Potential local authority level Cruise Ship Levy in Scotland: partial business and regulatory impact assessment

Section 1: Background, aims and options

Background to policy issue

Introduction

The Visitor Levy (Scotland) Bill was passed by the Scottish Parliament in May 2024 and received Royal Assent in July 2024, becoming the Visitor Levy (Scotland) Act 2024. The Act gives councils a power to introduce a visitor levy on stays in overnight accommodation, once it has followed the process set out within it. The revenue raised must be used on facilities and services related to the visitor economy. This reflected not just the local pressures associated with sustained high numbers of visitors, but also the wider policy context of promoting greater local decision-making together with a recognition of the prevalence of such taxes in jurisdictions outside the UK.

The issue of a potential cruise ship levy was raised by members of the Scottish Parliament, local authorities, and others during the passage of the Act. In response the Scottish Government indicated it was open to exploring a potential cruise ship levy in the future.

The Programme for Government 2024-25 committed to intensify work on a potential cruise ship levy and to undertake a public consultation on the matter. The Scottish Government has not decided whether to give local authorities the power to introduce a cruise ship levy in their areas.

Background

Cruise tourism, where visitors arrive at a port in Scotland by cruise ship, has been growing rapidly over recent years. Between 2018 and 2019, the total number of passengers arriving by cruise ship to Scotland grew by 8%, grew by 17% since 2017 (Ekosgen, 2020). Separate research on cruise schedules for 2024 indicate that there has been significant growth in the years since then, with the number of cruise ship calls increasing, and the average passenger capacity of those ships also increasing. The total cruise passenger capacity (the sum of passenger capacity of every ship at every port call) scheduled to visit Scotland in 2024 has almost tripled in ten years. The equivalent growth (change in visitor numbers and visitor nights over the ten years to 2023) for all overnight visits to Scotland was less than 15% (Scottish Tourism Observatory, 2024). Overnight visits exclude day trip visitors, who will not be paying for overnight accommodation.

With approximately 1.2 million visits in 2024, cruise tourism is equivalent to approximately 5% of the 34.4 million overnight international tourist nights (the sum of the nights spent in all overnight visits) in Scotland in 2023 (Visit Scotland, 2024). This equates to around 2% of the overall 69.8 million overnight visitor stays in 2023, including residents of Great Britain (Visit Scotland, 2024). Overall visitor numbers for 2024 are not yet available to be able to make a direct comparison. Cruise tourism makes up a much higher proportion of overnight visitor numbers in some areas than others. For example, in 2018, 84% of overnight visitors in Orkney and 79% of those in Shetland, were cruise ship passengers (Ekosgen, 2020, p. 25).

There is significant uncertainty about the future growth in cruise visits to Scotland. There has been strong underlying growth across the whole sector, but regional effects may also have boosted growth in Scotland in recent years. Anecdotal evidence indicates that the Russian invasion of Ukraine in 2022 led to operators having to amend cruises that included destinations such as St. Petersburg. The rescheduled itineraries may have led to short term growth in other destinations, including Scotland.

This scale and growth of visitors, compounded with their concentration, both in terms of locations and times of arrival, has led to perceptions of additional pressures on local infrastructure, facilities and services in some places. This in turn has led some to call for additional investment in such infrastructure and services. Cruise ships, unlike other forms of tourism, deliver significant numbers of visitors in a short time frame, creating particular pressures for destinations that are different than those created by other types of tourism.

Industry figures from 2023 show that the number of cruise passengers globally has recovered more quickly than the total number of international tourists, and the number of cruise passengers in north Europe was around 30% higher in 2023 than in 2019. They also show that cruises in north Europe are most likely to be taken by European residents, and the source countries most likely to cruise in Europe are the UK, Ireland, and Germany (CLIA, 2024)^[1].

Across the cruise industry, ships have been growing in size, with the biggest cruise ships now having approximately double the capacity of the biggest cruise ships in 2000. The majority of ships visiting Scotland are small to medium size ships, with passenger capacity averaging around one thousand. The largest cruise ships visiting Scottish ports in 2024 had accommodation on board for up to four thousand passengers. One ship that called in Lerwick had capacity for over six thousand passengers, approximately equivalent to the town’s entire population. On days when multiple vessels call in Scotland’s busier ports, there may be more than five thousand passengers arriving in a single morning. It should be noted that passenger capacity is indicative and based on each passenger cabin having two occupants. This means that a ship can operate at more than 100% of this capacity if enough cabins are booked for more than two people.)

