i.e. local businesses,
business owners and employees). The
government receives 50 per cent of
AUD 5.9
the total economic impact. Estimated million
leakage is six per cent (i.e. the money
floats out of the economy through
50 %
Government
imports like fuel and profits which go
AUD 3 million
to foreign business owners).
AUD 1.1 million

Added value of cruise tourism
TOTAL ADDED VALUE
industry is AUD 1.1 million. In other

0.01 % of GDP
words, cruise tourism industry in the
AUD 1.1 million TOTAL
ADDED
researched ports contributed some 0.01% of GDP VALUE
0.01 per cent to PNG’s GDP in 2015.
Employment impact of cruise

tourism is 203 jobs. These are both full- 203 jobs
time and part-time jobs.
PAGE 6
EXECUTIVE SUMMARY
SOLOMON ISLANDS
(Honiara)
AUD 0.60 million Other 0%, AUD 3,031 Direct economic impact
in 2015 was AUD 0.60 million in Honiara.
Cruise passengers F&B businesses 4%, AUD 25,235 Sixty-five per cent was generated from
AUD 0.18million 31% Retail stores 3%, AUD 18,965 spending by cruise operators (mainly
Souvenir sellers 7%, AUD 38,982 through port fees), 31 per cent was
Crew members Tour operators generated by passengers and four per
AUD 0.02million 4% 15% AUD 0.09million cent by crew members purchasing
goods and services from local
businesses. The majority (65 per cent)
Cruise operators Government
of this revenue went to the government
AUD 0.39million 65% 65% AUD 0.39million
through the collection of port fees and
tour operators (15 per cent).

AUD 40,821 The supply chain of businesses serving
cruise tourism is short as a high
Transport Providers proportion of businesses operate in the
87% AUD 35,677 informal economy. The main sources
of indirect impacts are: tour operators
purchasing transport services, food
Retail Stores
and beverage businesses and general
13% AUD 5,144
retail stores purchasing goods from
local suppliers.

Leakage 10 %
of cruise tourism calculated as direct
AUD 0.07 million 27%
Private beneficiaries
plus indirect economic impact is AUD
AUD 0.17 million
0.64 million. Twenty-seven per cent
of total economic impact of cruise
tourism benefits private beneficiaries
AUD 0.64
(i.e. local businesses and employees).
million The government receives 63 per cent
of total economic impact. Estimated
Government 63 %
leakage is 10 per cent (i.e. the money
flows out of the economy through
AUD 0.4 million
imports like fuel and profits of foreign
business owners)
TOTAL ADDED VALUE
Added value of the cruise tourism

21 jobs
% of GDP AUD 89,639 TOTAL industry is AUD 89,639. In other words,
639 0.01% of GDP

ADDED
VALUE
the cruise tourism industry in Honiara
contributed some 0.01 per cent to SI’s
GDP in 2015.
Employment impact of cruise

21 jobs tourism is 21 jobs. These are both full-
time and part-time jobs.
PAGE 7
EXECUTIVE SUMMARY
Direct economic impact

Papua New Guinea
In 2015, cruise companies, passengers and crew spent an estimated AUD 5.7 million in PNG across the five
researched ports. Depending on the port, each cruise ship call contributed an average of between AUD
24,000 and AUD 159,000 to the local economy.
Extrapolating this figure to the entire country, the total direct economic impact of cruise tourism in PNG is
estimated at approximately AUD 6.3 million6, with the researched ports receiving 89 per cent of the total.
The leading source of expenditure is generated through cruise companies (which account for 54 per cent
of total expenditure) mainly through a variety of fees paid to ports, government agencies or communities.
The remaining expenditure (43 per cent) comes from passengers mainly through tour purchases, with
crew expenditure representing three per cent of the total.
The distribution of expenditure among ports differs. The majority of expenditure in PNG benefits Alotau
(42 per cent) and Rabaul (41 per cent), as these are the entry ports and most developed for tourism. A
summary of total expenditure with a breakdown by PNG ports is provided in Table ES1 and Figure ES1.
For the 2015 impact assessment in PNG, a total of 60 calls were assumed across the five researched
ports. There were an additional 76 calls made at mainly smaller island destinations by cruise ships of a
smaller average size (between 150 – 300 passengers). It is estimated that these additional calls contribute
much less (11 per cent) to the total cruise tourism impact in PNG. On this basis, the five researched ports
focussed on in this study are considered representative of total cruise tourism impact.
6 Extrapolation accounts for 76 ship calls made at other PNG ports to those researched. Passengers, crew and cruise line operators’ expenditure
were adjusted accordingly to account for a much smaller average vessel size (150 – 300 passengers).
PAGE 8
EXECUTIVE SUMMARY
Table ES1 Total estimated direct impact by PNG port 2015 (AUD)
PNG Calls Total Total Crew Total Cruise TOTAL TOTAL

Passenger Impact Line Impact Direct AVERAGE
Impact Impact Impact per
call
Alotau 15 751,700 70,589 1,562,500 2,384,789 158,986
Doini Island 11 228,601 5,558 242,000 476,159 43,287
Kiriwina 10 171,116 5,110 120,000 296,226 29,623
Kitava 8 92,369 3,696 96,000 192,065 24,008
Rabaul 16 1,224,742 73,706 1,020,000 2,318,447 144,903
TOTAL 5 60 5,667,686 94,461

Researched
Ports
TOTAL PNG 136 6,362,304 46,782

(Extrapolated)
Figure ES1 Breakdown of direct impact by PNG port and source in 2015 (AUD)
Rabaul Alotau Passengers

41%, 42%, 43%,
AUD AUD AUD 2.47
2,318,447 2,384,789 million
Kitava
3%, Kiriwina Cruise Crew
Doini Island
AUD 5%, Company 3%,
9%,
192,065 AUD 54%, AUD 0.16
AUD 476,159
296,226 AUD 3.04 million million
PAGE 9
EXECUTIVE SUMMARY
Solomon Islands
The total direct economic impact to Honiara port in SI for 2015 is estimated at AUD 0.6 million with each
cruise ship call contributing an average of AUD 46,169 to the Honiara economy.
As in the case of PNG, when this data is extrapolated to account for the smaller cruise ships and other SI
ports of call, the total direct economic impact of cruise tourism is estimated at AUD 0.9 million7.
The majority of expenditure comes from cruise companies (65 per cent of total expenditure). The
remaining expenditure comes from passengers (31 per cent) and crew (four per cent). Table ES2 provides a
summary of headline expenditure and Figure ES2 provided a breakdown of its source.
Table ES2 Total estimated direct impact by SI port 2015 (AUD)
SI Calls Total Total Crew Total Cruise TOTAL TOTAL

call
TOTAL 1 13 182,671 24,800 392,730 600,201 46,169
Researched
Port (Honiara)
TOTAL SI 47 900,768 19,165
Figure ES2 Breakdown of direct impact by SI port and source in 2015 (AUD)
Passengers
31%,
AUD 182,671
Honiara
100%,
AUD
600,201
Cruise Crew
Company 4%,
65%, AUD
AUD 392,730 24,800
7 Extrapolation accounted for 47 calls at other SI destinations. Passenger, crew and cruise line operator expenditures were adjusted to account
for a much smaller average vessel size (150 – 300 passengers).
PAGE 10
EXECUTIVE SUMMARY
Passenger expenditure
Depending on the port, average passenger expenditure is estimated between AUD 7 and AUD 76 per day
in PNG. Average passenger expenditure is estimated at AUD 28 per day in Honiara, SI.
Passenger expenditure varies significantly due to large differences in spending opportunities (e.g. pre-
booked tours through cruise companies are only available in Rabaul and Alotau), and other factors (such
as the availability of ATMs, foreign currency exchange, shaded areas and toilets ashore), which make
venturing ashore more attractive.
Figures ES3 and ES4 following provide a summary breakdown of expenditure by port and expenditure type
for PNG and SI respectively.
Figure ES3 Average passenger expenditure by port and type8 in PNG (AUD)
ToursPB Tours Transport Services Souvenirs Retail Food & Beverage Other
Rabaul 76
Kitava 7
Kiriwina 9
Doini Island 11
Alotau 47
0 10 20 30 40 50 60 70 80
Figure ES4 Average passenger expenditure by port and type9 in SI (AUD)
Honiara 28
0 10 20 30 40 50 60 70 80
8 Services include hair braiding and massage. Tour PB refers to Pre-Booked Tours which are arranged on-board the cruise ship by the cruise
company in advance of port arrival. Tours refers to purchases made by individuals on arrival at the port with local operators.
9 Services include hair braiding and massage.
PAGE 11
EXECUTIVE SUMMARY
Key drivers of passengers spend:
Time passengers spend on shore: Studies across different countries consistently

highlight that passengers who spend more time ashore also spend more.
Passengers’ satisfaction with the variety of things to see and do: Passengers spend
more if they think there are a greater variety of things to see and do. The majority of
passengers that spent in PNG and SI would spend more on clothing, watches/jewellery
and handicraft/souvenirs if more options were available.
Availability of pre-booked tours: Passengers who pre-booked tours10 spent

significantly more (on average AUD 79 in PNG) than those who did not pre-book tours
(on average AUD 21 in PNG). Relative to other goods and services currently available,
pre-booked tours are the most costly (up to AUD 130), but many passengers purchase
them (47 per cent of passengers in Alotau and 48 per cent of passengers in Rabaul).
Passengers with pre-purchased tours spend less on transport and more on souvenirs.
Crew expenditure
Due to only a small number of survey responses from crew members, the estimates of crew expenditure
are based on the Vanuatu 2014 study. Ports were classified into two groups: small ports (Doini Islands,
Kiriwina and Kitava) and medium ports (Alotau, Rabaul and Honiara). Based on the Vanuatu 2014 findings,
the analysis assumes that crew members spend an average of AUD 5 per day at small ports and AUD 28
per day at medium ports.
PNG and SI lack pull factors for crew members to go and spend ashore. Global studies11
indicate that crew members go ashore to access low-cost communication services (i.e.
internet and phone) as on-board alternatives are expensive, food and beverage at local
restaurants and bars, entertainment/night clubs and transportation from the ship to
these amenities. They also tend to spend on clothes and electronics. All these facilities/
products are scarce or not available in PNG and SI.
10 Tours sold on board are compliant with cruise-line operating standards that meet or exceed minimum international standards for safety and
insurance protection, as well as the level in quality as outlined by each cruise-line’s brand position.
11 Business Research & Economic Advisors (BREA) report 2014-2015
PAGE 12
EXECUTIVE SUMMARY
Cruise line expenditure

The majority of cruise company expenditure per port call relates to fees that directly flow to the
government. These fees differ significantly by port.
Port fees charged at the port of entry into the country (i.e. Alotau and Honiara) are higher, due to national
customs and immigration fees paid. Port fees also differ by vessel size. For the five researched ports in
PNG, the average size of a cruise ship per call was between 1,300 and 1,900 passengers, compared to 530
passengers in Honiara12.
Other company expenses on goods and services include port agent fees and corporate operational
expenditure.
Data for this assessment is based on internal estimates by Carnival Australia. Care was taken in using this
data by triangulating with information gathered from stakeholders including ship agents in PNG and SI.
Estimated total cruise line expenditure by port in 2015 is provided in Figure ES5.
Figure ES5 Total cruise line expenditure by port and type in 2015 (million AUD)
Fees Company expenses on goods and services

1.8
1.6
0.1
1.4
1.2
1.0 0.1
0.8
1.5
0.6
0.9
0.4
0.2 0.4
0.2
0.1 0.1
0.0
Alotau Doini Island Kiriwina Kitava Rabaul Honiara
12 To account for differences in average passenger capacity and vessel size, cruise line estimates on port fees paid were re-weighted for ports
where average passenger capacity was <700 pax (i.e. Honiara). It was assumed port fee per passenger are twice as high for smaller vessels (<700
pax) if compared to bigger vessels. This assumption is based on the results of Anonymous Survey of Cruise Operators Expenses conducted by
Seaports in 2014.
PAGE 13
EXECUTIVE SUMMARY

Indirect economic impact in PNG is estimated at AUD 0.2 million in PNG and AUD 0.04 million in SI. Small
indirect economic impact is a result of short supply chains and the structure of the economy.
Indirect economic impact is the revenue received by local businesses that supply goods and services to
businesses directly benefiting from cruise tourism. It is the second round impact of cruise tourism and the
size of this impact indicates how money multiplies in the economy.
The following are the two main reasons why the observed indirect impacts are low in both PNG and SI.
A large proportion of businesses directly benefiting from cruise tourism operate in the informal
subsistence economy of farming and fishing. Data from this informal economy is difficult to capture
and has limited indirect impact as revenue is kept by the family producing the good or service. Direct
income contributes directly to the household budget in such cases. This informal economic activity
is much more pronounced in PNG and SI than in other tourist destinations and should be taken into
account when interpreting this impact
By definition, indirect impact excludes the portion of direct economic impact that goes to the
government. Compared to other cruise tourist destinations (i.e. Vanuatu) the share of direct
expenditure that goes to government is large

The total economic impact of cruise tourism is calculated as direct plus indirect economic impact. Total
economic impact in PNG is estimated at AUD 5.9 million. Total economic impact in SI is estimated at AUD
0.64 million.
Final beneficiaries of total economic impact are government and local private beneficiaries. Part of the
impact leaks into the economy through imports (e.g. insurance, fuel costs, profit to foreign owners of
businesses, employees).
Forty-three per cent (PNG) and twenty-seven per cent (SI) of total economic impact of cruise tourism
benefits local private beneficiaries. Governments receive 51 per cent (PNG) and 63 per cent (SI) of
expenditure. Estimated leakage is 6 per cent (PNG) and 10 per cent (SI).
The observed structure of total economic impact is a result of the following features of the cruise tourism
industry:
The impact on government is high because of a high share of collected port fees relative to other
expenditure
The impact on private beneficiaries is high as the expenditure from cruise industry predominantly flows
into tours operators and handmade souvenir businesses. These sectors are labour intensive, locally
owned and almost independent from imports
The impact on private beneficiaries is further increased because a large share of the economy in each
country is considered informal (i.e. businesses do not pay tax). It is assumed that the entire expenditure
at Doini Island, Kiriwina and Kitava flows into such subsistence economies
The added value of cruise tourism to PNG’s GDP is estimated at AUD 1.1 million or 0.01 per cent of GDP in
2015. The gross value added of cruise tourism to SI’s GDP is estimated at AUD 0.09 million or 0.01 per cent
of GDP in 2015.
PAGE 14
EXECUTIVE SUMMARY
Employment impact
In PNG, cruise tourism generated an estimated 203 employment opportunities (0.6 per cent of working
age population of the five researched ports). In SI, the industry generated 21 employment opportunities
in Honiara (or 0.06 per cent of the working age population). Measured employment opportunities relate
only to the private sector and exclude any impact by cruise tourism on employment in the public sector.
Figure ES6 presents the estimated impact of cruise tourism on employment opportunities in PNG and SI
by sector and by port.
These figures do not indicate full-time equivalent (FTE) jobs only but the number of jobs (including a
mixture of full-time and part-time/ad hoc employment depending on the sector) that cruise tourism
generates. The estimates are calculated on a ratio of reported employment to revenue for each sector
based on data obtained from interviews with businesses. For each sector, these numbers were used to
estimate the employment ratios which were applied to the total direct and indirect economic impact for
private beneficiaries. Due to the limited understanding of some business representatives interviewed,
full-time equivalent figures for employment were not provided. Instead, the number of employees
working in the business on the day of the cruise (e.g. the number of family members selling handicrafts)
was reported. As a result, for the purpose of this study, employment impact is referred to as employment
opportunities or jobs.
In line with the approach adopted in the Vanuatu 2014 study, the employment impact does not include
employment resulting from fees paid by cruise operators at ports or other tax and duty collections. But
given the significant size of this expenditure relative to other spend in PNG and SI some employment
impact is likely to occur (i.e. in port and government administration).
The specialist tourist retail sector (selling handicrafts and souvenirs) benefits the most in terms of total
employment opportunities despite the fact that this sector receives only about six per cent of total
economic impact in both PNG and SI. Handicraft and souvenir businesses have many ‘employees’ and are
mainly family run, but the intake from cruise tourism is low and not consistent because businesses only
open when a cruise ship is in port. For instance, based on qualitative research there are many handicraft
sellers at Kiriwina, but the majority of sellers are subsistence farmers. As a consequence, the number of
full-time equivalent employment created by cruise tourism is currently low as cruise calls are infrequent
and last for only a day. But the number of employment opportunities created is high since many people
engage in the sector once the cruise ship arrives.
The lessons of Vanuatu and Fiji (as more developed tourism economies) illustrate the future potential
for PNG and SI. Increasing the frequency of cruise calls and the numbers of passengers will encourage
local businesses to establish permanent retail premises and employ of full-time staff. The Vanuatu study
estimated full-time equivalent employment at 1,170 jobs. Similar numbers can be expected in PNG and
SI given a similar number and frequency of cruise passengers. Many of these jobs would come from the
services and amenities that are not yet available in PNG and SI, and/or new products such as organised
tours.
PAGE 15
EXECUTIVE SUMMARY
Figure ES6 Impact on employment opportunities in PNG and SI by sector (above) and port (below)
PNG SI
135
Employment Opportunities
52
16
6 7
3 0.5 1 3 0.8
Tours and General retail Food & Beverage Transport Specialist tourist retail
Entertainment
PNG SI
135
72
44 41
52 31
21
15
16
6 7
3
Alotau 0.5
Doini Island Kiriwina 1 Kitava 3 0.8 Rabaul Honiara
Entertainment
PAGE 16
EXECUTIVE SUMMARY
Comparison of key indicators

Table ES3 below compares key indicators in the 2015 PNG, SI; 2014 Vanuatu study and the 2015 BREA
study
Table ES3 Comparison of key indicators in the 2015 PNG, SI; 2014 Vanuatu study13 and 2015
BREA study14
Indicator PNG SI Vanuatu13 BREA

201514
Number of researched ports 5 1 3 -
Number of calls at researched ports per year 60 13 201 -
Average number of passengers per call 1311 - 1927 530 ~ 2081 -
Average number of crew per call 757 260 - -
% of passengers going ashore 93% - 97% 94% 91% - 97% 94%
Average time spent ashore (hours) 3.4 – 4.3 3.7 - 4.4
Average passengers spend per call (AUD) 7 - 76 28 11 - 96 179
Average crew spend per call (AUD) 5-28 28 5 - 51 93
Total direct economic impact of cruise company 3.0 0.4 6.2 -

per year (AUD million)
Average direct economic impact per call 94,461 46,169 164,000 -
Direct economic impact per year at researched 5.7 0.6 33 -

ports (AUD million)
Indirect economic impact per year at researched 0.2 0.04 19 -

ports (AUD million)
Total economic impact per year at researched ports 5.9 0.64 52 -

(AUD million)
Benefit to private beneficiaries (% of total economic 43% 27% 49% -

impact)
Benefit to government (% of total economic impact) 51% 63% 11% -
Leakage (% of total economic impact) 6% 10% 41% -
Value added (AUD million) 1.1 0.09 8.4 -
Value added as a share of GDP 0.01% 0.01% 0.75% -
Employment opportunities 203 21 3,250 -
1214
13 Vanuatu figures are for 2013

14 Business Research & Economic Advisors (BREA) conducted several Economic Contribution of Cruise Tourism to the Destination Economies
Studies, the latest was published in October 2015. The scope of the study concerns the Caribbean, Mexico and Central & South America
PAGE 17
EXECUTIVE SUMMARY
Summary of opportunities for improving the impact of cruise

tourism
To support stakeholder efforts to improve the economic impact of cruise tourism in PNG and SI, 11
options (six for PNG and five for SI) comprising of groups of preferred actions were subjected to a cost-
benefit analysis (CBA). The CBA validates the robustness of these options using the best available
information and data from Carnival Australia, Seaports Group and other published sources. Where
assumptions are made, they are set out in Section 6 of the study (and accompanying annexes).
To select the shortlist of the options, the Consultant firstly considered a long list of actions gathered
from businesses, in-country workshops and consultations within DFAT, Carnival Australia and the Pacific
Horticultural and Agricultural Market Access Program (PHAMA). These actions were then screened for
feasibility, before being shortlisted as options that would benefit from synergies for the CBA.
The purpose of the CBA was to help identify priority options based on their anticipated benefit-cost ratio.
A summary of the results is provided in Table ES4. The key findings are summarized below.
Providing an ATM or foreign exchange booth at/or near the wharf in Alotau (the first port of call for
many cruises) is found to have the highest benefit-cost ratio. In short, it was found that the Papua New
Guinean Kina (PGK) is not a frequently available currency for tourists visiting PNG and many traders in
PNG do not accept alternative currency (i.e. AUD). Without currency exchange facilities on the cruise
ship, this resulted in many passengers being unable to make purchases when visiting PNG ports. The
low fixed cost of providing this facility is easily offset by increased passenger expenditure for the 10
years assessed
In the same vein, improving information provided to passengers prior to disembarking in both PNG
and SI is estimated to have a large positive net impact. In-depth interviews with passengers indicated
that they wanted to spend more, but lacked the opportunities and confidence to do so. It is a relatively
low cost exercise to provide a three-minute quarantine video, update destination materials and
provide a map of the ports to encourage cruise passengers to explore and better navigate attractions
and amenities at each port visited. These actions also give passengers the confidence to purchase
handicrafts, resulting in higher expenditure
Increasing cooperation and coordination between businesses, local communities, government and
cruise operators particularly in the development of future tours and excursion offers (which are the
highest expenditure items for passengers), is also anticipated to generate significant net benefits.
Businesses should be better prepared for cruise ship arrivals with an improved range of better-priced
and coordinated products to offer passengers. Key to this option in PNG and SI is the establishment of
a more formalised cruise committee in each port with assigned roles and responsibilities. For example,
it is assumed these committees will take the lead in broadcasting the arrival of cruise vessels to local
businesses, and submitting relevant and updated destination information to cruise operators to ensure
information given to passengers is accurate and useful
Improving customs and immigration procedures in PNG is expected to generate significant benefits
as speedier and more efficient procedures allow passengers to spend more time ashore. Benefits
are estimated proportional to the extra time spent ashore when more goods and services are to be
purchased
PAGE 18
EXECUTIVE SUMMARY
Improving port amenities (such as the provision of shaded areas and seating, sanitation blocks and
litter bins) in many destinations is shown to have a significant net positive impact. The option makes the
port area more attractive to passengers considering a trip ashore. When ashore, it also increases the
time passengers are willing to spend in the port with a proportional increase in expenditure assumed in
the analysis
Opening up cruise destinations, such as Gizo and Tavanipupu in SI, requires significant upfront
investments at high cost. For example, this includes jetties, upgrades to wharfs and hydrological
surveys to be carried out before larger cruise ships can operate efficiently in these ports. However,
over time the improvements will increase levels of expenditure due to a higher frequency of calls and
numbers of passengers
The new wharf at Honiara is already under construction and will provide net benefits within 25 years.
However, the benefits to freight shipping operators from a new wharf are not quantified and are
considered significant as they are the largest users of this infrastructure
In conclusion, the CBA highlights the importance of capacity building, improved communication and
information options to facilitate higher cruise tourism expenditure. These options also contribute to
supporting economic development through tourism where a limited formal economy currently exists
in many smaller destinations. Often low cost to implement, these options ensure local communities,
businesses and government realise the potential of cruise tourism for economic growth and employment.
These options achieve the highest benefit-cost ratios.
Infrastructure investment is also important for the longer-term prospects of these cruise tourism
economies. High in upfront costs, the benefits of these investments may seem low but they are essential
prerequisites for future economic development. Without a new wharf in Honiara, or similar infrastructure
at other destinations, cruise tourists will not visit these countries in the numbers expected, consequently
reducing the economic impact of the sector.
PAGE 19
EXECUTIVE SUMMARY
Table ES4 Summary of the benefit-cost ratio of proposed opportunities to improve the impact
of cruise tourism in PNG and SI15
Option Details Present Value Net Benefit-
(AUD million) Present cost
Value ratio
Costs Benefits
Papua New Guinea

