Recovery in Progress: Bookings, Pricing Headed UpwardMarch 19, 2010 By: Susan Young
Rick Sasso, president, MSC Cruises USA; Dan Hanrahan, president and CEO, Celebrity Cruises; Stein Kruse, president and CEO, Holland America Line; Kevin Sheehan, CEO, Norwegian Cruise Line; Adam Goldstein, president and CEO, Royal Caribbean International; Gerry Cahill, president and CEO, Carnival Cruise Lines
“What a difference a year makes and we’re all very thankful for that,” said Kevin Sheehan, CEO, Norwegian Cruise Line, talking on a cruise executive panel talking about the “state of the industry” at Cruise Shipping Miami this week. “A year later we’re seeing solid signs of recovery, [although it’s] one that will play out over the next few years.”
For example, he cited a 100-to-300 percent improvement in stock prices for Carnival Corp. and Royal Caribbean Cruises Ltd., the world’s two biggest cruise firms, since last year’s conference. “The stock market is usually a leading indicator of where an industry is headed so we should all feel a sense of cautious optimism that the industry is being looked upon so favorably,” Sheehan said.
The industry is seeing positive yield growth, although below what Sheehan characterized as “pre-meltdown levels.” But beyond that, he said the general climate of the industry is much more positive and “becoming contagious to the industry’s customer base.”
Last year, cruise lines enticed wary consumers onboard with unprecedented deals from lower deposits to kids sailing free. By the end of 2009, a media blitz about amenity-laden ships [such as Oasis of the Seas] also kicked in, noted Sheehan. He told the audience that excitement created by “history making vessels” will continue this year as 12 new Cruise Lines International Association (CLIA) member line ships are launched.
He urged the industry to continue to push the extraordinary value of a cruise vacation. NCL recently looked at pricing for a family of four on a cruise, in Las Vegas or in Orlando. A cruise could save the family 15 percent for comparable features.
“And, unlike Las Vegas, where a family can visit a replica of Venice, or in Orlando where they can see a slice of Morocco or Mexico in a theme park, we offer the real Venice, the real Morocco, the real Mexico” Sheehan said. Guests also visit multiple destinations not just one when cruising.
Industry growth in yields and capacity is now augmented by expansion into other markets, most noticeably Europe, Sheehan said, citing “the impending modern-day Spanish Armada that will descend on Barcelona in 2011.” Three of the world’s largest cruise ships of major contemporary brands will home port there during the summer.
Europe is hot but what about the Caribbean? “We cannot deny it’s the industry’s bread and butter,” Sheehan said, stressing that Florida continues to be the industry’s hub and new capacity will continue to fuel Caribbean cruise growth.
Alaska has seen a reduction in capacity, he said, citing a significant increase in the cost of operating in the region as well as a consumer demand reduction because of the recession. “As an industry, we hope to work with the government of Alaska to find a solution for the cost disparity we see today,” Sheehan said.
All executives on the panel said their booking curve is beginning to lengthen, a relief to all. “It seemed that at the end of 2008 and into 2009, the window had shrunk so much that we were actually contemplating copying Disney World and setting up booths at the pier and selling cruises on the spot,” Sheehan quipped. Now, he said, the lines are getting some the largest lead times in year and have experienced a robust Wave Season.