IDEAS home Printed from https://ideas.repec.org/a/pal/marecl/v23y2021i4d10.1057_s41278-020-00158-3.html
   My bibliography  Save this article

Economies of scale in cruise shipping

Author

Listed:
  • Sergi Ros Chaos

    (UPC)

  • Athanasios A. Pallis

    (University of the Aegean
    Universidad de Los Andes)

  • Sergi Saurí Marchán

    (CIMNE-UPC)

  • David Pino Roca

    (Barcelona Port Authority)

  • Agustín Sánchez-Arcilla Conejo

    (UPC)

Abstract

The cruise industry has evolved rapidly over the past decades, with the building and operation of ever-larger cruise ships being a key factor in this growth. This study examines whether the observed increases in vessel size are supported by the fundamentals of economies of scale, as allegedly occurs with container ships; in other words, we inquire whether increases in ship size imply decreases in the average costs per passenger. We attempt this by developing a detailed cost model for cruise ships, distinguishing among three types of costs: capital costs, operating costs and voyage costs. The quantification of these costs allows the determination of potential savings due to the presence of scale. In parallel, we analyse the sensitivity of each cost category to parameters such as sailing speed and distance travelled. The research provides an assessment of the direction the cruise industry is heading, as regards the scale of vessels in operation: our findings suggest that economies of scale are realised only up to a certain ship size, which today stands at 120,000 gross tons. For larger cruise vessels, average costs (per passenger) increase and dis-economies of scale start to set in.

