March 17, 2009
The 25th annual Cruise Shipping Miami Convention, the year's largest cruise event, kicked off with a panel discussion that featured top executives from six major lines. In front of a packed house, executives from Royal Caribbean, Holland America, Carnival Cruise Lines, Celebrity Cruises, Norwegian Cruise Line and MSC Cruises discussed the "state of the industry."
Top of mind, not surprisingly, was the flagging economy's impact on the cruise industry. In fact, all of the topics touched upon -- from deployments to new-building -- referred back to the ever-changing financial climate.
While 2008 was clearly a challenging year for cruise lines and consumers -- rising unemployment rates, a plummeting stock market and home foreclosures have made for a more cautious traveler -- overall, these head honchos were unified in their rose-colored vision of 2009 and beyond. Rick Sasso, president and CEO of MSC Cruises USA, referred back to times in the history of the industry when there was great uncertainty -- double-digit unemployment during the early 1980's, travel fears following September 11, 2001 -- and pointed out that the number of cruise passengers still continued to grow.
NCL's recently appointed CEO, Kevin Sheehan, agreed: "We woke up one day, and half our net worth was gone," but "2009 will not be a lost year."
So what are the lines doing to ensure continued success?
Pricing. In the midst of Wave Season, the year's most popular time for booking a cruise, we're seeing unheard-of deals, including kids-sail-free options, complimentary shore excursions and added onboard credit. Lines are also offering perks, such as job-loss protection and relaxed cancelation and final-payment policies, all in an attempt to allay the worries of passengers and fill ships -- albeit at never-before-seen prices.
Interestingly, opinions on pricing strategies varied across the board. Dan Hanrahan, CEO of Celebrity and Azamara Cruises, indicated his discomfort with offering the Celebrity brand in the marketplace below a certain price. He noted that Celebrity won't take business if it'll hurt "pricing integrity" or adversely affect the brand image. On the flip side, Holland America's Stein Kruse countered: "It's simple. Not filling our ships does not make sense; our business model is based on [filling ships]."
Deployments. Carnival, in particular, is relying on offering short Caribbean cruises out of U.S. homeports, which are within driving distance for roughly half of the U.S. population. The line originally had two ships that were scheduled to sail in Europe during summer 2009, but it ultimately decided to cancel those cruises in light of the economic situation. Conversely, Royal Caribbean and MSC are tapping source markets from around the world -- South America, Asia, the United Kingdom -- to fill ships. In other words, Brazilians sail on the cruises offered out of Brazil, and Asians take advantage of the cruises offered out of Far East countries.
New Cruise Ships. In the current economic climate, new-cruise-ship orders have certainly slowed, but the panel was unanimous in its belief that new orders will pick up in the near future. Innovative new-builds drive the industry -- and ships like the 220,000-ton, 5,400-passenger Oasis of the Seas, the largest and most innovative project yet, benefit the whole industry through the attention they bring. And, despite the recession, the order books are robust, with 14 ships debuting in 2009 and almost 40 ships on tap for construction through 2012.
With talk turning to Oasis, will other lines follow Royal Caribbean's lead? Gerry Cahill, president and CEO of Carnival, stated it's unlikely that Carnival will build bigger vessels, at least for right now. (The 130,000-ton, 3,652-passenger Carnival Dream, the line's largest ship ever, will debut later this year.)
Refurbishments. Beyond delivering new ships, the major industry players are also investing in existing fleets. Recent major refurbishments include Carnival Sensation, several ships in luxury line Regent Seven Seas' fleet and Celebrity Galaxy, which was transformed into Mein Schiff for Tui Cruises, a new German line headed by Royal Caribbean.
--by Dan Askin, Associate Editor
Image appears courtesy of Dan Askin.
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Pictures from the Trade Show Floor