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Discussion Starter · #1 ·
In wake of problems, cruise ships cut prices
11 April 2006
Associated Press Newswires

A spate of high-profile problems on the high seas, hurricane fears and weak demand for Caribbean sailings are leading cruise companies to offer fire-sale discounts in an effort to lure leery consumers aboard.

The problems are combining to make this the most challenging cruise season for the industry since 2003, when Iraq war fears and post-9/11 woes hurt bookings. The bulk of the issues are occurring in the Caribbean, the most popular cruise destination and where most first-time cruisers tend to sail. The busy port in Cozumel, Mexico, for example, continues to be under repair after being severely damaged by Hurricane Wilma last fall. Travel agents also say that memories of last year's brutal hurricane season are dissuading some would-be cruisers. And some travelers have been spooked by concerns about cruise safety. A number of recent onboard incidents -- including a passenger disappearance and a pirate attack -- have sparked a congressional inquiry and increased the likelihood of new legislation or regulatory oversight to help protect passengers.

Some of these factors are contributing to a slowdown in industry growth: This year the increase in North American passengers is expected to be 4.5 percent compared with almost two decades of growth that has averaged over 8 percent increases per year. Some analysts are downgrading their forecasts for major cruise companies, after Carnival Corp. reported fiscal first-quarter earnings late last month that showed signs of a slower Caribbean "wave season," the first months of the year when the cruise industry has traditionally sold the majority of its sailings.

To spur demand, cruise companies are now cutting prices, mainly for Caribbean sailings from now to the fall. Royal Caribbean Cruises Ltd., for example, is offering a deal on a number of Bahamas, Mexico and Caribbean trips in which the third and fourth cruisers can sail for $99. Carnival has a seven-night eastern Caribbean trip beginning on Aug. 26 with prices starting at $529. (Sailings later in the season go for around $749.) Norwegian Cruise Line, part of Star Cruises of Malaysia, has a Western Caribbean cruise for $439 per person for seven nights out of Houston on Oct. 21, which is about $100 lower than normal.

Other factors are also contributing to the lower prices: Travel agents say that Royal Caribbean's new mega-ship, Freedom of the Seas, is diverting some bookings from other cruises. When it makes its debut in May, Freedom of the Seas will be the largest cruise ship in the world, at 160,000 tons and with capacity for 3,600 passengers. (The ship will boast an adults only "solarium" with cantilevered whirlpools and a 1,215-square foot presidential suite.) Also, a warm winter in the Northeast is damping demand from sun-seekers.

There has been a broad array of bizarre cruise-ship incidents recently. Last summer, George Smith of Greenwich, Conn., disappeared from a Royal Caribbean ship in the Mediterranean while on his honeymoon. In November, pirates attacked a vessel run by Carnival's Seabourn Cruise Line off Somalia. In the past couple of weeks, a fire killed one passenger on a Princess Cruises ship near Jamaica, 12 cruise passengers on a bus excursion crashed and died in Chile, and incidents of a stomach virus broke out on a number of different ships.

In January, a group was formed called International Cruise Victims, which is composed of alleged victims of cruise-line crimes and of victims' families and friends. Rep. Christopher Shays (R., Conn.) convened a hearing in December to look into cruise safety in the House Subcommittee on National Security, Emerging Threats, and International Relations. A second hearing was held on March 7. Now, Mr. Shays says he's looking at the recommendations submitted at that second hearing by International Cruise Victims.

Still, cruise-industry officials point to a solid safety record. Fifteen cruise lines reported that from 2003 to 2005, 206 passengers or crew submitted complaints. There were 178 reports of sexual assault, 24 missing travelers and four robberies. That's during a time when the industry carried more than 30 million passengers, according to the International Council of Cruise Lines, an industry group.

Nonetheless, Michael Crye, the group's president, is actively taking measures to assuage critics. Last month he met with the Bahamian Maritime Authority (many of the major cruise ships are registered in the Bahamas) in order to work toward a bilateral treaty that would ease the way for the U.S. government to take action if an incident occurs on a Bahamian-flagged vessel. (Investigating crimes that occur on board cruise ships is sometimes complicated by factors including where the ship is based, where it is sailing and the nationality of the crew and passengers.) His group is reaching out to the Federal Bureau of Investigation and the U.S. Coast Guard to put together a memorandum of agreement about how to handle any future alleged crimes.

