The two chambers of Mexico's legislative branch have approved a $42 head tax on cruise passengers. If the measure goes into effect as anticipated, will it dampen demand for Mexican ports?
Cruise trade groups are sounding the alarm, but one expert suggests that the charge will be baked into cruise prices, and it will be business as usual.
The Florida-Caribbean Cruise Association (FCCA) said in a letter to Mexican president Claudia Sheinbaum that the tax would make cruising in Mexico 213% more expensive than the average Caribbean port, effectively pricing Mexico "out of the cruise market."
"Cruise lines are already actively considering significantly altering itineraries," FCCA CEO Michele Paige wrote.
That was echoed by the Mexican Association of Shipping Agents, which said that the tax would benefit other Caribbean ports where passenger fees would be, on average, three times less than in Mexico.
Paige warned in the letter that $42 per person is "a cost that cannot be easily absorbed by most cruise guests." She also expressed concern with the last-minute notification and implementation of the tax, saying it gave cruise lines "virtually no time to prepare, and it creates confusion and uncertainty for our guests." Further, she said, "there is no clear understanding of exactly how this is to be implemented in practice starting in 2025."
The FCCA said Dec. 9 that the implementation of the tax had been delayed until July 1.
The tax is 'essentially a rounding error'
However, Andrew Leahey, adjunct professor at Drexel University Kline School of Law and a columnist for Bloomberg, said he hasn't seen any indication that countries and cities that have adopted a tourist tax have seen appreciable tourism decreases.
While most people won't want to pay an additional $42, "if it's baked into the cost of the trip, it's essentially a rounding error," he said. "I can't imagine very many people that take an annual cruise would pull the plug owing to a trip going from $1,800 to $1,842. It'll almost certainly be absorbed by most customers."
The $42 tax has long been charged to Mexico visitors, but cruisers had been exempt since they overnight on ships. In a statement, the government said removing the exemption would treat foreigners who enter the country by air and sea equally. Cruise ships also pay port fees in Mexico, which the FCCA said amounted to $62.6 million during the 2023-24 cruise year.
Leahey also said that Mexico's wanting to end the cruise industry's exemption is logical absent the administrative capacity to levy a tax for those who disembark, such as Venice's day-pass system.
"The more protective economic position would be to tax all the cruise passengers as though they may disembark," he said, adding that cruisers would be unable to avoid the tax by staying on the ship.
And even if they are not in a destination as much as hotel guests, "the influx of folks from the cruise industry invariably foists costs onto local economies," Leahey said. "Even factoring in whatever economic activity they spur when they visit."
Advisor: Mexico interest has been waning
Tawnee Sons, co-owner of World2Sea, a Cruise Planners franchise in Valrico, Fla., thinks the head tax will impact demand for Mexico ports of call.
"It represents a significant hike, especially in a market where guests are already grappling with steadily rising taxes and fees each year," she said. Only a few years ago, she added, taxes and fees on a seven-day cruise typically ranged from $100 to $150 per person.
"Today, the average has climbed to $200 to $250. An additional $42 per person for itineraries that include a port in Mexico is likely to exacerbate frustration during the booking process," Sons added.
Sons said demand for Mexico itineraries is already on the decline after several years of strength that was driven by uncertainty in regions like Europe and the Middle East.
"The trend is now shifting toward destination-based travel, further diminishing demand for Mexican ports of call," she said. "Given this decline in interest, a substantial increase in fees could make these itineraries even less appealing, particularly for families and affinity groups, who often choose cruising as a value-oriented vacation option."
The FCCA said that Mexico tax would be "particularly damaging" to Quintana Roo, the Mexican state that is home to Cozumel, Mexico's busiest cruise port, and Costa Maya. The FCCA says cruise tourism represents 40% of GDP in Quintana Roo.
U.S.-Mexico political considerations?
The tax was approved shortly after President-elect Trump said he planned to impose tariffs on both Canada and Mexico. Leahey said it's possible that Mexico's decision will "draw the ire of the incoming Trump administration and the disproportionate effect -- real or perceived -- on American travelers may be used as an impetus to raise tariffs on Mexican imports."
While Leahey doesn't think the tax was a direct response to Trump's tariff threats, he said it could be a reaction to Trump insisting Mexico "do something" about U.S. border crossings, given that most of the tax will fund the Mexican army.
"I can imagine the Mexican army needing additional funding to send additional troops and supplies to the border and/or step up enforcement elsewhere," he said.
The tax makes Mexico the latest country to target cruisers to raise revenue. New Zealand this year increased cruise passenger fees by 74%; Iceland levied a tax on cruisers this year, charging them more than hotel guests; and Greece's prime minister this fall made plans to impose a $20 levy on cruisers to Santorini and Mykonos.
This report was updated to include information about a delay in implementing the tax.