Onsite: Cruise Executives Discuss Industry Amid Unstable Economic Climate

MIAMI-The theme of continued cruise industry growth within a changing and threatening economic landscape was an ongoing thread throughout the opening general session of the Seatrade Cruise Shipping Convention, which kicked off Tuesday in Miami. Chris Hayman, managing director of Seatrade, moderated a panel of six cruise line CEO's: Dan Hanrahan, president and CEO of Celebrity Cruises and Azamara Cruises; Stein Kruse, president and CEO of Holland America Line; Colin Veitch, president and CEO of Norwegian Cruise Line; Adam Goldstein, president and CEO of Royal Caribbean International; Rick Sasso, president and CEO of MSC Cruises USA; and Gerry Cahill, president and CEO of Carnival Cruise Lines.

The most pressing item of discussion tackled by the panel concerned the economic outlook and its affect on the cruise industry. Carnival's Cahill recounted past recession years of 1990 and 2004 and said that, in those times, the cruise industry still increased annual passenger counts. The reason: cruising's value. In fact, cruising is the one industry where pricing has remained stable. While hotels keep charging exorbitant rates, cruise pricing remains flattish. "That value message is a powerful asset," said Royal Caribbean's Goldstein. Rick Sasso, echoing a prior comment he had made at last week's cruise3sixty conference in Fort Lauderdale, said taking market share away from land-based holidays was imperative.

On the issue of demand and globalization, Sasso said North America was the most penetrated market in cruising, but still not fully penetrated. While the Caribbean remains a focal point of cruising, capacity in the region has declined and moved to destinations such as Europe. "There are more options to optimize assets," said NCL's Veitch.

Interestingly, the Asia market was given ample discussion, not only as an untapped destination, but a place to build more ships. RCL's Goldstein said Asia was still in its infancy, but there was focus to build up brands there. NCL's Veitch said Europe still remains more of a focus, but there is opportunity for Asia growth. Always the comedian, MSC's Sasso made the point that "wherever there is population and water, we will be."

In the realm of shipbuilding, 36 news ships will be delivered by 2012, representing 15 brands. The way ships are being built is changing too. "Guests who pay top dollar want special treatment," said Goldstein. While Carnival's Cahill said going to a class system on cruise ships was not in its future, other ships do have special VIP areas such as the villa suites and private courtyards on NCL's more recently built ships.

Meanwhile, private equity has become a hot topic in the cruise industry in just a year's time, with Apollo Management buying into three different brands. One of which, NCL, was represented on the panel by Veitch, who said "private equity is a big boost for the cruise business," and didn't rule out the possibility that more private equity firms might jump into the mix. "It's an observation," he said, "that our industry is undervalued. If Apollo came in, perhaps others will follow."

As the discussion wound down, the panel all still expressed concerns over the economy, and named fuel as the biggest challenge ahead. Sasso also added that while the trade press painted a fair picture of the industry, he would like to see consumer press coverage improve its message. (DE)

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