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Copyright © 1995-2002 
Linda Coffman

Out to Sea… or Branson?
The Vacation Conundrum

March 6, 2001—Miami Beach 

An outraged travel agent once related to me the frustration of helping a client plan a surprise cruise for his wife’s birthday.  The woman’s reaction to learning her gift was a glorious Mediterranean cruise holiday was, “Oh, it’s nice… but I really wanted to go to Branson.” 

Despite the overwhelming popularity of Branson, Las Vegas, and Walt Disney World, did your Y2K cruise seem a tad more crowded than in years gone by?  Was it slightly more difficult to get a desirable stateroom and the dinner seating you’ve taken for granted?  Did it seem like there were almost a million more people vying for service, attention, and deck chairs?  Well, there were—literally.  According to figures just released by Cruise Lines International Association (CLIA), almost 6.9 million North Americans embarked on a cruise vacation in 2000, a whopping 992,000 (or 16.8%) more than in 1999. 

New ships, new destinations, and, according to Richard Sasso, CLIA Chairman and President of Celebrity Cruises, the “best value for vacation dollars” attracted an increase in passengers that actually outstripped the year’s growth in capacity of 11% new berths in the North American cruise fleet.  Cruise liners sailed over 90% booked.  Sasso stated, “Fourteen new vessels joined the North American fleet last year.  They were safer, more spacious, more environmentally friendly, and more exciting than ever.  The public caught the fever as these new ships were heavily promoted and great word-of-mouth circulated the vacation marketplace.”

Seatrade—State of the Industry
Seatrade Cruise Shipping Convention 2001 opened on Tuesday, March 6th with a spirited “State of the Industry” Debate.  To get our blood stirring, Richard Sasso began with a video parade of glamorous new vessels.  With the “soul of the industry” highlighted, he and seven other top cruise industry executives began discussing and debating the immediate past and present condition of the industry and offered us a glimpse into the coming decade.  Participating in addition to Sasso were Philip C. Calian, CEO, American Classic Voyages; Frank Del Rio, Co-CEO, Renaissance Cruises; Bob Dickinson, President, Carnival Cruise Lines; Pier Luigi Foschi, Managing Director, Costa Crociere; Peter Ratcliffe, CEO, P&O Princess Cruises; Colin Veitch, President & CEO, Norwegian Cruise Line; and Jack Williams, President, Royal Caribbean International.

What’s New
Innovation is the buzzword of the new century and these gentlemen all agreed that to challenge land-based vacation competitors they have to offer fresh new concepts afloat in order to attract the large segment of the population who hasn’t taken a cruise.

Norwegian Cruise Line’s Freestyle Cruising concept was cited as a revolution in cruise dining.  Veitch explained that by removing the core element of structure, they were able to introduce a genuine resort dining experience.  North American passengers on NCL’s Norwegian Sun will find unprecedented choices—nine restaurants in addition to the traditional dining room.  As when vacationing at a land-based resort, passengers can choose to eat out in a different restaurant every evening.

Carnival’s Dickinson agreed that this is part of an evolution; however, Carnival’s changes have not been reactionary but the result of cause and effect.  NCL made a big splash with Freestyle but the timing was right for lines such as Carnival and Princess, who were already busy tweaking their dining programs.  With four mealtime options, Carnival ships’ galleys will be serving fewer meals at any one time, resulting in better quality of preparation and service.  Also being introduced is a dining room team service concept that will mean a less harried staff and more a more satisfying passenger experience.

Ratcliffe stated that Princess is striving to deliver a more personalized experience to their passengers as well, including not only dining options, but also offering more control over such aspects of the total cruise package as airline flights and shore excursions.

More Ships—Bigger Ships
Anyone who’s booked a cruise in recent years knows it’s been a buyer’s market.  What about the industry’s bottom line…?  These gentlemen are concerned with price deflation but see sunny days ahead.

Dickinson cited 92% occupancy rates as proof that additional ships have succeeded in drawing a larger percentage of the total vacation market.  In his view, past capacity constraints restricted growth and today’s' modern floating resorts produce a higher customer satisfaction rate.

An aging population and wealth factors contribute to a growing vacation market according to Veitch.  He predicted cruise lines will persist in innovating, compete for vacation market share, and enter markets not previously tapped.  International markets and land and sea packages are two potential expansion areas.

Ratcliffe also pointed to positive industry growth driven by demographic changes and high passenger satisfaction levels.  He projected global growth at even higher levels than in the United States.  European markets, and specifically the German market, are being targeted for expansion.  Traditionally, Europeans have more holiday time available to them and are an under-tapped passenger source.