Suggested Citation

  • Sergi Ros Chaos & Athanasios A. Pallis & Sergi Saurí Marchán & David Pino Roca & Agustín Sánchez-Arcilla Conejo, 2021. "Economies of scale in cruise shipping," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 23(4), pages 674-696, December.
    • Handle: RePEc:pal:marecl:v:23:y:2021:i:4:d:10.1057_s41278-020-00158-3
    DOI: 10.1057/s41278-020-00158-3
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41278-020-00158-3
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41278-020-00158-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Tran, Nguyen Khoi & Haasis, Hans-Dietrich, 2015. "An empirical study of fleet expansion and growth of ship size in container liner shipping," International Journal of Production Economics, Elsevier, vol. 159(C), pages 241-253.
    2. Lorenzo Gui & Antonio Paolo Russo, 2011. "Cruise ports: a strategic nexus between regions and global lines—evidence from the Mediterranean," Maritime Policy & Management, Taylor & Francis Journals, vol. 38(2), pages 129-150, January.
    3. Ernestos Tzannatos, 2010. "Costs and benefits of reducing SO2 emissions from shipping in the Greek seas," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 12(3), pages 280-294, September.
    4. Jeronimo Esteve-Perez & Antonio Garcia-Sanchez, 2015. "Cruise market: Stakeholders and the role of ports and tourist hinterlands," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 17(3), pages 371-388, September.
    5. Athanasios A. Pallis & Francesco Parola & Giovanni Satta & Theo E. Notteboom, 2018. "Private entry in cruise terminal operations in the Mediterranean Sea," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 20(1), pages 1-28, March.
    6. Ghosh, Sugoutam & Lee, Loo Hay & Ng, Szu Hui, 2015. "Bunkering decisions for a shipping liner in an uncertain environment with service contract," European Journal of Operational Research, Elsevier, vol. 244(3), pages 792-802.
    7. Silos, J.M. & Piniella, F. & Monedero, J. & Walliser, J., 2012. "Trends in the global market for crews: A case study," Marine Policy, Elsevier, vol. 36(4), pages 845-858.
    8. Thanos Pallis, 2015. "Cruise Shipping and Urban Development: State of the Art of the Industry and Cruise Ports," International Transport Forum Discussion Papers 2015/14, OECD Publishing.
    9. Jeronimo Esteve-Perez & Antonio Garcia-Sanchez, 2017. "Characteristics and consequences of the cruise traffic seasonality on ports: the Spanish Mediterranean case," Maritime Policy & Management, Taylor & Francis Journals, vol. 44(3), pages 358-372, April.
    10. Hercules E. Haralambides, 2019. "Gigantism in container shipping, ports and global logistics: a time-lapse into the future," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 21(1), pages 1-60, March.
    11. Bandara, Yapa Mahinda & Nguyen, Hong-Oanh, 2016. "Influential factors in port infrastructure tariff formulation, implementation and revision," Transportation Research Part A: Policy and Practice, Elsevier, vol. 85(C), pages 220-232.
    12. Elizabeth R. DeSombre, 2006. "Flagging Standards: Globalization and Environmental, Safety, and Labor Regulations at Sea," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262541904, December.
    13. Edwin Van Hassel & Hilde Meersman & Eddy Van de Voorde & Thierry Vanelslander, 2016. "Impact of scale increase of container ships on the generalised chain cost," Maritime Policy & Management, Taylor & Francis Journals, vol. 43(2), pages 192-208, February.
    14. Castillo-Manzano, José I. & Fageda, Xavier & Gonzalez-Laxe, Fernando, 2014. "An analysis of the determinants of cruise traffic: An empirical application to the Spanish port system," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 66(C), pages 115-125.
    15. Papathanassis, Alexis, 2012. "Guest-to-guest interaction on board cruise ships: Exploring social dynamics and the role of situational factors," Tourism Management, Elsevier, vol. 33(5), pages 1148-1158.
    16. Notteboom, Theo E. & Vernimmen, Bert, 2009. "The effect of high fuel costs on liner service configuration in container shipping," Journal of Transport Geography, Elsevier, vol. 17(5), pages 325-337.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tsiotas, Dimitrios & Niavis, Spyros & Sdrolias, Labros, 2018. "Operational and geographical dynamics of ports in the topology of cruise networks: The case of Mediterranean," Journal of Transport Geography, Elsevier, vol. 72(C), pages 23-35.
    2. Jiawei Ge & Mo Zhu & Mei Sha & Theo Notteboom & Wenming Shi & Xuefeng Wang, 2021. "Towards 25,000 TEU vessels? A comparative economic analysis of ultra-large containership sizes under different market and operational conditions," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 23(4), pages 587-614, December.
    3. Athanasios A. Pallis & Francesco Parola & Giovanni Satta & Theo E. Notteboom, 2018. "Private entry in cruise terminal operations in the Mediterranean Sea," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 20(1), pages 1-28, March.
    4. Dariusz Bernacki, 2021. "Assessing the Link between Vessel Size and Maritime Supply Chain Sustainable Performance," Energies, MDPI, vol. 14(11), pages 1-21, May.
    5. Vicente-Cera, Isaías & Acevedo-Merino, Asunción & Nebot, Enrique & López-Ramírez, Juan Antonio, 2020. "Analyzing cruise ship itineraries patterns and vessels diversity in ports of the European maritime region: A hierarchical clustering approach," Journal of Transport Geography, Elsevier, vol. 85(C).
    6. Petri Helo & Henri Paukku & Tero Sairanen, 2021. "Containership cargo profiles, cargo systems, and stowage capacity: key performance indicators," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 23(1), pages 28-48, March.
    7. Joanna Kizielewicz, 2020. "Measuring the Economic and Social Contribution of Cruise Tourism Development to Coastal Tourist Destinations," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 147-171.
    8. Nikola Kutin & Zakaria Moussa & Thomas Vallée, 2018. "Factors behind the Freight Rates in the Liner Shipping Industry," Working Papers halshs-01828633, HAL.
    9. Tan, Roy & Duru, Okan & Thepsithar, Prapisala, 2020. "Assessment of relative fuel cost for dual fuel marine engines along major Asian container shipping routes," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 140(C).
    10. José I Castillo-Manzano & Mercedes Castro-Nuño & Lourdes López-Valpuesta, 2018. "“When Las Vegas takes to the sea," Tourism Economics, , vol. 24(1), pages 135-140, February.
    11. M. A. Mueller & B. Wiegmans & J. H. R. Duin, 2020. "The geography of container port choice: modelling the impact of hinterland changes on port choice," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 22(1), pages 26-52, March.
    12. Wu, Wei-Ming & Huang, Deng-Shing, 2018. "Modelling the profitability of container shipping lines: Theory and empirical evidence," Transport Policy, Elsevier, vol. 72(C), pages 159-170.
    13. María J. Andrade & João Pedro Costa & Eduardo Jiménez-Morales, 2021. "Challenges for European Tourist-City-Ports: Strategies for a Sustainable Coexistence in the Cruise Post-COVID Context," Land, MDPI, vol. 10(11), pages 1-20, November.
    14. Yui-yip Lau & Tsz Leung Yip & Maneerat Kanrak, 2022. "Fundamental Shifts of Cruise Shipping in the Post-COVID-19 Era," Sustainability, MDPI, vol. 14(22), pages 1-14, November.
    15. De, Arijit & Choudhary, Alok & Turkay, Metin & Tiwari, Manoj K., 2021. "Bunkering policies for a fuel bunker management problem for liner shipping networks," European Journal of Operational Research, Elsevier, vol. 289(3), pages 927-939.
    16. Assunta Di Vaio & Flavio Boccia & Lourdes Trujillo, 2020. "The cooperation strategies for the performance improvement in the cruise sea–land logistics: evidence from Italy," Quality & Quantity: International Journal of Methodology, Springer, vol. 54(5), pages 1479-1490, December.
    17. Baştuğ, Sedat & Haralambides, Hercules & Akan, Ercan & Kiraci, Kasim, 2023. "Risk mitigation in service industries: A research agenda on container shipping," Transport Policy, Elsevier, vol. 141(C), pages 232-244.
    18. Wang, Shuaian & Wang, Xinchang, 2016. "A polynomial-time algorithm for sailing speed optimization with containership resource sharing," Transportation Research Part B: Methodological, Elsevier, vol. 93(PA), pages 394-405.
    19. Ksciuk, Jana & Kuhlemann, Stefan & Tierney, Kevin & Koberstein, Achim, 2023. "Uncertainty in maritime ship routing and scheduling: A Literature review," European Journal of Operational Research, Elsevier, vol. 308(2), pages 499-524.
    20. Rosa-Jiménez, Carlos & Perea-Medina, Beatriz & Andrade, María J. & Nebot, Nuria, 2018. "An examination of the territorial imbalance of the cruising activity in the main Mediterranean port destinations: Effects on sustainable transport," Journal of Transport Geography, Elsevier, vol. 68(C), pages 94-101.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:marecl:v:23:y:2021:i:4:d:10.1057_s41278-020-00158-3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.