Feasibility of Operating
The S. S. Canadiana on Lake Erie
by Economics Research Associates prepared for
Western New York Economic Development Corp. and the Friends of the Canadiana,
Inc. [Abstract]
Contents:
I____ Introduction.
II___ Executive Summary~~~~~~~~~~~~(expanded)
III___ Market Conditions~~~~~~~~~~~~(omitted)
IV__ Survey of Comparable Facilities~~~~(omitted)
V___ Ridership Projections.~~~~~~~~~~(omitted)
VI__ Financial Analysis.~~~~~~~~~~~~~(omitted)
VII__ Economic Impact.~~~~~~~~~~~~~(omitted)
App. ERA Project Descriptions.~~~~~~~(omitted)
Tables
III-1
Historic and projected Buffalo population.
VII-1 Incidental
spending by Canadiana passengers.
VII-2
Total economic impacts.
Note... The full report is over 70 pages. For the sake of size we have omitted
chapters III thru VII and the Appendix while making every effort to carry their
full meaning in an expanded Executive Summary. We have bracketed the wording
that has been brought in to the original summary. A complete copy of the
Feasibility Study is available for a nominal copy and postage fee of $4.00.
Section I
Introduction:
Economics Research Associates (ERA) was retained
by the Western New York Economic Development Corporation and the Friends of the
Canadiana, Inc., to determine the feasibility of operating the vessel, once
restored, as a cruise ship and passenger ferry on Lake Erie. Specifically, ERA
was asked to:
-examine the potential markets for cruise ship operations;
-analyze the operation of comparable vessels;
-project ridership totals, by category;
-review and analyze financial aspects of proposed operations;
-prepare an operating statement; project the economic impacts of such as
operation on the -City of Buffalo; and
-identify funding sources for restoration costs.
Four factors make this idea an interesting proposition. First, and most general,
is the almost mystical appeal which ships and water seem to have to many people.
Second, the Canadiana, when restored, will be a first-class experience, with
modern equipment and furnishings, a number of amenities and a large passenger
capacity. Third, the Canadiana is remembered by many in the Buffalo, Crystal
Beach and Port Colborne areas and her restoration efforts have sparked
considerable interest. Finally, and perhaps most important, the Canadiana
represents a financially sound opportunity for the citizens of Buffalo and
Western New York to invest in their economic future. While we have recommended
some changes in the program, we find the basic concept fundamentally sound.
Section II
Market Considerations
Median household income, which had been declining
in real terms, is currently keeping pace with inflation, and is expected to
increase in real terms.
Tourist visitation to the area is high, due to the presence of Niagara Falls,
one of the "natural wonders" of the world. (Casual estimates of visitation to
the Niagara Frontier range from eight to twelve million persons per year.)
Tourism to Buffalo however is considerably lower. A total of 750,000 visitors
(250,000) overnight plus (500,000) day trip, came to Buffalo in 1986, a figure
that is projected to increase by about 3-5% per year. Convention delegates to
Buffalo numbered about 50,000 (plus 50,000 in smaller facilities throughout Erie
county) and growth was projected at 10-15% per year, based on advance bookings,
increased activity and an increased marketing budget.
There are a number of large corporations and trade associations in the Buffalo
area as well. Buffalo as the state's second largest city, plays a role as
regional government headquarters, a banking and communications center, an
educational and medical center and a distribution area for the Western New York
region.
(Conclusions:
Buffalo is a diverse market for an attraction such as the one proposed. The
regional population, while declining, appears to be doing so at a lower rate
than in the past. Other statistics, such as trends in effective household buying
income, indicate that the economic downturn may have bottomed out. Tourism has
increased over the past two years and is expected to grow at a modest rate.
Convention bookings are increasing and the area remains a popular shopping
destination for Canadian citizens, a factor which may be positively affected by
the decline of the U.S. dollar relative to world currencies in recent months.
The city is home to a number of major employers, public and private, as well as
regional trade associations and organizations. With the exception of the Buffalo
Zoo, the closest regional attractions are Niagara Falls and Darian Lake.)