So, why have Royal Caribbean and Princess delayed options on their newest shipbuilding projects?  According to RCI’s Williams, it was a matter of timing and not a concern of industry weakness.

Where Do We Go?
“New Guy on the Block,” Frank Del Rio of Renaissance expressed concern that too much emphasis was being placed on capacity and not enough on destination orientation.  He views the challenge to find new destinations and airlift limitations as areas of concern.  The cruise industry has to offer the vacationing public a compelling reason to fly.  While pricing has been depressed across the board by industry expansion, Renaissance is uniquely positioned in the “premium” category with its R-class vessels.  Del Rio pointed out they are not small ships, but “smaller”—with all the amenities of big ships for a lot of value.

When Hawaii was mentioned as a growth destination, Calian of American Classic Voyages took some heat.  He insisted that a recent bill introduced before congress to eliminate all trace of gaming machines on ships embarking passengers for inter-island cruises was not protectionism.  Instead of being aimed at stifling their competitors (most notably NCL), Calian referred to the bill as a “legislative preference.”

More ports are vying for cruise lines’ business and Calian noted Delta Queen Coastal Voyages will begin calling on east coast ports with their small destination-intensive vessels.  RCI is also expanding into ports they haven’t sailed from in the past—Galveston, Tampa, and New Orleans—gaining a foothold into some established ports.  More investment is seen as necessary for port development.

Promises, Promises
Why haven’t the other cruise lines picked up Carnival’s “guarantee” of a good cruise or your money back?  Dickinson seemed puzzled that the other lines haven’t jumped in to offer what he considers an outstanding marketing tool.  Passengers can leave the cruise at the first port of call and receive a pro-rated refund of their cruise fare if their expectations are not being met.  He pointed out the similarity between the Carnival guarantee and being able to check out of an unsatisfactory resort.  He also divulged that very few passengers take advantage of the offer, “Don’t over promise and under deliver and your passengers don’t use it.”  To Dickinson, the issue is perception of newcomers to cruising.  The guarantee relieves some of the risk element and coaxes them into booking.  General consensus of the other executives was that the Carnival guarantee raises a negative by the travel agent at just the point when positive aspects of cruising should be emphasized.

Smoke on the Water
The debate rages over smoking versus non-smoking passengers and how to meet their expectations.  Dickinson proudly hailed Carnival’s Paradise as an innovation—offering passengers the “first” completely smoke free ship.  Del Rio pointed out that passenger areas on the entire Renaissance fleet are non-smoking and have been since the R1 was introduced in 1998.  Other cruise line executives are more pragmatic—particularly Foschi, whose Costa ships attract a heavy mix of European passengers who tend to be politically incorrect smokers (at least to their North American passenger brethren).  While Dickinson hinted at the introduction of another smoke free ship, Del Rio conceded that Renaissane non-smokers might have to give a bit for smokers on a limited basis.  All agree that it should be possible to successfully divide those who do and do not smoke and that group bookings tend to suffer in a totally non-smoking vessel/fleet.

The Bottom Line
While newer, bigger, and better ships are being launched to compete against the likes of Walt Disney World, Branson, and Las Vegas attractions, what are the single most important elements to these gentlemen for a brighter corporate cruising future?  

  • Philip Calian (American Classic Voyages)—The introduction of United States Line and the Patriot

  • Jack Williams (RCI)—The growing pressure to deal with the issues discussed without allowing quality to slip

  • Colin Veitch (NCL)—Product innovation and cost efficiencies

  • Frank Del Rio (Renaissance)—Penetration of the travel agent community

  • Richard Sasso (Celebrity)—QVI or Quality, Variety, and Innovation

  • Peter Ratcliffe (P&O Princess)—Globalization

  • Bob Dickinson (Carnival)—Recruitment, training, and retention of employees

Online & Out to Sea
Finally, Jack Williams and Pier Luigi Foschi touched on a discussion about the Internet.  Williams stated that advertising invites potential passengers to look closer at cruising and the World Wide Web delivers additional detailed information.  For example,
“Yahoo has millions of people talking to one another.”  Foschi agreed that the Internet is a valuable source of information and a tool for travel agents as well as a method to sustain communications.

The Crystal Ball
According to CLIA research, “Compared with 15 years ago, when the average cruiser was 56 years old, today’s new cruiser is 46, and current cruise prospects average 43 years of age…”  Cruising is no longer for just the overfed, newlywed, and nearly dead.  Look for an 8.5% increase in berths in 2001 and a similar growth in passenger figures.

Calm seas and blue skies... 

Reporting from sunny Miami Beach, Linda Coffman