Industry Forecast for More Growth

Additonal newbuilding orders could be around the corner, according to John Newbold, Division Executive, Global Shipping at CitiBank N.A.

“I wouldn’t be surprised to see new ships ordered in the next few months,” said Newbold. But, although orders for new vessels are likely, he expects the pace of new vessels coming on line to slow down considerably after the next couple of years.

Newbold also expects that 1996 and 1997 will foster some of the heaviest discounting because of the significant increase in market capacity – about 15 percent, he estimated – scheduled for this period. 

Newbold also continues to predict the emergence at the turn of the century of an unspecified number of successful mega lines that will control most of the existing brands.

“The industry is splitting into the ‘haves’ and the ‘have-nots.’ The trend is definitely in the direction of the big operators owning the brands … niche players just don’t have the marketing clout to compete, ” he explained.

However, competition is not out of the question.

“I don’t know if there will be four, five or six operators left standing because there are players (such as Disney Cruise Line) who can come along with the right formula to compete with already established players,” said Newbold.

But, the “price of entry is getting higher and you need to be a Disney to get into the market,” he said.

As for the existing operators, Newbold noted, “The marginal players will either have to join up or sell out to the big boys.”

Global View

Cruise lines must also adopt a global outlook in order to survive, according to Newbold.

“The cruise market has grown up – it’s not just people who want to go to the Caribbean anymore, and lines will have to find different destinations and clientele which is non-American,” Newbold said.

Economies of scale also continue to figure largely in the survival equation. Newbold recounted how the larger lines, which are also proving successful, can obtain volume purchasing therefore driving down operational costs. He also noted that some lines, such as Carnival Cruise Lines, wisely spend their marketing dollars where they can achieve the highest rate of actual bookings.

Newbold also emphasized that a good management team is an important factor and that top management ideally also should have cruise industry knowledge.

He conceded that some critics may be correct when they say that the industry has recycled management leaders, who move from line to line, for too long. However, he underscored that tomorrow’s leaders should come from middle-management ranks.

“There are some good middle-management people out there who could comprise the next wave of top executives,” Newbold said.

Some of the factors essential for survival, whether it be a big or small line are, according to Newbold, a good management team, a focused marketing strategy, a sound operating philosophy, new hardware, and a source of working capital.

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