Increase the Providing foreign exchange booths near or at the 0.03 1.9 1.87 57
provision of foreign wharf in Alotau
exchange services
Improve Provide quarantine videos and leaflets to 0.1 3.2 3.1 27
information to passengers
passengers Update destination information provided by
cruise operators to passengers
Develop and provide maps of the port, city
centre and areas of interest
Inform passengers of the opportunity to make
donations to locals
Improve customs Pass legislative changes to enable the cruise 0.1 0.9 0.8 13.8
and immigration operators to use non-proclaimed ports for
procedures clearance to plan itineraries more effectively
and increase cruise frequency. This could be
achieved by increasing the number of proclaimed
entry/exit ports or using procedures (like other
PICs) which allow the operator to bear the cost
of using immigration services at non-proclaimed
ports. Most of the costs associated with the new
procedure (i.e. to fly customs officers to the non-
declared port of entry) would be borne by cruise
operators directly
Improve passengers clearing processes in
line with those used in other PICs. Currently
the immigration process takes a long time
(requiring crew to collect passport copies for all
passengers) and reduces on-shore time for the
passengers who must wait for their passports to
be returned before disembarking
Develop the Establish a more formalised cruise committee 0.2 3.1 2.9 13.1
product offering in Develop tours and excursions on smaller islands
PNG (i.e. Kitava and Kiriwina)
Upgrade port Construct a sanitation block near or at the wharf 0.2 1.6 1.4 7.6
amenities in PNG area in Kitava and Kiriwina
Provide covered areas, including seating for
passengers in Kitava and Kiriwina
Clear signage to enable cruise passengers
to navigate from the port area to leading
attractions and points of interest in Alotau and
Rabaul. Although amenities exist, passengers
do not know where to go to reach them (i.e.
currency exchange and banks)
15 Costs and benefits of investments are estimated over 10 years. Costs and benefits of investment in Honiara’s wharf is estimated over 25 years
reflecting the longer life to asset and the fact that this is investment is on-going.
PAGE 20
EXECUTIVE SUMMARY

Value ratio
Costs Benefits
Improve Kitava – extend a jetty to enable simultaneous 0.7 3.1 2.4 4.3
infrastructure to disembarkation of two tenders for more efficient
existing ports of transportation of passengers to and from larger
call cruise ships
Alotau – provide fresh water supplies for cruise
ships to World Health Organization (WHO)
standards. As the first port of call for cruise ships
from Australia, development of this capability is
considered a priority for cruise development in
the region
Madang – reinforce and extend the port berth
to enable more regular and larger ships to dock
in port. Based on the assessment of Seaports
marine engineers, this would entail construction
of two sinker blocks and upgrades to fenders.
Solomon Islands
Develop the Establish a more formalised cruise committee 0.1 1.58 1.47 15
product offering in Develop more tours and excursions
Honiara
Open new Open Gizo as a destination for large vessels. This 1.5-2.6 4.5-12.7 3-10.1 1.7-8.6
destinations in the will require:
SI cruise offer • A hydrographical study for the destination
• Additional bollards/large cleats to be added
adjacent the sloping concrete ferry wharf
at Gizo to allow ship tenders to safely berth
alongside
• The red and white navigational beacon’s
and green starboard hand buoy as marked
on official chart BA 1735 to be replaced to
International Association of Lighthouse
Authorities (IALA) standards at Gizo. This will
assist ship tenders (lifesaving appliances) in
making safe entrance/egress from the port
area
• Encouraging and supporting the Solomon
Islands Maritime Safety Administration
(SIMSA) to ensure the maintenance of
navigational aids and an effective marine
safety information (MSI) system as required
by the International Maritime Organization
Safety of Life at Sea (IMO SOLAS) convention
Open Tavanipupu as destination for large
vessels. This will require:
• Preliminary weather monitoring
• Hydrological survey of reef entrance to
Tavanipupu
• Destination impact study
• Landing facilities (i.e. jetty)
Beach shelters/huts
PAGE 21
EXECUTIVE SUMMARY

Value ratio
Costs Benefits
Improve Provide quarantine videos and leaflets to 0.1 0.7 0.6 6.7
information passengers
provided to Update destination information provided by
passengers cruise operators to passengers
Develop and provide maps of the port, city
centre and areas of interest
donations
Upgrade Honiara’s Construct and maintain a sanitation block 0.3 0.5 0.2 1.8
port amenities Provide covered areas (including seating for
passengers) considered important to provide
shade and cover in times of inclement weather
Improve signage to enable cruise passengers
attractions and points of interest
Provide litter bins and port beautification actions
to make the area more attractive for cruise
passengers
Upgrade Honiara’s Construct a wharf capable of handling future 48.5 49.3 0.7 1.02
port infrastructure cruise ships of up to 264m in length and current
ships of 220m in length (already in construction)
Provide water supplies to WHO standards of 50
tonnes per hour
PAGE 22
INTRODUCTION JUNE 2016
1 Introduction
1.1 Approach and methodology
This study followed a data driven approach, including primary data collection from cruise operators, passengers,
crew, and tourism related businesses in PNG and SI. This data was collected through surveys, focus groups and
interviews on-board two separate cruises in November 2015 and January 2016. The ports of call on each cruise
are summarised in Figure 1.1 below.
Figure 1.1 Data collection cruise itineraries and ports of call (November 2015 and January 2016)
Papua New Guinea
Solomon Islands
Honiara
The approach and methodology used for the economic impact assessment of the cruise tourism industry on the
economies of PNG and SI is in line with the global cruise industry studies conducted by Business Research and
Economic Advisors (BREA)16, as well as the previous Vanuatu 2014 study in assessing the following.
Direct economic impact is the revenue the government and businesses receive from cruise ship tourism from
the expenditure of cruise passengers, cruise crew members and cruise operators on goods, services, taxes and
port fees in each country. Data was collected through passengers and crew surveys on board, as well as data
provided by cruise operators (i.e. Carnival Australia)
Indirect impact is the revenue received by suppliers of goods and services to businesses affected by direct
impact. It is the second round impact of cruise tourism. The data was collected through face-to-face interviews
with businesses in the six visited ports by asking questions about their cost structure and main suppliers
16 Business Research & Economic Advisors (BREA) conducted several Economic Contribution of Cruise Tourism to the Destination Economies studies, the
latest was published in October 2015. The scope of the study concerns the Caribbean, Mexico and Central and South America.
PAGE 23
Total economic impact is the aggregation of direct and indirect economic impacts, and represents the total
economic activity generated by cruise tourism in each country. In this study the final total economic impact
is broken down by sector and by final beneficiary (i.e. government, private beneficiary or leakage). This study
does not measure induced impacts which measures the additional impact from private beneficiaries through
household expenditure by employees (direct and indirectly) employed by the tourism industry
Added value is the contribution of total economic impact from cruise tourism to GDP. It is calculated as a sum of
wages and profits generated by total impact
Employment Impact is the total economic impact on employment in the country. It is calculated based on the
ratio of reported employment (full-time and part-time employment) to revenue by sector. This ratio is then
multiplied by revenue from cruise tourism in each sector to estimate the final employment impact. The data was
collected through face-to-face interviews with businesses in each port by asking questions about their total
revenues and the number of people they employ. For example, if the businesses noted they employ two workers
and had AUD 20,000 of revenue in 2015, then AUD10,000 of total economic impact from cruise tourism generates
one additional job in this sector. Due to the limited understanding of some business representatives interviewed,
they could not provide full-time equivalent figures but rather reported the number of people that worked in the
business on the day of the cruise. As a result we refer to employment impact as employment opportunities
Economic impact of cruise tourism expenditure

This study presents two estimates of cruise tourism expenditure:
The economic impact on the five researched ports (Alotau, Rabaul, Kiriwina, Kitava and Doini Island) in PNG
and one port in SI (Honiara). These estimates are based solely on the data obtained from the two cruises,
scaling up by the number of times cruise ships of this size are scheduled to call in these ports in 2016
The economic impact on the whole country of PNG and SI accounts for the fact that mainly smaller cruise
ships call at ports other than the researched ports in PNG and SI. To do this, assumptions were revised to
reflect the lower port fee paid by smaller ships, the lower number of passengers per ship arriving in each port
and the frequency of calls to these other ports. Extrapolation on this basis provides a first estimate of the
total economic impact of cruise tourism on each economy
Unless otherwise stated, the impacts reported are based on the economic impact on the researched ports.
Insufficient data was available to estimate the country-wide impacts disaggregated by sector and port.
A total of 2,254 passenger responses were collected. The average passenger response rate was eight per cent per
port (344 passengers per port), but passengers reported on average for 2.03 persons, in line with other studies.
Compared to the Vanuatu 2014 study, sample sizes are smaller but this was expected due to the limited number of
cruise ships surveyed (only two ships were surveyed) and the higher number of ports surveyed on each cruise ship
(six ports). However, the achieved sample sizes are large enough to provide statistically robust results.
The survey was complemented with four focus groups and several in-depth interviews with passengers on-board to
build an in-depth understanding of their spending behaviour and drivers.
In addition, 36 face-to-face interviews were conducted with businesses operating in the study ports. The aim of the
interviews was to collect data on the basic cost structure, levels of employment and main suppliers of each business
to compute the supply chain. Twenty-nine businesses were interviewed in PNG and seven businesses in Honiara, SI.
Due to small sample size, data was analysed in aggregate and triangulated with secondary literature and in-country
expert opinion before reaching robust conclusions.
Draft results of the economic impact assessment and underlying assumptions were presented and discussed at the
in-country workshops in PNG and SI in March 2016.
PAGE 24
The study is based on in-depth qualitative and quantitative research conducted at five ports
in PNG and one port in SI
Alotau – with a population of approximately 12,000, Alotau is one of the larger urban ports in PNG
and the capital of Milne Bay Province. Here, cruise passengers can pre-book the largest variety
of tours combining war, history and culture tours. There is a good range of places available to
purchase food and drinks.
Doini is a privately-owned island and resort with less than 100 inhabitants and a pleasant beach.
Business activities include a restaurant serving food and drinks, and activities such as fishing,
boat trips, kayaking, dancing and singing performances. There were no pre-booked or local tours
available.
Kiriwina with a population of 37,000, this is one of the largest and most populated islands of the
Trobriand Islands where natives live a self-sufficient lifestyle. It is renowned for wood carvings and
snorkelling. Many handicraft vendors line up by the footpaths at the beach to sell their goods to
cruise tourists. No pre-booked tours were available on board cruise ships but local guides can be
hired for a walk to the village in exchange for a donation.
Kitava is a small tropical island with some 2,000 – 3,000 inhabitants. It is part of the Trobriand
islands where the natives live a self-sufficient lifestyle. Cruise passengers can purchase a diverse
range of goods including wood carvings, craft, shells, jewellery and coconuts. No tours were
available to pre-purchase on the cruise ships. However, there are local tour guides offering Skull
Cave visits and boat tours.
Rabaul is an urban port in East New Britain province with a population of approximately 8,000.
It is popular for its volcanoes, scuba diving, snorkelling sites, World War II history and cultural
life. A variety of businesses serve cruise passengers including local tour operators, souvenir and
handicraft vendors, supermarkets and local markets. Tours were available either to pre-book on
cruise ships or to purchase directly from local operators.
Honiara is the capital city of the Solomon Islands and has approximately 65,000 inhabitants.
When large cruise ships arrive local businesses set up a craft and souvenir market at the wharf,
offering a variety of handicrafts. Tours were not available to pre-book on cruise ships, but local
operators were accessible at the wharf.
PAGE 25
1.2 Limitation of this study
While every effort has been made to ensure that the sample of data collected is representative of the population,
and that the methods used in collection and analysis are robust, there are a number of limitations to this study:
Estimation of induced impacts is beyond the scope of this study. Induced impacts, defined as the impacts
of expenditure from private beneficiaries of indirect cruise ship tourism spending, (i.e. household expenditure
from employees of businesses that benefit from cruise tourism) have not been considered as part of this study.
To do so, would require an understanding of how private beneficiaries spend the income they received from
cruise ship tourism
The sample is based on data collected on two large cruise ships and smaller expeditionary cruise ships
were not surveyed. Data collection was undertaken on two large cruise ships visiting PNG and SI with the
most comprehensive itineraries, during the months of November 2015 and January 2016. The cruise tourist
population on-board both cruises is considered representative of the larger vessels visiting PNG and SI in
2015/2016. As the popularity of cruise tourism to PNG and SI continues to expand, the demographics of
tourists and their spending patterns are likely to change. Therefore, the study only provides a snapshot of
expenditure and its impact in 2015/2016. Although PNG and SI are also visited by a number of smaller cruise
vessels and private yachts, surveying these passengers and crew was not within the scope of this study
Sample data for estimating the expenditure of crew members was low. A survey of crew expenditure was
undertaken on each cruise ship but the response rate from those who disembarked at each destination was
very low. Several factors contributed to this outcome: (i) crew have limited time off from their duties while on-
board and are reluctant to spend that time completing a questionnaire; (ii) very few crew members were found
to leave the ship at each destination, other than at larger ports; and (iii) there is a high level of survey fatigue
as most crew have encountered such surveys before on other cruise trips. In response, informal interviews
were held between the researchers on-board and crew members to find out about their spending patterns and
motivations for expenditure, which are included in our assessment. Nevertheless the amount of quantitative
information obtained remains negligible. To account for such a small sample size, care has been taken by on-
board researchers to validate the results by reviewing the estimated expenditure and ensuring it mirrors their
general observations and experience of crew spending patterns. Secondly, the results have been compared to
crew expenditure in other studies. As crew incomes and hours worked are similar across different cruises, it is
reasonable to assume expenditure is similar
Employment impacts from cruise line spending at ports were not estimated as part of this study. Due to
the subsistence nature of the economy in many ports of call, full-time cruise tourism employment is limited.
In addition, due to the limited business understanding of those interviewed, only the number of employees
present on the day of the interview were provided. In the absence of secondary data on the structure of the
supply chain and/or input-output tables for each sector, it was not possible to provide full-time equivalent
(FTE) job numbers or detailed indirect employment impacts. As a result we refer to employment impact as
employment opportunities
1.3 Comparison with/lessons from other studies

It is natural to compare the results of this study with similar studies conducted in other PICs or similar tourist
island destinations in the Caribbean. However, care should be taken in comparing countries and their economies.
As alluded to above, PNG and SI differ significantly from other PICs for the following reasons:
PNG and to a lesser degree SI are highly undeveloped tourism destinations in terms of the number of cruise and
other tourists they attract, the tourism infrastructure available to them (including road transport, cultural and
retail destinations) and awareness of tourism as an important source of revenue among businesses. Numbers
of visitors are increasing and improvements to infrastructure are being made, but it will take time to reach the
numbers seen in similar Pacific and Caribbean tourist destinations
Cruise ship tourism in PNG includes stops at otherwise hard to reach and largely unspoilt destinations. While this
is ultimately the attraction of ports like Kiriwina, Kitava, and Doini Island, commercial business is limited. Many
local people are employed in subsistence farming and fishing. Cruise tourism provides a supplementary source
of cash income, in which products and services are sold to visiting tourists from no fixed premises or registered
business. This informal economy is difficult to capture, and has limited indirect impact on the wider economy as
revenue is kept by the family producing the good or service. Cash income contributes directly to the household
budget in such cases. This informal economic activity is much more pronounced in PNG and SI than in other
tourist destinations and should be taken into account when interpreting the expenditure findings. Namely the
supply chains when assessing indirect impacts are very short, involving only one supplier, if any at all
Taking these differences into account, levels of passenger and crew spend are broadly aligned with the results
seen in Vanuatu and elsewhere in the Pacific Islands. A change to the itinerary in the second cruise also enabled
the expenditure surveys to be completed for Port Vila in Vanuatu. The results obtained from Port Vila confirmed
broad alignment of the results of this study. Furthermore, the assumptions used have been tested with tourism
representatives in each country and with the researchers who visited each port of call.
1.4 Structure of this study

The remainder of this study follows the logical sequence of impact assessments:
Section 2: provides a quantification of the direct expenditure impacts
Section 3: presents the quantification of indirect economic impacts including on employment and leakage from
each country’s economy
Section 4: quantifies to total economic impact
Section 5: identifies the barriers to and opportunities for further economic development from cruise tourism
Section 6: presents the result of a CBA of potential options to improve the impacts of cruise tourism in
PNG and SI
Technical Annexes are also provided supplementing the main study:
Annex 1: Methodology
Annex 2: Quantitative analysis of passengers’ spending drivers
Annex 3: Cost structures and assumptions
Annex 4: Assumptions for the CBA
PAGE 27
DIRECT ECONOMIC IMPACT JUNE 2016
2 Direct economic impact
PNG summary
In total, cruise companies, passengers and crew spent AUD 5.7 million in PNG during 2015 across the five researched
ports (Alotau, Rabaul, Kiriwina, Kitava and Doini Island). Depending on the port, each cruise ship call brought an
average of between AUD 24,000 and AUD 159,000.
If this data is extrapolated, the total direct economic impact of cruise tourism in PNG is estimated at approximately
AUD 6.3 million.
The major source of the expenditure is cruise companies (which account for 54 per cent of total expenditure) mainly
through a variety of fees paid to ports, government agencies or communities. The remaining expenditure comes from
passengers (43 per cent) mainly through purchases of tours. Crew expenditure accounts for only three per cent.
The distribution among ports differs. The majority of expenditure in PNG benefits Alotau (42 per cent) and Rabaul (41
per cent), as these are entry ports and are more developed ports. Total and breakdown of expenditure by port in PNG
is provided in Table 2.1.
The impact assessment for PNG in 2015 assumed a total of 60 calls at the five researched ports. There were also an
additional 76 calls at other mostly small island destinations with significantly smaller average vessel sizes (between
150 – 300 passengers). It is estimated that these additional calls bring a marginal share (11 per cent) to total cruise
tourism impact in PNG. As a result, the five researched ports in this study provide a good insight.
Table 2.1 Total estimated direct spend per average port call – PNG 2015 (AUD)
PNG Calls Total Total Crew Total Cruise TOTAL TOTAL

call
Alotau 15 751,700 70,589 1,562,500 2,384,789 158,986
Doini Island 11 228,601 5,558 242,000 476,159 43,287
Kiriwina 10 171,116 5,110 120,000 296,226 29,623
Kitava 8 92,369 3,696 96,000 192,065 24,008
Rabaul 16 1,224,742 73,706 1,020,000 2,318,447 144,903
TOTAL 5 60 5,667,686 94,461

Researched
Ports
TOTAL PNG 136 6,362,304 46,782

(Extrapolated)
PAGE 28
Figure 2.1 Location of cruise ship calls in PNG in 2015
Rabaul
Kiriwina Kitava
Alotau
Doini
Note: Blue dots mark PNG ports where cruise ships called in PNG in 2015. Red dots mark the ports of Alotau, Doini, Kiriwina, Kitava and
Rabaul included in this study.
SI summary
The direct economic impact to the port of Honiara in SI in 2015 is estimated at AUD 0.6 million. On average each cruise
ship call brought AUD 46,169 to Honiara.
If this data is extrapolated, the total direct economic impact of cruise tourism in SI is estimated at approximately AUD
0.9 million.
The majority of the expenditure comes from cruise companies (65 per cent of total expenditure) mainly through
different fees paid to ports, government agencies or communities. The remaining expenditure comes from
passengers (31 per cent) and crew (four per cent).
PAGE 29
Table 2.2 Total estimated direct spend per port call – SI 2015 (AUD)
SI Calls Total Total Crew Total Cruise TOTAL Direct TOTAL
Passenger Impact Line Impact Impact AVERAGE
Impact Impact per call
TOTAL 1 13 182,671 24,800 392,730 600,201 46,169

Researched
Port (Honiara)
TOTAL SI 47 900,768 19,165

(extrapolation)
SI Calls Total Average Total Average Total Average TOTAL TOTAL Direct
Passenger Crew Impact Cruise Line AVERAGE Impact
Impact per per call Impact per Impact per
call call call
TOTAL 1 13 14,052 1,908 30,210 46,169 600,201

Researched Port
(Honiara)
TOTAL SI 47 19,165 900,768

(extrapolation)
Figure 2.2 Location of cruise ship calls in SI in 2015
Honiara
Note: Blue dots mark SI ports where cruise ships called in 2015. The red dot marks the port of Honiara, which was sampled in this study.
PAGE 30
2.1 Cruise passenger expenditure