Safety concerns are putting off even some veteran cruisers. Debra Werner, a 39-year-old from Paramus, N.J., who has taken five cruises, says: "I am thinking of cruising again but am leery. I would love to do a Mediterranean cruise but am concerned for my safety." She's a former corrections officer and adds that, "I have dealt with murderers, rapists, and armed robbers and the stuff on cruises still bothers me."

Some of the deals are on the newest ships, and not just in small inside cabins with no view. Carnival, for example, has rates starting at $499 for seven-night trips beginning Sept. 24 on its Carnival Conquest ship, the first of its largest class of ships, which made its debut in 2002. About 40 percent of cruises take place in the Caribbean versus 12 percent for the second-highest destination, the Mediterranean, according to the Cruise Lines International Association.

In the Caribbean, on trips for less than seven days, A.G. Edwards & Sons Inc. Equity Research found in a March 21 report that May and June prices for Carnival cruises have dropped by percentages in the single digits per day and Royal Caribbean is down by low double-digit percentages. For trips longer than seven days in the Caribbean in August and September, Carnival prices are down by mid-single-digit percentages and Royal Caribbean prices have dropped by percentages in the low teens.

Deals to other destinations are harder to come by because demand for Europe, Alaska and Hawaii remains strong. Still, some isolated cruises are weaker than usual and some price cuts are emerging. Regent Seven Seas Cruises, a unit of Carlson Cos., for example, is extending some of the discounts that would have already been closed by this time of year: It is still offering a free airfare deal on 12 Baltic cruises in June, July and August, which give customers a choice of a complimentary economy airline tickets, a $499 business-class upgrade, or a $1,000 discount off the price of the cruise. Silversea Cruises Ltd. has 30 percent savings on a Sept. 5 sailing between Vancouver and Los Angeles.

Dave Hickman, a 55-year-old retired marketing executive from Chino Hills, Calif., who takes about one cruise a year, cashed in on one such deal. He booked a September Caribbean sailing and snared a 500 square foot suite with a balcony -- that normally would have cost $5,000 for two -- for about $3,600.

147,702 Posts
Discussion Starter · #2 ·
NCL boss says cruise prices heading in the right direction
14 July 2009
Lloyd's List

THE downward spiral in prices for cruise holidays is showing signs of having touched bottom, according to Norwegian Cruise Line chief executive Kevin Sheehan, writes Andrew Spurrier in Paris.

“Pricing has started to show limited signs of moving in the right direction,” he told guests at the floating-out of the company’s latest newbuilding, Norwegian Epic, at STX France’s Saint Nazaire shipyard on Friday.

He said that, after falling prices at the start of the year, the company had registered no further fall during the past two months.

He warned, however, that the recovery process would be a long one. “It is going to take time for the market to recover to where it was in 2008,” he said.

Mr Sheehan said the company had nevertheless succeeded in filling its ships this year despite a “horrible” economic environment.

“We have been able to work our way through. We filled our ships except for a couple of cruises in January.”

Bookings had since returned to “where they should be” and passenger numbers this year had been higher than last year in recent months.

“The bad news is that we are doing it with less pricing,” he said, adding that cashflow was nevertheless higher than at the same point last year.

In terms of market share the 4,200-passenger Norwegian Epic would bring the company back to where it had been prior to the decision to withdraw from its fleet the Norwegian Majesty and the Norwegian Dream, he said.

The vessel, which was moved from its dry dock to an outfitting dock on Saturday, is due to be delivered in June next year.

NCL cancelled the Norwegian Epic’s sistership, which was also due to be built at Saint Nazaire, late last year.

Mr Sheehan justified the decision by saying that the uncertainty the company had felt about market prospects last year had since been shown to be justified.

He did not rule out future new orders but indicated that it had no firm plans for growing its 11-vessel, 24,000-berth fleet further for the moment.

147,702 Posts
Discussion Starter · #3 ·
Carnival upbeat on new business despite overtonnage fears
15 July 2009
Lloyd's List

CARNIVAL UK remains confident about the global cruise market in the face of accusations of industry overtonnage, writes Roger Hailey.

