What’s in a price for cruise ships berthing in Sydney Harbour?
Sydney is home to one of the world’s most spectacular harbours offering tourists a close-up view of landmarks like the Opera House, Harbour Bridge, The Rocks, and close proximity to Darling Harbour and the central business district. It is no surprise that Sydney Harbour is both a popular destination and home port for cruise ships, with around 350 ship calls a year.
Cruise ships calling into Sydney Harbour are berthed at either the Overseas Passenger Terminal or White Bay Cruise Terminal, depending on availability and size of the ships. Cruise ship operators pay the Port Authority of New South Wales (Port Authority) site occupation charges for the use of berths and moorings in Sydney Harbour.
In 2016, these charges were the subject of a review by the Independent Pricing and Regulatory Tribunal (IPART) who is responsible for recommending maximum site occupation charges to the Premier of New South Wales.
Our experts were retained to support the Port Authority’s engagement with IPART and the state government throughout this review. We advised and assisted on a submission in relation to the economic contribution of the cruise ship industry, the extent of any indirect subsidies, comparisons of charges to international counterparts, the consideration of pricing structures and mechanisms, and to develop reasonable site occupation charges. One aspect of our analysis of the economic contribution of the cruise ship industry is presented in the figure below.
Figure 1 Revised estimates of output, wages income and value add by the cruise ship industry
To assist IPART and the Premier determine appropriate site occupation charges, we adopted a ‘building block’ model to demonstrate that the Port Authority’s proposed $35 per passenger charge was reasonable and anchored in its efficient costs. Our analysis assisted the Port Authority to engage with key stakeholders and make its case for the $35 per passenger charge, a figure that was ultimately agreed by the state government, even though IPART recommended a different site occupation charge.