Cruise Executives Celebrate Prosperous Times at Seatrade

Apr 07, 2017

“What an incredible business this is, what an incredible future we have, and what amazing toys we play with,” said Pierfrancesco Vago, executive chairman of MSC Cruises, in mid-March during Seatrade Cruise Global’s State of the Industry session in Miami.

His comments earned an enthusiastic round of applause. Executives attending Seatrade were extremely bullish about a projected record year for the industry, delivering one report after another of a strong market and good prospects — from the Caribbean and Alaska to the greatly improved Mediterranean — with strong prices strong and increased volume. The only serious problem executives were wary about was national boundary measures that inhibit travel.

“We've got things going well now,” said Arnold Donald, president and CEO of Carnival Corporation & Plc. “As long as the world stays open to travel, we'll do fine. If the world shifts to closed borders, that would be a problem.”

Frank J. Del Rio, president of Norwegian Cruise Line Holdings Ltd., agreed that geopolitical issues are the biggest threat to the strong industry.

Executives celebrated the world orderbook, with 74 vessels being built in the next 10 years and $51.7 billion in investment. Vago noted that nearly every brand has a ship on order, but that supply won’t exceed demand, since growth is only 8 percent annually when the yards are full. However, he noted that all this will change as Asia enters the shipyard business.

“Asia will start building ships like they were sandwiches,” he said.

Del Rio provided figures showing that 82 percent of cruise decisions are based on itinerary; 77 percent are based on price; and 68 percent are based on the length of the cruise. He said the destination not only determines per diems and yields, but also onboard revenue, with shore excursions representing the lion’s share.

Richard D. Fain, chairman and CEO of Royal Caribbean Cruises Ltd., discussed how the line spent hundreds of millions of dollars on a seawater system that filters more than 98 percent of sulphur from emissions, bringing wastewater to the potable level. He noted that it is especially important for the private sector to step up at a time when “the government is not a good guarantor of the Earth’s health.”

Cruise lines also announced ambitious ship orders with innovative new designs.

Del Rio centered on Norwegian Bliss, the third Breakaway Plus ship, which launches in June 2018 as the largest ship sailing to Alaska from Seattle. He noted that the $30,000 upgrades to Pier 66 will be opening this summer in preparation. Bliss will also sail a few Mexican Riviera cruises out of Los Angeles and a 14-day cruise through the Panama Canal. In addition, Del Rio said Norwegian Cruise Line’s Project Leonardo orders for four 3,300-guest ships every year starting in 2022 will give the brand more port flexibility than ordering larger vessels.

Vago pointed out that no line has ever placed orders as far out as MSC, which has announced newbuild orders through 2026, which is when he expects clientele to expand from 1.8 million passengers to 5 million (North America currently accounts for 200,000 passengers).

“Being a private company is a huge advantage; you can invest in the long term,” he said.

Vago also noted that in the span of 13 years, MSC brought out 12 new ships and now has 11 on order. The single year-round North American ship, MSC Divina, will grow to three by 2019, as MSC Meraviglia and MSC Seaside come to Miami. Gianni Onorato, CEO for MSC, pledged that the company will continue to pay agents commission on shore excursions, spa treatments and air.

Meanwhile, although Cunard Line did not announce a newbuild, Carnival has invested $200 million in the brand, according to Josh Leibowitz, chief strategy officer for the corporation, who has now added the title of senior vice president for Cunard North America.

“That’s the kind of scale that people talk about for a fleet of 10 to 15 ships,” Leibowitz said, underlining Queen Victoria’s $45 million refurbishment this May, which involves cutting off the back portion of the ship and adding a new sundeck and 30 new staterooms, while completely refurbishing its 24 suites.

Leibowitz noted that a big Cunard incentive is inexpensive airfare, especially for one-way flights, now that Carnival is buying all brands’ air together. For example, as of mid-March, the economy fare for a traveler sailing back on Queen Mary 2 from Southampton, England, to New York one way — which is published at $1,816 on British Airways — is 87 percent lower with Cunard, at $230.

The positive perception of the cruise industry from Seatrade attendees also extended to the major cruise destinations , which are projecting increased cruise business and arming up infrastructure to serve it.