Not all passengers will disembark at every port call. Based on engagement with industry representatives we have assumed that approximately 85% of passengers will disembark at Scottish ports on average, for the purposes of this partial BRIA. This will clearly be subject to variation between different ports, ships, and will even be affected by the weather on the day the ship arrives. This assumption gives an adjusted number of 1 million disembarkations in 2024.

Cruise ships carry large crews, at a ratio of approximately one crew member for every three passengers. This implies crew visits of approximately 400,000 in Scotland in 2024. It is assumed that crew are more likely to remain on board during a port call. We have assumed for the purposes of this partial BRIA that 50% of crew disembark during an average port day in Scotland, meaning crew disembarkations of 200,000 in 2024.

Cruise visits tend to be concentrated in the summer months, with around 60% of cruise passengers scheduled to arrive in the busiest three months of June, July, and August, as illustrated in Figure 1. The largest cruise port areas in Scotland by passenger numbers are Invergordon (Highland), Orkney (Kirkwall and other harbours and anchorages), Edinburgh (including Newhaven, Leith and South Queensferry), Lerwick (Shetland), and Greenock (Inverclyde).

More detail on port calls is given in Table 1 below. It is assumed the number of passengers on board is equal to the passenger capacity, which aim to sail full, and are able to sail at more than 100% capacity (as each cabin is assumed to have capacity for two people but often holds groups of more than two). Where ports did not provide figures for estimated passenger capacity or passengers on board, passenger capacities were taken from cruise operators’ websites. The numbers in Table 1 do not include staff and crew on board. This can be a significant proportion of the total number of people onboard, but they are generally excluded from industry estimates and from arrival taxes.

May not sum due to rounding [1] All harbours and anchorages [2] Newhaven, Leith & South Queensferry

[3] Actual passenger numbers. When port calls were cancelled the passenger numbers were zero.

Source: Scottish Government Analysis of Cruise Schedules

Source: Scottish Government Analysis of Cruise Schedules

The infrastructure to accommodate cruise ships in Scotland has been developing over recent years. Cruise terminals opened in Aberdeen and Greenock in 2023, in Stornoway in 2024, and expansion plans are in place for Kirkwall. These represent significant investments, all including involvement by local councils to varying degrees, and reflect both the opportunities and pressures presented by large numbers of visitors arriving at once.

Cruise ship passengers who visit a destination bring economic benefits to the local visitor economy, through spending money at visitor attractions, local businesses catering to visitors, such as transport and tour operators, hospitality businesses, and retail. There will be much variation between how different groups of passengers on different ships and at different ports will choose how to spend their time and money. However, cruise visitors will generally spend less money than overnight visitors as their accommodation is included onboard the ship as part of their cruise.

* denotes average spend per night and ^ denotes average spend per visit

Source: Ekosgen, 2020

There is currently no agreed figure in terms of the total daily onshore spending per passenger. Table 2 is taken from a report published in 2020 that estimated that cruise tourists generate similar average daily spend as day trippers in Scotland at around £43 per day but are much fewer in number. It also estimated that cruise passengers tend to spend less per day than other overseas visitors (Ekosgen, 2020, p. 26). The estimated £41 million that was spent directly onshore by passengers and crew of cruises visiting Scotland represented 0.7% of all tourism expenditure in Scotland in 2019

These numbers are over five years old, so assuming they have increased in line with inflation would mean cruise tourists had an average spend of around £55 per day (Bank of England, n.d.).^[2] This average figure in the report was already adjusted to account for a proportion of passengers remaining on board during a port day.

Combining this estimated average daily spend of £55 with the estimated 1 million cruise passengers disembarking in Scotland in 2024, gives one estimate of total onshore spend of £55m in 2024. This equates to around 0.8% of the estimated £6.8bn total overnight visitor spending in Scotland in 2023, made up of £3.6bn by international visitors and £3.2bn by domestic overnight visitors (Visit Scotland, 2024).

