In the past, the status of the industry has usually been presented and discussed at the annual Miami cruise conference, which took place last week. This year, however, the format was more controlled than ever, which in turn suggests that there are issues that the executives are not eager to address in a public forum. Instead, presumably in order to generate some excitement, two new ship orders were announced by Oceania Cruises and Silversea Cruises. However, the announcements said they were memorandums of understanding and agreement, respectively, rather than the usual letter of agreement, letter of intent or actual contract.
2007 Forecast
The forecast for 2007, calls for 12.6 million passengers for the member lines of the Cruises Lines International Association (CLIA), according to Dan Hanrahan, president of Celebrity Cruises chairman of CLIA. That is an increase of 500,000 from last year. Hanrahan said that 10.6 million are expected to come from North America and 2 million from international markets.
Hanrahan also said that consumer trends fuel industry growth, with today’s passengers collecting experiences. He noted ports that are investing in new facilities to accommodate more passengers and new destinations such as Icy Strait in Alaska, which he described as a partnership between the cruise industry and the local community.
Changing Demographics
The industry is increasingly catering to trends and groups covering a wider range of demographics than the stereotype cruise passenger, according to Richard Fain, chairman and CEO of Royal Caribbean Cruises, who said the industry is moving in the direction of more market segmentation.
Bob Dickinson, president and CEO of Carnival Cruise Lines, added that in the future gays and lesbians will inevitably be important markets.
But ships exclusively for older passengers may not be in CLIA’s future. Said Colin Veitch, president and CEO of Norwegian Cruise Line NCL): “The last people on earth older people want to be with are old people.
Dickinson added that it makes more sense to convince younger first-time passengers who can come back for many more years, rather than older first-timers. Dickinson also said that the cruise industry is still only capturing three percent of the vacation market in this country, despite having the highest satisfaction rating of any vacation product. “We must make sure that future customers like our product,” he said.
Rick Sasso, president and CEO of MSC Cruises (USA) added that the market penetration in Europe is only 1 percent, and that he sees tremendous yield potential in the Mediterranean.
Fain pointed to the Brilliance of the Seas, which will be deployed year-round in the Mediterranean, and noted that “Europe is experiencing the growth we did 15 to 20 years ago.” Royal Caribbean international will also deploy the Independence of the Seas out of Southampton for the summer of 2008, when the third of the Freedom-class ships enters service. She will be catering primarily to U.K. customers for the summer season, according to Fain.
Veitch added that 40 percent of the passengers for NCL’s cruises in Europe are from Europe.
“The rich are getting richer,” commented Dickinson, “The Mediterranean is the Caribbean of 10 years ago.”
Stein Kruse, president and CEO of Holland America Line, is not giving up on the Caribbean. He said the industry began and will continue in the Caribbean, which will see more ships and passengers. It is close to the U.S. mainland (the biggest cruise market) and offers year-round cruising. And, he added, when Cuba opens up, the Caribbean will be able to start a new and exciting chapter.
As for Asia, Veitch said it will take a long time to develop. He said local markets only take two- and three-day getaway cruises. Seven-day cruises are not in the sights of most consumers in Asia today, he added.
Distribution
Dickinson said there is both good and bad news for travel agents in 2007. First, he said, the good news is that they can sell more cruises and make more money. The bad news is that it is hard to recruit new people to become travel agents, and it may be a dying business.
Dickinson also said that the changing structure of travel agencies from traditional store fronts to home-based agencies and call centers mean that there are fewer agents who will work proactively, tapping into the first-time market. “For the first time,” he said,” the first-timers are going down as a percentage of total passengers.”
Dickinson added that the cruise nights of 10 years ago are also dead. These functions served to convince first-timers to cruise. While the Internet can make up for some of this, the problem is that the Internet is not emotionally interactive, he said.
Softness in the Caribbean
Veitch made a compelling case that the economy is to blame for the softness in the Caribbean, and the other executives on the state-of-the-industry panel all seemed to agree. There was no debate or disagreement on the topic.
In the past, the status of the industry has usually been presented and discussed at the annual Miami cruise conference, which took place last week. This year, however, the format was more controlled than ever, which in turn suggests that there are issues that the executives are not eager to address in a public forum. Instead, presumably in order to generate some excitement, two new ship orders were announced by Oceania and Silversea. However, the announcements said they were memorandums of understanding and agreement, respectively, rather than the usual letter of agreement, letter of intent or actual contract.
