Peter Yesawich, vice chairman emeritus for MMGY Global // © 2016 SeaTrade Cruise Global
Feature image (above): During the conference, industry leaders discussed the state of the cruise industry, and Peter Greenberg, travel editor for CBS News, served as moderator. // © 2016 SeaTrade Cruise Global
With 24 million passengers expected to sail this year — 1 million more than last year — and 20 new Cruise Lines International Association (CLIA) ships launching between 2015 and 2018, the industry clearly has a wide berth for growth.
At this year’s Seatrade Cruise Global conference, which took place March 14-17 in Fort Lauderdale, Fla., four “titans of the industry” — so-called by Peter Greenberg of CBS News Travel and PBS' "The Travel Detective" — discussed current and future innovations in cruising during the State of the Global Cruise Industry panel.
Greenberg, the panel’s moderator, pointed out that 1.2 billion people cross global borders annually, but only 23 million cruised last year — a tremendous opportunity for growth. Executives agreed that a great deal of cruising’s current growth is driven by international markets, with Australian cruises hitting 1 million and China rising rapidly to 700,000.
Panel speakers Richard Fain, chairman and CEO of Royal Caribbean Cruises Ltd.; Arnold Donald, president and CEO of Carnival Corporation & Plc; Pierfrancesco Vago, executive chairman of MSC Cruises; and Frank Del Rio, president and CEO of Norwegian Cruise Line Holdings Ltd., all agreed that it is the capability of the shipyards that constrains annual cruise capacity growth to 6 percent.
According to Donald, growth for most regions is even less than 6 percent, with much currently aimed at Asia, leaving about 2 percent for the rest of the world. He added that China had 135 million outbound tourists last year, the largest number in the world.
“The Chinese market could total as much as the entire rest of the worldwide market,” he said.
Since the industry can’t grow faster by adding ships, it must polish its older vessels.
“It’s a mistake to think only new ships deliver a high return; our smallest, oldest ship has the highest yields,” Del Rio said. “So we are spending half a billion dollars to upgrade our current fleet, taking a more balanced approach to growth.”
In addition to shipbuilding limits, Fain noted that people still have old prejudices about what cruising is; he said changing this misconception is the rationale behind adding ship features such as rock-climbing walls and onboard surfing. The panelists discussed other challenges to the industry as well, including fear, fuel issues, currency changes and disease, which all happen every year, yet the industry continues to grow.
Fain stated that cruising has remained strong, even after 9/11, giving much credit to CLIA, which has generated a noncompetitive policy when facing industry challenges.
“We don’t compete on core values, and CLIA helps bring us together,” Fain said.
He pointed out that after 9/11, cruise lines — which had discussed together what their security policies should be after a crisis — had 100 percent inspection in place the day after the attacks, whereas other sectors took as long as a year.
Peter Yesawich, vice chairman emeritus of MMGY Global, reported on the latest trends from the perspective of 26 years of analysis. The news was encouraging for travel consultants: 24 percent of future cruisers said they use travel agents — a number expected to rise, as 27 percent polled said they plan to use agents. Seventy percent reported that agents are very influential. According to Yesawich, 43 percent of prospective cruisers said that they would book through Amazon, leaving attendees buzzing about the opportunity for a large agency network to partner with Amazon.
Using a sample of 2,800 households, Yesawich characterized six of 10 American leisure travelers as active travelers and noted that 11 percent of leisure travelers have booked a cruise (a little higher than gaming vacations, but lower than theme park trips). He said 46 percent of these travelers are interested in taking a cruise in the next two years, “a wonderful horizon line for the industry.”
Millennials and baby boomers proved to be the strongest prospects for cruising. Yesawich added that 23 percent of those interested in cruising are grandparents, a great multigenerational opportunity. In addition, 65 percent of respondents took a celebration vacation for a milestone birthday or anniversary.
During the conference, all four cruise executives praised travel agents, noting that the bulk of their reservations come through this distribution channel, and that they hope and expect this to continue.
Fain underlined Royal Caribbean International’s heavy investment for agents last year, noting: “We’re lucky to have maintained their support.”
Del Rio said agents have adapted to technology rather than been threatened by it, and that agents are the key to qualifying clients, the single most important issue in cruise satisfaction.