Cruise Shipping Miami State of the Industry panel // © 2011 Cruise Shipping Miami State of the Industry
During the positive and well attended State of the Industry panel discussion at Cruise Shipping Miami (CSM) in mid-March, cruise executives perceived the industry as emerging from the recession on a more global basis.
Stein Kruse, president and CEO of Holland America Line, echoed Warren Buffet’s bullish view of the economy’s future.
“The cruise industry is creative, innovative, focused and strong,” he said, “and it has its best days ahead.”
He pointed out that there are now 76 million U.S. baby boomers in the 47-65 age bracket, prime candidates for cruise vacations, with penetration of the vacation market still small.
In an introductory analysis of the industry, Jan Swartz, new chair of CLIA’s marketing committee and executive vice president of Princess Cruises and Cunard Line, also spoke of the cruise penetration as “a small sliver in the big vacation pie.”
“At a time when blues and reds can barely get along, the many countries and cultures on cruise ships work together to deliver a great product,” she said.
One of the most important points Swartz raised is that in a TNS study of the cruise lines, consumers showed the highest level of commitment to brands — more than for their baby products, sports, cars, etc. That commitment translates both to repeat customers and word of mouth promotion.
The issue that emerged as the most troubling to the panelists is the tangle of environmental regulatory laws that requires officers on board to study constantly just to know which ones they must be compliant with at a given time in a cruise.
While Kruse believes fuel prices will come back down, he sees the planned implementation of the Emissions Control Area (ECA) as having a serious negative effect on cruising. The program, which takes effect August 2012, would affect any cruise operating within 200 miles of the North American coast, regardless of local population numbers and conditions.
Administered by the Environmental Protection Agency, the ECA program addresses the interaction of ships with air, a change from the emphasis on interaction with the water that existed until about five years ago. Ships would be required to use fuel that contains significantly less sulphur, a move that could require cruise lines to refit engine systems and will certainly raise fuel costs.
Royal Caribbean International CEO Adam Goldstein said the ECAs would “change our world,” affecting Puerto Rico and the Virgin Islands as well as the mainland. He mentioned possible alternatives to achieve ECA goals, including scrubbers that remove sulphur from emissions and, eventually, biofuels.
The other executives on the panel — Jan Swartz, executive vice president of sales and marketing for Princess Cruises and Cunard Line; Gerry Cahill, Carnival Cruise Lines CEO; Kevin Sheehan, Norwegian Cruise Line CEO; first-timer Pierfrancesco Vago, MSC Cruises CEO; and Dan Hanrahan, Celebrity Cruises CEO — agreed that deployment and port calls would be heavily impacted by the new regulatory measures.
Cahill noted that people are quick to point a finger at the cruise ship sailing under the Golden Gate Bridge, while ignoring the Hummer driving over it. He also sees far reaching effects from the most recent recession, which was longer and more severe than any others since 1929.
“Don't assume that at the end of the recession everything will go back the way it was — some of the changes may be beginnings of a trend,” he warned.
He said Carnival does not intend to pick up the pace of fleet expansion in the foreseeable future.
Sheehan, however, does see increased growth ahead for NCL, with two ships on order.
“We see interest up with newbuilds,” he added.
Each innovative ship, he said, brings more visibility and greater interest to the entire cruise industry.
Hanrahan observed that the slower increase in supply, with 11 new seagoing ships debuting in 2011, bodes well for stronger pricing in the industry. He sees large potential markets in the UK and Australia, along with the growth in the North American market, which CLIA projects as 16 million this year.
Vago emphasized the increasing importance of the European market, pointing out that in past 10 years, Europe has seen a 163% increase in cruise passengers. He noted that Europeans have much more leisure time than Americans, with the average number of public holidays in Europe numbering 30 compared to four in U.S.
Along with cruise executives, new CLIA president and CEO Christine Duffy praised the work of Alaska’s Governor Sean Parnell, who was the first governor to attend CSM last year and this year addressed the 1,500 attendees concerning the steps his state is taking to work with the cruise industry.
“Since last year’s conference he has amply demonstrated his support for the travel industry in general and cruising in particular and we look forward to continuing to work with him and his administration to further develop a mutually beneficial business environment in his great state,” Duffy said.