2.1.1 Headline expenditure
The aim of the passenger survey was to estimate the average onshore expenditure of cruise passengers at
different ports of call in PNG and SI. This expenditure includes pre-booked tours, purchases of handicrafts and
other products. The data obtained from the survey is used as the basis for direct impact modelling assumptions17.
Passengers’ expenditures varies significantly among the surveyed ports due to differences in spending
opportunities (e.g. the availability of pre-booked tours) and other factors such as the availability of ATMs,
currency exchange services, shaded areas and toilets ashore.
On average, passengers spend AUD 76 per day in Rabaul, AUD 47 in Alotau and between AUD 7 and AUD 11 per day
in smaller ports (i.e. Doini Island, Kiriwina or Kitava). In Honiara, passengers spend AUD 28 on average per day18.
The global average passenger spend is much higher, estimated in the region of AUD 17919. The Vanuatu 2014
Study estimated passengers spend AUD 96 in Port Vila, AUD 45 in Luganville, and AUD 11 in the Mystery Islands20.
Figure 2.3 Average passenger expenditure by port (AUD)
100
80 76
60
47
40
28
20
11 9
7
0
17 A large share of passengers pre-book tours if those are available (Alotau, Rabaul). Due to leakage through profits taken by intermediaries (cruise operators)
it was assumed that 70 per cent of this spending effects the local economy.
18 It should be noted that the data for Honiara was gathered on a Sunday when some businesses where closed.
19 USD 128 based on BREA 2014 - 2015
PAGE 31
Figure 2.4 Breakdown of average passenger spend by port and sector (AUD)
Alotau $47 direct spend per passenger day Doini Island $11 direct spend per passenger day
Retail 3%,
Food &
Souvenirs 5%, AUD 2
Beverage 4%,
AUD 2.24
AUD 1.65
Other Other Tours
Transport 10%, AUD 14%, AUD
1%,
4%,
AUD 0.57 1.17 1.58
AUD 1.72
Tours Food &
9%, Beverage
AUD 4 25%,
AUD 2.70 Souvenirs
30%, AUD
ToursPB 3.28
74%,
AUD 35 Retail
21%,
AUD 2.33
Kiriwina $9 direct spend per passenger day Kitava $7 direct spend per passenger day
Food &
Beverage
Food & Transport
Other Tours 7%, AUD Other
Beverage 8%, 7%, AUD
10%, AUD 11%, 0.49 14%, AUD
AUD 0.74 0.63 Tours
0.97 AUD 1.05 1.01 24%, AUD
1.77
Retail
7%, AUD
0.48 Transport
10%, AUD
0.70
Souvenirs Souvenirs
Retail Services Services
57%, 37%, AUD
6%, 1%, AUD 1%, AUD
AUD 5.41 2.73
AUD 0.53 0.14 0.10
Rabaul $76 direct spend per passenger day Honiara $28 direct spend per passenger day
Retail Food & Food & Beverage 7%,

Souvenirs 5%, Other
4%, AUD 3 Beverage 1%, AUD 2.04
AUD 4.09 1%,
AUD 0.76
AUD 0.47
Transport Other 1%,
3%, AUD 1.05
Retail
AUD 2.36 8%,
AUD 2
Tours Tours
20%, Souvenirs 49%,
AUD 15 21%, AUD 14
ToursPB AUD 5.75
66%,
AUD 50
Transport
14%,
AUD 3.86
PAGE 32
Key findings
Qualitative research found passengers are often not expecting many services and don’t particularly
want them. Passengers are mostly interested in, and surprised by, the beautiful unspoilt locations, the
friendliness of the locals and rich local cultural history.
There was a consensus among passengers interviewed that not much money is needed to have a
great time at these locations. The main expectation from passengers is to be able to relax and enjoy
these pristine places.
Quantitative analysis confirms that on average passengers spent little (AUD7 to AUD11) at small
island destinations (Doini Island, Kitava, and Kiriwina).
Passengers’ expenditure during the entire trip (in PNG) is lower or equal to what they expected to
spend. Passengers expected to spend between AUD 150 and AUD 200 in total at the five visited ports
(P&O amount suggested at money exchange points). Based on the quantitative analysis, average
expenditure was AUD 150 per passenger across the five ports in PNG.
Passengers would like to contribute more to the local communities. Quantitative data shows
that most passengers would spend more on entertainment, tours, clothing, watches/jewellery and
handicrafts if more were available), or donations (both monetary and material).
Average passengers spent a significant amount (AUD 35 to AUD 50 on average) on pre-book tours to
book on-board cruise ships
Pre-book tours were not available on-board cruise ships to Honiara, Doini Island, Kitava and Kiriwina.
Pre-booked of tours will be available on Carnival Australia cruises to Honiara from May 2016 onwards
Discussions in focus groups highlighted that some passengers preferred to pre-book tours through cruise
operators. Others would like to book directly with local tour operators based on the perception that those
tours are cheaper with more money going straight to the community
The proportion of passengers going ashore is high. Survey results indicated that between 93 per cent (Kitava) and
97 per cent (Doini Islands) of passengers went ashore at the surveyed ports. This is consistent with the Vanuatu
2014 Study and the global average of 94 per cent21.
Once ashore, passengers spend between 3.4 and 4.3 hours (depending on the port) discovering destinations
before returning to the cruise ship. Globally, the average number of hours ashore is 4.4 hours22.
Among the different ports, Kiriwina Island and Kitava attracted the lowest number of passengers. A large
proportion (between 39 and 40 per cent) of passengers did not spend while ashore at these destinations. In
contrast, Rabaul attracted a high amount of passengers ashore (96 per cent), and only six per cent of them chose
not spend, with the average passenger returning to the cruise ship after 4.3 hours. A breakdown of passengers
going ashore by port and their spending pattern is provided in Figure 2.5.
21 BREA 2014-2015
22 Ibid.
PAGE 33
Figure 2.5 Proportion of passengers going ashore and not spending by port (AUD)
Percentage of passengers going onshore

Percentage of people who went onshore but spent no money on the day (*)
96% 97% 96%

100% 94% 93% 94%
80%
60%
39% 40%
40%
31%
17%
20% 12%
6%
0%
The proportion of passengers going ashore is high, but some passengers still prefer staying on board.
"[Honaira] Didn't go ashore because I don't like

tenders and the journey looked quite long today"
Passenger
"Didn't go ashore, felt that there was no difference

between Kitava and previous two ports [Kiriwina
and Doini Island]" Passenger
PAGE 34
Figure 2.6 below provides details on the observed average time spent ashore by port.
Figure 2.6 Detail of average passenger time spent ashore by port
The average time passengers spent ashore is lower than the global average. Qualitative
research found this is partly due to: heat, lack of basic facilities and a lack of food that is
perceived to be safe to consume. Time spent on tours also influences the time spent ashore. A
prominent pattern observed by researchers was that after a few hours of a full-day stop spent
ashore, many passengers return to the cruise ship for lunch and are unlikely to return, choosing
to stay aboard the ship during the remainder of the day. On average passengers spent:
3.4 hours at Kiriwina: Passengers returned to boat

fast. Some felt overwhelmed by too many vendors,
there was not enough shade, no places to sit and "[Kiriwina] Very picturesque
the beach was not pleasant. Passengers also but not really tourist friendly"
mentioned locals “begging”
3.6 hours at Kitava: Passengers preferred Kitava
over Kiriwina and stayed ashore longer. It had nice
"There are not really many
seating areas and shade. Vendors and locals were
less “pushy”
amenities in [Alotau] for
people on cruises to go and
3.7 hours in Alotau: Extreme heat and humidity
get a cool drink where they can
prevented passengers from spending more hours
feel comfortable. If that was
ashore. Some passengers perceived Alotau
available I would have spent
as quite raw and dirty. Some rest areas were
available for passengers but there was no clear
longer... We saw International
signage so most passengers did not use this. Many Hotel but it wasn't inviting,
passengers went on tours that lasted two hours with security fencing, didn't
feel you were welcome"
3.7 hours in Honiara: The port was visited on a
Sunday and many businesses were closed. There
was a lack of facilities (toilets)
3.8 hours at Doini Island: Resort bungalows were "I would have liked to get out
available for cruise passengers to use. There were of town [Honiara] today but
appropriate facilities, shade, a restaurant with food found it very limited in terms
and drinks available for passengers of transportation. I got off at
4.3 hours in Rabaul: Longer stay on-shore because
9:30 and all the tours were sold
most passengers went on volcano and WWII out, would have liked to take an
history tours that last between three-and-a-half extended tour for 6.5 hours"
to four hours
PAGE 35
2.1.2 Drivers of expenditure

This section identifies potential drivers of passengers’ on shore expenditure (average spend). The following
potential drivers were explored through quantitative analysis (passenger surveys) by calculating correlation
coefficients: household income, passengers’ satisfaction levels, availability of options and whether or not
passengers pre-purchased tours.
The factors outlined below indicate a strong correlation to mean spend, but this does not establish certainty that
the factors identified cause more spending. The analysis was conducted separately for PNG and SI where possible.
Due to the small sample size, availability of options and pre-purchased tours were explored in aggregate.
Three key drivers of passengers spend23
Time passengers spend on shore: Survey results across different countries consistently
indicate that passengers who spend more time ashore also spend more on local products and
services.
Passengers’ satisfaction with the variety of things to see and do: Passengers spend more if
they think there are a greater variety of things to see and do. Independent of the country, the
majority of passengers that spent in PNG and SI would spend more on clothing, watches,
jewellery, handicrafts and souvenirs if more options were available.
Availability of pre-booked tours: Passengers who pre-booked tours spent significantly more
(on average AUD 79) than those who did not pre-book tours (on average AUD 21). When
available, many passengers purchased pre-booked tours (47 per cent of passengers in Alotau
and 48 per cent of passengers in Rabaul).
Figure 2.7 Mean spend by time spent ashore (hours)

PNG SI
60
Mean Spend Per Passenger (AUD)
50
40
30
20
10
0
1 2 3 4 5 6
Hour spent ashore
Number of respondents: 2061
23 Comparative table of correlations is included in Annex 2.
PAGE 36
There was a positive correlation between mean spend and time ashore of up to six hours for PNG and five hours
for SI. The downward trend in expenditure after five hours in SI illustrates the need for more things to do. We know
from qualitative findings that many passengers were prepared to spend more, hence the positive correlation.
In terms of satisfaction, there is a strong positive correlation between “variety of things to see and do” and total
spend in both PNG and SI. On average, passengers who were not at all satisfied with the variety of things to see
and do spent only AUD 13 and those who were extremely satisfied spent AUD 34.
Figure 2.8 Mean spend per passenger by satisfaction with variety of things to see and do
60
PNG
50
40
32
30
24 24
20 15
13
10
0
Not at all satisfied Not very satisfied Somewhat satisfied Very satisfied Extremely satisfied
60
SI 53
50
40 36
28
30 26
20
12
10
0
Not at all satisfied Not very satisfied Somewhat satisfied Very satisfied Extremely satisfied
PAGE 37
More than half of passengers were ‘very’ or ‘extremely satisfied’ with the current variety of
things to see and do at most ports – especially at Doini Island, Kitava and Rabaul
(see Figure 2.9).
Doini Island rates the highest. It offers fishing, boat trips, self-guided walks around the Island and
kayaking. There are many different groups performing cultural dances and songs, but less availability of
crafts. Some passengers pointed out it felt more commercial, less authentic and more in line with other
Pacific Islands
Kitava is liked for being authentic, untouched and un-touristy. Passengers can purchase handicrafts, join
tours with local tour guides to the lookout at the top of the hill, King Cameron’s Grave and Skull Caves,
take a raft-boat to a deserted island and purchase food and drinks (coconut) from stalls
In Rabaul many passengers go on tours (volcanoes and WWII history), the selection of handicrafts is good
and includes local products as well as commercial “made in China” products
Figure 2.9 Share of passengers who were ‘very’ or ‘extremely satisfied’ with the current
variety of things to see and do by port in PNG
Doini Island 72%
Kitava 67%
Rabaul 67%
Kiriwina Island 51%
Alotau 41%
In Honiara, 55% of the passengers very ‘very’ or ‘extremely’ satisfied with the variety of things to see
and do.
PAGE 38
Around one-fifth of passengers were ‘not very’ or ‘not at all’ satisfied with the variety of
things to see and do in Alotau, Honiara and Kiriwina Island (see Figure 2.10).
The main town of Alotau is about 30 minutes walk from the port and (especially those on tours) rarely
make it into the town centre. Tourist offers close to the port are limited, there is no information desk or
local tour operators at the port and signage is poor. Alotau has a good range of places available for food
and drinks, however souvenirs and woodcarvings are less obvious to buy. Tourists can purchase a variety
of tours such as Ahoima traditional cultural experiences (e.g. meet my family, Alotau history tour, the
Battle of Milne Bay tour and traditional cooking classes)
Kiriwina Island has the highest number of local people servicing cruise tourists. It is renowned for the
wood carvings and spectacular snorkelling. But passengers commented there is not enough variety
of handicrafts and some passengers were concerned that crafts are imported. There were local tour
guides available for village tours, but passengers were not aware of this offer. Passengers also expressed
concerns for animals with locals encouraging passengers to pay for photos with parrots and turtles
Figure 2.10 Share of passengers who were ‘not very’ or ‘not at all’ satisfied with the current
variety of things to see and do by port in PNG
Alotau 22%
Kiriwina Island 19%
Rabaul 10%
Kitava 9%
Doini Island 6%
In Honiara, 19% of the passengers were ‘not very’ or ‘not at all’ satisfied with the variety of things to see
and do.
PAGE 39
Cruise passengers were asked whether they would spend more if more options were available. More than 50 per
cent of passengers who spent would have spent more on entertainment activities, clothing, watches/jewellery and
handicrafts, if more were available.
Passengers who did not spend would most likely spend more on tours on the day (40 per cent), followed by handicrafts
(30 per cent) and clothing (28 per cent), suggesting a gap in the market for these areas in particular.
Responses were similar at ports of PNG and SI ports, but passengers in SI are more likely to spend more on most
items (if more options were available).
Figure 2.11 Percentage of passengers who would have spent more by country
PNG SI
30%
25%
% passengers who would spend more
20%
15%
10%
5%
0%
PAGE 40
Passengers who pre-booked tours spent significantly more than those that did not pre-book tours.
Figure 2.12 Spend for passengers who booked/did not book tours in PNG (AUD)
PNG
Tours not
19
pre-booked
Tours pre-
78
booked
0 10 20 30 40 50 60 70 80 90
Passengers who pre-booked tours spent less on transportation, more in retail and handicrafts, but much the
same on food and beverage.
Collected passengers data does not allow for detailed analysis of spending patterns based on passengers’
demographics. Consistent with studies by BREA and the Vanuatu 2014 study, one survey per cabin was collected
and one passenger was asked to report spending on behalf of all cabin/family members. Based on such data
individual expenditure by gender or age cannot be identified.
Ninety-one per cent of passengers responding to the survey hold permanent residence in Australia. The
sample sizes of passengers from other countries (e.g. UK, US and Canada) are too small for statistical spending
comparison based on country of origin (because calculated differences are not statistically significant).
PAGE 41
2.2 Cruise crew expenditure

The number of collected survey responses from crew was insufficient to conduct quantitative expenditure
analysis. To estimate the total direct economic impact of cruise crew expenditure, several assumptions were
made for based on the Vanuatu 2014 study and qualitative insights gathered during research on two cruise ships
visiting PNG and SI in November 2015 and January 2016.
For the purpose of analysis, ports are classified into two sizes:
1. Small ports include Doini Island, Kiriwina and Kitava. It is assumed that the size and type of expenditure
compares to that of Mystery Island in Vanuatu
2. Medium Ports include Alotau, Rabaul and Honiara. It is assumed that the size and type of expenditure compares
to Luganville in Vanuatu. Crews did not spend on duty free and entertainment activities in PNG and SI, as there
are no such businesses operating (or they do not attract crew members) in these localities
Assumed share of crew going ashore is 13 per cent for small ports and 26 per cent for medium ports. In
comparison, the global average is 39 per cent24 (Table 2.3).
The analysis assumes that on average crew members spend AUD 5 per day at small ports and AUD 28 per day at
medium ports in PNG and SI from the Vanuatu study. As the wages of crew do not differ significantly between
Vanuatu and PNG/SI cruises, we consider this a sensible assumption given the absence of primary data on which
to base the analysis. The main expenditure is in food and beverage, retail (i.e. supermarkets) and transports. In
comparison, global average crew expenditure at port per day is AUD 9325.
Currently PNG and SI lack pull factors for crew members to go and spend ashore. Based on
global studies26, crew members go ashore to access cheap communication services (because
internet and phone, on-board connection is expensive), food and beverage at restaurant and
bars, entertainment/night clubs and transportation to these facilities. They also tend to spend
on clothes and electronics. All of these facilities and products are scarce or not available in PNG
and SI.
Figure 2.13 Crew expenditure breakdown by type of expenditure and port size (AUD)27
Medium Port
Small Port
0 5 10 15 20 25 30
24 BREA 2014-2015
25 USD 67 Ibid.
26 Ibid.
27 Based on Vanuatu 2014 data
PAGE 42
ALOTAU RABAUL HONIARA
ITEM Average Share of Weighted Average Share of Weighted Average Share of Weighted
spend per all onshore average spend per all onshore average spend per all onshore average
passenger visits spend per passenger visits spend per passenger visits spend per
who spent passenger who spent passenger who spent passenger
on that (AUD) on that (AUD) on that (AUD)
item (AUD) item (AUD) item (AUD)
Tours PB 71 49% 35 98 51% 50 35 18% 6
Tours 19 22% 4 43 36% 15 18 42% 8
Transport 7 23% 1.72 19 13% 2.36 14 27% 3.86
Services 9 1% 0.07 13 1% 0.15 5 1% 0.07
Souvenirs 11 21% 2.24 11 37% 4.09 14 42% 5.75
Retail 7 22% 2 9 29% 3 9 24% 2
Food &
7 25% 1.65 6 14% 0.76 8 24% 2.04
Beverage
Table 2.3 Detailed breakdown of passenger expenditure for Alotau, Rabaul and Honiara
Other 6 9% 0.5 7 12% 0.9 5 7% 0.4
TOTAL 47.18 76.26 28.12
PAGE 43
2.3 Direct expenditure by cruise companies

The majority of cruise company expenditure relates to fees that directly flow to the government of each country.
Data for this assessment is based on estimates by Carnival Australia, shipping and logistics companies working in
PNG and SI, as well as additional stakeholders.
Total direct expenditure by cruise companies in PNG in 2015 is estimated at AUD 1.6 million in Alotau and AUD 1.0
million in Rabaul. Expenditure at smaller island destinations is estimated between AUD 0.1 million in Kitava and
AUD 0.2 million in Doini Island. Total direct expenditure of cruise companies in Honiara in 2015 is estimated at AUD
0.4 million.
Fees paid by cruise companies at larger ports include a range of charges by government departments, port
authorities, and shipping and logistics companies including customs and immigration fees, quarantine fees, port
fees etc. It was assumed that customs and immigration fees and other national fees such as those charged by the
National Maritime Safety Authority (NMSA) in PNG are charged at the first port of entry (i.e. Alotau and Honiara).
Fees at smaller island destinations are negotiated and flow directly to the community.
Based on a comparative example of fees paid by one large cruise ship at different ports, port fees, agency fees and
quarantine fees are comparable between the three larger ports (Alotau, Rabaul and Honiara). However, fees paid
for customs, immigration and the NMSA are much higher in PNG compared to SI. Together these fees account for
58 per cent of total fees paid in PNG (Alotau and Rabaul ports), compared to nine per cent at the SI port of Honiara
(see Figure 2.15).
Other direct expenditure by the cruise company relates to expenses on goods and services. This includes
corporate expenditure for operations (e.g. travel, accommodation and professional advisory fees). These
company expenditures were allocated evenly between Alotau and Rabaul based on the number of calls in 2015.
Procurement of other goods is mostly centrally managed from home ports, and there are currently no locally-
sourced products in PNG or SI for larger vessels. A port agent in Honiara noted that smaller vessels sometimes
purchase provisions from the port (e.g. eggs) and smaller vessels also pay for garbage disposal. It has not been
possible to quantify this extra expenditure in this study.
PAGE 44
Figure 2.14 Estimated total cruise company expenditures in 2015 by port (AUD million)
Fees Company expenses on goods and services

1.8
1.6
0.1
1.4
1.2
1.0 0.1
0.8
1.5
0.6
0.9
0.4
0.2 0.4
0.2
0.1 0.1
0.0
Source: Carnival Australia and PNG and SI cruise agents, internal data
Figure 2.15 Comparative breakdown of fees paid by a large cruise ship (2,000 pax) at larger ports in
PNG and SI
Customs and Immigration National Maritime Safety Port Fees*
Alotau/Rabaul 22% 36% 42%
Honiara 9% 91%
Note: *Port fees include anchorage, pilotage, International Ship and Port Facility Security (ISPS) code, berthage, berth reservation, mooring gang
service, agency fee and professional service tax.
Source: Internal data from PNG and SI cruise agents.
PAGE 45
Port fee challenges in PNG

Lack of coordination and a need to adopt international practices: Some stakeholders noted
there is a level of confusion between various authorities collecting fees from visiting ships in
PNG. Reportedly, each authority has a different method of charging fees, overtime, ad diem
allowances, policies related to boarding vessels in designated and undesignated ports etc. One
shipping agent noted that PNG needs to conform with internationally accepted practices
related to manifests, documentation and methods of charging vessels that are consistent with
other destinations.
High fees: Based on data gathered, fees charged in PNG are significantly higher than those in SI.
Some stakeholders and cruise ship operators noted recent high fees charges by NMSA might
result in some cruise ships bypassing PNG in the future. Based on their calculations this
especially applies to small (50-100 passengers) exhibition cruises that visit PNG once a year.
Ports in the Pacific region and around the world are under sustained pressure to keep costs to a
minimum, specifically for cruise ships if tourist destinations are to remain competitive.
However, a vast body of literature recommends port fees should be set at a level that covers the
expenses and investment needed to build and maintain a port as well as the local infrastructure
to accommodate cruise passengers28.
Legislation and customs rules: According to current legislation, the first port of entry for cruise
ships in PNG must be a declared port (e.g. Alotau, Rabaul, and Port Moresby). By law cruise ships
need to stop first at one of the declared ports before going to other destinations. However,
other PICs (e.g. Fiji, and SI) allow cruise ships to enter the country also through undeclared ports
(an example of undeclared port in PNG is Conflict Island). This opens up more possibilities for
cruise operators to better tailor their itineraries.
28 See for instance Brida, JG & Zapata, S (2010) Cruise tourism: economic, socio-cultural and environmental impacts.
PAGE 46
2.4 Direct economic impact by industry