Comparable Vessel Operations:
ERA examined the operation of six comparable
vessels, five in the northeast and one in Louisiana. Operating characteristics,
such as cruise offerings, amenities and ticket prices were fairly similar
although some variations were observed. Ridership generally exceeded 50% of
capacity.
(The vessels assessed were:
S.S. Natchez; a steam powered sternwheeler operating out of New Orleans. 265 ft
long including wheel, 46 ft wide and a capacity of 1,600 people on three decks.
Equipped with bar, gift shop, buffet dining room and galley and a dance floor.
S.S. Minne-Ha-Ha; also a sternwheeler, 103 ft long with 30 ft beam. Capacity 300
riders. Operates on Lake George NY.
S.S. Columbia and S.S. Ste. Claire; both propeller driven and operating in the
Detroit area. Columbia is 200 ft long, a 45 ft beam and a capacity of 2,566
persons on three decks. The Ste. Claire is 181 ft by 50 ft with a capacity of
2414.
S.S. Chautauqua Belle; a reproduction of a Mississippi River paddlewheel
steamboat operates on Lake Chautauque in WNY. It is 65 ft long with a 20 ft beam
with two decks and a capacity of 120 persons.
S.S. Trillium; a side-wheeler with a length of 150 ft and a 30 ft beam. Operated
by the City of Toronto, Ont.
S.S. Belle of Louisville; oldest operating steamboat on the Mississippi River. A
sternwheeler, 168 ft long by 41 ft beam with a capacity of 800 persons. She is
equipped with a bar, a souvenir shop, a bandstand and a dining area.
Conclusions:
As can be seen, there are a number of comparable
vessels throughout the eastern United States and Canada. Although each has its
own unique operating characteristics dictated by local market conditions and the
physical limitations of the vessel itself, cruises and steamship rides remain a
popular pastime as a recreational activity and a profitable venture for
operators.)
Ridership Projections:
Based on an analysis of available markets and
comparable systems, ERA proposes:
~~~~~90 day operating season;
~~~~~a week-day schedule of an afternoon cruise for two hours, from 2:30 to
4:30.
~~~~~a sunset cruise, from 7:30 to 9:30; and
~~~~~dock-side luncheon service from 11:30 to 1:30.
(1995 update. On week-ends, ERA suggested two round trips to Crystal Beach.
Weekends can now be used for a variety of other purposes as described in the
preface and else-where in this book. We believe this new circumstance will
affect all previous estimates of the ERA in a positive manner.)
Using this schedule, ERA has projected total ridership of 208,350 to 238,100
persons.
(As noted in the prior section concerning market conditions, there are several
factors which make Buffalo a good market for the proposed venture. first, there
is a high percentage of persons 65 and over in the resident population. This age
bracket tends to have more leisure time and, increasingly, tends to participate
in organized activities.
Second, average household disposable income has increased in recent years, so
that it is now keeping pace with inflation, and is projected to grow in real
terms by 1990. This will mean that more residents will be predisposed toward
recreational activities such as the Canadiana.
Third is the projected growth in tourism and convention business. According to
the New York State Department of Commerce, approximately 40% of all tourist
travel to the Niagara Frontier occurs during the summer months. Border crossings
also increase proportionately in the summer months, in both directions. Thus
approximately 325,000 tourists and 25,000 convention attendees are available as
potential customers, in addition to one million residents.
Fourth, the Erie Basin Marina attracts high numbers of people during the summer
season, indicative of an interest in the waterfront.
Fifth, the waterfront development plans as proposed by the City of Buffalo and
the Niagara Frontier Transportation Authority include provisions for the
Canadiana.
Finally, this concept has been proven successful in other markets. The
Minne-Ha-Ha for example, a vessel with a capacity of only 300 persons, carries
approximately 100,000 persons per season. In a similar situation, the Columbia
and the Ste. Claire carry 450,000 passengers per year. Thus it is anticipated
that the Canadiana will be equally well supported.)
