Cruise Shipping Miami: State of the Industry

The theme that emerged from the State of the Industry panel at Cruise Shipping Miami was globalization, as it became clear with one presentation after the other that industry sourcing and marketing has truly gone worldwide.

The annual gathering brought together around 12,000 attendees representing all aspects of the cruise industry, many of whom crowded into the keynote State of the Industry panel with introductory speeches by David Scowsill, president and CEO of the World Travel and Tourism Council, and Christine Duffy, president and CEO of CLIA, who provided a clear picture of a coalescing industry focusing its worldwide impact.

Despite the economic woes that created a ripple effect worldwide, cruising is the fastest-growing sector of travel and tourism. CLIA’s figures estimating 20.9 million passengers sailing this year on its current 58 member lines represents 3.3 percent growth; worldwide cruising numbers generated $36 billion, growing 4.8 percent.

Scowsill’s 2012 figures indicated that, for the first time, a billion people traveled internationally in 2012 and that travel is responsible for 260 million jobs, six times more than the automotive industry and one in 11 jobs on the planet. He said that last year the travel industry provided 9 percent of the global domestic product, generating $6.6 trillion. He foresees a shift during the next 10 years from the mature market to younger travelers, and in another shift, China is predicted to overtake the U.S. travel figures within 20 years as two billion people in the emerging middle class enter the market from India and China.

Scowsill emphasized that the global industry must speak and act with one voice to ensure that three key priorities are met for the continued growth of tourism and travel: freedom to travel, including a streamlined, transparent visa process; policies for growth, with taxation levels and regulatory measures that stimulate growth; and sustainable tourism policies to preserve the environment. He said the U.S. has lost $600 billion in income since September 11 with its negative visa policy, and found encouragement in a video of President Obama’s statement that “Tourism is the number one product we have to export; I want America to be the top tourism destination in the world.”

Duffy noted that 10 cruise industry associations are now combined and that new associations are being created, most recently CLIA Germany.

She added, “Our footprint will continue to grow.”

The CLIA fleet is growing also, with 15 new vessels scheduled to debut during 2013-14 for CLIA’s river cruise lines, and 10 for seagoing cruise lines. These collectively represent more than $7 billion in investment, and scheduled ship revitalizations represent an additional commitment of sums from $18 million to $500 million-plus from member lines.

Carnival Cruise Lines president and CEO Gerry Cahill discussed the developments following the Carnival Triumph engine fire, which resulted from a leak in the fuel return line; the damage knocked out both engine rooms and the ship had to depend on the emergency generator. He said the top priority had been the safety of the guests and that the focus has now switched to lessons that could be learned. Carnival has started a comprehensive fleet review, which is also being carried out by other Carnival Corporation lines, using both experts from the corporation and from outside it, with groups working in Mobile, Miami, Southampton and Trieste. CLIA also is doing an assessment and expects to come up with solutions that can be implemented across the world fleet.

In the area of cruise industry regulatory responsibility that came up in the wake of the Triumph fire, panelists made it clear that the industry is heavily regulated from outside and within. Adam Goldstein, president and CEO of Royal Caribbean International noted that wherever ships sail there is a regulatory regime in effect through the International Maritime Organization, plus each country’s regulatory measures. He pointed out that adherence to regulations starts in the shipyard and the flag state. Stein Kruse, Holland America Line president and CEO, added that port states also inspect the ships and that cruising is exceptionally safe, with nearly 30 million people taking extraordinary vacations without anything to mar them.

The health of the industry was underlined by Norwegian Cruise Line president and CEO Kevin Sheehan, who discussed his company’s recent move to go public following quarter after quarter of consistent growth.

“We were 20 to 30 percent above the pricing set in the roadshow and 30 times oversubscribed,” he said. “At the end of the day, cruising is the safest vacation anybody could have.”

He underlined the resilience of the North American market, which has continued to grow through challenges from oil prices to the economy, and said he feels that the economic indicators are now going the right way.

“If the environment stays stable, given the slowdown in capacity growth, we will hopefully be able to bring pricing up to a more respectable level,” he added.

The cruise executives characterized the world cruise market as resilient because of its value in hard economic times. Pierfrancesco Vago, CEO of MSC Cruises, said that, despite the economic problems in Europe last year, which he called “annus horribilis”, over a five year period Italy grew 6 percent, Spain 3 percent; he said France has finally opened up as well.

Manfredi Lefebvre d’Ovido, chairman of Silversea Cruises, also noted that, although Italy declined 10 percent in cruising last year and Spain 18 percent, the picture is much brighter in Northern Europe, where Germany grew 10 percent and the U.K. 11 percent.

Celebrity Cruises president Michael Bayley predicted that China and Asia in general will be boom markets in the next decade and discussed the increasing trend for cruise lines’ setting up offices in an increasing number of international locations. Goldstein noted that Royal’s Mariner of the Seas is joining Voyager in the Far East, responding to the influx of the middle class there. He added that developing the distribution system in these markets is a top priority.

“We need knowledgeable agents who can explain the product and its differences, and we need port of call development there,” he stated.

Carnival Cruise Lines, which has traditionally been almost exclusively focused on the American market, is sending the Spirit year-round to Australia. In discussing the match between the product and the Australian consumer, Cahill said, “Maybe we’ll visit groups in some other markets, too.”

The issue of emission control in North America and its effect on itinerary planning, particularly in Alaska, was discussed by Kruse, who recalled the removal of ships after punitive taxes and fees were levied against the cruise industry in Alaska, and noted that the pro-business governor has brought business back almost to earlier levels. He said the efforts to alleviate ECA restrictions with population averaging had been unsuccessful, but that the industry was finding more hope in equivalent action, including the emerging scrubber technology. If the dialogue allows cruising to avoid the worst of ECA costs, he said, “The future looks absolutely bright.”

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