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Cruise industry says “value” will help it stay afloat during economic storm

Posted by Anita Dunham-Potter On March - 21 - 2009

Cruise executives at the annual Seatrade Cruise Shipping convention in Miami said deteriorating consumer confidence, a recoiling in discretionary spending and widespread job loss have hurt their bottom line, forcing them to slash fares and pump up onboard spending bonuses just to stay afloat.

“Things are not as rosy as we’d like them to be, but we’ve recovered from adversarial times before and we will again,” said Rick Sasso, chair of the Cruise Lines International Association (CLIA) Marketing Committee and president and CEO of MSC Cruises USA. Sasso noted that the industry continued to grow during past downturns, including the Iranian revolution and oil crisis in 1982, 9/11 and the Iraq war.

Worldwide, about 13.35 million passengers are expected to cruise in 2009, up about 2.6 percent from last year. But growth in 2009 is forecast to be the weakest in five years as the recession holds down consumer spending along with the revenues major cruise lines.

“We are facing unprecedented challenges,” said Kevin Sheehan, president of Norwegian Cruise Line.

Despite the looming economic challenges, ships are expected to sail at a 102 percent occupancy rate this year, said Sasso. Ships can exceed 100 percent of their capacity when some staterooms carry more than the standard two passengers.

This year, 14 new ships will be delivered to CLIA members for a net berth capacity increase of 6.5 percent or 18,031 beds — double the number introduced in 2008. Among the new ships debuting this year is Royal Caribbean’s 220,000-ton Oasis of the Seas, which will be the world’s largest cruise ship when it begins sailing from Fort Lauderdale in December. The massive vessel will carry 5,400 passengers and 2,165 crew and offer seven distinct ‘neighborhoods,’ including a Central Park, and an open-air area in the ship’s center with activities that include the first-ever zip-lining at sea.

Cruise value

Despite the recession, the cruise industry is holding on and executives say it will emerge as healthy as it always has during down periods because the value of cruising will get the industry through hard economic times. Executives cite recent travel agent studies that show cruises rank highest in consumer interest and perceived value compared other vacations and is the top reason consumers will be motivated book a cruise.

“The cruise industry is poised to get through these hard times and will come out stronger in the end,” said Sasso, stressing the value of cruising as the reason. He added that the “value component” is a more powerful message today than ever before. Still a number of executives said they have been forced to slash fares and expand onboard spending bonuses to avoid empty staterooms.

“We need to stay strong on the value message,” said Sheehan. He noted initiatives like job loss insurance and reduced deposits are helping skittish consumers book a cruise vacation. “Now is not the time for the industry to hold back. We need to showcase the value of our product,” he said.

Executives were quick to point out that about 50 percent of North Americans live within driving distance of a U.S. homeport, making cruises a more affordable option when air service is not required. Carnival Cruise Lines’ CEO Gerry Cahill said having more cruise ports within driving distance is helping consumers, especially families, make the decision to book a cruise. Cahill said Carnival’s 17 North American homeports have helped the company during the economic crunch.

Celebrity Cruises CEO Dan Hanrahan noted that the average booking window at Celebrity has shortened quite a bit since last year, but he said it’s a temporary situation. “I think the consumer needs to see that the economy is starting to recover,” he said. “When the consumer gets that confidence I think you’ll see the booking window extended again.”

Mixed messages

Carnival’s Cahill said the current market presents opportunities through marketing. “Current conditions present a big opportunity to attract people who would never have cruised before. Plus, marketing is the engine that drives people into the travel agencies to book cruises,” Cahill said.

But, Cahill cautioned that with so many new media channels springing up marketing is now more complicated than before. Cruise operators have to recognize that with the rise of Web 2.0 and social networking, they can’t always control the messages. “Once in awhile, there are negative posts. You have to be willing to live with that.” Clearly, he was alluding to the recent controversy surrounding Royal Caribbean’s Royal Champion program where a select group of fans recruited by the line were encouraged to post only positive reviews and news on various cruise boards.

Holland America CEO Stein Kruse blamed the media for consumer fears with the nightly reports of economic gloom and doom. “Ships are full and we’re not getting the coverage in mainstream media it’s just lots of doom and gloom.” He noted the fact that more than 90 percent of Americans have jobs and pay their mortgages. “Our best times are ahead of us and we should not forget about that.”

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One Response to “Cruise industry says “value” will help it stay afloat during economic storm”

  1. Or if you really want to save money just visit one of the Caribbean Islands the cruise lines are still ignoring but are still a great value like Bocas Del Toro.

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