Financial Analysis
ERA proposes a ticket price schedule of $7.50 for
adults, $4.00 for children, $6.00 for adult groups, and $3.00 for children in
groups. Based on observed ridership on other vessels, ERA has projected that 50%
of all ridership will be full-fare adults, 30% groups, 10% full-fare children
and 10% free. Using these allocations, ticket revenues of $1.2 million will be
achieved. Spending on food and beverages on board will generate $1.25 million;
the dockside restaurant, $160,000; and the gift shop $52,000. Total revenues
will be $2.67 million.
Operating expenses will include salaries, wages and fringe benefits; supplies;
maintenance, janitorial service, fuel, insurance, marketing, administrative
costs, and cost of goods sold. A contingency has also been allocated. Total
expenses will be $2.23 million. An operating profit of $436,000 will be
realized.
Funding Sources:
In addition to funding from the EDC, public
sources for the restoration of the vessel and for infrastructure and waterfront
improvements at the terminals will include: the Economic Development
Administration; the Department of Housing and Urban Development's UDAG program;
the Community Development Block Grant program; the New York State Department of
Commerce Job Development Authority; the City of Buffalo; the New York State
Legislature; and the Province of Ontario. It is emphasized, however, that the
public funding is highly competitive and should not be depended upon.
Private sources include foundations, corporations and individuals. Each source
has associated costs and requires a different strategy.
Economic Impacts:
Direct impacts of the Canadiana will be
$2,800,000 annually. Total impacts (direct plus indirect spending) will be
$7,000,250. Of this total, $3,654,500 will remain in Buffalo.
(Approximately 210,000 persons per season will ride the Canadiana. Of these,
about 156,000 will be non-stop cruise passengers; that is, there will be no
place of debarkation other than Buffalo. Spending by these people in conjunction
with their cruise will include transportation costs (gasoline, taxi fare or
public transit fees); parking expenditures and incidental purchases en route
such as visits to retail establishments and restaurants.)
Approximately $145,000 in tax revenues will be generated by direct spending. No
attempt has been made to quantify taxes generated by indirect spending.
Operation of the Canadiana will create a total of 77 full- time and 35
part-jobs. (The Canadiana will require six full time and 35 part time (nine
full-time equivalent) personnel. In addition, a number of other positions will
be created by the spending for operations and incidental purchases. At an
assumed rate of 1 job for every 100,000 of direct spending, another 20 full-time
positions will be created. Incidental spending will result in 5.7 full-time jobs
and indirect spending will create 45 jobs.)
Approximately 30 of the full-time, and all of the part-time jobs will be in
Buffalo
Finally, it must be noted that the Canadiana will have a positive effect on the
overall waterfront development effort, and on visitation to the waterfront, as
it demonstrates successful rehabilitation of the City's coastal areas and adds
to the "critical mass" of visitor activities and attractions. No attempt has
been made to quantify this impact.)
Table III-I
Historic and Projected Population Trends In
Buffalo
1970 1980 1990
Buffalo 463,000 358,000 329,000
Erie C. 1,113,000 1,015,000 954,000
SMSA*1 1,113,000 1,015,000 954,000
*1 Erie and Niagara Counties
Source: U.S. Census Bureau, New York State
Department of Commerce,
Sales and Marketing Management and
Economics Research Associates.
Table VII-1
Incidental Spending By Canadiana Passengers
Category Trans. Parking Retail Total
Single-Destination Cruise 78,000 156,000 39,000 273,000
Buffalo-Crystal Beach 19,500 78,000 - 97,500
Crystal Beach-Buffalo - - 195,000 195,000
Totals 97,000 234,000 234,000 565,500
Allocated to Buffalo 32,500 234,000 208,000 474,500
Source: Economic Research Associates.
Table VII-2
Total Economic Impacts:
Category Dir/Impact [x] Tot/Impact
Canadiana Oper. 2,234,600 2.5 5,586,500
Transportation 97,000 2.5 243.750
Parking 234,000 2.5 585,000
Retail Sales 234,000 2.5 585,000
Totals 2,800,000 2.5 7,000,250
Amount allocated
to Buffalo *1 1,461,800 2.5 3,654,500
*1 It has been assumed that 50% of the Canadiana's
operating expenditures will be made in the
City of Buffalo.
Source: Economics Research Associates
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