In a media conference call last month, Carnival Corp. & plc CEO Arnold Donald addressed key issues and agendas for the company and the cruise industry overall. According to Donald, in order to stimulate demand and raise pricing, the cruise lines and agents must do a better job of pairing customers with the right brand and highlighting the advantages of cruising over land-based vacations.
“It is clear to me that, as an industry, we have not done a good enough job of communicating what cruising is,” he added. “We haven’t effectively conveyed its value compared to land vacations. We need to change preconceived notions. We have to equip travel professionals to attract new people to cruising.”
He also stressed the importance of using travel agents to pair consumers with their ideal brand.
“Clearly the travel professional remains a critical partner,” he added. “We want to elevate their ability to put people with the right brand – the key is correct qualification.”
However, attendees argued that, because the major cruise lines are offering fewer incentives for agents, mainstream cruising has become a less profitable enterprise for them. According to a number of recent polls (including one from NACTA), a smaller percentage of agents are selling contemporary cruises in favor of all-inclusive vacations, tours and inclusive luxury and river cruises, where higher fares and few non-commissionable fees equate to more profit.
In response, Carnival has limited growth in an effort to raise pricing by increasing demand. Attendees asked how this will work when competitors are bringing in more ships — notably, MSC Cruises recently announced four large ship orders, coupled with its increased investment in the American market. Robin Farley, UBS analyst, has speculated that the industry’s capacity shifts to Australasia could drive up pricing in the Caribbean, with fewer ships deployed there.
According to Donald, cruising brands are so differentiated that there is really no effect on repeat passengers from new entrants such as MSC, and he sees shifts in the numbers in the Caribbean as less important than bringing in the new cruiser.
“What’s really going to drive higher pricing is more effectively conveying of the value of cruising,” he said.
Carnival has said that it expects China to become the world’s second-largest cruise market in 2017. When asked about the possible effects on the U.S. market when China starts to reach that potential, Donald replied that the North American and European markets will not be taking a back seat. Carnival will debut new ships for all markets, although he also acknowledged that there are limits to the number of vessels that can be built in a given amount of time.
“If we wanted to build 10 ships in a year, we couldn’t,” he said. “There’s a limit to capacity growth.”
There is no doubt that new ships will be built specifically for the Asian market. Right now, however, Carnival Corp. is working on determining which brands should be players there. The recent transfer of two Holland America ships (the Ryndam and Statendam) to P&O Cruises in Australia underlines Carnival’s strong emphasis on cooperation and leveraging its corporate size, while preserving brand identity. Donald stressed opportunities that cash in on Carnival Corporation’s scale without infringing on brand differentiation, such as using a common platform for newbuilds across the brands.
In terms of West Coast operations, Carnival Cruise Lines will place the Miracle in year-round, weeklong Mexican Riviera cruises from Long Beach, Calif., to Mazatlan beginning this October, while Carnival Legend will sail the Alaska program from Seattle in May 2015, following its inaugural season in Australia.
The line also plans to offer four Hawaii sailings in the near future. An 11-day cruise on Carnival Legend will sail from Honolulu to Vancouver on May 7, 2015; and three 15-day cruises on Carnival Miracle will operate round-trip from Long Beach in October and November, 2015, and November, 2016.
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