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Cruise executives optimistic despite weakening economy

Posted by Anita Dunham-Potter On March - 11 - 2008

Seatrade photo by Anita Dunham-PotterCruise line executives speaking at the annual Seatrade cruise convention in Miami today presented a surprising rosy outlook despite the U.S. economy’s bleak outlook.

While not immune to a weakening economy, the industry has proven it can weather some tough storms. Gerald Cahill, president and CEO of Carnival Cruise Lines, points to tough economic times in 1990 and 2001. “In spite of those years cruise lines still grew. The industry was remarkably resilient despite the economic downturn,” he said.

Executives also noted the fact that Americans still like to vacation, but they will be looking for more bang for their buck. “There’s this belief among people that they deserve their vacations,” said Dan Hanrahan, president and CEO of Celebrity Cruises and Azamara Cruises, units of Royal Caribbean Cruises Ltd. “The fact that cruising provides such value is what’s helped the cruise industry weather this storm so far.” Indeed, Cahill noted that on average cruises are about 20 to 50 percent cheaper than comparable land-based vacations. Stein Kruise, president and CEO of Holland America Line chimed in about value, “I opened an old cruise brochure for 1981 and we’re still selling cruises at the same price.  Without adjusting for inflation.”

Nevertheless, cruise lines have insulated themselves more from U.S. economic woes by going more global. More ships have been deployed to Europe than ever before. “We don’t have all our eggs in one basket,” said Colin Veitch, president and CEO of Norwegian Cruise Line. He says the Caribbean is the still the biggest destination for ships, but “it’s a vote of confidence” in the European market to move ships there.

The cruise industry is investing big simply because the demand for the cruise product is rapidly growing globally. Hanrahan said 12.6 million passengers took cruises in 2007 with 10.3 million of those coming from North America. The industry expects an increase in worldwide cruise passengers this year to 12.8 million people — as lines plan to add eight new ships in 2008 and more than 35 new vessels in the next four years. Total cost for the new ships – 22 billion! Talk about putting your money where your mouth is.  Hanrahan also cited one fun fact about the 35 new ships – put them all end-to-end, and they’d stretch six miles long.

Stay tuned for more Seatrade updates.

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