Wave Season Prognosis Good

Cruise executives optimistic despite virus and fear of war

By: Theresa Norton Masek

Despite the stubborn virus that continues to make an occasional appearance onboard, cruise executives are expressing cautious optimism for a healthy Wave Season.

“We’ve gone through an awful lot,” said Kirk Lanterman, CEO of Holland America Line-Westours. “But the cruise industry seems to be very resilient and pricing seems to be good.”

Radisson Seven Seas Cruises has reported that bookings during Christmas week were 15 to 20 percent higher than last year. And Carnival Corp. expects yields to inch up 1 to 3 percent in first-quarter 2003.

The biggest damage to cruising’s reputation continues to be the extensive, sometimes shrill media coverage of the Norwalk-like virus that has sickened thousands.

In one of the most recent outbreaks, Royal Caribbean International reported 71 suspected cases on the Majesty of the Seas’ four-day cruise, which ended Dec. 27.

Overall, however, the International Council of Cruise Lines reports that the virus hit less than .01 percent of the 7.4 million people estimated to have cruised in 2002. And the virus has sickened many people on land too.

While health authorities have praised the lines’ response to the virus, some executives worry that consumers have lingering doubts that will affect their actions during the time of year when most cruise reservations are made.

Factor in economic issues, the fear of war with Iraq, rising tension with North Korea and continuing strife in Israel, and it would seem that Wave Season is facing rough waters.

But Mark Conroy, president of Radisson Seven Seas Cruises and chairman of the Cruise Lines International Association, said the bookings already have begun for the busy months of January, February and March.

“During Christmas week, we did about $1 million more in net revenue than Christmas week the year before,” Conroy said. “That’s about 15 or 20 percent more.”

He said consumers appear to be more concerned about the economy and Iraq than they are about the virus and that many are waiting until the last minute to make reservations.

For example, Conroy said the line received two lucrative bookings for a 122-day world cruise on Dec. 16, just three weeks before the Jan. 7 departure.

“We are noticing a lot of churn in the number of bookings that stick from reservation to sailing,” Conroy said. “The stick is usually about half, but now it ranges from 30 to 45 percent. The marketing seems to be working, which means people are calling agents and making reservations, but they’re not always putting the money down. Customers want to go, but they’re nervous.”

Micky Arison, chairman of the six-brand Carnival Corp., said advance-booking occupancy levels and prices for fiscal 2003 were “up slightly” compared with last year’s levels at the same time.

The company does not release exact figures.

“However, booking levels have slowed recently, which may have been partially caused by the recent media attention focused on stomach flu on cruise ships,” Carnival Corp. stated Dec. 19. “Historically, widespread adverse media coverage on cruise industry issues has had a temporary negative effect on booking trends.”

This quarter, Carnival Corp. expects net revenue yield to increase 1 to 3 percent compared with the same period last year.

But operating costs will be 4 to 6 percent higher, when calculated on an available berth-day basis, because fuel costs are increasing. There also will be a significant increase in marketing costs related to the new ships that are expected to increase capacity by 17.5 percent this year.

Norwegian Cruise Line also reports that both load factors and yields are running ahead of last year.

“Clearly, there’s some uncertainty in terms of a possible war, but we’re not seeing that reflected in our bookings,” said Andy Stuart, senior vice president of marketing and sales. “We’re seeing a very strong outlook for 2003.”

Other events tilting in favor of the cruise industry were the early snow and miserable weather in parts of the Northwest, Midwest and East.

“The weather hasn’t been that great all over the country, so people are starting to plan vacations,” Conroy said.

Of course, it might not be that difficult to increase sales and revenue over early 2002. At that time, the travel industry still was reeling from the post-Sept. 11 fallout. Cruise lines lured passengers with deep discounts remember $399 for a week in the Caribbean? and redeploying ships to nearby seaports, which has proven successful for most lines.

“There are some events hanging on out there who knows what will happen with the Iraq situation,” Lanterman said. “But I think the Wave Season will turn out to be very good.”