News for the Hospitality Executive
|By Tom Stieghorst, South Florida Sun-Sentinel
Knight Ridder/Tribune Business News
Mar. 17, 2004 - After two years of sliding prices, 2004 is shaping up to be a tonic for the $15 billion cruise industry, a major South Florida employer.
That was the consensus in Miami Beach on Tuesday, where a panel of CEOs talked about the state of the industry at the annual Seatrade Cruise Shipping Convention.
Although last week's terrorist strike in Madrid kept exuberance in check, executives forecast a solid increase in bookings and prices this year.
"Compared to what we've been used to, it seems terribly encouraging," said Richard Fain, chairman of Miami-based Royal Caribbean Cruises. "We're feeling pretty good this year."
"We're all experiencing quite positive demand compared to last year," added Colin Veitch, president of Norwegian Cruise Line, also based in Miami.
About 9.5 million people took a cruise last year and the industry trade group, Cruise Lines International Association, is projecting about 10.6 million guests will occupy the 235,881 berths on 150 cruise ships in the world fleet in 2004.
North Americans, the bulk of the business, grew from 7.6 million to 8 million last year. Still, to get a higher number of passengers on an increasing number of ships, most lines resorted to discounting that squeezed profit margins.
This year, bookings are robust, especially when compared to the poor numbers from last year in the run-up to the Iraq war. Miami-based Carnival Corp.'s bookings are ahead more than 50 percent since early January, said vice chairman Howard Frank.
"There seems to be some evidence there will be continued strengthening going forward," he said.
The much-publicized debut of the Queen Mary 2, which came to Fort Lauderdale on its maiden voyage in January, has to some degree raised consumer awareness of cruising worldwide, Frank said.
Luxury lines are benefiting as much as the mass market. "We're starting to pull back some of the discounts because of the way bookings have gone in 2004," said Albert Peter, chief executive officer of Fort Lauderdale-based Silversea Cruises.
Peter said the weak dollar has made cruises in Europe a great value and that is fueling sales, along with pent-up demand.
Peter, who is Swiss, said fallout from the Madrid train-bombing is not yet evident. "We haven't seen a major impact so far and we don't' expect one," he said. "Coming from Europe, we are almost more used to terrorist acts like this one."
Bob Dickinson, president of Carnival Cruise Lines, said the impact on cruises is likely to be similar to the post-Sept. 11 events like the U.S. anthrax attack, which produced ripples that became smaller as time passed. He said the underlying demand for vacations in the U.S., where 71 percent of households have dual incomes and work long hours, remains.
"It's like a stream. Maybe demand is pent up or dammed up for a week or two, or a month or two. Eventually that current has to find its destination," he said.
Most of the executives on the panel discounted the prediction of a Wall Street analyst that up to 25 percent of cruise bookings by the end of 2006 would be made over the internet or through other direct channels, further pressuring travel agents.
"That would be a real challenge," said Fain, who put the direct business of his brands at less than 10 percent today. Dickinson said that Carnival direct bookings were "a little north of 15 percent", while others put theirs at 5 to 7 percent.
But panelists agreed that the number is inching up, and that younger customers in particular are much more likely to book direct. "The younger generation is far more web-astute," said Frank.
Mark Conroy, chairman of the Cruise Lines International Association, and president of Fort Lauderdale-based Radisson Seven Seas Cruises, said that it is important that the public not become unduly risk-averse because of events like the Madrid bombing.
"We need to take the risk profile and put it in perspective so that people continue to travel and the sons-of-b--- that do this kind of stuff don't win," he said.
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(c) 2004, South Florida Sun-Sentinel. Distributed by Knight Ridder/Tribune Business News.