However, industry estimates from CLIA put the total daily onshore spending per passenger at a higher figure of around £90 for 2022, which is around £95 in 2024 prices. This is based on survey evidence on spend per passenger across Europe (CLIA, 2022), including tours, as well as accommodation and inbound travel spend for embarking passengers (although it is worth noting that Scotland has a relatively low share of these embarking passengers).

Combining this higher level estimated spend of £95, with the estimated 1 million cruise passengers disembarking in Scotland in 2024, gives a higher estimate of total onshore spend of £95m in 2024. This equates to around 1.4% of the estimated £6.8bn total overnight visitor spending in Scotland in 2023 (Visit Scotland, 2024).

In addition to passengers there are large crews on board cruise ships. Analysis of available evidence from published schedules indicates that there is an approximate ratio of 1:3 crew per passenger. Industry feedback from roundtable events indicated that crew members might spend around £35 on shore on a port day. Applying this to the 1.2m passengers implies total crew calls of around 400,000, of which approximately half might disembark, so spending approximately £7m on shore in Scotland, or an additional 0.1% of total overnight visitor spending in Scotland.

Of the estimated passenger and crew spend of £41m in 2019, £35.9m (88%) was estimated to have been spent by passengers and crew landing at the five main ports for cruises in Scotland (Invergordon (£8.9m, 22%), Edinburgh (£7.6m, 19%), Kirkwall (£7.6m, 19%), Greenock (£7.1m, 17%) and Lerwick (£4.7m, 12%) (Ekosgen, 2020, p. 24)).

The local geographic spread of visitors’ spending will also vary by port. For example, visitors disembarking at mainland ports will have a range of options for day trips across the region, whilst those disembarking at island ports will mainly be limited to that island. In general, a cruise ship will be in port for less than twelve hours, meaning the time constraints on passengers will discourage them visiting attractions further afield that would increase the risk of missing their departure that day.

Some examples from the same research (Ekosgen, 2020) illustrate some local views of cruise tourism:

• Over 70% of businesses and communities surveyed in Orkney and Shetland thought that cruise tourism has increased visitor spend at attractions significantly, and almost 60% thought it has increased spend in local businesses significantly.
• More than half of businesses and communities (55%) surveyed in Orkney thought cruise tourism has generated new employment to a significant extent.
• Consultees in towns including Stornoway, Lerwick and Castle Bay reported benefits in summer arising from increased footfall in the town centres.
• As with overnight visitors staying in other types of accommodation, visitors arriving on cruise ships will put some pressure on local services, facilities and infrastructure, particularly in smaller and remote rural communities. This is likely to include roads, for example, which are used by coach tours and to access local attractions.

Some other points raised in the 2019 research included:

• Issues with traffic congestion and overcrowding in towns, villages and at visitor attractions.
• In Skye, coaches can only travel on major roads, which typically means the north end of Skye loop, and to some key destinations (incorporating the A87, A850 and A855 to visit Old Man of Storr, Dunvegan Castle, Eilean Donan Castle). This creates bottlenecks, and despite improvements in managing flows of people (pre‑booking times at attractions, improved parking, etc.), dispersal remains a challenge.
• The pressures in Shetland are not as great as those in Orkney. However tours tend to visit the same set of attractions, so even with good management of coach flows, the logistics are challenging.
• 75% of those surveyed in Orkney said there was a significant impact at certain times of the year in terms of pressure or congestion on the local transportation network. In Shetland, 60% said there was a significant impact.

Levies on cruise tourism internationally

There are a number of international examples of visitor levies that include cruise ships, sometimes charged as an entry, or access fee. These are sometimes charged at an international border (e.g. the “International Visitor Conservation and Tourism Levy” in New Zealand) or at a local perimeter (e.g. the “Venice Access Fee”). There are also various cruise ship levies, charged on different bases. A preliminary evidence review of a selection of international examples of relevant levies is being published by the Scottish Government, including a review of how such levies operate and evidence around their impacts. Cruise levies are in place in Amsterdam (Netherlands), Barcelona (Spain), Dubrovnik (Croatia), and Venice (Italy).

