2005 Industry Outlook

2005 promises to be a great year when demand catches up with capacity, allowing cruise pricing to continue to inch up. The main reason is that there are fewer new ships being introduced so there will be less new capacity added compared to recent years.

Several cruise lines have also taken further pricing initiatives by cracking down on agent discounting and rebating, insisting that only official prices are advertised.

In addition, onboard spending is on an upward swing driven by more opportunities to spend.

Furthermore, these developments are supported by are a relatively buoyant economy and a confident consumer.

While 2004 was successful for most of the industry, there was considerable shuffling of executives, an indication that all the brands were not equally up to the task.

Most noticeable was Cunard Line’s move within the North American Princess Cruises organization with only two executives seemingly uniquely devoted to Cunard. The rest of the executives and staff are shared with Princess. As one analyst put it, who asked not be identified, “to be merged into the Princess organization, must be the biggest insult to Cunard.” 

Both at Holland America Line (HAL) and Costa Cruise Lines, long-time executives have stepped aside to let new people take over the helm. 

Executive shuffles have also taken place at Royal Caribbean Cruises as well as at Disney Cruise Line and Silversea Cruises.

Meanwhile, for 2005, the pressure will be on HAL and Celebrity Cruises to produce results, following investments in product upgrades and turn­ around efforts.

Norwegian Cruise Line (NCL) will also be in the spotlight in 2005. NCL has taken on a formidable challenge in Hawaii and pending how well that effort moves along, next year may well be a turning point for the company.

NCL has to run its business differently to give travel agents reasons to sell its products. But sailing a different course also means bigger risks and higher costs.

In other moves, both Seabourn Cruise Line and Windstar Cruises are said to be for sale.

In 2005, the industry expects Carnival Corporation to place the first order for its new Pinnacle Project class of ships Royal Caribbean has not yet made its move into Europe beyond moving another ship to Island Cruises and Carnival has yet to make its move in Asia Pacific.

How NCL and MSC Cruises will do against Carnival and Royal Caribbean also merits attention. So there is plenty to make the industry very interesting next year as well.

But the main focus will be on pricing. Analysts have for the past couple of years said that 2005 will be the year when pricing can move up significantly and perhaps even as far as to pre-9/11 levels. That is the goal. If that does not happen, there may be a lot of unhappy investors.

(The Jan 14 issue of Cruise Industry News will carry a comprehensive financial forecast for 2005.)

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