State of the Industry Panel Focuses on Safety, Moving Forward After Concordia Tragedy

March 13, 2012

(4 p.m. EDT) -- The kick-off "State of the Industry" event at Cruise Shipping Miami, the annual mega-conference that draws cruise line honchos, suppliers and port officials from some 120 countries, usually begins like something of a pep rally. This year, there was a change in tone.

During a far-ranging two-hour conversation, six cruise line execs zipped through topics from China to new-builds to environmental regulations. But much of the focus was on how lines will move forward in the wake of January's Concordia disaster that left 32 people dead and thrust the cruise industry under the media microscope.

Carnival Corp.'s chairman and chief operating officer Howard Frank issued poignant, off-the-cuff opening remarks. Frank spoke of how he's been traveling back and forth to the Tuscan coast, where the 3,000-plus passenger ship lies half-submerged, to meet with port officials, colleagues and families of the victims.

"As a cruise ship operator, there is nothing more heart-wrenching than the loss of one of your passengers or crewmembers," said Frank. He commended the ship's crew, which was able to evacuate more than 4,000 people in some two hours under extraordinary circumstances. "They're the real heroes," he said, adding that their stories are the ones that will endure. And he spoke to his commitment to Costa's management, its heritage and even Italy's maritime roots. As a show of solidarity to Costa's management team, he said, he's been wearing a Costa Cruises lapel pin since the January 13 tragedy. (Frank typically swaps pins depending on which Carnival Corp. brand he's meeting with.)

Frank's introductory comments transitioned into the panel chat, which featured top execs from Royal Caribbean, Carnival Cruise Lines, Celebrity Cruises, MSC Cruises, Norwegian Cruise Line and Holland America. Panel moderator Christine Duffy, president and CEO of the Cruise Lines International Association, set the stage by referencing the ongoing industry-wide review of safety and emergency response procedures. Duffy highlighted the immediate industry-wide change to muster drill protocol -- all lines have agreed to hold the drills before sailaway, rather than within 24 hours as dictated by the International Maritime Organization. Duffy said another safety-related announcement is coming later this week.

Adam Goldstein, Royal Caribbean's president and CEO, talked about improving bridge management. It's been widely reported that Costa's captain waited for more than an hour before giving the abandon-ship order. While the captain will retain ultimate authority, said Goldstein, the members of the "bridge team must be encouraged to speak up if they're unsure that the ship isn't doing exactly the right thing at the right time."

"Preparation for a crisis isn't all that different from other business processes," added Gerry Cahill, Carnival's president and CEO. "The plan, which obviously has to be flexible in this case, needs to identify the people potentially involved, and you need to train those people," he said. The third piece, Cahill explained, is dealing with the situation post-crisis -- especially with emotional needs. For that, Carnival has 1,200 volunteers who make up its "care team."

When it comes to training, Celebrity Cruises' president and CEO Dan Hanrahan was effusive; he detailed biweekly drills, crowd management and passenger assistance protocols, and rules governing watertight doors and lifeboats. Meanwhile, Stein Kruse, Holland America's president and CEO, said it was an issue of educating onlookers. "The industry is fundamentally safe -- we just need to do a better job of making the case."

Despite the focus on safety, there was no debate about one thing: The industry will move past the Concordia disaster, said the execs, and continue its remarkable growth from 1.4 million passengers in 1980 to more than 16 million three decades later.

Beyond the issue of safety, the panelists commented on a number of other topics. Here are a few snapshots:

New ship slow-down with a caveat. Anyone who's watched Cruise Critic's new cruise ship order chart waste away won't be surprised to hear that the number of new-builds debuting from 2013 to 2015 has dropped by more than a third compared with the launches from 2010 to 2012. As the saying goes, it's the economy, stupid.

"You have to look back at economic situation in 2008 and 2009 -- those are the years we'd be making orders for ships that would debut in 2013, 14, 15," said Kevin Sheehan, Norwegian Cruise Line's president and CEO. Lines are trying to stay relevant in other ways; Carnival and Celebrity are spending considerable sums investing in older ships. It's cheaper, too -- Carnival's Fun Ship 2.0 initiative is forecast to cost the company $500 million. Its newest ship, Carnival Breeze, due out in June, cost an estimated $740 million. "They feel like new ships when you're done with them," added Hanrahan.

Still, there are new-builds on the way. Norwegian, Royal Caribbean and Princess are all set to debut pairs of new-builds in the next few years. On the topic MSC Cruises had some big news to share: The Italy-based line just put ink to paper on MSC Preziosa, which will debut in 2013.

Carnival is not going global. It's a question we've been asking. With Carnival Spirit heading to Australia in October and a pair of Carnival ships in Europe in 2013, is Fun Ship Freddie going to need a new passport? Cahill put an end to any speculation. "I think that Carnival identified a couple markets that it could go into, and it's going," he said. The regions in question (the United Kingdom and Australia) have one key thing in common: English speaking passenger bases.

But listen to this. Drive-to cruise markets are abundant in China, said Goldstein, noting that Royal Caribbean's 3,114-passenger Voyager of the Seas will become the largest ship ever to cruise in the Far East starting May 26. Stein Kruse added some additional perspective. If the industry can get just 1 percent penetration in India and China -- doable, he said, given the growth of the countries' economies and the 2 to 3 percent penetration enjoyed by the United States and Europe -- that could mean 25 million new cruisers.

Environmental rules that could impact your next cruise. Sort of. Starting August 1, new legislation outlines an Emissions Control Area for cruise ships. Within a certain mile range from U.S. and Canadian shores -- up to 200 miles from the coast -- cruise ships will be required to use low-sulphur fuel oil or "equivalencies."
Adam Goldstein, president and chief executive officer of Royal Caribbean International, said there might be issues with acquiring the required fuel. "How can we be accountable for fuel that's impossible to get?" he asked. Holland America's Kruse cautioned that if the EPA and cruise industry can't reach an equitable agreement, there may be deployment changes. "Our assets can move," he said. "If we can no longer be profitable, we will move."

"The consequences, especially for outlier and smaller ports can be devastating," added Goldstein.

--by Dan Askin, News Editor