Speaking in the company’s newly-opened Ocean Terminal in Southampton, Carnival UK fleet director John Marden said: “More than 300,000 people are cruising on the world’s oceans at any one time. There are over 300 cruiseships operating around the world and most of the new ships have capacities in excess of 3,000 passengers.”

Noting that the cost of a new cruiseship can exceed €550m ($769m), Mr Marden said: “The cruise orderbook is large. Between now and 2012, 32 new vessels are due to be delivered, bringing 70,000 new beds at a cost of $8.9bn.”

Mr Marden said industry comment on overtonnaging overlooked the self-regulation in place on cruise capacity.

“Not only will these 32 ships barely keep pace with the annual growth demand of 8%, but furthermore, there is almost no more shipyard capacity for these specialist ships left within the next four years.”

Mr Marden said the UK cruise industry had seen average 12% annual growth rates since the turn of the millennium and the UK market now accounted for nearly one third of the 4m annual cruises in Europe.

He said that new cruiseships, often purpose built for the UK market, created a large amount of interest and offered facilities that can attract “a broader range of passenger”.

Mr Marden added: “Demographics also work in our favour. While we need to attract first-time, younger cruisers, it is the disproportionately high growth in more mature audiences with higher levels of disposable income which are fuelling this major expansion in our market. We believe the prospects remain excellent.”

Mr Marden said Carnival could absorb significant yield erosion and still be profitable.

“We are very fortunate with our economies of scale, and maybe we are fortunate that one of our key costs at the moment, fuel oil, has naturally come down in price due to the same recessionary pressures that weigh on ticket prices.”

The UK cruise market had little capacity increase in 2009, which meant the 12% growth rate could reduce much lower but still be profitable.

Carnival will next year add two more ships to its fleet, the Azura in April and Cunard’s Queen Elizabeth in October.

147,702 Posts
Discussion Starter · #4 ·
Royal Caribbean reports 2nd quarter loss as fewer consumers book cruises
29 July 2009

CHICAGO (AP) - Royal Caribbean Cruises Ltd. said Wednesday its second-quarter loss was worse than expected, and it lowered its outlook for the year, saying cancellations and other costs from this spring's swine flu outbreak cut into profits.

The results sent shares down more than 17 percent before they recovered slightly.

For the three months that ended June 30, the owner of Royal Caribbean International, Celebrity Cruises, Pullmantur Cruises, Azamara Cruises and CDF Crosiers de France, said it lost $35.1 million, or 16 cents per share.

That compares with a quarterly profit a year earlier of $84.7 million, or 40 cents per share.

The swine flu cut Royal Caribbean's profit by 5 cents per share as people scaled back on travel. Effects of the virus -- which CEO Richard Fain called "that damn flu" during a conference call with investors -- are expected to continue hurting the company during the third quarter and for the full year.

"Obviously, the economy continues to be a challenge, and the impact from the publicity surrounding H1N1 has been very frustrating," Fain said in a statement.

Revenue fell 15 percent to $1.35 billion, down from $1.58 billion a year ago. There were no one-time items.

Analysts polled by Thomson Reuters, who generally exclude one-time items from their estimates, predicted a loss of 13 cents per share on revenue of $1.36 billion.

Meanwhile Wednesday, the Miami-based company also offered forecasts for its third quarter and full year that were below analyst expectations: a profit between 95 cents and $1 per share for the third quarter and between 70 cents and 80 cents for the year. It previously estimated it would earn $1.35 per share for the year. Both figures includes a drag on earnings related to the swine flu of 18 cents per share in the third quarter and 27 cents per share for the year.

Analysts expect earnings of $1.22 per share in the third quarter and 94 cents for the year.

Stifel Nicolaus & Co. analyst Steven Wieczynski wrote in a note Wednesday to investors that the predicted impact of the swine flu was "more severe than we expected."

Aside from flu concerns, the company said summer bookings have been stable outside of Spain, where a poor economy and high unemployment have vexed business. Also, new bookings for the fall have started to outpace the same time last year, although occupancy and prices remain lower than last year.

Royal Caribbean shares remained low down throughout the day, closing down $2.48, or 15.1 percent, to $13.91.

147,702 Posts
Discussion Starter · #5 ·
Slumping economy hits Alaska cruise business
4 August 2009

ANCHORAGE, Alaska (Reuters) - Poor economic conditions are squeezing the cruise business in Alaska, a mainstay for the state's seasonal tourism business, hurting leading ship operators Carnival Corp & Plc and Royal Caribbean Cruises Ltd.

