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Cruising Through Stormy Economy


Cruise sector will survive economic slump

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Mar 12, 2008

IN SPITE of gloomy economic forecasts, the cruise industry is in good shape to weather an economic downturn, speakers at the Seatrade cruise conference in Miami suggested this week.

Gerry Cahill , chief executive of Carnival Cruise Lines, said the industry had to deal with a flood of negative information on the state of the US economy, with downward houseprices, bad employment predictions and a stock market downturn of 15-20%, the industry had performed well during the last two periods of recession in 1990 and 2001.

If US citizens were obliged to make sacrifices to offset economic issues like the price of oil, they were also wedded to the idea of an annual vacation, and the cruise industry had much to offer in offering a value for money experience, he told delegates at the Seatrade annual cruise convention in Miami.

Recent survey information suggests that, faced with an downturn, the US population is not inclined to forego its annual vacation, and cruise holidays are among the best value for money available, Mr Cahill said.

With the globalisation of the cruise sector, other countries offered a significant new source of potential cruisers, he said, as witnessed by the three fold increase in the number of cruisers in Europe between 1995 and 2006, according to European Cruise Council statistics.

Considering advance bookings for 2008 in terms of occupancy and pricing for Carnival and Royal Caribbean, cruising should turn out to be resilient, he believed.

Royal Caribbean president Adam Goldstein believed that the industry’s message that it provided value for money was one of the most valuable assets it had.

Colin Veitch did not feel the industry needed to be overly concerned about an economic downturn, as fundamentals for cruising remained good, with an ageing population with high disposable income.

Rick Sasso, chief executive of MSC Cruises (USA) told delegates that the cruise industry’s stamina to deal with every adversity in 40 years of growth had been extraordinary. North America, he said “is and has been the most penetrated market but North America is still under-penetrated.

Drivers for the future included the extensive investment being made in new tonnage. MSC alone has invested E4bn in the last three years, he said. Cruise passenger were now getting ships with twice the space per passenger than 20 years ago, he said, and the variety of brands available meant that there was something to suit every lifestyle.

He also praised the talent available in the industry, with a combination of youth and experience.
If deployment of capacity in the Caribbean has dropped somewhat this year, most speakers agreed that the region remained the best cruising place in the world although there were opportunities to balance Caribbean business with other markets. If cruise lines decided to put ships into the European market rather than leaving them in the Caribbean, this was less a sign of lack of confidence in that market but a sign of confidence in Europe, Mr Veitch said.

Putting cruise ships into Asia is another area that the cruise lines are considering, although pricing might be an issue, as was the amount of time people take for holidays. Mr Veitch said his company’s personal interest was developing in Europe but for those companies already in Europe, Asia would prove an interesting market for development.

According to Mr Goldstein, one trend among cruise lines was that of “disegalitarianism”. This, he described as a change in perception by passengers who, while being prepared to pay “top dollar” were not prepared to accept being on the same footing as other passengers when outside their cabins.

If European yards continue to dominate in the cruise shipbuilding sector, speakers felt that there was no reason why this should not change, but at the moment the Far Eastern yards were fully occupied with building ships for other sectors of the shipping industry. Tackling issues like cutting down on fuel and handling waste needed to be addressed in the shipbuilding context.

Stein Kruse, chief executive of Holland America Line said that given the currency challenge presented by a weak dollar and a strong euro, shipbuilding propositions from Asian yards would be attractive. However he felt that while the “skill sets” were available, Asian yards were not quite there in terms of availability of sub-contractors.

There was little to suggest that current high fuel prices would change, Mr Kruse said and the cruise industry was under pressure to find ways of conserving fuel, whether by the use of distillates, cold ironing, hull coatings or emissions trading.

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Cruise sector will survive economic slump
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