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Gulf Cruise Industry

Piracy threatens Gulf cruise trade

Oct 20, 2011

High security costs incurred because of piracy are holding back the growth of the cruise industry in the Gulf.

The cruise sector is an increasingly important part of Dubai's and Abu Dhabi's tourism growth plans. But sailing to the region involves passing through high-risk areas, as cruise liners must navigate the waters of the Gulf of Aden, which are patrolled by pirates.

"It is a challenge for future growth in the region," said Craig Milan, the senior vice president, land operations, for Royal Caribbean. "You have ships that are already dedicated to the region, but it's just an additional impediment to putting additional capacity in the region, where you could put the ship elsewhere and don't have to deal with the security costs."

A 2,000-passenger ship brings an average revenue of about Dh1 million (US$272,253) to each port of call, according to research by Seatrade, a shipping communications company.

Abu Dhabi has plans to attract 300 ships and more than 600,000 passengers a year by 2030.

"It certainly just makes it more challenging for the repositioning of big ships such as ours coming from the Med," Mr Milan said. "Repositioning cruises are normally a challenge to fill anyway at decent yields, so when you have a lower ticket price and higher insurance cost and higher security cost, it just makes it less attractive. It doesn't mean that you're not going to do it, because you clearly have to get your ship to where it says it's going to go."

Insurance costs for ships travelling to the region would be more than 50 per cent higher because of piracy, industry insiders said.

Hapag-Lloyd, which offers smaller cruises carrying 164 to 420 passengers, said it had to fork out between €5,000 (Dh25,431) and €10,000 a day for security teams as vessels sailed through waters where there was a risk of piracy. Depending on the route, the teams could be needed for about 12 days. There is also the cost of accommodating the security teams on board in passenger cabins.

"It's a big issue from a fundamental security point," said Sebastian Ahrens, the managing director of Hapag-Lloyd.

"Beyond that, it's a big issue in terms of the financial implications, not just from insurance, but additional security measures on board. The financial implications are so significant that certainly, as far as the positioning is concerned for smaller vessels, economically you can basically write off the positioning even if you're going full.

"Going full on a positioning to Dubai or from Dubai through the Gulf of Aden at this point in time is - unless you discount like crazy - an illusion anyway because on the way after Muscat, there are few places where you can stop that are worthwhile for your clients before you get up to Port Safaga or Hurghada or Sharm El Sheikh or Aqaba."

Still, the cruise industry has grown substantially in recent years in the UAE, and this month MSC Cruises is launching its first Gulf cruises, which will sail out of Abu Dhabi. But the company agrees that piracy is an issue.

"For sure it's a big problem," said Neil Palomba the corporate operating officer of MSC Cruises. "We as MSC have been facing the past years some challenges, and of course we did integrate precautions. There are already [measures] in place by the various authorities worldwide that they try to escort cruise ships in a convoy. But if you say, are cruise ships less or more vulnerable, I don't think there is a big difference between types of ships."

Piracy threatens Gulf cruise trade
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