These examples demonstrate that there are different ways to structure and to administer a levy on cruise tourism. The evidence we have found does not show cruise ship calls reducing to a large extent after such a levy is introduced. Where levies have been introduced specifically on cruise visits, further measures have also been taken with the aim of limiting cruise activity. These include limitations on the number of port calls allowed per day, or banning ships over a certain size from docking.

A reduction in the cruise tourism as a reaction to a cruise ship levy is a key risk, and one area of uncertainty that would flow from giving a power for councils to introduce such a levy. There are alternative destinations both in Scotland and outwith Scotland that cruise ship operators could consider calling at to avoid a levy at a specific port. This has been seen, for example, in Amsterdam, where there are alternative ports (Ijmuiden and Rotterdam) an easy drive away from the city’s tourist sites that do not charge the same levy and are now more financially attractive to ship operators when planning itineraries.

Purpose/ aim of action and desired effect

During work to develop and consider a visitor levy on overnight accommodation calls were made for there to be put in place a similar levy that would apply to cruise ships and their passengers. Several parts of the world already have such levies, and some organisations believed that such a levy would also be appropriate in Scotland.

The Scottish Government has no plans to introduce a nationwide cruise ship levy. However, the Scottish Government is consulting on an optional power for local authorities to introduce a cruise ship levy. There would be no requirement for them to do so. It would be for each local authority to decide whether it wished to use the power.

The Scottish Government has made no decision on whether to give local authorities the power to introduce a cruise ship levy. The public consultation seeks views on giving local authorities such a power, and the reasons why consultees support or oppose such a levy. We are interested in the views that consultees put forward on the purpose of any such levy.

Those who support such a cruise ship levy argue that it would provide a means of raising revenue from the cruise industry, reflecting the impact that they believe cruise tourism has on communities and local authority services. Some stakeholders, linked to overnight accommodation, are supportive of a cruise ship levy. They believe that when overnight accommodation is subject to a levy, the cruise industry should also contribute through an equivalent levy.

Options (considered so far/ still open)

In the public consultation on a potential cruise ship levy the Scottish Government is asking for views on what alternatives (if any) would achieve the same goals as a cruise ship levy. The Scottish Government has not made a final decision on whether or not to give local authorities the power to introduce a cruise ship levy. We will consider carefully alternative options put forward by those who respond to the consultation.

In relation to the basis of a cruise ship levy charge, a number of options are put forward in the consultation paper for consultees to consider. These are set out in more detail below.

Firstly, a charging structure could be based on cruise ship passenger numbers. Charging a levy on the basis of the number of passengers would mean any levy reflected the number of people arriving on a cruise ship and therefore matched the pressures faced by a local area from cruise tourism. There are several ways of basing a cruise ship levy on measures related to the number of passengers on a ship. These are touched on briefly in turn below.

• Capacity: Each ship has a passenger capacity, usually defined as double occupancy in each passenger cabin. In reality this is unlikely to be the exact number of passengers on board, because some cabins will accommodate more than two passengers (e.g. a family cabin), and not all cabins will be occupied on each voyage a ship takes. This capacity number could form the basis for a charge.
• Passenger list: All passenger ships are required to maintain a list of passenger and crew, which they will share with port authorities in advance of their arrival. This will be an accurate measure of the number of passengers on board, but will not reflect how many people will disembark in any given port. It will also have some details about the passengers, potentially allowing for application of exemptions on the basis of age, for example. This passenger list could form the basis for a charge.
• Disembarkation: The number of people actually disembarking a ship will have the closest relationship with any local pressures. As far as we are aware ports do not currently have a legal requirement to count passengers off and on to the ship. However, ship operators will have an interest in ensuring that all passengers are on board before they leave port. A number of port calls also involve transferring passengers to the shore on smaller “tender” vessels”. This suggests that operators may keep a record of who, or how many people have disembarked their ship during a port call. This number of people disembarking could form the basis for a charge.
• Based on gross tonnage (GT), which is the industry standard measurement for the size of many types of larger vessel. It is a measure of the internal space of a vessel, and so will be related to the passenger capacity, and will also be affected by the volume of space not used for passenger accommodation, e.g. communal space, crew areas, storage, etc. Port fees already paid by ship operators are often structured and charged on a GT basis, to reflect the size of a given vessel. The information required will therefore be easily to hand to all parties directly involved in a cruise ship port call. There are two broad sub-options for how to charge based on GT. These are a fee per gross tonne, or a stratified approach where there would be a charge per gross tonne under a certain threshold or thresholds, with a different charge per gross tonne above that. This could be designed to charge larger vessels more, or less, than smaller vessels.

