Cruise lines: 'We do not accept Mexico's $42 fee'Cruise lines: 'We do not accept Mexico's $42 fee'

Cruise industry leaders have told Mexico 'We do not accept the $42 fee,' according to Michele Paige, CEO of the Florida-Caribbean Cruise Association.

She said Carnival Corp. & plc's Josh Weinstein, Royal Caribbean Group's Jason Liberty, Norwegian Cruise Line Holdings' Harry Sommer and MSC Group's Pierfrancesco Vago — whose companies represent the bulk of Mexico's cruise traffic — have indicated they're ready at a moment's notice to fly to Mexico City if they can meet with 'the right people.'

'Our ask is for the Mexican government to grant us a meeting with the chief of staff or the president to be able to recognize the importance of Mexico and the cruise industry together,' Paige said.

Collection issues

The FCCA met with Tourism Secretary Josefina Rodríguez Zamora a few times and Treasury Secretary Carlos Lerma once, but they've only conveyed the message that 'This fee is going to be put in place. This fee is not against cruise lines. It's against passengers. They don't know how they're going to collect it ... And we should be very happy because they've given us the six-month delay,' Paige related.

The delay until July 1 came about because 'We kept emphasizing this is something we cannot collect,' Paige said. 'Most of our ships are full for next year. We're not going back and charging the $42.' So lines would have to eat the cost.

Related:Mexico delays implementing $42 cruise fee for six months

And going forward, she warned Mexico's 'pricing [itself] out of consumer demand.

'We take cruise passengers where they want to go, and cruise lines are in business to make money.' It all comes down to whether people are willing to spend $168 more for a family of four, without getting anything extra in return.

Seatrade Cruise News asked a couple large cruise retailers for their perspective, but they declined to comment. Another said Mexico cruises typically book closer in — within six months — because of proximity and length, making for the shortest booking window apart from Bahamas getaways.

Seeking a win-win

Still, said FCCA President Adam Ceserano: 'We're not prepared to implement the fee at all. We haven't agreed to the number. There's a lot of work that needs to be done, and we need to ... have an ongoing discussion about what could be a win-win for the industry and for Mexico. Right now, we're very far apart.'

The FCCA's Michele Paige with Adam Ceserano, right, and Norwegian Cruise Line Holdings' Dan Farkas, left, chair of the FCCA operations committee, during the association's 2023 conference in Mazatlán, Mexico PHOTO: FCCA

Paige and Ceserano said the industry's open to discussing ways to increase economic impact in the country through purchasing and employment. Currently lines do more purchasing in Puerto Rico than Mexico, because Puerto Rico has a program addressing cruise line needs.

'Mexico is not looking at the cruise industry as a true economic driver. There's so much we could do,' Paige said. Another example could involve the new Ruta Maya train linking coastal cities with destinations in the interior that don't get much tourism.

'Cruisers are in-transit'

Hiking the immigration fee to $42 is 'completely unfair,' in Ceserano's view because cruise passengers are in-transit, spending about six hours in port. That's been their recognized status for years.

'We were given an exemption because we do not fall into the same place as airline passengers,' Paige explained. And visitors who cross the border by land aren't charged the higher fee as long as they stay under seven days.

Paige said the $42 cruise fee applies once, for the duration of the sailing in Mexico; it is not levied at every port. However, some industry sources said that's not clear.

The use for this revenue hasn't been clarified, either. Mexican media have reported most of the money will go to Mexico's army. (Since 2020, the army has been in charge of the seaports, a change made by former President Andrés Manuel López Obrador aimed at combating corruption and drug smuggling.)

Cruise lines are 'scrambling'

Some 9.3m people were expected to visit Mexico by cruise this year, a number projected to top 10m in 2025.

But now lines are 'scrambling to see what they're going to do,' Paige said. There's talk of reducing Mexico deployment, but it's complicated.

Cruise itineraries are planned 18 to 24 months ahead, and sales open to the public with the pricing, and government fees and taxes, disclosed to consumers by law.

Whether there's a mechanism to get around that is unclear.

According to an industry legal expert, 'Depending on the specific language provided to the consumer at the time of booking, cruise lines may have the flexibility to pass on to booked passengers the proposed $42 per passenger Mexico tax. However, the California “Honest Pricing Law” that became effective on July 1, 2024, does not appear to provide any flexibility for cruise lines to pass on charges that were not part of the “advertised price” for transactions subject to the California law.'

This law resulted in cruise lines going to uniform national pricing.

Seatrade Cruise News reached out to the cruise giants to ask if they're hearing concerns from customers or travel advisors, how the operators might change plans, if they're implementing the new fee and what this means for their investments in Mexico. All of them deferred to the FCCA.

A lot of cruise line money is going into infrastructure that supports Mexico tourism, both on the ground there, and stateside. Royal Caribbean Group plans to buy Puerto Costa Maya and adjacent land for $292m, transforming it into Perfect Day Mexico, which Quintana Roo's governor has said would mean a whopping total $600m investment. The company also intends to develop a Royal Beach Club Cozumel. Royal Caribbean hasn't announced any changes so far.

At the Port of Galveston alone, a fourth cruise terminal is being built, with MSC Cruises to begin sailing from there, along with Norwegian Cruise Line deploying a larger ship with an eye to going year-round. Royal Caribbean co-funded a terminal for its biggest vessels. Mexico is fundamental to those Galveston itineraries. It's the same for California homeports, and even cruises to Hawaii stop in Mexico to satisfy US cabotage.

Cruise passengers flow ashore at Cozumel PHOTO: ANNE KALOSH

Yet Paige recalled a seismic shift from the past that sprang from another destination's big price hike. On that occasion, The Bahamas 'doubled fees to the cruise industry, and the industry didn't feel that was warranted,' so ships pulled out. And that was the beginning of Cozumel's growth as a cruise port. Could things swing the other way?

In the case of Mexico now, the FCCA calculated that even a modest 10% to 15% reduction in cruises would nullify any revenues collected from the $42 fee.

More costly than Caribbean competitors

Initially, the FCCA determined it would make Mexico 213% more expensive than the average cost at Caribbean ports. However, the percentage is actually higher for ports in Quintana Roo, home to Cozumel and Costa Maya, in light of a previously agreed $5 fee set to take effect Dec. 31.

Before the $42 came out — shocking the industry with no advance notice — the FCCA in partnership with Quintano Roo's governor agreed to a fund for improvements to tourism infrastructure that elevate the product for consumers. Under a memorandum of understanding, both the state and the lines will chip in $5 per passenger to the fund. And both parties, working together, will determine how best to apply the money.

Adding $42 to the $5 makes Cozumel 283% more expensive than comparable nearby cruise destinations, and Costa Maya 235% more expensive, according to Ceserano.

That $5 fee was agreed after meetings stretching over a year, and cruise lines know where the money is going. 'We did this as good partners,' Paige said.

Who are going to be the losers?

But now 'It almost seems like the federal government has cut off the states,' she continued. '... Who are going to be the losers? All the people in the states, the communities, who are the recipients of the expenditures of the cruise passengers and the crew.'

Cruise industry stakeholders in Mexico are worried, and a demonstration took place recently in Cozumel. Governors reportedly have expressed their concerns to the federal government.

It's been more than a dozen years since the country decided to classify cruisers as in-transit. Back then, like now, a law was passed to raise the immigration fee. But the cruise industry was engaged in talks with officials that resulted in the in-transit designation.

'So we're still hopeful,' Paige said, 'that they're going to say "The cruise industry is very important to Mexico. Let's work together."'