The majority of direct economic impact benefited the public sector (i.e. government), and the tours and
entertainment services industry (i.e. tour operators). Breakdown by sector is provided in Table 2.4.
Table 2.4 Direct economic impact by industry (AUD)

Economic Impact Industry PNG SI
Direct Economic Tours 1,688,738 92,909
Impact
Transport 123,197 28,350
Souvenirs (including handicrafts and artworks) 340,223 38,982
Food and beverage (restaurants and bars) 203,993 25,235
Retail stores (supermarket, general store item) 176,383 18,965
Other 294,652 3,031
Government 2,840,500 392,730
TOTAL Direct 5,667,686 600,201

Economic Impact
PAGE 47
2.5 Total Direct Impact by Port in PNG in 2015

Figure 2.16 Direct economic impact in Rabaul
AUD 2.3 million

Other 5%, AUD 121,056
F&B businesses 2%, AUD 51,030
Retail stores 5%, AUD 66,929
Cruise passengers
AUD 1.2million 53%
Tour operators
Crew members
44% AUD 1.0million
AUD 0.07million 3%
Government
Cruise operators
40% AUD 0.9million
AUD 1.0million 44%
Figure 2.17 Direct economic impact in Alotau
AUD 2.4 million

Other 5%, AUD 113,334
Cruise passengers Transport businesses 2%, AUD 45,021
AUD 0.75million 32% F&B businesses 3%, AUD 68,298
Retail stores 2%, AUD 44,936
Crew members
AUD 0.07million 3% Tour operators
25% AUD 0.6million
Cruise operators
AUD 1.6million 66% Government
61% AUD 1.5million
PAGE 48
Figure 2.18 Direct economic impact in Kiriwina
AUD 0.3 million

Other 7%, AUD 20,820
Cruise passengers F&B businesses 6%, AUD 16,707

AUD 0.17million 58% Retail stores 3%, AUD 9,840
Tour operators
Crew members
6% AUD 19,010
AUD 5,110 2%
Cruise operators
Government
AUD 0.12million 41%
41% AUD 0.12million
Figure 2.19 Direct economic impact in Kitava
AUD 0.2 million

Other 8%, AUD 14,574
Cruise passengers F&B businesses 5%, AUD 8,675

AUD 0.09million 48% Retail stores 3%, AUD 6,282
Tour operators
Crew members
12% AUD 22,511
AUD 3,696 2%
Cruise operators
Government
AUD 0.1million 50%
50% AUD 0.1million
PAGE 49
INDIRECT ECONOMIC IMPACT JUNE 2016
3 Indirect Economic Impact

Indirect economic impact in PNG is estimated at AUD 0.2 million and AUD 0.04 million in SI. Small indirect
economic impacts are the result of short supply chains in the local tourism economy and the structure of the
overall economy (see Table 3.1).
Table 3.1 Indirect economic impact by industry (AUD)

Indirect Economic Impact Transport services 120,276 35,677
General retail (supermarket, general store item) 88,202 5,144
TOTAL Indirect Economic 208,478 40,821

Impact
Indirect economic impact is the revenue received by local businesses that supply goods and services to
businesses directly benefiting from cruise tourism. It is the second round impact of cruise tourism and the size of
this impact indicates how money multiplies in the economy. By definition, indirect impact excludes the portion of
direct economic impact that goes to the government.
Indirect economic impact was calculated by simulating the supply chain of the five main industries benefiting from
cruise tourism in SI and PNG. In summary, the following was observed:
Tour and entertainment services: The main local suppliers of tour operators are transport service providers
(i.e. providing mini buses)
Transport services: Transport services mainly rely on imported goods (imports of fuel and vehicle) and have
limited indirect impacts
Specialist tourist retail such as handicrafts, souvenirs and artwork: The majority of businesses in this sector
operate in the informal economy. Data from this informal economy is difficult to capture and has limited indirect
impacts as revenue is kept by the family producing the good or service
General retail such as supermarkets: The main local suppliers of general retail industry (such as supermarkets)
are larger local general retailers
Food & beverage services: The main local suppliers of food and beverage services are local general retail
industry (i.e. supermarkets)
PAGE 50
TOTAL ECONOMIC IMPACT JUNE 2016
4 Total Economic Impact

4.1 Summary
Total economic impact in PNG is estimated at AUD 5.9 million. Total economic impact in SI is estimated at AUD
0.64 million. The majority of this impact (97 per cent in PNG and 94 per cent in SI) comes from direct impact.
Final beneficiaries of total economic impact are government and local private beneficiaries. Part of the impact
leaks from the economy through imports (i.e. insurance, fuel costs and profits to foreign owners of businesses).
Forty-three per cent (PNG) and twenty-seven per cent (SI) of the total economic impact of cruise tourism
benefits local private beneficiaries. Governments receive 51 per cent (PNG) and 63 per cent (SI) of
expenditure. Estimated leakage is six per cent (PNG) and 10 per cent (SI).
The observed structure of total economic impact is a result of the following features of the cruise tourism
industry:
Impact on the government is high because of a high share of collected port fees relative to other
expenditure
Impact on private beneficiaries is high since the expenditure from the cruise industry predominantly
flows into tours operators and handmade souvenir businesses. These sectors are labour intensive,
locally owned and almost independent from imports
Impact on private beneficiaries is further increased because a large share of the economy in each country
is considered informal (i.e. businesses do not pay tax). It is assumed that the entire expenditure at Doini
Island, Kiriwina and Kitava flows into such subsistence economies
Added value impact of cruise tourism to PNG’s GDP is estimated at AUD 1.1 million or 0.01 per cent of GDP in
2015. Value add of cruise tourism to SI’s GDP is estimated at AUD 0.09 million or 0.01 per cent of GDP in 2015.
Table 4.1 Total economic impact by industry (AUD)

Direct Economic Tours and entertainment services 1,688,738 92,909
Impact
Transport services 123,197 28,350
Specialist tourist retail services (handicrafts, souvenirs and 340,223 38,982

artwork)
Food and beverage industry (restaurants and bars) 203,993 25,235
Other* 294,652 3,031
Public sector (i.e. government) 2,840,500 392,730
Indirect Economic Transport Services 120,276 35,677

Impact
TOTAL Economic 5,876,164 641,022

Impact
Note: Other includes services such as hair braiding and donations from passengers.
PAGE 51
4.1.1 Differences between researched ports

The islands of Kitava and Kiriwina differ significantly from the rest of the ports surveyed due to the fact that
these ports have limited services and no infrastructure. The islands function as subsistence economies and the
inhabitants are farmers. Cruise companies pay the anchorage fee, which directly benefits the community. Family-
owned businesses selling goods and services operate on an ad-hoc basis when cruise ships arrive. The revenue
from sales to cruise passengers complements subsistence farming and has not yet developed as an alternative
source of close to full-time employment.
The impact assessment assumes that revenues received from cruise ships are used entirely by local private
beneficiaries (for family consumption). There is no supply chain, no taxes paid (i.e. no government revenue), and
there is no leakage from the economy as all materials are locally-source through farming (e.g. wood, vegetables).
The ports of Alotau, Rabaul and Honiara are characterised by a larger business presence. The impact of direct
expenditure in these ports was calculated by simulating the flow of the money in the economy through the value
chain (including secondary effects). This section reports key findings per industry. A detail account of assumed
cost structure per industry and country is provided in Annex 3.
4.1.2 Tours and entertainment services

Tours and entertainment services in Alotau, Rabaul and Honiara range from war and colonial history tours (e.g.
Milne Bay Tour, Kokopo War Museum), to cultural tours, cultural performances and cooking classes. The operators
were separated into two groups:
Registered tour operators serve passengers who pre-booked tours through cruise companies or online. There
are also registered tour operators offering services ashore at the wharfs. Those operators pay related taxes,
insurance and other fees. Tours can be pre-booked through cruise companies for Alotau and Rabaul. In Honiara
pre-booked tours are only available online through other operators
Unregistered tour operators also serve passengers while ashore. They do not pay related taxes, insurance
and other fees. For example, in Rabaul tour operators need to pay a fee of 200PGK per person per day to access
the port area and need to comply with local insurance regulation to offer services at the wharf. As a result, only
two local tour operators gained access to the port area but many other businesses are crowded outside the
main port gates. Reportedly, some of these tour guides are officially unemployed and offer tours to earn extra
income. It is assumed that 40 per cent of tours ashore is purchased from unregistered operators
Private beneficiaries receive a high share of direct expenditure because the revenue is mainly used to hire local
tour guides and local transport providers.
Table 4.2 Key findings of the economic impact analysis of tours and entertainment services
Alotau Rabaul Honiara
Share of direct expenditure on pre-booked 26% 36% 10%

tours
Share of direct expenditure on tours ashore 5% 16% 13%
Beneficiary of expenditure PNG SI

(% flow from every dollar spent)
Private beneficiaries 87% 88%
Government 6% 3%
Leakage 7% 9%
PAGE 52
4.1.3 Transport Services

Transport services are limited to mini buses and taxis operating at wharfs to transport passengers into towns or
on tours. These services are mainly hired by tour operators and accounted for in secondary impact.
This sector has a high leakage rates due to dependency on fuel imports with the cost of fuel accounting for a large
proportion of costs to businesses (see Table 4.3).
Table 4.3 Key findings of economic impact analysis of transport services

Share of direct expenditure on transport 2% 3% 7%
services

Government 9% 5%
Leakage 51% 57%
4.1.4 Specialist tourist retail services (handicrafts, souvenirs and artwork)

The majority of handicrafts sold are handmade and locally produced (e.g. wood carvings, baskets and drums etc.).
Vendors are often unemployed and/or have other jobs and set up ad-hoc stalls when cruise ships arrive. It was
assumed that 80 per cent of business in this sector are not registered and do not pay taxes, social security and
other related fees.
In Honiara, businesses set up a craft and souvenir market at the wharf offering a variety of products. Some craft
stalls are supported by local industry groups (such as the Solomon Islands Women in Business Association, which
provides stalls for free). Imported souvenirs (e.g. t-shirts and caps) are only available in Rabaul.
The sector has a high distributional effect since 99 per cent of the money spent on special tourist retail, benefits
private beneficiaries (see Table 4.4).
Table 4.4 Key findings of the economic impact analysis of specialist tourist retail services

Share of direct expenditure on specialist tourist retail 3% 4% 10%
services

Government 0% 0%
Leakage 0% 1%
PAGE 53
4.1.5 Food and beverage service industry (restaurants and bars)

Qualitative research suggests most passengers are not particularly interested in purchasing food and drinks
ashore as they are provided on-board. Many passengers are also deterred from eating locally produced food
because of food safety concerns.
Restaurant and bars such as the Honiara Yacht Club and Rapopo Plantation Resort in Rabaul, mainly serve local
guests and other tourists. The reported intake from cruise tourists is below 10 per cent.
It is estimated that a relatively high share of expenditure from the food and beverage sector flows to private
beneficiaries, mainly because businesses buy the majority of goods at local supermarkets and markets. The main
source of leakage (estimated at around 50 per cent of profits) is due to foreign business ownership.
Table 4.5 Key findings of economic impact analysis of food and beverage service industry

Share of direct expenditure on food and 4% 3% 6%
beverage

Government 2% 3%
Leakage 7% 26%
4.1.6 General retail (supermarket and general store items)

The majority of products sold in the general retail sectors are imported. Businesses in this sector are largely
foreign-owned (i.e. predominantly Chinese, Fillipino or Australian). It is assumed that 80 per cent of profits leak
offshore and hence the estimated leakage is high (between 35 per cent and 48 per cent depending on the country).
Table 4.6 Key findings of economic impact analysis of general retail industry
Share of direct expenditure on general retail 2% 3% 5%

Government 12% 16%
Leakage 35% 48%
PAGE 54
4.2 Leakage and the informal economy

Studies estimate leakage in PICs is high due to the limited production of the economies and dependency on
imports (e.g. 41 per cent in Vanuatu, 60 per cent in Fiji). However, in PNG and SI the direct impact of the cruise
industry is predominantly in the tours and entertainment and specialist tourist retail services (souvenirs)
industries. These industries are labour intensive, have low leakage due to the high share of locally owned
businesses, and a minor share of imports in business costs (i.e. most of the souvenirs are produced locally and fuel
and vehicles are the main imports across the supply chain of the tour industry).
The informal economy as a share of the total economy is considered high. Based on official statistics 75 and
85 per cent of employment in PNG and SI respectively comes from subsistence agriculture. Based on research
observation, most businesses operating in the tour and entertainment and specialist tourist retail service
industries are informal (i.e. do not pay tax).
PAGE 55
4.3 Employment impact

Estimates of the impact of the cruise tourism sector on local employment are based on reported employment-
to-turnover ratios obtained during interviews with businesses. The majority of employment generated through
cruise tourism is on a part-time basis, often complementing subsistence farming (which employs 75 per cent
of the population in SI and 85 per cent in PNG)29. This is particularly relevant in the smaller islands of Kiriwina
and Kitava and is also a dominant factor in certain sectors such as specialist tourist retail sector (handicrafts,
souvenirs, and artwork).
The reported impacts are not based on full time equivalent (FTE) employment but rather indicate the number of
employment opportunities (a mixture of full-time and part-time jobs depending on the sector) that cruise tourism
generates (see Table 4.7).
It is estimated that in 2015, 203 jobs in five ports were created in PNG as a result of cruise tourism. This equates to
jobs for 0.6 per cent of the working age population at these ports – of which 200 jobs were generated directly and
three indirectly. Most jobs were created in Rabaul (72), followed by Alotau (44) and Kiriwina (41).
In 2015, cruise ship tourism generated 21 jobs in Honiara representing 0.06 per cent of working age population.
Twenty jobs were created directly and one indirectly.
The specialist tourist retail sector (i.e. handicrafts and souvenirs) benefits most in terms of total employment
opportunities. This is despite the fact that this sector receives about only six per cent of total direct and indirect
impact in both PNG and SI. Handicraft and souvenir business have many ‘employees’ and are mainly family run but
the intake from cruise tourism is low and inconsistent because businesses only operate when cruise ships arrive.
For instance, based on qualitative research there are many handicraft sellers at Kiriwina, however the majority
of sellers are subsistence farmers. Hence, the employment opportunity generated from cruise tourism seems
large in number but only lasts for the day when the cruise ship arrives and there were only 10 cruise ship visits to
Kiriwina in 2015.
In line with the approach adopted in the Vanuatu 2014 study, the employment impact does not include
employment resulting from government revenues derived from fees paid by cruise operators or other tax and
duty collections.
Table 4.7 Average number of employment opportunities per AUD 10,000 of revenue per sector and
estimated employment impact in PNG and SI 2015
Sector Average number of PNG employment SI employment impact

jobs per AUD10,000 impact
Tours and entertainment services 0.31 52 3
General retail (supermarket, general store 0.21 6 0.5

items)
Food and beverage services (restaurants 0.34 7 1

and bars)
Transport (taxi/bus/ground transportation) 0.13 4 0.8
Specialist tourist retail (handicrafts, 5.10 135 16

souvenirs, artwork)
TOTAL 203 21
% of working age population 0.6% 0.06%
29 World Bank Indicators (2013)
PAGE 56
Figure 4.1 Total employment opportunities by country and sector (above) and by port (below)
PNG SI
135
52
16
6 7
3 0.5 1 3 0.8
Entertainment
PNG SI
135
Opportunities
Opportunities
72
Employment
Employment
52
44 41
31
21
15 16
6 7
3 0.5 1 3 0.8
Entertainment
The method adopted to calculate employment impacts in the previous Vanuatu 2014 study and BREA studies
differ marginally from the approach adopted in this study. In these studies the employment impact was estimated
by using the average full-time salaries for employees in each sector. The Vanuatu study additionally assumed that
more than 33 per cent of employment is part-time to derive estimate of employment opportunities. This study
does not make use of full-time salaries for employees in each sector due to the lack of available data for PNG and
SI, and the high share of sectors operating in the informal economy. As a result, the employment impact estimates
are based on a ratio of reported employment-to- turnover data obtained during interviews with businesses.
PAGE 57
OPPORTUNITIES JUNE 2016
5 Opportunities for increasing the economic impacts

of cruise tourism in Papua New Guinea and Solomon
Islands
This section considers the opportunities that exist to increase the economic benefits of cruise tourism in PNG and
SI. It also assesses the barriers to greater cruise tourism impact and explores the potential for further growth of
the sector in these countries.
5.1 Barriers to the economic impact of cruise tourism
Summary of key barriers to the economic impact of cruise tourism

Research conducted through business interviews, in-depth cruise passenger interviews, and in–country
workshops identified the following key challenges and barriers to increasing the economic impact of cruise
tourism in PNG and SI.
Basic port infrastructure is inadequate, limiting efficient access for larger cruise ships, specifically in
Honiara (where a new wharf is now under construction), and in Kitava (where a new jetty is required to
enable disembarkation of two tenders simultaneously) and Alotau (where new fresh water supplies are
required, as per industry standard)
Destinations lacked basic facilities to attract cruise tourists ashore and encourage longer visits, with
increase expenditure. This includes a lack of adequate sanitation facilitates, shaded areas, seating and
litter bins in most destinations, specifically in the port area
A tourism industry is not established in some destinations and efforts are required to support businesses
in developing their offer. Businesses need to work collaboratively with government, other businesses and
cruise line operators to be prepared for the influx of tourists and maximise their economic impact. This
issue is common, to varying degrees, across all ports
Businesses lack commercial awareness and there is disconnect between cruise operators, local
businesses and other stakeholders which, (linked to the previous point), contributes to limited business
preparedness and an undeveloped tourism offer
Cruise passengers lack confidence in the goods and services available. This is due to factors such as a
lack of information on quarantine procedures when returning home, limited transparency of pricing from
some souvenir sellers of souvenirs and a general lack of product understanding (i.e. cultural value and
production methods of handicrafts)
Leakage of indirect expenditure could be reduced by purchasing local throughout the supply chain
The numbers of cruise tourists visiting PNG and SI is currently low compared to similar destinations.
Security concerns, lack of destination information and marketing were the major factors highlighted that
inhibit increased numbers of tourists visiting PNG and/or SI
The following is an outline of the problems identified, summarising the responses received from cruise
passengers, crew and businesses, and the findings of in-country workshops held in Port Moresby and Honiara in
March 2016.
PAGE 58
5.1.1 Basic port infrastructure is inadequate, limiting access for larger cruise ships
A leading barrier to the development of cruise tourism in many of the ports is the lack of adequate infrastructure
to permit efficient access for larger cruise ships. Additional infrastructure is also required in hub ports (i.e.
Alotau and Honiara) to enable cruise ships to extend their stay at small ports and offer a more extensive cruising
schedule.
In Honiara, the wharf must be sufficiently large enough to permit the largest cruise ships in the Pacific region
(maximum length size of 264 metres) to berth and take on-board fresh water supplies at 50 tonnes per hour at a
quality meeting World Health Organization (WHO) standards. At present, cruise ships must anchor offshore and
tender passengers to shore. Passenger responses indicate that the inconvenience of this slow and inefficient
process was one of the reasons some passengers decided to stay on-board. For others it limited the time they had
ashore. The new wharf currently under construction will accept its first 200-metre plus cruise ship in September
2016.
As Alotau is the port of call for many cruise ships from Australia, there is a need for the same standard of fresh
water supplies to be available as in Honiara. The ability to take on fresh water is an important factor as it improves
the comfort levels for cruise ship passengers and helps to open up other destinations in the area to cruise tourism.
In smaller ports of call, (such as Kitava), the construction of a new jetty is required to enable two tenders to
disembark simultaneously so that passengers can be transported to and from larger cruise ships more efficiently.
Improvements are also required at Madang port to reinforce and extend the port berth to enable larger ships to
dock in port more regularly.
Without these infrastructure improvements, cruise operators will not be able to extend their cruise offer in
PNG and SI using larger cruise ships. The impact on passenger comfort and access to ports will also hinder the
development of cruise tourism in both countries.
5.1.2 The tourism industry is not established in some destinations

Kitava, Kiriwina and Doini are considered subsistence economies with most inhabitants relying on fishing and
agriculture for their livelihoods. Cruise tourism income is a rare source of cash to supplement otherwise low
incomes and is important as it enables families to purchase essentials which they cannot barter (e.g. fuel, boat
engine parts, and tools). The small local economy has not developed sufficiently to maximise the opportunities
that cruise tourism offers.
In the urban centres of Alotau, Rabaul and Honiara, (which have more developed economies), the tourism industry
is still considered to be in its infancy. Visits by larger cruise ships are increasing from a low base in comparison to
other Pacific Island destinations (e.g. Vanuatu and Fiji). As a consequence, the following features of the tourism
industry limited the passenger expenditure and the impact of cruise tourism more generally:
Many businesses are family owned which limits the indirect impacts of cruise tourism expenditure as revenue
goes directly in to household budgets. For instance, handicrafts and coconut drinks are typical products
produced and sold to cruise passengers but these require limited production inputs and therefore have limited
economic impact outside of the family
Family members may not be paid for their work and are unlikely to be fully employed by activities related to
cruise tourisms. As noted, many vendors see cruise tourism as a supplementary income rather than a primary
source of employment. The implication is that while the number of persons employed may be high, only a
limited number can be considered full-time and wages are likely to be below average full-time equivalent
earnings
PAGE 59
Without an established tourism industry in smaller ports, there may be a reluctance to see its longer term
potential. One business owner interviewed suggested that some vendors may see tourists as an opportunity to
‘make a quick buck’, opposed to a long- term business opportunity. In part this reflects the short time cruises
have been stopping in these ports, and the infrequency of cruise ships which currently visit. This short-term
mentality reduces the willingness of local businesses to invest in premises and the quality of their products and
services, subsequently hampering the development of a more substantive tourism industry
While these issues are more acute in the smaller ports, the tourism industry in Alotau, Rabaul and Honiara is
no less under-developed according to passenger and business feedback (see box below). The contrast of PNG
and SI destinations with Port Vila on the second cruise in this study illustrates the scale of the gap – not only
in the number of businesses established to serve cruise passengers, but also in the level of cruise passenger
expenditure and its economic impact.
If PNG and SI are to benefit from the opportunities that cruise tourism offers, one of the first steps must be to
establish an economy and tourist industry with the capacity to handle the influx of tourists in a sustainable way,
while at the same time maintaining the unspoilt and uncommercial nature of the ports, (which many passengers
highlighted as a drawcard). Factors limiting the growth of businesses include limited access to start-up capital,
limited knowledge of financial management among business owners, limited awareness of tourism possibilities in
remote areas, and cultural challenges such as issues with local women setting up businesses.
Summary of business feedback – tourism industry development