Cruise lines have had to slash prices to fill berths this year, and three companies plan to remove vessels from Alaska waters in 2010, in search of more profitable destinations.

"The model for cruise lines is you discount the ticket prices until you fill the ships," said John Binkley, president of the Alaska Cruise Association, in a telephone interview Monday.

Total cruise traffic -- which normally accounts for 60 percent of the tourists who come to Alaska -- will likely be the same this year as last, when a little over 1 million passengers sailed through the state, said Binkley. But only because of drastically reduced fares.

Cruise lines have slashed Alaska prices 40 percent, Ralph Samuels, Holland America's vice president for external affairs, said in a speech to the Anchorage Chamber of Commerce, Monday. Holland America is operated by Carnival, the world's No. 1 cruise line company.

That compares with price cuts of 12 percent to 15 percent for Caribbean cruise packages, "which is now our competition," Samuels said. "It's become tougher to sell Alaska to the market," he said.

Holland America and other lines are also experimenting with new itineraries, planning stops next year in non-traditional cruise destinations like Anchorage, Kodiak and Homer, Samuels said.

Holland America is one of three companies planning to relocate a ship from Alaska to more lucrative destinations. Royal Caribbean, the world's No. 2 cruise line, and Norwegian Cruise Line have also said they each plan to move one ship from Alaska next year.

Royal Caribbean did not return calls for a comment.

The removal of those three large ships will mean at least 142,000 fewer passengers traveling on Alaska cruises next year, Binkley said. With profit margins reduced in Alaska, companies have decided to move some ships "to where they're going to get the best rate of return for their shareholders."

In all, Alaska Cruise Association members currently have 28 large cruise ships plying Alaska waters this year.

About 10 years ago, Alaska held 10 percent of the world's cruise market share, but now holds only about 5 percent market share, said a representative of Princess Cruises, also owned by Carnival.

Alaska's high business cost is the biggest challenge, according to industry officials.

Samuels, a former state legislator, put some blame on a $50-per-passenger head tax established by a sweeping 2006 citizen initiative that imposed new levies, fees and environmental regulations on the industry.

"I would hope that the legislature and the administration would start a debate on the economics of the head tax and tourism in general," he said.

147,702 Posts
Discussion Starter · #6 ·
Cruise industry bucks recession as travelers go to sea

NEW YORK, Jan 20 (Reuters) - Despite the credit crunch, rising unemployment and swine flu, the cruise industry had a banner year in 2009 and the trend is expected to continue this year as younger travelers take to the high seas.

More than 13 million people took a cruise, an increase of 3.3. percent from the previous year, and the number is expected to hit 14.3 million in 2010.

"We are not recession proof but we are recession resistant," Richard Sasso, the chairman of the marketing committee of of the Cruise Lines International Association (CLIA) and the president and CEO of MSC Cruises USA, told a news conference.

"We keep reinventing in the industry."

CLIA, which represents 25 members ranging from riverboats carrying less than 100 passengers to a supership that can accommodate more than 5,400 guests, predicts demand will remain high in the United States and increase overseas.

Nearly 24 percent of cruise guests were from abroad and Sasso believes that number will rise as cruising becomes more popular with European consumers.

There is also an untapped market in the United States where only a fraction of the population has taken a cruise.

"Eighty percent of the people (in the US) haven't tried us," said Sasso.

The Mediterranean, Caribbean, Mexico and Alaska are still the most popular cruise destinations, but more people are opting for river cruises, according to Terry Dale, the president and CEO of CLIA.

Couples are the biggest demographic group traveling on the high seas but baby boomers, repeat cruisers and multi-generational bookings are seen as the biggest growth areas.

"Multi-generational travel will continue to be a strong part of our foundation in 2010," he explained.

And like most other industries, cruise lines are using Facebook and Twitter to advertise their services.

"It is an integral part of how we communicate with our customers," said Dale, adding that the average age of a cruise passenger has dropped to about 47.

He attributed the decrease, which is about 10 years younger than a decade or more ago, to an increase in family cruises and the popularity of themed, or affinity, cruises based around music, wine and food.
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