Newbuilding Boom Spanws Megaship Generation

The cruise fleet is rapidly expanding, and newbuildings are the order of the day. Contracts for 15 new ships will deliver 16,282 additional berths by 1989. When refurbishments are considered, forecasts indicate there will be a total of 20,000 new berths by 1990.

Industry spokespeople believe that there will be sufficient demand to absorb the additional capacity, noting the industry’s steady growth over the past decade and the vast untapped North American market. However, many say that it may take from seven to ten years for demand to catch up to supply. As a result, heavy discounting will remain the trend, forcing cruise lines to operate on tight budgets for the next several years.

The latest trend in vessel design are the megaships. Designed to accommodate 1, 500 passengers or more, these ships are more economically efficient than their predecessors, and offer a wider variety of activities.

They are also changing the shape of cruising, according to several industry executives.

“The ports of call are becoming less significant,” said Richard Revnes, president of Royal Cruise Line. “You used to go ashore for the shopping, gambling and good food, but now you get all of that on the cruise ship and most of the time there is more variety and quality on board. You also take away from the native flavor of the port when you unload 2,000 passengers at a time.”

Revnes added that he regrets the trend toward increasingly larger vessels because “they make cruising a more impersonal experience.” He predicts that the Caribbean cruises will became “‘Las Vegas’ at Sea,” with three or four days of partying and no ports of call.

John Bland, president of Sitmar Cruises said that the larger vessels are designed for the experienced passengers who “are more inclined to focus on the ship itself. However, the destinations will always be important,” he said.

Small vs large operators

The megaship’s arrival has created a debate within the industry about whether or not the smaller cruise lines will be able to compete with large fleet operators.

“Smaller ships are less competitive because they are not as economically efficient,” said Cees Tensen, VP of Marketing for Holland America Westours. “The smaller operations may not be with us for much longer.”

According to Rod McLeod, VP of Marketing, Royal Caribbean Cruise Line, the new generation of cruise ships are highly competitive, from both an economic and product standpoint.

“They offer a wider variety of activities, entertainment, shopping and cuisine,” he said. “They also offer considerable economies of scale, so they can fare well, regardless of which way the market turns.”

McLeod said that many of the smaller lines have retreated from the high volume vessels by positioning their ships in the lower Caribbean, and will face fierce competition when the major operators move in.

New Opportunities for Specialization

“The trend toward larger ships also creates an opportunity for niche players,” McLeod said. “The smaller operations that can offer a unique product will be able to find a happy home. Price will be the only other weapon but that will became increasingly ineffective because of the efficiency of the super ships,” he added.

“As the market grows, new opportunities will develop in distinct niches – coastal cruising and windsail cruising, for example,” John Bland said. “The well-targeted and well-managed products will succeed.”

Smaller cruise lines may do better than those with five or six ships, according to Revnes. “The little guy has more flexibility – he can turn around faster and is not saddled with heavy debts. The key is to develop one product and find a niche in the marketplace.”

Richard Knotts, president of Dolphin Cruise Line says the industry will continue to grow, and he expects Dolphin to grow along with it.

“There is a lot of character and charm in the refurbished ships, and there is a market for them,” he said.

Caribbean to Remain Most fpopular Destination

Most of the megaships will operate in the Caribbean.

“Few other areas can sustain vessels of that size,” McLeod said.

According to those interviewed, the Caribbean will remain the most popular area for cruises, with more lines moving down to San Juan.

The Mediterranean is also expected to return as a strong destination next year barring further incidents – and cruises to Northern Europe are expected to became increasingly popular.

“Our cruises to Northern Europe fill before anything else and we’ll see more competition there,” Revnes said.

Alaska will still be popular, but it will see a softening, without Expo and fears of terrorism boosting tourism there, the respondents reported.

Mexico already is beginning to thin out. “By year’s end, there will only be three operators there – Sitmar and Carnival regu­larly, and Princess seasonally, so everyone should do well,” Bland said.

The largest growth area will be in the South Pacific, Australia and the Orient, according to all of those interviewed.

South America has the least potential for growth because there are “so many limita­tions,” according to Revnes.

“Most of the lines that have tried South America have failed. It is a short season and it doesn’t live up to passengers’ expectations of what South America is all about,” he said. “Most of the ports are very commercial. The airfare is also expensive and service is limited, and the ports do not offer the appropriate services to the cruise operators.”

Jo Kling, of Landry & Kling, added that the South American ports are also far apart.

The Full-Fledged Floating Resort

As for the future, designs on the drawing board indicate that the megaships currently being brought on line may be only the first generation of the full-fledged floating resort that is to cane. NKK and Iko Maritime A/S of Japan and Norway have designed the Multi Activity Cruise Siip (MAC) – or the vessel it advertises as “the cruise ship with everything but an 18-hole golf course.” Featuring 1,000 cabins, and a host of leisure and entertainment facilities, this cruise ship design incorporates an entire marina inside the vessel. Norwegian Caribbean Lines’ Phoenix project has similar features. In addition, both designs have twin-hulls, and are based on the concept that the vessel itself is the destination.

Many industry spokespeople question w’nether these designs will actually became reality. However, they all agree that innova­tion will be the key to industry success, and that the range of options available to the consumer will became increasingly wider.

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