Industry Leaders Talk Supply and Demand in Miami

What is the biggest strength of the cruise industry?

“2014 showed growth in cruise penetration (in Europe),” said Pierfrancesco Vago, executive chairman of MSC Cruises, quickly noting that all of Europe was made up of 700 million potential customers, and currently the penetration rate was close to one percent. And that may be the case around the globe, where market penetration rates are considered much lower than they could be.

It was the beginning to Miami’s trademark state of the industry session led by CNN correspondent Richard Quest.

“We are talking about a global industry with very little penetration,” Vago later said in the discussion.

“It’s still a United States driven industry but we are global now,” said Frank Del Rio, president and CEO of Norwegian Cruise Line Holdings. “The United States still drives the majority of customers.”

Del Rio said oil prices and low interest rates were driving more disposable income.

Added Richard Fain, president and CEO of Royal Caribbean Cruises: “We are growing, the industry is continuing to grow and this is a good time of the industry.”

Fain said the industry has yet to find its break-out formula to find a whole new customer, although he added there was infinite growth opportunity on the near horizon in Asia.

“My focus is on demand growth,” said Fain. “I frankly can’t change supply growth in the near-term. We need to find a way to break out of the pattern we’ve been satisfied with.”

In short, Fain wants more people deciding to cruise, thus raising the price and driving more investment.

Carnival Corporation President and CEO Arnold Donald said annual growth of 10 to 15 percent was possible given the right factors.

Vago explained the supply was controlled by a few shipyards managing a handful of building slots.

Is there a holy grail to the future? It may be Cuba, which offers a new destination in a short sailing distance from Florida.

“We today probably go to other destinations that are less developed than Cuba,” said Del Rio, who quickly cited a sailing distance of 220 or so nautical miles from Miami.

Added Donald: “When the embargo is lifted we’ll be there.”

More realistic than Cuba, however, is the potential market in China.

Both Norwegian and MSC are looking into going to China, and Donald said eventually there may be Chinese cruise ship building to support the growth that could come from the Chinese market.

“The cruise industry will end up accelerating development there and whether they end up building ships, we’ll see,” said Donald.

Does itinerary planning drive bookings?

Del Rio said it was all about itineraries, and that he is personally planning all itineraries across three brands and 21 ships under Norwegian.

Donald, said, however, it was based on the brand. For example, Seabourn passengers may be looking for ports on a cruise while Carnival passengers are going for the brand experience.

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