Cruise Lines Carry On

Despite ups and downs, optimism steady at Seatrade session

By: Theresa Norton Masek

MIAMI BEACH Like a ship in stormy waters, the cruise industry this past year has experienced enough ups and downs to make anyone queasy.

Direct bookings are inching upward, newbuild orders have virtually stopped, a stomach flu generated negative and often incorrect media coverage, reservations lines ring or fall silent, depending on the day’s war news, and the economy is still in the tank.

Yet cruise line executives are optimistic 2003 might turn out OK. That was the tone of top executives speaking last week at the annual State of the Industry panel discussion at the cruise industry’s largest international gathering, the Seatrade Cruise Shipping Convention here.

“Clearly, this is a much more disappointing Wave Period than any of us hoped for,” said Richard Fain, chairman of Royal Caribbean Cruises Ltd. “But it is remarkable how well this industry responds to these kinds of challenges and I think this year will be no different.”

Howard Frank, vice-chairman of Carnival Corp., said overall passenger numbers are up over last year, although price and revenue are down slightly. “People are waiting for the next shoe to drop in Iraq,” Frank said. “But when the demand does come back, it will come back even stronger than it was before. We haven’t given up on this year by any means.”

Colin Veitch, president of Norwegian Cruise Line, said fear of a war in Iraq has dampened demand even more than the Sept. 11 terrorist attacks.

“Last year, we had the specter of 9/11, but that turned out to be a single, sharp shot to the system,” Veitch said. “This year, we have a number of influences the possibility of war, the economy, the Norwalk-like virus. It’s all having a longer-term, dragging impact on demand, and it’s difficult to know where that will end. Uncertainty is the great enemy of our business.”

Of course, cruise lines can and do lower prices to fill ships. In fact, the number of worldwide passengers on CLIA-member cruise lines in 2002 rose 15.5 percent to 8.66 million, filling 97 percent of overall capacity, according to figures cited by CLIA Executive Director Bob Sharak.

Cruise lines also moved many ships away from the Eastern Mediterranean and other perceived hot spots to the U.S. after Sept. 11, gaining passengers who were relieved to drive not fly to cruise ports. That close-to-home trend continues to gain steam, and is also helping to generate business in trying times.

It’s a trend that is even spreading to Crystal Cruises, an upscale line that has always boasted worldwide itineraries.

“We are looking at shorter, seven-day round-trip cruises out of U.S. ports,” said Gregg Michel, Crystal’s president.

Even so, Michel said the new Crystal Serenity, scheduled for a June delivery, will remain in the Mediterranean this summer “notwithstanding unforeseen events.” Fain also said Royal Caribbean International and Celebrity ships will remain in Europe “absent something really quite dramatic.”

Veitch said the Orient Lines ship based in the Med is having a “difficult time” filling up. NCL, he said, is focused on its Homeland Cruising program and will increase the number of North American homeports in 2004 from this year’s 13. “We have no plans to increase Europe or Mediterranean deployment,” he said.

Meanwhile, several executives said direct bookings continue to inch upward, especially among the largest, mass-market lines.

CLIA still says 90 percent of sales are made by travel agents, but Carnival Cruise Lines President Bob Dickinson said his company booked 13.6 percent direct in 2002.

Fain said he didn’t have exact figures but that direct bookings were “under 10 percent.”

“The bulk of bookings for the foreseeable future will be through travel agents, and travel agents who work aggressively through us will see their business grow,” Fain said. “But there’s no question [direct bookings] will grow. We are providing every opportunity for consumers to buy our cruises.”

Cunard Line Ltd. President Pam Conover said about 10 percent of Cunard and Seabourn bookings are direct while Veitch put the figure for NCL at 5 percent. Michel said Crystal books exclusively through agents. “If our direct business is over 1 percent, I’d really be surprised,” Michel said.

Dickinson said that cruise lines’ main competition is land-based resorts and hotels, which regularly book 75 to 80 percent of their business directly with consumers.

Dickinson said the CLIA figure of 90 percent agent bookings will “never be 80 percent direct because we’re not selling hotel rooms, which are commodities, we’re selling an experience ... that depends on personal, one-to-one interaction that a travel agent provides.”