“The cruise tourism industry is very new and the local businesses are trying to keep up – they have not seen this
kind of influx before.” (Alotau)
“Tourism is still very up and down –people are still learning.” (Alotau)
“Locals need to be passionate about what they make, rather than trying to make a quick buck” – dishonesty and
overcharging of tourists.” (Alotau)
“It is an exciting time for the area due to the cruise ships and the income is often all the income people get from
selling carvings, etc.” (Kiriwina)
“They think cruise ships are great – it is the only way to make money – otherwise they just live of the land through
farming.” (Kiriwina)
“It will come – they are still getting their heads around it.” (Rabaul)
5.1.3 Businesses lack commercial awareness

A major draw for cruise passengers visiting PNG and SI is the uncommercial and unspoilt nature of the
destinations visited by cruise ships. However, pre-visit focus groups with passengers revealed that the lack
of commercial experience and awareness among businesses has led to reduced expenditure by passengers
compared to what they had planned to spend. There is a lack of business acumen about what to produce, how
to sell those products to cruise tourists and at what price. This also reflects the limited product offer in terms of
tours and handicrafts highlighted in the qualitative findings.
PAGE 60
In some destinations the lack of established business premises to operate from meant that many handicraft
sellers have to travel from nearby villages in order to meet the cruise ship on arrival and sell products by the
roadside, at irregular intervals and with limited information on the price of goods for sale. On the second cruise
researchers noted some improvement in business acumen with vendors displaying fixed prices in Doini, providing
straws for coconut drinks, and instilling hygienic food-handling practices. However, this is not considered
common practice and passengers expect a higher standard before they are willing to increase expenditure.
Quotes from interviews highlighting this issue are provided in the box below.
Summary of business feedback – business commercial awareness

“There is a lack of knowledge of what tourists want – there is a disconnect between what is on offer and what is
there.” (Tourist Authority, Alotau)
“Products can be very expensive as some carvings are priced at 440 Kina and these are not very popular – tourists
are typically looking for smaller items around 20 Kina.” (Alotau)
“Local people have little knowledge of how to sell or run businesses so they need help from government (which is
starting to happen).” (Alotau)
“Need to educate the locals more on what is needed for tourists” (Rabaul)
The stop at Port Vila on the second cruise reinforced the scale of the problem. Casual observation of the
researchers revealed that expenditure by cruise passengers was much higher in Port Vila compared to previous
destinations visited. In part this was due to the fact that this was the last stop on the cruise and passengers were
encouraged to spend left-over currency.
5.1.4 There is a disconnect between cruise operators and local businesses

A disconnect between cruise operators, local businesses and other stakeholders is another factor impeding the
development of the tourism industry in PNG and SI. According to interviews with businesses the disconnect takes
three forms:
1. Limited communication about cruise schedules, resulting in many vendors missing the cruise ship visit. This
is particularly relevant on the smaller islands where many vendors have to travel from nearby villages. In larger
towns, the lack of communication results in many vendors not opening up their premises or being ill prepared
for the influx of tourists. The majority of businesses interviewed in all destinations highlighted the need for
better communication and collaboration between local providers and cruise ships
2. Lack of a long-term commitment by cruise operators to stop at ports does not provide conditions conducive
to investment by local businesses. While there are enterprising locals who wish to start their own business and
existing businesses wanting to expand (e.g. from a street stall to permanent premises), without a commitment
by cruise operators to guarantee a regular stream of tourists, development is hampered.
3. Limited coordination and collaboration of local businesses and communities. Workshops highlighted the
fragmented nature of many efforts to inform businesses of forthcoming cruise stops and the local response to
ensuring businesses are open, streets are clean and attractive, and support is provided in terms of providing
currency exchange services or destination information to passengers.
PAGE 61
5.1.5 Cruise passengers lack confidence in the goods and services available
Although less developed than some South Pacific Island destinations, PNG and SI does offer a choice of
attractions, goods and services (including organised tours, handicrafts, food and drink) which passengers can
spend their money on. However, researchers observed that many passengers were reluctant to purchase goods
and services available for several reasons:
Passengers were uncertain regarding quarantine rules and this deterred many consumers from buying
handicrafts. On the first cruise passengers were provided with information through a video presentation,
an on-board quarantine box, and a presentation by a cruise ship representative. On the second cruise less
information was available to passengers and no quarantine box was provided. This meant passengers were not
given nearly enough information to make informed purchasing decisions. Their concerns included not wanting
to lose souvenirs at customs, not wanting to line up for inspection at customs, and not wanting to damage
Australia’s ecosystem
There was scepticism about whether the products available are genuine. Passengers were not willing to
purchase handicrafts if they thought they were mass-produced or not locally made. Concerns about the finish
of some items, (which were considered too consistent to be handmade), and the fact that the same items would
appear at multiple destinations at different prices also led scepticism and confusion
Prior to disembarking, passengers also stated that they are poorly informed of the spending opportunities
and activities available at each destination (i.e. local markets, crafts, local tour guides, schedule of
performances). On the first cruise, a printed document was left in cabins prior to each port of call. On the
second cruise, no written information for Doini, Kiriwina, Kitava and Honiara was made available to passengers.
In Alotau, Rabaul and Port Vila pamphlets were distributed on the first day of the cruise providing information
on tours available for purchase through the cruise operator. However, some of the printed materials were
out-of-date and not informative enough for passengers wishing to plan a day of activities. A destination
expert was also on board the second cruise to provide lectures about each stop. The content of the lectures
focussed on history, culture and sightseeing, but there was limited practical information on where things can
be found at each destination, the prices of goods and services, and the options available to those wanting to
take a local tour (see summary in the box following). Passenger feedback highlighted frustration at a general
lack of practical information and in some instances “misinformation” provided by the lecturer on some ports.
Although many were willing to explore each port with an open mind, they lacked the basic information needed
to navigate each destination, arrange activities and make the most of the opportunities available
These factors resulted in passengers not feeling sufficiently confident and empowered to make the most of
the spending opportunities in each port of call. A summary of the feedback from businesses and passengers is
provided in the box following.
PAGE 62
Summary of business and passenger feedback – passenger confidence

Quarantine uncertainty
“There needs to be better information on the quarantine laws so passengers and locals know exactly what they
can bring on board.” (Business, Alotau)
“Many passengers are willing to take the risk but many are not – especially with bigger, more expensive
purchases.” (Business, Rabaul)
Destination information
“There should be ‘do’ and ‘don’t’ information on what passengers can bring for the children on the island – books,
pens, and paper are good. Lollies and soft drinks are not.” (Business, Kitava)
“Awareness needed about local providers – there is no information on the boat leaflets about them.” (Business,
Alotau)
“There is no tourist website for Rabaul – it needs more advertising abroad which should be done by the local
tourism board.” (Business, Rabaul)
“There needs to be more information and more maps for tourists as well as easier transport – [the business] get
very few visitors from the cruise ships.” (Business, Rabaul)
There is an historical society in Rabaul – the cruise ships should contact them to help train tour guides who
currently only give basic or incorrect information.” (Business, Rabaul)
“Passengers had not conducted detailed research prior to this trip and were unsure of what to expect.”
(Passenger focus groups and in-depth interviews)
“The current consensus was that these documents [cruise provided leaflets] contain some information but most
passengers would like more.” (Passenger focus groups and in-depth interviews)
“Passengers like bringing gifts for the local communities which are much appreciated (e.g. pens, paper, and toys).
However, many were unaware this was an option.” (Passenger focus groups and in-depth interviews)
“Passengers would like more information about the products and services each port is renowned for.” (Passenger
focus groups and in-depth interviews)
5.1.6 Passenger expectations are often not met

Despite expressing a willingness to be ‘surprised’ by what each destination offered and not wanting destinations
to become like Fiji (as one passenger quoted), many passengers found that destinations did not meet their
expectations for the following reasons:
Limited awareness about options available to passengers: Many passengers felt that they were not informed
of the options available to them. For example, many passengers did not know that local tour guides and
transport could be arranged at each destination, rather than booked solely through the cruise operator. During
focus groups, passengers stated that they often booked through the cruise operator even though it was more
expensive because they considered it a safer and more convenient option. Nevertheless, would like to have
been made aware of the alternatives and given the choice
PAGE 63
This refers to Honiara in particular, where the second cruise did not arrange tours and it would have been helpful
to know what local alternatives were available. Businesses confirmed they were willing to provide hire cars,
drivers and other services to cruise passengers if tourists came to them but they require some promotion and/
or information to be provided on-board the cruise ships
Trip itineraries did not allow sufficient time to enjoy the scenery or learn from the experience. Many
passengers felt rushed to “tick boxes” with little time left to engage with local communities and purchase the
goods and services available. While it is understandable that tourists want to spend more time to explore and
experience a place of interest, the research consultant noted that the tour provider often requires a strict
schedule to enable the timely pick up of the next group of tourists. Feedback from passengers suggests
the current balance is not quite right as passengers were only given to 5-10 minutes at each site on some
excursions. On other trips, the number of stops was cut short, and in one case, the attraction was closed,
unbeknownst to the tour guide
Prices were higher than expected in PNG and SI, limiting cruise passenger expenditure. Many tourists
expected PNG, in particular, to be relatively inexpensive and planned their expenditure accordingly. In reality,
prices were broadly comparable to Australia for items such as drinks and food, which came as a surprise to
many. More pre-cruise information was requested by passengers to plan their trips
Information about the range of activities available was often limited. Passengers stated that they were given
insufficient information about what there was to do at each destination, subsequently contributing to lower
expenditure. Businesses highlighted the need to promote awareness of the activities and attractions available
at each destination, (including scuba diving, surfing, sailing, fishing, walking etc.)
Insights from passengers and businesses concerning expectations are provided in the box below.
Summary of business and passenger feedback – passenger expectations

“Being able to deliver on the expectations of tourists through a range of products and training of the local
people.” (Alotau)
“Cruise ship could be very good for the hire car business but obviously there are many elderly passengers who
don’t expect to drive – we would be happy to provide a driver if asked.” (Honiara)
“Passengers would have liked to have known more about the opportunities to book local tour operators in Rabaul
and Alotau (or local guides on island ports.)” (Passenger focus groups and in-depth interviews)
“The annual Canoe Festival was held in early November (Alotau). There were expectations from passengers that
they would be able to see this festival.” (Passenger focus groups and in-depth interviews)
5.1.7 Destinations lacked basic facilities

A common problem expressed in focus groups was a lack of facilities on-shore, which deterred cruise tourists
from leaving the cruise ship (i.e. to nearby villages) or to seek out attractions and businesses which could be
appealing to tourists (e.g. cafes, restaurants, handicraft vendors). Passenger feedback highlighted the lack of the
following facilities in particular:
Limited currency exchange facilities on-board and on-shore. On the first cruise, a limited amount of local
currency was available on-board and the cruise operator noted that the amount available had been reduced in
recent years due to the operating costs associated with holding this money
PAGE 64
On the second cruise, no similar provision was made available. In the less commercial destinations of Kitava,
Kiriwina and Doini, there was no currency exchange facilities available ashore, forcing some vendors to
exchange AUD for local currency, to enable passengers to make purchases. With limited local currency available
to vendors, many passengers in focus groups considered they could have spent more. At larger destinations,
passengers were frustrated by a lack of information about the location and opening hours of banks or currency
exchange facilities. Without this information, very few passengers were able to find and use these facilities,
leaving many with limited local currency. The exception was Honiara where foreign exchange facilities are
available, ATMs are located close to the wharf and AUD is widely accepted
Lack of maps and directional information to guide passengers: Passengers noted it was difficult to find
destination maps and/or directions to basic amenities and services, (e.g. banks, toilets, food and beverage
retailers, attractions, points of interest etc.). This information was not available prior to arrival in port, and once
ashore there were limited signs and directions. As consequence, cruise passengers were reluctant to explore
some destinations and were unaware of opportunities for leisure and entertainment where they could have
spent money. This also contributed to many passengers returning to the cruise ship after only a short visit
ashore, and the difficulty passengers had in exchanging currency on the second cruise
Lack of sanitation facilities: many passengers were concerned about the lack of sanitation facilities ashore,
particularly in the smaller ports of call. Even in the larger ports this was also considered a problem due to limited
directional signage making it difficult for passengers to find these facilities even where they were available. As
the number of cruise ship passengers visiting PNG and SI grows, this is clearly a priority need
Lack of shaded areas: passengers reported that there was insufficient seating and shaded areas available in
Kitava, Kiriwina and Doini. Many older passengers surveyed on both cruises cited this reason for staying on-
board or returning to the ship after only a short time on-shore
5.1.8 Leakage of indirect expenditure

Leakage refers to the expenditure which flows out of an economy when a proportion of the costs of production
and profits flow to an overseas beneficiary. For example, fuel is often imported, so the amount a tour operator
pays towards fuel costs, taxes and some costs for the vendor, goes to the overseas fuel supplier. The less leakage,
the greater the impact on the local economy as money is allowed to flow into local investment, employment and
household expenditure.
Four sources of significant leakage were identified from the research:
Cruise operator supply chains for goods and services. Each cruise takes on-board a large volume of goods and
services at the destinations it visits and/or on before embarking on a cruise from its home port. Operators do
not currently procure goods and services in PNG nor SI
Cruise operator-organised tours and excursions: Many passengers are encouraged to purchase tours
promoted on-board and sold through the cruise companies. These tours are often more expensive than the
tours provided by local guides and as a proportion of the price goes to the cruise operator as profit, leakage
from the local economy is increased. Allowing local providers to advertise on-board was suggested as a means
to inform passengers of the alternatives, increase the number of local tours booked and increase the income
to local economies. A caveat is that many passengers prefer to purchase cruise operator-arranged tours for
convenience, insurance and general safety reasons. Cruise operators also only work with local providers that
meet their minimum standards
PAGE 65
A high proportion of cruise passengers go ashore, but return early, reducing the size of the captive market for
local economies. For example, feedback from the first cruise highlighted that while passengers went ashore in
the morning, many went back on-board for lunch and did not return ashore in the afternoon.
Interviews with businesses in Honiara and Rabaul also highlighted that other than tour companies and vendors,
local businesses (specifically cafes, restaurants and hotels) are not getting many tourists through the door. This
reflects a number of issues related to limited transportation, the lack of prior information at each destination,
low passenger awareness about what is available and a lack of local business promotion. Consultant notes
highlighted that it may also not be in the interests of cruise operators for passengers to be spending more
money on local food and drink. A local businessperson in Alotau suggested that better information could be a
solution saying that:
“Cruise operators also tell tourists to be wary of buying local food… they once prepared 1,500 meals and sold about 30”
Foreign-owned businesses: As in the Vanuatu study, the research found that many businesses profiting from
cruise tourism, (e.g. shop owners and tour operators) are owned by expatriates. Consequently, there is leakage
of profits overseas which could otherwise be reinvested into local economies. In part, this is a reflection of the
limited tourism industry and the difficulties associated with starting businesses in these countries, which can be
addressed by supporting the development of local economies and increasing tourist numbers in the long-term
5.1.9 The numbers of cruise tourists visiting PNG and SI is currently low
compared to similar destinations.
The reasons given by businesses and passengers suggested that the reasons more people do not visit PNG and SI are:
PNG has a negative reputation among some potential tourist markets, driven by crime in Port Moresby
and media reports about the country. This negative perception is not limited to just cruise tourism and was
identified by passengers and businesses as a hindrance to tourism growth in PNG
There is limited promotion of PNG and SI as tourist destinations in the media. This extends to a lack of
guidebooks, websites, and other sources of information that inform and promote destinations. These
sources are also helpful for tourists who have decided to visit PNG and SI, as they can find out more about
the attractions, culture and activities available. Businesses also suggested that more could be made of the
connections many potential tourists have with the region (e.g. family members who fought in World War II) to
find out more and visit in the future. Natural attractions such as unspoilt beaches, volcanoes, and coral reefs
could also be featured more in promotional materials.
Businesses on the smaller islands indicated that improved coverage of the water-based activities (such as
scuba diving) would help to bring in more tourists
Customs and immigration procedures in PNG could be improved. At present, cruise ships must use proclaimed
ports for clearance which limits cruise itineraries and the frequency of calls. Cruise operators consider this a
competitive disadvantage compared to other Pacific Island destinations. This could be addressed by PNG and
SI permitting cruise operators to bear the cost of using immigration services at non-proclaimed ports, and
bringing the process in line with other PICs in order to increase passenger time on-shore
PAGE 66
COST BENEFIT ANALYSIS JUNE 2016
6 Cost benefit analysis of the opportunities for

increasing the economic impacts of cruise tourism to
Papua New Guinea and Solomon Islands
6.1 Introduction
6.1.1 Overview
This section introduces and then assesses the costs and benefits of a shortlist of options selected to address the
barriers and challenges preventing the full realisation of the economic impact of cruise tourism to PNG and SI. The
options include packages of actions to be taken together to benefit from synergies that reduce the cost and/or
maximise expected benefits.
The options were developed from a long list of actions developed during in-country workshops with businesses,
donors and government stakeholders; primary research with passengers and businesses during two cruises
in November 2015 and January 2016; and the additional input of cruise operators and the Seaport Group, port
infrastructure and development experts. Proposed actions were grouped into nine categories:
Infrastructure investment actions
Product development of goods and services available to cruise tourists
Capacity building, (referring to actions to improve the absorption of cruise tourism expenditure by local
economies)
Communication and collaboration between local stakeholders, businesses, government and cruise operators
Funding
Training and education needs
Passenger information and awareness
Improving standards and awareness, to improve destination quality and enforcement of existing minimum
standards
Local impact
Each proposed action was prioritised as either a short-term priority (enabling planned cruise schedules in PNG
and SI to take place), or a longer-term priority to develop the potential of, and maximise the future benefits of
cruise tourism in each country. This helped to identify the most urgent actions that could be grouped together
as options. This exercise also identified actions that are so long-term in nature that they are not priorities for
this study. For example, developing a fly-cruise offer in PNG and SI was considered a long-term action which
requires not only cruise ships to be based in PNG or SI, but also a high frequency of direct flights and sufficient
airport capacity to be established before such an offer can be developed. This would also include improved road
connections between the port and airport. Experts consulted considered this action unfeasible in the foreseeable
future, but suggested it could be considered once the necessary infrastructure is in place 10 years or more from
now. For this reason the action was screened out.
The shortlist of proposed actions were then grouped as options, giving consideration to the on-going actions
of the private sector, local and national governments and development partners to any potential synergies to
support cruise tourism in PNG and SI. The final shortlist of options was then taken forward for the CBA.
PAGE 67
6.1.2 Methodology for assessing the costs and benefits of the proposed options
The CBA aims to quantify the costs and benefits of the proposed shortlist of options. The impacts are assessed
over a 10-year period, reflecting the fact that many options require action in the first year, resulting in benefits
from years 2 to 10. This approach is consistent with the Vanuatu 2014 study.
A summary of the general assumptions used in the analysis is provided in Table 6.1. A more detailed description
of methodology used to quantify each option, the assumptions and data sources used is provided in Annex 4. An
elaborated summary accompanies the assessment of each option in the following sub-sections outlining options
for PNG and SI. The final sub-section provides the consultant’s concluding remarks on the CBA.
Core assumptions of the CBA
Assumption Valuation Details

Solomon Papua New
Islands Guinea
Assessment period 10 years Vanuatu 2014 study
Exchange rate 0.18SBD:AUD 0.47PGK:AUD xe.com
1.3USD: AUD
Discount rate 1% 2% Vanuatu study 2014 discount rate (7%), minus (-) average
inflation rate 2011-14 of SI and PNG (5.95%/4.8%)30
Construction costs Occur in year 1 Vanuatu 2014 study
Maintenance costs Occur in years 2-10

30
Estimated impact is reported as the present value of the costs and benefits over the 10-year period in today’s
money. That is, by discounting the flow of costs and benefits in years 1-10, we account for inflation which would
otherwise mean AUD 1 today is only worth AUD 0.95 next year and even less the year after. The net impact of the
costs and benefits is referred to as the net present value (NPV) of the options as it is the expected benefits of the
option minus its expected costs. This value is also presented as a ratio of benefits to costs. For example, a 2:1 ratio
would imply spending AUD 1 results in benefits of AUD 2.
30 Source: World Bank
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6.2 Papua New Guinea

6.2.1 Option 1: Infrastructure improvements to existing ports of call
The following infrastructure actions were identified for ports of call in PNG to enable cruise ships to access each
destination and efficiently disembark passengers:
Action 1: Extension of a jetty in Kitava to enable simultaneous disembarkation of two tenders for more efficient
transportation of passengers to and from larger cruise ships
Action 2: Alotau provision of fresh water supplies for cruise ships to WHO standards. As the first port of call for
cruise ships from Australia, development of this capability is considered a priority for cruise development in the
region
Action 3: Madang reinforcement and extension of the port berth to enable more regular and larger ships to
dock in port. Based on the assessment of the Seaport Group this would entail the construction of two sinker
blocks and upgrades to fenders
All three actions are included under this option and are considered the responsibility of the relevant port authority
to implement.
The CBA results are provided in the box below.
Costs
The assumed unit costs are consistent with those used in the SI assessment, based on estimates provided
by Seaport Group. In year 1 this includes the construction of beach shelters/huts (AUD 65,000) and
extension of the existing jetty at Kitava (AUD 195,000), the improvement of water supplies at Alotau to
WHO standards (AUD 195,000), and the construction of two sinker blocks and upgrades to fenders at
Madang (AUD 39,000).
Maintenance costs incurred in years 2-10, differ by capital asset, with 1-2 per cent of CAPEX per year
assumed in the case of landing facilities (i.e. jetty), 15-20 per cent for beach shelters and 10 per cent for
water supply equipment.
Present value of costs: AUD 0.7 million
Benefits
These infrastructure improvements will increase the attractiveness and accessibility of these destinations
for cruise ships, resulting in an increased number of calls to Kitava (an additional four in years 2-4 and seven
in years 5-10 according to Carnival Australia projections, Alotau (two additional call in years 5-10), and
Madang (an additional three in years 2-4 and eight in years 5-10).
Present value of benefits: AUD 3.1 million
Net Present Value (NPV)
AUD 2.4 million
Benefit-cost ratio
4.3:1
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6.2.2 Option 2: Upgrade port amenities in PNG

