What's New in Cruise? 6 Execs Speak Up

March 16, 2010

The annual Cruise Shipping Miami convention draws cruise line executives, representatives from ports of call all over the world, and manufacturers and designers who supply vessels with everything from sewage systems to new carpet. Today, all gathered for the ritual convention kickoff -- the "State of the Industry" press conference.

The event, a panel of cruise industry leaders, is one of the few times in a year when presidents of major lines actually debate in public. (On hand this year: honchos from MSC Cruises USA, Celebrity Cruises, Carnival Cruise Lines, Holland America Line, Norwegian Cruise Line and Royal Caribbean -- all male, by the way.)

And so attendees wait with baited breath, hoping one of the participants will reveal something fresh, new and fascinating about the cruise industry.

In previous years, panel participants engaged in freewheeling debate that, at turns, was antagonistic, hysterically funny or amazingly revealing. Alas, that era is gone now that most cruise lines are public companies and executives more or less stick to a prepared script. The conundrum was actually recently addressed in Royal Caribbean President and CEO Adam Goldstein's "Why Not?" blog, in which he described participation as "the annual challenge of trying to be interesting while making sure we don't say anything too noteworthy."

Still, there were some intriguing insights shared. Here's a selection of the choicer morsels:

The five-language safety drill -- found today on lines like Costa Cruises and MSC Cruises, which have traditionally attracted a global audience -- may become more common in coming years as other lines expand their international reach. "It is impossible to ignore the role of globalization as driver of expansion," MSC Cruises USA President and CEO Rick Sasso said. "The pace of growth in other international markets is now striking. European markets grew by 12 percent, with Germany exceeding one million passengers for the first time while the U.K. market has exceeded 1.7 million. Both are expected to double within the next decade."

The six cruise leaders unanimously agreed that beyond Europe -- which is the most powerful market after North America -- up-and-comers include South and Central America, Southeast Asia, and Australia.

Though U.S. governors used to commonly attend the cruise industry's annual convention, this year, only Sean Parnell -- Alaska's new governor -- showed up. And his state, which is seeing a first-ever downturn in cruise ships this year and next, took a blistering hit, most notably from Holland America President and CEO Stein Kruse, who says that overzealous fees and over-the-top regulatory requirements are directly responsible for Alaska's cruise woes. "Alaska needs to realize that people and ships won't go to Alaska just because it's there," Kruse says. "The next two years we'll see pre-2004 reductions in Alaska. We're sad to see this."

He continues, "Pre-2006 in Alaska there were stringent but fair regulations and the cruise industry paid fair but quite significant amount of taxes. A ballet initiative was put in front of voters ... about a head tax, and told them that cruise lines would continue to come, passengers would continue to come, and that's not true. After a consecutive string of 30 years of growth, it stopped this year. Alaska's down 17 percent. It's a significant decline with a huge impact that hurts businesses in Alaska.

"Ships are operating full," Kruse adds, "but they are full somewhere else." And it's not just the head tax, he notes. "Alaska has the most burdensome regulatory requirements in the world." He offered a rather bizarre example of how cruise lines have been held to higher standards than any on-land facility in Alaska: "We cannot even take on fresh water because when we take it on it has a higher copper content that what Alaska allows us to discharge in ... Alaska. That's how crazy it's gotten."

The economy was a major topic, with all cruise line executives agreeing that 2010 will be a better year -- for the cruise lines themselves -- than were 2008 and 2009. What does this mean? Fares will continue to rise. As well, NCL CEO Kevin Sheehan offered an interesting insight into the differences between the way people booked cruises in the heart of the recession (at the last minute) versus today (they're back to planning in advance). In 2008, he says, the "booking window had shrunk so much we contemplated putting booths on the pier and selling cruises on the spot."

Now, however, all of the executives agreed that their respective lines are trying to lure advance planners with seriously tempting deals (free air, two-for-one fares). They're hopeful that the best price possible is the advance price.

If the cruise line executives were all in agreement on the fares-are-rising theory, there was a bit of dissent when it came to the topic of building new ships. "Sometimes we get too hung up on new-builds," says Carnival Cruise Lines President and CEO Gerry Cahill. "New ships are great -- but the majority of guests who sail on Carnival this year will sail on ships other than Carnival Dream [the line's newest ship, launched in 2009]." Adds Cahill, "We're focusing on quality, not just on new-builds. It's great that our guests really love the Carnival Dream but we would prefer they prefer Carnival."

MSC Cruises' Sasso, whose fleet is one of the youngest in the industry, heartily disagreed. "We need more ships," he says. "The industry can only grow if we have more new ships."

Stay tuned from more from the Cruise Shipping Miami convention throughout this week.

--by Carolyn Spencer Brown, Editor in Chief

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