About The Landing Fee
The Portland Spirit works hard at keeping our cruises affordable and memorable. The last few years has demonstrated that our old pricing model is no longer workable. Our customers vary from a couple celebrating an evening out to groups of 600 convention attendees. The couple can book the day of their celebration and that same day the convention organizer will book up to two years out. The Portland Spirit organization performs nearly 2,000 cruises a year representing about 150,000 guests. We have really struggled with pricing and have decided to adopt a new way of pricing.
In the past we had our base cruise price and for a few years we had a $2 fuel surcharge for all passengers. This surcharge was inadequate and did not begin to cover wild fluctuation in costs. I know there has been low core inflation for several years. There are costs that not directly reflected in the national inflation rate. Here are a few unanticipated cost increases the Portland Spirit has been impacted by the last couple of years.
When the City of Portland instituted 'Paid Sick Leave' for all employees forcing us to upgrade our payroll system to track something that existing software programs were not designed for, we were surprised at the upfront and continuing costs of the program. This one program is over $.50 per passenger in cost. The full impact of this program has not been determined as employees are only just starting to use it more aggressively.
We have always provided health care to our full time and many of our part time employees, but the Affordable Care Act (ACA) increased our health care costs significantly. The ACA was designed to significantly slow the rate of annual increases in health care costs, but sadly this has not been true. The amount of paperwork to report each employees status as to their choice of getting health care (or to not get it) to the Federal government is incredible. The Federal rules are still in being written, but the rules for non-compliance provide large fines for employers.
The price of fuel has been all over the place while food pricing has done nothing but go up. The demand for seafood and quality dairy products has been skyrocketing with no relief in sight. California last year adopted a State law requiring all eggs sold in California had to come from chickens that were provided extra living space. This additional living space is expensive as California egg producers were forced to reduce existing flocks to comply with the new space requirement. Oregon growers, able to get much higher prices in California, sold their eggs to California. This egg sell off force a large price increase for all end users of eggs in Oregon.
It is true we are spending less on fuel than we were just two years ago. But we had invested heavily in new, more fuel efficient engines the last ten years at great expense. Those investments would not be justified with current fuel market prices, but they still must be paid for. Hopefully, the price of fuel will remain low for a while so we can keep the Landing Fee in balance.
The Marine Transportation Security Plan, a Homeland Security required program gets more expensive annually with required equipment and training being added to the plan. This year alone we have been forced by regulation to invest near $1 per passenger in new security/safety equipment. Since 9/11 our spending on additional requirements never seem to slow down.
Oregon has had the second highest minimum wage (currently at $9.25 per hour) in the nation with an annual cost of living adjustment that went into effect on January 1st. Oregon does not count tip credit or service charge (about $6 per hour in additional compensation) towards an employee's minimum wage. In February 2016 the Oregon state legislature has decided that the State minimum wage was not high enough and it has decided a new wage of $9.75 will go in effect starting July 2016 with large annual increases after that till 2022. We are not sure how to deal with this unexpected huge cost.
To provide the Portland Spirit some breathing room we created the Landing Fee in 2013 and it is currently at $4 per passenger for all cruises. In 2014 we started a process to identify a new reservation software program that will allow us to be more responsive to the market. We hope to have the new system in place by April 2016. The new system will cost about $250,000 and have an annual cost over $45,000, but we feel it is vital to invest in this new system. This new system will allow us to change our pricing model. The new pricing model will have base prices for people that book their cruises far in advance to save money, but as the cruise dates gets closer and/or the cruise fills up the price will increase. We believe this will allow us to fairly increase revenue to pay for additional costs and provide guests the best value we can.
This is a completely new pricing model for us and we will be experimenting with how to move prices up and how to do it in a reasonable fashion. We will continue to have a landing fee and it will remain at $4 per person. But as we become more proficient at demand pricing the landing fee could be adjusted.
I encourage everyone to share their feedback with our pricing as we go forward. We are proud of the wonderful memories we have provided to the millions of our guests in the past and look forward to continuing those experiences with the best value in the future. We are in new economic territory and we must adapt and evolve and I hope you will all assist us in keeping the Portland Spirit viable.
Sincerely,
Dan Yates, President
Portland Spirit
dan@portlandspirit.com
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