Option 2 combines a number of actions concerning improvements to the port area for cruise passengers.
The overarching objective is to make the port area more appealing to passengers, ensuring more passengers
disembark and increase their expenditure. This option includes the following:
Action 1: Construct a sanitation block near or at the wharf area in Kitava and Kiriwina
Action 2: Provide covered areas, including seating for passengers in Kitava and Kiriwina
Action 3: Erect clear signage to enable cruise passengers to navigate from the port area to leading attractions
and points of interest in Alotau and Rabaul. Although amenities exist (i.e. currency exchange and banks),
passengers do not know where to go to reach them
This is an option for local and national governments to implement the above
Costs
The costs are assumed to be AUD 52,000 for the construction of a sanitation block, and AUD 97,500 for
the construction of covered areas and seating for passengers in Kitava and Kiriwina. In Alotau and Rabaul
improvements to signage are assumed to cost AUD 19,500. All costs are based on Seaport Group estimates
and occur in year 1.
Maintenance of the sanitation block is estimated to cost 10 per cent of CAPEX in years 2-10 and 5 per cent
for the maintenance of covered seating areas.
Benefits
These improvements are likely to result in passengers spending more time ashore at each destination,
increasing their total expenditure as a consequence. Passenger expenditure is assumed to increase
proportionally with increased time ashore as follows:
In Kitava and Kiriwina, time spent is increased from to 3.4 to 3.6 hours currently to 3.8 hours; as observed in
Doini Island from year 3; and
In Alotau and Rabaul, passenger time spent ashore is assumed to increase by 15 minutes from year 3.
AUD 1.4 million
Benefit-cost ratio
7.6:1
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6.2.3 Option 3: Streamlining customs and immigration procedures in PNG

Two actions are proposed under this option:
Action 1: Legislative changes to enable the cruise operators to use non-proclaimed ports for clearance. This
will allow cruise companies to plan itineraries more effectively and increase cruise frequency. This could be
achieved by increasing the number of proclaimed entry/exit ports, or using procedures like other PICs where
the cruise operator is allowed to bear the cost of using immigration services at non-proclaimed ports. Most
of the costs associated with this new procedure (i.e. to fly a customs officer to the non-declared port of entry)
would be borne by cruise operators directly
Action 2: Improve the process of clearing passengers in line with processes used in other PICs. The current
immigration process is cumbersome, takes a long time (requiring crew to collect and copy passports for all
passengers) and reduces on-shore time for the passengers who must wait for their passports to be returned
before disembarking. In other jurisdictions, (such as New Zealand), arrival formalities are performed at sea with
authorities joining the vessels at the overseas port of departure. In other cases this is conducted on-board the
ship before passengers disembark. This could be efficiently carried out in a processing area as passengers leave
the ship
This option should be implemented by PNG’s customs and immigration service. The CBA results are provided in
the box below.
Costs
A Standard Cost Model (SCM) approach was used to quantify the cost of this option assuming:
The time of 10 legislators for one month are required to undertake legislative change, (at PNG government
pay scale 18); and
The cost of training equates to 20 customs officers’ time for one month (at PNG government pay scale 10).
Benefits
As in the previous options, the benefits are assumed proportional to the additional time passengers spend
ashore due to less onerous customs procedures. This option is also assumed to increase the number of
calls to Conflict Island, which will be accessible under the new legislation. The detailed assumptions are:
The number of calls to Conflict Island increases to nine calls per year in years 3-10. Spending levels are
assumed to be similar to passenger expenditure observed in Kitava; and
Increase in time spent ashore in Alotau by 15 minutes in years 3-10, due to less time spent on customs
procedures by passengers.
AUD 0.8 million
Benefit-cost ratio
13.8:1
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6.2.4 Option 4: Increase the provision of foreign exchange services

An acute problem in PNG ports of call was the limited availability of foreign exchange (forex) facilities, which
consequently limits passenger expenditure. Having a forex on-shore is costly due to the irregularity of cruise ship
calls, whereas the costs of a forex on-board would be borne by cruise ship operators alone, and hence are not
costed as part of this assessment.
Action 1: Providing an ATM or foreign exchange booth at or near the wharf in Alotau
Providing one ATM near or at the wharf in Alotau was considered sufficient to meet the demand for forex based on
current passenger numbers. As Alotau is the first port of call for many cruises it was assumed that the availability
of an ATM machine at the wharf would increase passengers spend over the entire trip in PNG. The CBA results are
provided in the box below.
Costs
The costs of installing and operating a foreign exchange service in Alotau is estimated based on the
following assumptions:
AUD18,850 for the purchase and installation of an ATM machine in year 1; and
10% of the purchase cost per annum in maintenance in years 2-10.
Benefits
From year 2, the presence of a foreign exchange service is estimated to increase expenditure by an average
of AUD25 per passenger for the 20% of passengers who are assumed to make use of this new service.
AUD 1.87 million
Benefit-cost ratio
57:1
6.2.5 Option 5: Development of the product offer in PNG

Option 5 combines two actions to develop the product offer in PNG:
Action 1: Establish a more formalised cruise committee
Action 2: Develop tours and excursions on smaller islands (i.e. Kitava and Kiriwina)
A major barrier to cruise tourism development and its economic impact is the lack of communication about
passenger data and cruise schedules between cruise operators and local stakeholders, and inadequate
dissemination of information within local economies.
One proposed action is to establish a cruise committee in each port composed of cruise tourism-related
stakeholders. The other is a role for tourism authorities to gather and disseminate information of national interest
to improve communication, cooperation and collaboration at the national level.
PAGE 72
The terms of reference related to the roles and responsibilities of the cruise committee should include:
Dissemination of information (e.g. cruise schedules, alerting businesses to Sunday arrivals)
Share information on passenger expenditure and feedback
Collect the opinion of businesses, conduct passenger research once ashore to provide accurate market
intelligence to inform future development and decision-making
Work with cruise operators to develop the cruise offer
Planning and identifying future investment needs
Function as the principle source of information to feed into leaflets, videos and other marketing information
materials
Consultation also highlighted the need for the development of tours and excursions to meet passenger demands.
The analysis shows that the economic impact of cruise tourism is greatest from passenger expenditure on tours
and excursion in each destination. On the cruise trips surveyed, there were no tours available on-board in Kitava
and Kiriwina and the local tour market is in its infancy. It is recommended that capacity development training is
organised for current and potential tour operators in Kitava and Kiriwina.
The cost benefit analysis assumed the main cost under this option would be time spent by cruise committee
members to perform their function, as well as funding the capacity building for tour operators in Kitava and
Kiriwina. The main benefit would come from increased spending by passengers visiting PNG.
Costs
A SCM approach was used to estimate the costs of committee meetings and the time needed to administer
the sharing of information. It is assumed that these costs will be incurred in all years. The Consultant has
used SI employee survey data on average wage costs and estimated the time each activity involves, and
estimated the cost by multiplying these two numbers per activity. The total cost is estimated by multiplying
the number of persons involved in the activity, and/or it frequency. Table A4.6 in Annex 4 provides more
details on the data used.
Training costs were obtained via quotation from a training provider for a 1-3 month business capacity
course in PNG. It is further assumed that this training is provided in years 1 and 2 only, with a 20 per cent
administration fee charged on the training cost.
Benefits
Through improved communication and a better developed tour offer, it is assumed passengers visiting
Alotau will spend more achieving 80 per cent of expenditure observed in Rabaul in years 3-10. In Kitava and
Kiriwina passengers will spend twice more than the current spending on tours.
AUD 2.9 million
Benefit-cost ratio
13:1
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6.2.6 Option 6: Improving information provision to passengers in PNG

The need to improve the quality and quantity of information provided to passengers when making destination
and purchasing decisions was identified as a priority. Without this information, average passenger expenditure
is reduced partly due to uncertainty regarding quarantine restrictions, especially in relation to handicrafts (in
particular those with feathers and seeds).
The actions recommended to address low expenditure are:
Providing quarantine videos and leaflets to passengers
Updating destination information provided by cruise operators to passengers
Developing and providing maps of the port, city centre and areas of interest
Informing passengers of the opportunity to make donations
Efforts should be coordinated closely with those of the Pacific Horticulture and Agricultural Market Access
(PHAMA) program on quarantine issues and the cruise committee/ donor organisation regarding donations and
general information given to passengers. Cruise operators are also an important communication channel to
passengers and should be involved in implementation. It is anticipated that the cruise committee would take the
lead in this option. The estimated impacts are provided in the box below.
Costs
Estimates of the costs of this option are based on:
A quotation of AUD 81,000 for the production of a three-minute video providing quarantine information;
AUD 0.1 per double sided leaflet produced for passengers. It is assuming all passengers receive a leaflet on
each cruise.
Three days of a person’s time on an average government salary (from PNG Employment survey) per year to
update map and destination information.
The updating of the information and provision of leaflets occurs in each and every year.
Present value of costs AUD 0.1 million
Benefits
This analysis conservatively estimates that by being more informed, passengers on average spend 20 per
cent more on souvenirs and donations in years 3-10 than they do at present.
AUD 3.1 million
Benefit-cost ratio
27:1
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6.3 Solomon Islands

6.3.1 Option 1: Upgrade Honiara’s port infrastructure
The first priority for Honiara is to upgrade the port capacity in order to handle large cruise ships. An AUD 33.8
million investment, funded by the Japan International Cooperation Agency (JICA), is already underway for the
construction of a new 180 to 200-metre long wharf in Honiara.
Cruise ships are currently required to anchor offshore and ferry passengers to and from the port in smaller
vessels. The journey takes 20-30 minute in each direction, making disembarkation much slower and less efficient
than it could be, and reducing passenger time on-shore. For the full economic impact of cruise tourism to be
realised by businesses in Honiara, a first step is to ensure that cruise ships are able to moor directly at the port
wharf, providing direct and efficient access to the town for passengers.
The new wharf will berth 220-metre ships by October 2016, 264-metres pending the successful operation of
220-metre ships and potentially up to 300-metre ships in the future. However, the location and environmental
conditions of the new wharf are not optimal and the original design was done for 200-metre cargo ships. Using the
facility for the larger cruise vessels is theoretically possible, but needs to be tested.
A second priority is to ensure adequate fresh water supplies are available to cruise ships. As a first stopping point
for many cruises, fresh water supplies are needed in Honiara to replenish supplies before visits are made to
smaller ports in the region. The alternative would be greater desalination of sea water on-board. The provision of
fresh water also offers an additional revenue stream for port operators.
The specifications of the required actions are:
Action 1: A wharf capable of handling future cruise ships of up to 264-metres in length, and current ships of
220-metres in length (already in construction)
Action 2: Water supplies to WHO standards of 50 tonnes per hour
Both actions are required in time for the inaugural call of Pacific Eden to Honiara on 1 October 2016. These actions
are considered the responsibility of the Solomon Islands Port Authority (SIPA).
If implemented, these improvements are expected to encourage more cruise ships to call in Honiara and increase
the time passengers spend ashore. It is estimated that in 10 years cruise tourism alone will cover some 50 per cent
of the costs of the investments needed under Options 131.
31 Calculated benefit cost ratio is 0.5:1
PAGE 75
An additional benefit of the new wharf is increased capacity of Honiara’s port to handle larger cargo ships. The
expected increased number and revenue from cargo ships is not quantified due to the lack of available data. The
result of the CBA for Option 1 are presented in the box below.
Costs
JICA’s ‘Project for the Improvement of Honiara Port Facilities’ has allocated AUD 33.8 million including
construction of the new wharf, which is assumed to take place in year 1. Seaport Group estimates the cost
of improving the water supply available at Honiara to WHO standards to be AUD 195,000 in year 1, plus
maintenance costs of 2 per cent of the initial cost per year thereafter.
Benefits
Two benefits are quantified:
• Increased number of cruise calls to Honiara, including larger ships due to improved infrastructure
(based on Carnival Australia growth projections)
• Time spent onshore by passengers is increased from 3.7 hours on average to 4.3 hours (best
performing large port of call surveyed – Rabaul)
A third benefit – improved cargo handling from the new wharf – has not been quantified. The assessment is
conservative, as in practice a new wharf would be expected to have a lifecycle in excess of 10 years, which
would see the benefits exceed the costs over time.
AUD 0.7 million
Benefit-cost ratio
1.02:1
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6.3.2 Option 2: Upgrade Honiara’s port amenities

Option 2 combines a number of actions concerning improvements to the port area for cruise passengers. The
overarching objective is to make the port area more appealing to passengers, thus ensuring more passengers
disembark and increase their expenditure in Honiara. This option also ensures that port facilitates are better
equipped to handle the influx of passengers forecast to visit Honiara. This option includes the following actions:
Action 1: Construct and maintain a sanitation block
Action 2: Provide covered areas, including seating for passengers which is considered important to provide
Action 3: Provide clear signage to enable cruise passengers to navigate from the port area to leading
attractions and points of interest
Action 4: Provide litter bins and make the area more attractive for cruise passengers via port beautification
For cost purposes it would beneficial if these actions are implemented simultaneously to uplift the port area and
its facilities in preparation for larger cruise visits starting 1 October 2016. Actions should be taken by SIPA in
cooperation with the Honiara City Council. The CBA analysis is summarised in the box below.
Costs
Seaport Group provided estimates on the unit costs of constructing a sanitation block at Honiara (AUD
52,000), covered areas and seating for passengers32 (AUD 97,500), provision of signage (AUD 19,500) and
litter bins/beautification of the port area (AUD 13,000). These are all considered one-off costs incurred
in year 1. Maintenance costs of 10 per cent of CAPEX are assumed for the sanitation block and other
amenities, incurred in years 2-10.
Benefits
The benefit of the port improvements is that by making the area more attractive to tourists, they are
more likely to spend more time ashore and therefore increase their expenditure (assumed proportionally).
Time spent ashore is assumed to increase from the current 3.7 hours on average to 4.3 hours, based on
the best performing port (Rabaul). It is assumed spending increases proportionally with time (i.e. a one per
cent increase in time spent ashore increases spending by one per cent) The number of calls to Honiara is
assumed to remain constant at seven calls per year from 2017.
AUD 0.2 million
Benefit-cost ratio
1.8:1
32 Purchase, delivery and erection of four 4m by 4m shelters, self-erected on site
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6.3.3 Option 3: Development of product offer in Honiara

Option 3 combines two actions to develop the product offer in Honiara:
Action 1: Establish a more formalised cruise committee
Action 2: Develop tours and excursions
A major barrier to cruise tourism development and its economic impact is the lack of communication related
to passenger data and cruise schedules between cruise operators and local stakeholders, and inadequate
dissemination of information within the local community.
A cruise committee currently exists in Honiara, which meets on an ad hoc basis prior to the arrival of each cruise
ship. Individual businesses also broadcast cruise arrivals the day before to ensure businesses are open (especially
on Sundays) and are prepared to manage cruise arrivals on the day. However, the cruise committee would benefit
from more formalised roles and responsibilities, regular meetings, and the provision of a single point of contact for
all information on cruise tourism in the Soloman Islands.
The terms of reference for a more formalised cruise committee should include:
Dissemination of information (e.g. cruise schedule, alerting businesses to Sunday arrivals)
Share information on passenger expenditure and feedback
Collect the opinion of businesses and conduct passenger research to provide accurate market intelligence to
inform future development and decision-making
Work with cruise operators to develop the cruise offer
Plan and identifying future investment needs
Function as the principle source of information to feed into leaflets, videos and other marketing and
information materials
The last bullet mentioned above is important for a number of stakeholders (including cruise operators and
websites promoting SI as a tourism destination) to ensure that the information they provide to passengers is
accurate and reliable. The recommended frequency of meetings is once per month with attendance by all major
stakeholders.
Consultation also highlighted the need to develop tours and excursions to meet passenger demands. The analysis
shows that the economic impact of cruise tourism is greatest from passenger expenditure on tours and excursion
in each destination. On the cruise trip surveyed, there were no tours available on-board. Tours will be available on
P&O cruise ships from May 2016 onwards.
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Since the market is in its infancy, there is a need to improve the quality of tours. It is recommended that a capacity
development training is organised for current and potential tour operators in Honiara. The CBA results are
provided below.
Costs
A standard cost model approach was used to estimate the costs of committee meetings and the time
needed to administer the sharing of information. It is assumed that these costs will be incurred in all years.
This study has used SI employee survey data on average wage costs and have estimated the time each
activity involves and the cost by multiplying these two numbers per activity. To estimate the total cost, this
is then multiplied by the number of persons involved in the activity, and/or its frequency (see Table A4.6 in
Annex 4 provides more details on data used).
Training costs were obtained via a quotation from a training provider for a 1-3 month business capacity
course in SI. It is further assumed this training is provided in years 1 and 2 only, with a 20 per cent
administration fee charged on the training cost.
Benefits
Through better communication between stakeholders and the development of a tour offer, it is assumed
passengers visiting Honiara will spend more, achieving level of expenditure close to the level observed in
Alotau. Conservatively, the analysis assumes the spending increases to 80 per cent of the level reported in
Alotau in years 3 and 4 (i.e. after training in years 1 and 2), and to 100 per cent of the level reported in Alotau
in years 5 to 10.
AUD 1.47 million
Benefit-cost ratio
15:1
PAGE 79
6.3.4 Option 4: Opening up of destinations in the Solomon Islands to cruise

tourism
Realising the economic potential of the Soloman Islands as a cruise tourism destination requires the expansion
of the cruise offer from a single port of call (Honiara) to multiple ports in the country. Establishing multiple
destinations will in time scale up the economic impact.
The core market for cruise tourism consists of 7-10 day schedules from Cairns. Destination ports must therefore
be located within a day’s cruise of each other and be sufficient in number to provide 3-5 day packages. With
Honiara the home or focal port of call, the remaining destinations could include Gizo and Tavanipupu.
Action 1: Opening Gizo as destination for large vessels
Consultation with cruise operators identified the following needs to be addressed in order to open Gizo as a cruise
destination:
• A hydrographical study for the destination
• Additional bollards/large cleats to be added adjacent the sloping concrete ferry wharf at Gizo to permit
ship tenders to safely berth alongside
• The red and white navigational beacons and green starboard hand buoy as marked on official chart BA
1735 to be replaced to International Association of Lighthouse Authorities (IALA) standards at Gizo.
This will assist ship tenders (lifesaving appliances) in making safe entrance and exit from the port area
• Encouraging and supporting Solomon Islands Marine Safety Administration (SIMSA) to ensure the
maintenance of navigational aids and an effective Marine Safety Information (MSI) system as required
by the International Marine Organization Safety of Life at Sea (IMO SOLAS) convention
Action 2: Opening Tavanipupu as a destination for large vessels
Developing this destination would require investing in the following areas:
• Hydrological survey of reef entrance to Tavanipupu
• Beach shelters /huts
The CBA results are provided in the box following.
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Costs
The actions required for the development of the SI cruise offer have been provided by Seaports. The estimated
unit costs are summarised in the table below for Gizo and Tavanipupu, which are assumed to be incurred in year 1.
Type of cost Valuation (AUD)

Action 1: Gizo
Hydrography survey for the location33 52,000
Additional bollards/large cleats to be added adjacent the sloping concrete ferry wharf to 19,500
allow ships tenders to safely berth alongside
The red and white navigational beacons and green starboard hand buoy as marked on official 26,000
chart BA 1735 to be replaced to IALA standards (SIMSA)
Public toilet facilities at or near the landing area 52,000
Action 2: Tavanipupu
Preliminary weather monitoring 26,000
Hydrography survey for this location34 52,000
Destination impact study 65,000
Landing facilities (i.e. jetty)35 325,000-650,000
Beach shelters /huts36 65,000
Consistent with earlier assessment, maintenance costs are assumed to equate to 10 per cent of CAPEX
incurred in years 2-10. Based on passenger survey results, passenger expenditure in both destinations is
assumed equivalent to average expenditure in Kitava.
Present value of costs: AUD 1.5m – AUD 2.6 million
Benefits
The number of cruise visit calls for Gizo and Tavanipupu will increase as per the projections from Carnival
Australia in the table below. The number of port calls are additional to the baseline of currently projected
calls over the next 10 years (see Section A4.2.3 of Annex 4).
Projected additional calls by year Gizo Tavanipupu

Years 2-4 1-7 4-6
Year 5-8 3-12 6-12
Years 9-10 3-17 6-14

Present value of benefits: AUD 4.5 - 12.7 million
AUD 3 - 10.1 million
Benefit-cost ratio
1.7-8.6:1
33 Cost of hydrography survey based on a 5-day survey at location and processing by SIHU
34 Cost of hydrography survey based on a 5-day survey at location and processing by SIHU
35 Landing facilities include 2 berths for ships tenders; valuation highly dependent on location for anchoring and access
36 Two 4m by 4m beach shelters, self-erected on site
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6.3.5 Option 5: Improving information provided to passengers in Soloman Islands