A cruise ship levy could also include some environmental element, for example based on vessel emissions, or vessel carbon intensity. Cruise ships contribute to both greenhouse gas emissions, such as carbon dioxide, and also local air pollution through sulphur dioxide, nitrous dioxide and particulate emissions. Cruise operators have been making significant investments in reducing emissions. A policy design that rewards this, potentially through reliefs for lower emission vessels, could be part of the design of any cruise ship levy. However, this would need to be explored further to establish what information is available on the emissions performance of each vessel, and who has access to that information.

There may be material considerations that can be taken into account when calculating a levy charge, such as the ship’s year of build, fuel type, the ship’s Carbon Intensity Score (CII) grade, or other features that improve environmental performance.

As part of the public consultation, the Scottish Government is seeking views on whether any cruise ship levy should consider the environmental impact of a cruise ship. Depending on the responses to the consultation, this aspect could be developed at a later stage.

Sectors/ Groups affected

A levy on cruise ship calls in Scotland could affect a range of public bodies, businesses and consumers from Scotland, the rest of the UK and from overseas, as well as some local communities around Scotland. These are discussed in turn below.

Public bodies

If the Scottish Government decides to give local authorities the power to introduce a cruise ship levy in their areas, each local authority would have to decide whether to introduce such a levy, and potentially the rate at which it is charged. Introducing a cruise ship levy is very likely to increase administrative burdens, depending on how it is implemented. Choices local authorities make on how to spend additional revenues may impact other areas for which they are responsible.

Some ports in Scotland are publicly owned and so impacts on port operators may be felt in the public sector as well as the private sector.

Businesses

One possible way of administering a cruise ship levy would be to make cruise ship operators responsible for paying the levy, either to councils directly, or through port operators who would pass it on to councils. This could lead to additional administrative burdens on cruise ship operators and also increase the cost of operating a cruise voyage that calls at ports where a levy is in force. In estimating economic impacts on business, it is worth highlighting that most of the major cruise operating companies do not have offices in Scotland, or anywhere in the UK. As such they would not usually be included in calculations of impacts on the Scottish economy and residents. Around one third of cruise passengers calls at Scottish ports in 2024 were by UK-owned cruise ships.

As part of their business, some port operators provide port services to cruise ships. If cruise operators change their itineraries to avoid some ports on account of a levy, those port operators may face a reduction in demand for these services. Some ports are owned by non-UK companies. Given the physical presence in Scotland, all of the port operations are included in considerations of economic impacts on business in Scotland.

Businesses supporting ship operations may include local shipping agents, who handle much of the interactions between local ports and the ships calling at them, or companies providing supplies or services to ships when they begin a journey, or sometime when they make a port call. Depending on the details of a potential levy, and the impact it has on port calls, this could impact demand for their services.

Businesses supporting cruise tourism may include local retail, leisure, hospitality, tour operators, taxi companies and a wide range of other businesses that cater to the needs of tourists in the area, be they cruise passengers or not. Any impact on the number of passengers disembarking could affect these businesses. On the other hand, however, they could benefit from council reinvestment of levy revenues to support the local visitor experience, if that is how they choose to use those revenues.

Consumers

It is likely that cruise operators would pass the cost of the levy onto passengers. Alternatively, operators may change destinations to avoid calls at ports with the levy in place, thereby reducing costs for passengers.

Communities

There have been instances of complaints from some local communities that the volume of cruise passengers in the area at certain times can feel overwhelming and create problems with congestion or pressure on access to local attractions (Scottish Government, 2024). A levy may help alleviate this by providing local councils with resources, which could be used to help mitigate perceived issues. This would be more likely to affect smaller communities than Scotland’s cities.