Industry leaders gathered in Ft. Lauderdale on Tuesday for the State of the Industry panel, discussing topics ranging from global expansion to new ships, and challenges and issues facing the global cruise business.
With a record orderbook and a record 24 million set to cruise in 2016, oncoming supply continues to be a discussion point.
Innovation was on topic to start the panel out, as new ideas have driven ship development to exceed guest expectations.
“They have to have a memorable, deep, emotional experience,” said Arnold Donald, president and CEO of Carnival Corporation. “To create that transformative guest experience and ship design is part of that.”
“I think we would argue the (ships) aren’t a destination by themselves,” said Richard Fain, chairman and CEO, Royal Caribbean Cruises, underscoring destinations are still key.
Pierfrancesco Vago, executive chairman, MSC Cruises, pointed to his 2017 newbuild, the MSC Seaside, as an innovation in the guest experience arena, bringing more deck and “sun” space per passenger. The ship will make its debut in Miami in late 2017.
“There has to be a balance between crazy white-lab coat innovation for the sake of innovation and innovative that has return,” added Frank del Rio, president and CEO, Norwegian Cruise Line Holdings.
Capacity Concerns
Ongoing newbuilding programs were brought up for a brief period in a tightly controlled panel discussion.
“I think you have to have a balance, you have to build new vessels because the industry is growing and there is new demand,” said Del Rio. “The investors in the industry and analysts that cover the industry have made the mistake over the years (saying) that only new ships that can command yield growth. In my company, the smallest oldest ship commands the highest yields.”
Vago added: “Newbuilds drive yield and improve profitability. The 24 million passengers … it is nothing. In Europe in the last five years the industry has grown 50 percent, while land-based experiences grew by zero.”
China
Donald said China growth is being limited by shipyard capacity, adding that returns in China were above average.
“There is a huge demand, a great positive for everybody,” Donald explained.
Carnival Corporation currently has three new ships on order being designed for the Chinese market. The Majestic Princess will be delivered in 2017, followed by two prototype Costa ships.
Fain underscored tonnage in Asia was not be positioned to the gambling market.
“If you took a cruise with 100 percent Chinese guests it would not look that much different than it would in the United States,” added Fain.
Cuba
Among the discussion points on Cuba, Vago confirmed that MSC would have a year-round ship out of Havana in 2017, previously reported by Cruise Industry News.
Fain called Cuba a terrific destination, noting he had seen a MSC ship when he was in Havana (i.e. recently), telling Vago to prepare to see one of Royal Caribbean’s ships there soon.
Fain said Cuba would bring a halo effect to the Caribbean, driving demand for the region to the tune of 10 to 20 percent.
“Cuba is a great opportunity for us in the cruise business,” Fain said.
Geopolitical Issues
“Every year those things happen, fuel prices go up, they go down,” Donald said. “As long as it happens every year as it’s been happening, we’re fine, we grew in all those years.”
Fain said the industry has shown a responsiveness over its history.
“We have proven over and over again our ability to deal with these problem as they come up,” Fain added.