The need to improve the quality and quantity of information provided to passengers when making destination
and purchasing decisions was identified as a priority. Without this information, average passenger expenditure
is reduced partly due to uncertainty regarding quarantine restrictions, especially in relation to handicrafts (in
particular those with feathers and seeds).
The actions recommended actions to address low expenditure are:
Action 1: Provide quarantine videos and leaflets to passengers
Action 2: Update destination information provided by cruise operators to passengers
Action 3: Develop and provide maps of the port, city centre and areas of interest
Action 4: Inform passengers of the opportunity to make donations to local communities
Efforts should be coordinated closely with those of PHAMA on quarantine issues and the cruise committee/ donor
organisation regarding donations and general information given to passengers. Cruise operators are also an
important communication channel to passengers and should also be involved in implementation. It is anticipated
that the cruise committee would take the lead in this option.
Costs
Estimates of the costs of this option are based on:
A quotation of AUD 81,000 for the production of a three-minute video providing quarantine information
AUD 0.1 per double sided leaflet produced for passengers (it is assumed that all passengers receive a
leaflet on each cruise)
Three days of a person’s time on an average government salary (from SI Employment survey) per year to
update map and destination information
Updating the information and the provision of leaflets occurs every year.
Present value of costs AUD 0.1 million
Benefits
The Consultant conservatively estimates that by being more informed, passengers on average spend 20 per
cent more on souvenirs and donations in years 3-10 than they do at present.
AUD 0.6 million
Benefit-cost ratio
6.7:1
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6.4 Concluding remarks

The headline findings are summarised in Table 6.1.
Providing an ATM or foreign exchange booth at/or near the wharf in Alotau (the first port of call for many
cruises), is found to have the highest benefit-cost ratio. In short, it was found that the PGK is not frequently
available currency for tourists visiting PNG and many traders in PNG do not accept alternative currency (i.e. AUD).
Without currency exchange facilities on the cruise ship, this resulted in many passengers being unable to make
purchases when visiting PNG ports. The low fixed cost of providing such an amenity is easily offset by increased
passenger expenditure for the 10 years under assessment.
In the same vein, improving information provided to passengers in both PNG and SI is also estimated to have
a large positive net impact. In-depth interviews with passengers indicated that they wanted to spend more, but
lacked the opportunities and confidence to do so. It is a relatively low cost exercise to provide a three-minute
quarantine video, update destination materials and provide a map of the ports to encourage cruise passengers to
explore and better navigate each port visited. These actions will also give passengers the confidence to purchase
handicrafts, ultimately resulting in higher expenditure.
Increased cooperation and coordination between businesses, local communities, government and cruise
operators, particularly in the development of future tours and excursion offers (which are the highest expenditure
items for passengers), is also anticipated to generate significant net benefits. Businesses should be better
prepared for cruise ship arrivals, with an improved range of better-priced and coordinated products to offer to
passengers. Key to this option in PNG and SI is the establishment of more formalised cruise committees in each
port with assigned roles and responsibilities. For example, it is assumed these committees will take the lead in
broadcasting the arrival of cruise vessels to local businesses and providing destination information to cruise
operators to ensure information given to passengers is relevant and up-to-date.
Improvements to customs and immigration procedures in PNG is expected to generate significant benefits
as speedier and more efficient procedures free up additional time for passengers to spend ashore. Benefits are
estimated proportional to the extra time spent ashore, when more goods and services are likely to be purchased.
Improving port amenities, such as the provision of shaded areas and seating, sanitation blocks and litter bins,
in many destinations is shown to have a significant net positive impact. The option makes the port area more
attractive to passengers considering a trip ashore.
Opening up cruise destinations such as Gizo and Tavanipupu in SI, requires significant upfront investments at
high cost. For example, this includes jetties, upgrades to wharfs and hydrological surveys to be carried out before
larger cruise ships can operate efficiently at these ports. However, over time the improvements enable increased
levels of expenditure from a higher frequency of calls and numbers of passengers.
The new wharf at Honiara is already under construction and will provide net benefits within 25 years. However,
the benefits to freight shipping operators from a new wharf are not quantified in the assessment due to lack of
data. The anticipated benefits would be much greater as cargo shipping is the largest user of the port. To enable
more cruise tourists to visit Honiara, this option was considered priority.
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Table 6.1 Summary of the costs and benefits of the proposed options to improve the impact of
cruise tourism to PNG and SI37
Option Details Present Value (AUD Net Benefit-

million) Present cost ratio
Costs Benefits Value
Papua New Guinea
Increased provision Provide an ATM or foreign exchange booth at or 0.03 1.9 1.87 57
of foreign exchange near the wharf in Alotau
services
Improving Provide quarantine videos and leaflets to 0.1 3.2 3.1 27
information provided passengers
to passengers Update destination information provided by cruise
operators to passengers
Develop and provide maps of the port, city centre
and areas of interest
donations.
Improvements Legislative change to enable the cruise operators 0.1 0.9 0.8 13.8
to customs and to use non-proclaimed ports for clearance to plan
immigration itineraries more effectively and increase cruise
procedures frequency. This could be done by increasing the
number of proclaimed entry/exit ports or using
procedures like other PICs where the operator
is allowed to bear the cost of using immigration
services at non-proclaimed ports. Most of the
costs associated with the new procedure (i.e. to
fly customs officers to the non-declared port of
entry) would be borne by cruise operators directly
Improve the process of clearing passengers in line
with processes used in other PICs. Currently the
immigration process takes a long time (requiring
passport copies to be taken for all passengers,
which is cumbersome as passenger passports
have to be collected by crew) and it reduces
on-shore time for the passengers who must
wait for their passports to be returned before
disembarking
Development of the Establish a more formalised cruise committee 0.2 3.1 2.9 13.1
product offer Develop tours and excursions at smaller islands
(Kitava and Kiriwina)
Upgrade port Construct a sanitation block near or at the wharf 0.2 1.6 1.4 7.6
amenities area in Kitava and Kiriwina
Provide covered areas, including seating for
passengers in Kitava and Kiriwina
Provide clear signage to enable cruise passengers
attractions and points of interest In Alotau and
Rabaul. Although amenities exist, passengers do
not know where to go to reach them (i.e. currency
exchange and banks)
37 Costs and benefits of investments are estimated over 10 years. Costs and benefits of investment in Honiara’s wharf is estimated over 25 years reflecting
the longer life to asset and the fact that this is investment is ongoing.
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Infrastructure Extension of a jetty in Kitava to enable 0.7 3.1 2.4 4.3
improvements to simultaneous disembarkation of two tenders for
existing ports of call more efficient transportation of passengers to
and from larger cruise ships
Alotau – provision of fresh water supplies for
cruise ships to WHO standards. As the first port of
call for cruise ships from Australia, development
of this capability is considered a priority for cruise
development in the region
Madang – reinforcement and extension of the
port berth to enable more regular and larger
ships to dock in port. Based on the assessment
of Seaports marine engineers this would entail
construction of two sinker blocks and upgrades to
fenders
Solomon Islands
Development of Establish a more formalised cruise committee 0.1 1.58 1.47 15
the product offer in Develop more tours and excursions
Honiara
Open new Open Gizo as a destination for large vessels, 1.5-2.6 4.5-12.7 3-10.1 1.7-8.6
destinations in the requiring:
Solomon Islands A hydrographical study for the destination
cruise offer
Additional bollards/large cleats to be added
adjacent the sloping concrete ferry wharf at
Gizo to permit ship tenders to safely berth
alongside
The red and white navigational beacons and
green starboard hand buoy as marked on
official chart BA 1735 to be replaced to IALA
standards at Gizo. This will assist ship tenders
(lifesaving appliances) in making safe entrance
and egress from the port area
Encourage and support SIMSA to ensure
the maintenance of navigational aids and an
effective Marine Safety Information (MSI)
system as required by IMO SOLAS
Open Tavanipupu as a destination for large
vessels, requiring:
• Hydrological survey of reef entrance to
Tavanipupu
Beach shelters /huts
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Improving Provide quarantine videos and leaflets to 0.1 0.7 0.6 6.7
information provided passengers
to passengers Update destination information provided by cruise
operators to passengers
Develop and provide maps of the port, city centre
and areas of interest
donations
Upgrade Honiara’s Construct and maintain a sanitation block 0.3 0.5 0.2 1.8
port amenities Provide covered areas, including seating for
passengers, considered important to provide
Improve signage to enable cruise passengers to
navigate from the port area to leading attractions
and points of interest
Provide litter bins and port beautification actions
to make the area more attractive for cruise
passengers
Upgrade Honiara’s Construct a wharf capable of handling future 48.5 49.3 0.7 1.02
port infrastructure cruise ships of up to 264-metres in length, and
current ships of 220-metres in length (already
under construction)
Provide water supplies to WHO standards of 50
tonnes per hour
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Annex 1 Methodology
A1.1 Selecting a sample of cruise ships and ports for primary

data collection
Only a handful of cruise ships were calling into PNG and SI ports during the data collection period
(November 2015 – March 2016). Based on purposive sampling, two ships were selected for research:
P&O Pacific Dawn departing Brisbane Australia on 7 November and calling into PNG ports of Alotau,
Kitava, Rabaul, Kiriwina and Doini
Princess Cruises/Sea Princess departing Brisbane Australia on 22 January and calling into PNG ports of
Alotau, Doini Island, Kiriwina, Kitava, Rabaul as well as Honiara in SI and Port Vila in Vanuatu
A1.2 Survey of passengers and crew members

A survey of passengers and crew members was conducted to collect data for on-shore spending and visit
satisfaction. For the purpose of comparison, the survey questionnaire followed the same structure and
questions used for BREA and Vanuatu 2014 studies.
The following protocol was applied at each port of call of the two selected cruise ships:
Paper-based surveys were distributed to passenger cabins by crew members at each port of call
The surveys were collected by crew members from passenger cabins the following day
Surveys were distributed before each port of call of the cruise
By completing a survey after each port visit and leaving it in cabin for collection, passengers entered a
promotion to win the ‘ultimate cruising package’ to be enjoyed on the last day of the cruise
A leaflet was distributed along with the surveys to passengers. The leaflet included details of the
promotion and details for recruitment to later stages of passengers’ research (see A1.3 Additional
Qualitative Research with Passengers)
A sample size of 100 passengers per port was targeted to ensure robust results
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A1.3 Additional qualitative research with passengers

An in-depth understanding of passenger and crew expenditure at each port was gathered through a four-
step approach to passenger research:
In-depth interviews (Phase 1)
• Approximately 20-30 interviews were conducted per cruise during the first three days after
departing Australia, each lasting around 20 minutes
• The purpose of the Phase 1 was to discuss expectations of spending at the ports prior to arrival
and what aspects they are looking forward to
• Vouchers were provided by Carnival Australia to incentivise passenger participation
• Phase 2 interviews were carried out once passengers and crew visited a port, and used to
collect instant qualitative feedback on the experience and spend at each port
• The team conducted approximately 5-10 interviews per cruise, each lasting approximately 10-
15 minutes
Focus groups
• Four focus groups took place on each ship during days 7-10 on the return trip to Australia
• Passengers discussed overall experiences of the ports and what they have spent money on.
Discussions focused on what demands and expectations passengers had when visiting ports
that were not met, and what they would be willing to spend if the tourism offer was enhanced
• Groups were segmented by travel group and life-stage to capture differences in demands and
expectations of the ports in question
• The final phase interviews took place on days 7-10 as the cruise returns to Australia
• The team conducted approximately 20-30 interviews per cruise, each lasting approximately
10-15 minutes to discuss overall experiences of the ports and what they spent their money on
• Incentives were considered to encourage participation by passengers and crew
A1.4 Business research

When passengers were visiting the port, researchers carried out interviews with 5-10 businesses per day
using a short survey. The survey took between 10-25 minutes to complete and requested information
on the basic costs structure of businesses, levels of employment and their suppliers to enable a reliable
mapping of the value chain.
The format of the business interviews proved slightly challenging with some businesses due to low
business acumen. As a result, specific questions around business costs were not always answered (in
detail). Instead, business owners were instead able to provide personal views on opportunities and
challenges regarding cruise ship tourism and its impact on their business.
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A1.5 Cruise operator and shipping agent data

Administrative data was collected from:
Cruise operators (i.e. Carnival Australia) including:
• Number of port calls per year, by how many vessels
• Number of passenger visits per year to PNG and SI
• Size of vessels and crews
• Itineraries (including day trips, excursions and entertainment)
• Take-up of excursions/tours/entertainment by passengers
• Cost of itineraries - to cruise passenger (if pre-booked or discounted)
• Taxes, fees and surcharges paid by cruise at each port, including fuel costs
• Value of goods and services taken on board vessel at each port, by vessel/itinerary
• Local staff used by cruise (on board or in port services if known)
We also gathered opinions/ data on:
• Projected future demand for cruises
• Expected future schedules and itineraries in PNG and SI
• Expected changes in vessel size
• Expected changes to passenger offering (i.e. facilities, activities, trips/excursions)
• Required infrastructure developments in the countries to support future cruise tourism growth
Other large cruise operators were also contacted (i.e. Royal Caribbean Cruises and Norwegian Cruise
Lines) but they didn’t have cruise ships visiting PNG or SI in 2015.
Shipping agents handling cruise ships in PNG and SI:
• Number and type of cruise ships handled at each port in 2015
• Examples of port fees charged to the cruise operator
A1.6 Main differences with previous studies

During the Vanuatu 2014 study, the survey with passengers and crew members was administrated by the
hotel operation staff on board of the cruise ships. There was no direct presence of researchers on-board.
However, a small number of cruise ships visiting PNG and SI during the study period and the large number
of ports required a different approach.
As a result, two experienced market researchers from TNS Australia were present on-board two cruise
ships to encourage passengers’ participation in more than one survey and conduct other qualitative
research (see A1.3 Additional Qualitative Research with Passengers). Quantitative findings of the current
study are hence enforced with qualitative insights gathered during field work.
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Annex 2 Quantitative analysis of passengers’

spending drivers
The table below summarises the correlation between the potential driving factors and mean spend, and
compares them with the Vanuatu 2014 study. The factor that is strong and positively correlated to mean
spend indicates (but does not establish with certainty) that the factor causes more spending.
Table A2.1 Summary table: Drivers of passenger expenditure
Factor Vanuatu Papua New Guinea Solomon Islands

(Previous Study) (This Study) (This Study)
Income
Income Little influence Weakly Positive No correlation

correlation
Satisfaction
Variety of things to see Strongly Positive Strongly positive Strongly positive correlation
and do correlation correlation
Satisfaction Strongly Positive Weakly Positive Positive correlation

for shopping correlation correlation
opportunities
Likelihood of Returning Strongly Positive No correlation Weakly positive correlation

in next three years
Time ashore/Awareness of activities
Time ashore Positive correlation up Positive correlation up Positive correlation up to 5 hours

to 7 hours to 6 hours
Awareness of on shore No correlation Positive correlation No correlation

tours/activities
Availability of options
If more options were Would have spent more Would have spent more on clothing, watches/jewellery,
available, those who on clothing, watches/ handicrafts/souvenirs, and entertainment
spent would have jewellery, and souvenirs
spent more on…
If more options were Would have spent more Would have spent more on tours on the day, handicrafts/
available, those who on clothing, souvenirs souvenirs
did not spend would
have spent more on…
Pre-purchased tour
Pre-purchased tour Spend less in transport Spend less in transport, more in souvenirs if tours were
and more in souvenirs if pre-purchased. Spend about the same in F&B
tours were
pre-purchased
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Annex 3 Cost Structures and Assumptions

This annex outlines the draft assumptions made related to the indirect impact assessment on the
economy of PNG and SI:
It shows assumed cost structure for each of the industries covered in the study
It maps out the assumed flow of the money into one of the three final categories (local beneficiaries,
government and leakage)
Summarizes the sources for assumptions
These assumptions and cost structures were applied to the ports of Alotau, Doini Island, Kitava, Kiriwina
and Rabaul in PNG and Honiara port in SI.
A3.1 Tours and Entertainment Services

Table A3.1 Comparison of assumptions for tours and entertainment services industry in PNG and SI
(2015) and Vanuatu (2014)
Papua New Guinea Solomon Islands Vanuatu Vanuatu

(activity (tour
based tour operators –
operators) transfer)
Cost Structure
Staff costs 11% 11% 30% 15%
Goods and materials 4% 0% 4% (electricity/

water/gas)
Equipment 5% 0% 15% (loan 5% (loan

repayment) repayment)
Services 8% 2% 10% (transfers)
Fuel/transport 9% 38% 10% 15%

(ownership/ rental,
maintenance, and fuel)
Property Rental / 10% 21% 10% (asset 25% (asset

Ownership investment) investment
and electricity/
water/gas)
Insurance 8% 8%
Other 16% 0% 10% 20%
Profit margin 30% 19% 11% 20%
Labour
Average Salary (PGK) 7,143 N/A - -
Labour Intensity (FTE 0.31 Assumed PNG Labour - -

per 1000 AUD) intensity
Source: ICF and Vanuatu 2014 Study
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Assumption Source for Papua New Guinea Source for Solomon Islands
Cost structure TNS and ICF business survey
Share of local goods, 100% based on TNS and ICF business survey. Services supplied by local transport
equipment and services providers (mini bus) and hiring local tour guides
GST 10% applied to staff costs and profit. VAT GST (goods and service tax rates applied)
on intermediate consumption refunded 10% Services tax applied to staff costs.
to business operators so not calculated. It GST on intermediate consumption
is further assumed only 50% ashore tour refunded to business operators so not
providers are registered and pay VAT as calculated (10% tax on domestic goods
there are many ad-hoc tour guides offering and 15% tax on imported goods not
services accounted). It is further assumed only 50%
of ashore tours providers are registered
and pay GST as there are many ad-hoc tour
guides offering services
Insurance 100% of insurance costs are assumed to be imported, with no import duties applied
Income tax 42% tax rate applied on average salary only 11% tax rate applied on average salary only
for registered tour operators for registered tour operators
Social Security Not applied – most businesses in tours and For registered businesses contribute 7.5%
entertainment sector employ less than 15 of salary cost and deduct 5% from private
employees beneficiaries (employee salary)
Corporate taxes No corporate tax applied to profits of No corporate tax applied to profits of
family businesses. 30% tax rate for family businesses. 30% tax rate for
residents and 48% for non-residents residents and 35% for non-residents.
Share of locally owned businesses
Share of locally owned businesses
assumed 100%
assumed 100%
Employment Employment impact has been calculated by calculating the total number of staff
employed in the industry per country and dividing this by the total industry income (for
year 2015)
2nd round of suppliers The main suppliers are transport companies (buses, taxis). It is assumed that 100% of the
money spent on fuel/transport and rent/ownership is further multiplied through the local
transport sector
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A3.2 Transport Services (taxi/bus/ground transportation)

Table A3.2 Comparison of assumptions for transport services industry in selected countries
Papua New Guinea Solomon Islands Vanuatu

Cost Structure
Staff costs 11% PNG cost structure 16%

assumed
Goods and materials 0% 51% (cost of products)
Equipment 8% 5% (rent/loan repayment)
Services 0% 8% (electricity/water/gas)
Fuel/transport 37%
(ownership/ rental,
Property Rental / 0%
Ownership
Insurance 12%
Other 0% 12%
Profit margin 32% 8%
Labour
Average Salary (PGK) 2,750 N/A -
Labour Intensity (FTE per 0.13 Assumed PNG Labour -

1000 AUD) intensity
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Share of local goods, 100% based on TNS and ICF business survey
equipment and services
VAT 10% applied to staff costs and profit. VAT GST (goods and service tax rates
on intermediate consumption refunded applied) 10% Services tax applied
to business operators so not calculated. It to staff costs. GST on intermediate
is further assumed only 50% ashore tour consumption refunded to business
providers are registered and pay VAT as there operators so not calculated (10% tax
are many ad-hoc tour guides offering services on domestic goods and 15% tax on
imported goods not accounted). It is
further assumed only 50% of ashore
tours providers are registered and
pay GST as there are many ad-hoc
tour guides offering services
Income tax 42% tax rate applied on salaries for registered 11% tax rate applied on salaries for
businesses registered businesses
(90% of businesses are assumed to be (90% of businesses are assumed to
registered) be registered)
Social Security Not applied – most businesses in transport For registered businesses contribute
sector employ less than 15 employees 7.5% of salary cost and deduct 5%
from private beneficiaries
(employee salary)
Fuel 10% ad valorem import tax on fuel 10% ad valorem import tax on fuel
100% of fuel is imported to the economy 100% of fuel is imported to the
economy
Corporate taxes No corporate tax applied to profits of family No corporate tax applied to profits of
businesses. 30% tax rate for residents and family businesses. 30% tax rate for
48% for non-residents residents and 35% for non-residents
Share of locally owned businesses assumed Share of locally owned businesses
80% assumed 80%
employed in the industry per country and dividing this by the total industry income
(for year 2015).
2nd round of suppliers It is assumed that the multiplier effect through the second round of suppliers is
zero– major supply comes through imported goods (fuel, vehicles)
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A3.3 Specialist tourist retail industry (handicrafts,

souvenirs, artwork)
Table A3.3 Comparison of Specialist Tourist Retail Industry in Selected Countries

Cost Structure
Staff costs 0% PNG cost structure

assumed
Goods and materials 20% 65% (material/Cost of

Products)
Equipment 0%
Services 0% 5% (electricity)
Fuel/transport (ownership/ 14%

rental, maintenance, and
fuel)
Property Rental / Ownership 12% 10% (rent)
Insurance 0%
Other 0% 5%
Labour
Average Salary (PGK) 1,100 -
Labour Intensity (FTE per 0.14 -

1000 AUD)
Share of local goods, 100% of based on TNS and ICF business survey. The majority of handicrafts and art
equipment and services work is produced locally
VAT No VAT rates applied No GST rates applied
Income tax No tax rate applied No income tax applied. Most of the
souvenir sellers have other jobs or
are unemployed and do not normally
pay taxes from these activity
Social Security Not applied – most businesses employ 15 or Not applied

less employees
Corporate taxes Not applied Not applied
(for year 2015)
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A3.4 Food and Beverage Services Industry (restaurants and bars)

Table A3.4 Comparison of assumptions for food and beverage services industry in the selected
countries

Cost Structure
Staff costs 16% 18% 15%
Goods and materials 32% 19% 52%

(cost of product
(food/beverages))
Equipment 5% 3%
Services 6% 0% 5% (electricity, water, gas)
Fuel/transport 4% 6% 3%
(ownership/ rental,
Property Rental / 12% 0% 9%

