Abstract
A review of seven large landlord port authorities around the world reveals a notable diversity of pricing structures. While port authorities increasingly act as commercial undertakings, port pricing often seems to be not driven by commercial considerations. In this paper, we argue that ports can be regarded as “business ecosystems” with multiple users. This provides a valuable perspective on pricing and raises the question of whether ports can be regarded as two-sided markets. We argue this is not the case. The business ecosystem perspective provides a basis for deducing seven pricing principles for port authorities that are detailed in the paper and illustrated with cases these principles. These pricing principles are broadly follow a direct user pays approach; capture value from “non-core” tenants; price aggressively for activities with a high strategic value; differentiate pricing based on price elasticity and connectivity improvements; maximize revenue from long-term lease agreements, price port dues competitively; critically consider differentiation of charges based on environmental performance; and finally use incentives to align interests of terminal operators and shipping lines. We conclude that the ecosystem perspective is central to the understanding of pricing decisions of port authorities and that various pricing issues deserve more attention.
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Notes
One example of port development that failed to meet this challenge is the container terminal in Amsterdam. Due to fierce competition from nearby ports, as well as some disadvantages of Amsterdam (the need to pass a lock, as well as draft limitations), shipping lines did not call the port with sufficient services to make it an attractive alternative of established ports in the area (i.e., Rotterdam and Antwerp). As a result, the foreseen container flows never materialized.
We benefitted with previous research efforts to find annual reports, see Van der Lugt et al. (2015).
The financial statement of TNPA of 2012 did not provide sufficient details to determine the division of the revenues by different type of port users. Therefore, we used figures of the current division as outlined in the proposal for a new tariff structure TNPA (2012).
In the airport industry, best comparable with seaports, managing bodies have a much more uniform pricing structure with a distinction between aeronautical and non-aeronautical revenues (Graham 2009). The shares of revenue types differ between airports, for instance in relation to the size of the airport (in larger airports the share of non-aeronautical revenues is higher), but there are widely applied principles regarding who is charged for what.
In the literature (two-sided) markets and (two-sided) platforms are both used. In the remainder of this paper, two-sided market is used for the theory, a platform is the infrastructure, product or service through which the interaction takes place. The customers linked to the platform are defined as the markets.
There is one other option that we do not explore in detail: differentiating pricing between cargoes with captive destinations (relatively high charges) vis-à-vis contestable destinations. This is only possible when shippers are charged directly (a pricing scheme we argue against, see pricing principle 1). An alternative is to provide more competitive prices for rail transport, as rail transport is generally over a longer distance and thus more likely to serve customers in contestable hinterlands. This issue is treated below, as it promotes intermodal connectivity.
Information about the Environment Ship Index and participating ports can be found at http://esi.wpci.nl.
Van Duin and Geerlings (2011) developed a model to calculate the CO2 emissions of a container terminal. Incentives or discounts could be proposed when tenants are able to reduce their environmental impact compared to the base year. The model also aims at providing directions for improvement like using electric driven vehicles.
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This research is supported by the Dutch Institute for Advanced Logistics (DINALOG) and was part of a research project on efficient multimodal hinterland networks.
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Van Den Berg, R., De Langen, P.W. & Van Zuijlen, P.C. Revisiting port pricing; a proposal for seven port pricing principles. WMU J Marit Affairs 16, 421–438 (2017). https://doi.org/10.1007/s13437-017-0127-y
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DOI: https://doi.org/10.1007/s13437-017-0127-y