Cruise line executives speaking at the annual Seatrade Cruise Shipping Convention in Miami last week presented a surprisingly rosy outlook despite record oil prices and the U.S. economy’s bleak outlook.
While not immune to a weakening economy, the cruise industry has a track record for standing strong in harsh economic times. Gerald Cahill, Carnival Cruise Lines’ president and chief executive, pointed to the tough years of 1990 and 2001. “In spite of those years, cruise lines still grew,” he said. “The industry was remarkably resilient despite the economic downturn.”
“We’re weathering this quite well,” said Dan Hanrahan, president and chief executive of Celebrity Cruises and Azamara Cruises, divisions of Royal Caribbean Cruises International. “Travel agents remain very bullish on what is going on, and travel agents are our leading indicators since they are having the conversations with customers.”
Cruising is a deal
Cruise executives cite the cruise product’s tremendous value at a low price as the main reason for optimism. Hanrahan noted that Americans still like to vacation, but they will be looking for more bang for their buck. “The fact that cruising provides such value is what’s helped the cruise industry weather this storm so far,” he said. Indeed, Cahill noted that on average cruises are about 20 to 50 percent cheaper than comparable land-based vacations.
Stein Kruse, president and CEO of Holland America Line, chimed in about value saying he had recently opened cruise brochures from the 1980s and 1990s. “We’re still selling cruises at the same price. That’s without adjusting for inflation and other factors,” said Kruse.
Despite the tanking economy, don’t expect a lot of discounting on cruise prices in the coming year, says Cahill. “It’s my guess that cruise pricing will end up being much more resilient than many of the doom-sayers are indicating,” said Cahill.
Cruising is more global
With cruise ships now positioned around the globe, cruise lines have further insulated themselves from U.S. economic woes. “We can move ships and the economics tell us where to put our ships,” says Rick Sasso, president of MSC Cruises USA.
Today the economics are telling cruise lines to put their ships in Europe to ply the lucrative Mediterranean waters. “We don’t have all our eggs in one basket,” said Colin Veitch, president and chief executive of Norwegian Cruise Line. He says the Caribbean is the still the biggest destination for ships, but, “it’s a vote of confidence” in the European market to move ships there.
Executives also hinted at the next big destination — Asia. Singapore, Taiwan and Korea announced new cruise terminals anticipating the growth. Cruise executives say the new cruise terminals aren’t just targeted at North American cruise travelers but are also aimed at the people who live in the region. Are there any other territories cruise lines are looking at? Sasso summed up globalization this way: “Wherever there is a population and water, there is a chance to have a ship.”
Ships get specialized
One thing that’s quickly changing onboard many ships is the amenities. It used to be that guests shared all the ship’s public spaces no matter what category of stateroom they booked. “This is changing,” said Adam Goldstein, president and chief executive of Royal Caribbean International. “Guests paying top dollar for the best accommodations expect special treatment outside their stateroom,” he added. He dubbed the trend “disegalitarianism.”
Indeed, special private dining spaces and lounges are popping up to serve the customers in the priciest staterooms. Cunard Line has its Queen and Princess Grills rooms with access to special restaurants, Norwegian Cruise Line has villas with private pool and courtyard, and MSC Cruises will be offering a private “Yacht Club” area on their upcoming ships. Even Carnival is getting in on the private public spaces act. When the line launches the new Carnival Splendor in July it will offer spa-only staterooms with exclusive access to the ship’s spa facilities.
Still, extra and better amenities aren’t only for guests paying top dollar. Carnival is redesigning its ships to offer different interest areas to enhance the onboard guest experience like the adults-only Serenity deck spaces and the family-friendly WaterWorks pool areas. “We’re all trying to attract different kinds of people,” Cahill said.
6 miles of ships
With 36 new ships scheduled for delivery from 2008 through 2012, the cruise industry is betting big that worldwide demand will grow. Hanrahan said 12.6 million passengers took cruises in 2007 with 10.3 million of those coming from North America. The industry expects an increase in worldwide cruise passengers this year to 12.8 million people with steady growth continuing in the years beyond.
Total cost for the 36 ships is approximately $22 billion. Hanrahan also cited one fun fact about the 36 new ships — put them all end-to-end, and they’d stretch six miles long.
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