Ownership
Insurance 2% 2%
Other 4% 15% 1%
Profit margin 18% 38% 15%
Labour

1000 AUD)
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Share of local goods, 100% based on TNS and ICF business survey. Supplies come from local markets and
equipment and services supermarkets
VAT 10% applied to staff costs and profit. VAT GST (goods and service tax rates applied)
on intermediate consumption refunded to 10% Services tax applied to staff costs.
business operators so not calculated. It is GST on intermediate consumption
further assumed 100% of businesses are refunded to business operators so not
registered calculated (10% tax on domestic goods
and 15% tax on imported goods not
accounted). It is further assumed 100% of
businesses are registered
Income tax 42% tax rate applied on salaries for 11% tax rate applied on salaries for
registered businesses (100% of businesses registered businesses. (100% of
assumed to be registered) businesses assumed to be registered)
Social Security Most of businesses employ more than 15 For registered businesses contribute 7.5%
employees. Calculated contributions to of salary cost and deduct 5% from private
government are 6% of the salary (from beneficiaries (employee salary)
the employee) and 8.4% of salary for the
employer
Corporate taxes No corporate tax applied to profits of No corporate tax applied to profits of
family businesses. 30% tax rate for family businesses. 30% tax rate for
residents and 48% for non-residents residents and 35% for non-residents
Share of foreign owned businesses Share of locally owned businesses
assumed 50% assumed 50%
(for year 2015)
2nd round of suppliers The main suppliers are local supermarkets. It is assumed that 100% of the money spent
on goods and material is further multiplied through the local retail industry
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A3.5 General retail industry (supermarket, general store items)

Table A3.5 Comparison of assumptions for general retail industry in the selected countries

Cost Structure
Staff costs 30% Assumed PNG cost 20%

structure
Goods and materials 43% 43% (cost of products)
Equipment 0%
Services 1% 12% (electricity/water/gas)
Fuel/transport 5%
(ownership/ rental,
Property Rental / 1% 10% (rent/loan payment)

Ownership
Insurance 0%
Other 0% 5%
Labour

1000 AUD)
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Share of local goods, Most of the goods sold at supermarkets are imported. This was assumed at 95%
equipment and services
Import duties on goods An average 20% import duty is assumed38
VAT 10% applied to staff costs and profit. VAT GST (goods and service tax rates applied)
on intermediate consumption refunded 10% Services tax applied to staff costs.
to business operators so not calculated. GST on intermediate consumption
100% of businesses assumed to be refunded to business operators so not
registered calculated (10% tax on domestic goods
and 15% tax on imported goods not
accounted). 100% of businesses assumed
to be registered
Income tax 42% tax rate applied on salaries for 11% tax rate applied on salaries for
registered businesses registered businesses
Social Security Most of businesses employ more than 15 For registered businesses contribute 7.5%
employees. Calculated contributions to of salary cost and deduct 5% from private
government are 6% of the salary (from beneficiaries (employee salary)
the employee) and 8.4% of salary for the
employer
Corporate taxes 30% tax rate for residents and 48% for 30% tax rate for residents and 35% for
non-residents non-residents. Share of locally owned
businesses assumed 70%. Retail trade is
Share of foreign owned businesses
predominantly Chinese owned
assumed 80% (Most of the supermarkets
are owned by Chinese and Pilipino expats)
(for year 2015)
To capture the potential for part-time employment, a range has been calculated based on
the assumption of 33% of FTE to be consistent with Vanuatu study
38
38 http://www.customs.gov.pg/06_legislation_and_publications/1_legislation/09_Import_Export_Tariff_2012_Version.pdf
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A3.6 Kitava and Kiriwina and Doini Islands

The islands of Kitava, Kiriwina and Doini Islands differ from the rest of the ports surveyed. Kitava and
Kiriwina function as subsistence economies and the inhabitants are farmers. Doini Island is a privately
owned island. In Kitava and Kiriwina, businesses selling goods and services are ad-hoc, family owned
businesses set up only when cruise ships arrive. As a result, the impact assessment assumed the revenues
received from cruise ships are used entirely by private beneficiaries (for family consumption), there is no
supply chain, no taxes are paid (i.e. no government revenue) and nothing leaks from the economy (all the
material is sourced locally from farming e.g. wood, vegetables).
Table A3.6 Assumptions for Kitava, Kiriwina and Doini Islands
Assumption Source for Papua New Guinea

Cost structure There is no formal economy. It is assumed that 100% of the revenues are used for family
consumption
Share of local goods, 100% of their materials (i.e. wood, vegetables) is sourced locally. It is assumed there is no
equipment and services leakage
Import duties on goods No taxes are paid
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Annex 4 Assumptions for cost benefit analysis
A4.1 General assumptions

The CBA covers a 10 year period for all options. The discount rates used for options in SI and PNG are 7
per cent (as assumed in the 2014 Vanuatu Study) minus the inflation rates of the respective countries. The
inflation rates of Solomon Islands and Papua New Guinea are 5.95 per cent and 4.8 per cent respectively –
these are the average inflation rates over 2011-2014.
For options which involve infrastructure constructions, it is assumed that all construction costs will be
paid in year 1 and the associated maintenance costs will be incurred from years 2 to 10.
Table A4.1 General assumptions related to CBA of all options
Type of Assumption Valuation Source

Period for cost benefit analysis 10 years Vanuatu 2014 Study
SBD:AUD Exchange Rate 0.18 xe.com
PGK:AUD Exchange Rate 0.47 xe.com
USD:AUD Exchange Rate 1.30 xe.com
SI Discount Rate 1% Vanuatu 2014 Study, World Bank
PNG Discount Rate 2% Vanuatu 2014 Study, World Bank
A4.2 Options for PNG

Option 1 – Infrastructure improvements to existing ports of call
Action 1 – Extension of a jetty in Kitava to enable disembarkation of two tenders simultaneously to
facilitate the more efficient transportation of passengers to and from larger cruise ships.
Table A4.2 Costs
Type of Cost Valuation Source

Extension of the existing jetty AUD 195,000 Seaport Group estimate
Beach shelters /huts AUD 65,000 Seaport Group estimate
Maintenance (landing facilities) 1-2% of CAPEX per year Seaport Group estimate
Maintenance (beach shelters) 15-20% of CAPEX per year Seaport Group estimate
Table A4.3 Benefits
Type of Benefit Valuation Source

Increased number of calls at Kitava in 4 additional calls Carnival Australia
years 2-4
Increased number of calls in years 7 additional calls Carnival Australia

5-10
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Figure A4.1 Existing jetty at Kitava

Additional assumptions
Two 4m by 4m beach shelters, self-erected on site
Baseline number of calls is 13; with the jetty extension,
17 calls expected in 2018-2020 and 20 calls expected in
2021-2026
Action 2 – Water supplies to WHO standards of 50 tonnes
per hour at Alotau
Table A4.4 Costs

Water supply to WHO standard of 50 tonnes per AUD 195,000 Seaport Group estimate
hour
Maintenance 10% of CAPEX Seaport Group estimate
Table A4.5 Benefits

Increased number of calls at Alotau in years 5-10 2 additional calls Carnival Australia, ICF estimate
Cost for water supplies to reach WHO standards assumes worst case provision, and includes package
water treatment, storage and pump
Revenue from water supply has not been taken into account
Number of calls at Alotau is likely to decline in the medium to long-term without this action; assumes
two additional calls with freshwater supply
Action 3 – Reinforcement and extension of the port berth in Madang to enable more regular and larger
ships to dock in port and construction of a sanitation block
Table A4.6 Costs

Construction of two sinker blocks and upgrades AUD 39,000 Seaport Group estimate
to fenders
Table A4.7 Benefits

Increased number of calls in Madang Year 2 - 4 3 additional calls Carnival Australia
Increased number of calls at Madang in years 8 additional calls Carnival Australia

5-10
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Baseline is 2-4 calls; 10-12 calls expected from year 4 with reinforcement and extension of port
Similar impact per passenger as observed in Kitava
Option 2 – Upgrade port amenities

Action 1: Construct a sanitation block near or at the wharf area in Kitava and Kiriwina
Action 2: Provide covered areas, including seating for passengers in Kitava and Kiriwina
Action 3: Provide clear signage to enable cruise passengers to navigate from the port area to leading
attractions and points of interest in Rabaul and Alotau
Table A4.8 Costs

Construction of a sanitation block AUD 52,000 Seaport Group estimate
Maintenance of sanitation block per 10% of CAPEX Seaport Group estimate

year
Construction of covered areas and 97,500 Seaport Group estimate

seating for passengers
Signage provision 19,500 Seaport Group estimate
Maintenance (other than sanitation 5% of CAPEX Seaport Group estimate

block)
Table A4.9 Benefits

Increase in passenger spend from Increase by 15 minutes ICF estimate
more hours ashore in Alotau and
Rabaul from year 3
Increase in passenger spend from Increase to current level observed in ICF estimate
more hours ashore in Kitava and Doini Island
Kiriwina from year 3
Cost for covered areas and seating for passengers includes purchase, delivery and erection of four 4x4-
metre shelters, self-erected on-site
Assume passenger spend increases proportionally with the increase in time spent ashore; time spent
to be increased from the current 3.4 and 3.6 hours (at Kitava and Kiriwina respectively) to 3.8 hours, as
observed in Doini Island
Option 3 – Improvements to customs and immigration procedures

Action 1: Legislative change (use of non-proclaimed ports for clearance)
Action 2: Improve process of clearing passengers.
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Table A4.10 Costs

Time spent to undertake legislative 10 legislators x 1 month ICF estimate, PNG government pay
change scale 18
Cost of training for customs officers 20 customs officers x 1 month ICF estimate, PNG government pay
scale 10
Table A4.11 Benefits

Increased number of calls at Conflict Increases to 80% spending observed ICF estimate
Island in years 3-10 in Alotau
Increase in passenger expenditure Increase by 15 mins ICF estimate

in Alotau from more hours ashore in
years 3-10
Wage of legislators assumed to be PNG government pay scale point 18
Wage of customs officers assumed to be PNG government pay scale point 10
Impact per passenger in Conflict Island similar to impact observed in Kitava
Assume passenger spend increases proportionally with the increase in time spent ashore
Option 4 – Increased provision of foreign exchange services

Action 1 – Providing ATM and a Forex booth near or at the wharf in Alotau
Table A4.12 Costs
ATM machine AUD 18,850 Quote to for purchase and installation

of ATM machine
Maintenance cost 10% of initial cost Vanuatu 2014 Study
Increased passenger spend in Alotau Additional AUD25 spend x 20% ICF estimate
from year 2 passengers who utilise service
Option 5 – Development of product offer in PNG

Action 1: Establish a more formalized cruise committee
Action 2: Development of tours and excursions
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Table A4.14 Costs

Time spent by members on meetings Once per month x 5 members x ICF estimate
1 hour x average wage per hour
Time spent to share information 2 hours per cruise ship x ICF estimate
average wage per hour
Time spent to collect opinion from 80 days x ICF estimate

businesses and to develop offer with
average government wage per day
cruise operators
Cost of training AUD 22,000 Quote for a 1-3 month training course
Administration costs 20% of trainer cost Vanuatu 2014 Study

Increased spending on tours and Increase to 80% of current Rabaul ICF estimate
pre-booked tours in Alotau in years level
3-10
Increased spending on pre-booked 2 times current tours spending ICF estimate

tours in Kitava and Kiriwina in years
3-10
Average wage of committee members assumed to be PNG government pay scale point 18
Government wage assumed to be PNG government pay scale point 10
Meetings of the committees is ongoing, i.e. costs are incurred throughout 10 years, assuming 4 cruise
committees operate
Trainings for business operators occur in year 1 (2 trainings) and year 2 (2 trainings).
70 per cent of pre-booked tours spending goes into the economy
Option 6 – Improving information provision to passengers

Action 1: Providing quarantine videos and leaflets to passengers
Action 2: Updating destination information provided by cruise operators to passengers
Action 4: Inform passengers of opportunity to make donations.
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Table A4.16 Costs

Quarantine videos AUD 81,000 Price quote for a three-minute video
production
Distribution of leaflets and AUD0.1 for each double sided leaflet ICF estimate
promotion material to passengers
x total passengers
Time spend to update information 3 days per year ICF estimate

x average government salary

Increase spend on souvenirs in years 3-10 Increase by 20% ICF estimate
Increase spend on donations in years 3-10 Increase by 20% ICF estimate
Three-minute video production
Each passenger receives one leaflet, and total passengers assumed to be baseline number of
passengers to Alotau
Government wage assumed to be PNG government pay scale point 10
A4.3 Options for Solomon Islands

Option 1 – Upgrade Honiara’s port infrastructure
Action 1: A wharf capable of handling cruise ships of up to 264-metres in the future, and currently those
of 220-metres in length
Action 2: Water supplies to WHO standards of 50 tonnes per hour.
Table A4.18 Costs

New wharf AUD 33,800,000 JICA funding program
Water supply to WHO standard of 50 AUD 195,000 Seaport Group estimate

tonnes per hour
Maintenance 2% of initial cost per year Seaport Group estimate
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Increased number of calls at Honiara Year 1 & 2 7 additional calls ICF estimate based on Carnival
Australia growth projections
Year 3 to 5 15 additional calls
Year 6 to 10 20 additional calls
Increase in spend from more hours ashore Hours ashore increase from 3.7 to 4.3 ICF estimate
(current level observed in Rabaul).
Wharf under construction is 180-200 metres long
Cost for water supplies to reach WHO standards
assumes worst case provision, and includes package water treatment, storage and pump
Assume passenger spend increases proportionally with the increase in time spent ashore. Time spent
to be increased from the current 3.7 hours to 4.3 hours as observed in Rabaul
Option 2 – Upgrade Honiara’s port amenities

Action 1: Construct a sanitation block near or at the wharf area
Action 2: Provide covered areas, including seating for passengers
Action 3: Clear signage to enable cruise passengers to navigate from the port area to leading attractions
and points of interest
Action 4: Provision of litter bins and port beautification actions to make the area more attractive for
cruise passengers
Table A4.20 Costs

Construction of a sanitation block AUD 52,000 Seaport Group estimate
Maintenance of sanitation block per 10% of CAPEX Seaport Group estimate

year
Construction of covered areas and AUD 97,500 Seaport Group estimate

seating for passengers
Signage provision AUD 19,500 Seaport Group estimate
Litter bins and port beautification AUD 13,000 Seaport Group estimate
action
Maintenance (other than sanitation 10% of CAPEX Seaport Group estimate

block)
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Increase in expenditure from more Hours ashore increase from 3.7 to 4.3 ICF estimate
hours ashore in years 2-10 (current level observed in Rabaul).
Cost of covered areas and seating for passengers includes purchase, delivery and erection of four 4x4-
metre shelters, self-erected on-site
Assume passenger spend increases proportionally with the increase in time spent ashore; time spent
to be increased from the current 3.7 hours to 4.3 hours as observed in Rabaul
Option 3 – Development of product offer in Honiara

Action 1: Establish a more formalized cruise committee
Action 2: Development of tours and excursions
Table A4.22 Costs

Time spent by members on meetings Once per month x 5 members x ICF estimate and 2010 SI Employee
survey
1 hour x average wage per hour
Time spent to share information 2 hours per cruise ship x ICF estimate and 2010 SI Employee
survey
average wage per hour
Time spent to collect opinion from 80 days x ICF estimate and 2010 SI Employee
businesses and to develop offer with survey
average government wage per day
cruise operators
Cost of training Two 1-3 months trainings provided in Quote for a 1-3 month international
Year 1 and Year 2, 22,000 each business capacity course
Administration costs 20% of trainer cost Vanuatu 2014 Study

Increased cruise passengers’ spend Increases to 80% spending observed ICF estimate
in years 3-4 in Alotau
Increased cruise passengers’ spend Increases to spending observed in ICF estimate

in years 5-10 Alotau
Wage of committee members assumed to be the average wage of management level in SI
Government wage assumed to be the average wage of skilled worker in SI
Meetings of the committee are ongoing, i.e. costs are incurred throughout 10 years
1-3 month capacity building programmes take place twice, once in Year 1 and once in Year 2
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Option 4 – Development of the Solomon Islands cruise offer

Action 1: Opening Gizo as destination for large vessels
Table A4.24 Costs
Hydrography survey for the location AUD 52,000 Seaport Group estimate
Additional bollards/large cleats to be AUD 19,500 Seaport Group estimate

added adjacent the sloping concrete
ferry wharf- to allow ships tenders to
safely berth alongside
The red and white navigational AUD 26,000 Seaport Group estimate
beacons and green starboard hand
buoy as marked on official chart
BA 1735 to be replaced to IALA
standards (SIMSA).
Public toilet facilities at or near the AUD 52,000 Seaport Group estimate
landing area.
Maintenance 10% of CAPEX Seaport Group estimate
Additional calls at Gizo in years 2-4 1-7 additional calls Carnival Australia and ICF estimate
Cost of hydrography survey is based on a 5-day survey at location and processing by SIHU
Baseline calls at Gizo is 3; 4-6 calls expected in 2018-2019 and between 12-20 calls could be expected in
2020-2026
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Action 2: Opening Tavanipupu as destination for large vessels
Table A4.26 Costs
Preliminary weather monitoring AUD 26,000 Seaport Group estimate
Hydrography survey for this location AUD 52,000 Seaport Group estimate
Destination impact study AUD 65,000 Vanuatu 2014 Study
Landing facilities (i.e. jetty) AUD 325,000 - AUD 650,000 Seaport Group estimate
Beach shelters /huts AUD 65,000 Seaport Group estimate
Maintenance 15-20% of CAPEX Seaport Group estimate
Calls at Tavanipupu in years 2-4 4-6 calls Carnival Australia and ICF estimate
Preliminary weather monitoring involves satellite data analysis
Cost of hydrography survey based on a 5-day survey at location and processing by SIHU
Landing facilities include 2 berths for ships tenders; valuation highly dependent on location for
anchoring and access
Two 4x4-metre beach shelters, self-erected on-site
Baseline calls at Tavanipupu is 0; 4-6 calls expected in 2018-2019 and 12-14 calls could be expected in
2020-2026
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Option 5 – Improving information provision to passengers

Action 1: Providing quarantine videos and leaflets to passengers
Action 2: Updating destination information provided by cruise operators to passengers
Action 4: Inform passengers of opportunity to make donations
Table A4.28 Costs
Quarantine videos AUD 81,000 Price quote for a three-minute video

production
Distribution of leaflets AUD0.1 for each double sided ICF estimate

and promotion material to leaflet
passengers
x total passengers
Time spend to update 3 days per year ICF estimate, 2010 Employment survey SI
information
x average government salary
Increase spend on souvenirs in Increase by 20% ICF estimate

years 3-10
Increase spend on donations in Increase by 20% ICF estimate

years 3-10
Three-minute video production
Each passenger receives one leaflet, and total passengers assumed to be baseline number of
passengers to Honiara (passengers numbers expected in 2017)
Average wage assumed to be average wage of skilled worker in SI
PAGE 112

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Assessment of the Economic Impact

of Cruise Tourism in Papua New Guinea

About the Australian Aid Program

About Carnival Australia

DIRECT INDIRECT DIRECT INDIRECT

PAPUA NEW GUINEA SOLOMON ISLANDS

PER S HIP P E R S HIP

Alotau $47 Doini Is. $11 Kiriwina $9

TOURS TRANSPORT SOUVENIRS RETAIL FOOD & BEVERAGE OTHER

Kitava $7 Rabaul $76 Honiara $28

*FOR FIVE RESEARCHED PORTS IN PNG & ONE IN SI

2 DIRECT ECONOMIC IMPACT 28

3 INDIRECT ECONOMIC IMPACT 50

4 TOTAL ECONOMIC IMPACT  51

5 OPPORTUNITIES FOR INCREASING THE ECONOMIC IMPACTS  58

6 COST BENEFIT ANALYSIS  67

ANNEX 2 QUANTITATIVE ANALYSIS OF PASSENGERS’ SPENDING DRIVERS 91

ANNEX 3 COST STRUCTURES AND ASSUMPTIONS 92

ANNEX 4 ASSUMPTIONS FOR COST BENEFIT ANALYSIS 102

Executive Summary JUNE 2016

Direct economic impact is the revenue

Indirect economic impact is the revenue

Economic impacts of cruise tourism expenditure

Executive Summary JUNE 2016

PAPUA NEW GUINEA

Indirect economic impact

Total economic impact

AUD 0.4 million 43%

AUD 1.1 million

industry is AUD 1.1 million. In other

Employment impact of cruise

Indirect economic impact

Total economic impact

Added value of the cruise tourism

639 0.01% of GDP

Employment impact of cruise

Executive Summary JUNE 2016

Direct economic impact

PNG Calls Total Total Crew Total Cruise TOTAL TOTAL

Doini Island 11 228,601 5,558 242,000 476,159 43,287

Kiriwina 10 171,116 5,110 120,000 296,226 29,623

Kitava 8 92,369 3,696 96,000 192,065 24,008

Rabaul 16 1,224,742 73,706 1,020,000 2,318,447 144,903

TOTAL 5 60 5,667,686 94,461

TOTAL PNG 136 6,362,304 46,782

Rabaul Alotau Passengers

Executive Summary JUNE 2016

Table ES2 Total estimated direct impact by SI port 2015 (AUD)

SI Calls Total Total Crew Total Cruise TOTAL TOTAL

TOTAL SI 47 900,768 19,165

Figure ES4 Average passenger expenditure by port and type9 in SI (AUD)

Executive Summary JUNE 2016

Key drivers of passengers spend:

Time passengers spend on shore: Studies across different countries consistently

Availability of pre-booked tours: Passengers who pre-booked tours10 spent

Cruise line expenditure

Fees Company expenses on goods and services

Executive Summary JUNE 2016

Indirect economic impact

2 DIRECT ECONOMIC IMPACT 28

3 INDIRECT ECONOMIC IMPACT 50

4 TOTAL ECONOMIC IMPACT 51

5 OPPORTUNITIES FOR INCREASING THE ECONOMIC IMPACTS 58

6 COST BENEFIT ANALYSIS 67

ANNEX 2 QUANTITATIVE ANALYSIS OF PASSENGERS’ SPENDING DRIVERS 91

ANNEX 3 COST STRUCTURES AND ASSUMPTIONS 92

ANNEX 4 ASSUMPTIONS FOR COST BENEFIT ANALYSIS 102

3.4 hours at Kiriwina: Passengers returned to boat