SWF file not found. Please check the path.

Cruise Business Commentary - Persistent perception problem highlights inadequacy of supply driven business model

“Clearly the hardware alone won’t be enough to dispel the myths of cruising," Stuart Leven, UK director of Royal Caribbean International was quoted by Travel Weekly as saying.

The cruise sector will be under increasing pressure to fill capacity unless consumers start considering a holiday at sea as on a par with regular land-based holidays, added Ben Bouldin, sales director of the same company in the UK, according to the same source.

We think this is hugely important.

When Cruise Business Review was launched almost a quarter of a century ago - the first issue came out in 1991 - this was the message we frequently heard: the industry needs to shrug off a dusty image of old ladies snoozing in libraries, wearing silly flowery hats. Thanks to some TV "reality" programmes, this may now have been confused further by an other extreme, with features on board life that few might called civilised. After all, the television in general and that in the UK in particular, seems to just want to "shock" its viewers.

However, that's beside the point.

The point, we think, is what Leven said, about hardware. That it alone is not enough to dispel myths about cruising.

We think that is probably the first admission, albeit an indirect one, by a senior industry executive in a very long that the industry's supply driven business model is due for a critical look. Talk to any senior cruise industry official and they will say that new ships will not cannibalise sales of cruising on their existing ships. But talk to a travel agent and you will hear a different story: "Everybody just wants to book on the latest ship," said one travel agent at an industry event.

However, we do not imply that the cruise executives are lying. Simply, we question whether older ships command the same yields as the latest one; after all, pricing is an efficient tool in triggering business.

However, when Susan Hooper was head of Royal Caribbean group's UK operations, she told an industry event that in her opinion, instead of using a supply driven business model, cruise lines should create the demand first and build the ships to meet that demand.

A report produced by Odo Maritime Research in cooperation with Cruise Business Review shows that both Carnival Corp & plc group and Royal Caribbean Cruises Ltd (RCCL) had not, by the end of 2013, reached net yields seen before the financial crisis; that their combined net profits were down by almost half since the peak and only a fraction above the level of 2003. Yet they carried 77% more passengers in 2013 than a decade earlier - and the two groups control almost two thirds of all lower berths in the industry.

Obviously, factors beyond the control of the industry affect these figures too, such as the economic downturn that emerged in 2008 and from which source markets are recovering at varying paces. The Costa Concordia accident should not be forgotten either. However, the fact that the two leading cruise industry groups have been able to grow volumes but not profits in recent years support the view that new ships alone are not enough to remedy the industry's ills.

We think that the industry is in need of serious soul searching: it is building ever larger vessels, many of which are innovative and exciting.It is not, however, building anything that caters for those that prefer smaller ships with a quieter atmosphere than the giants, apart from the luxury end of the market. This is, in our opinion, seriously limiting the scope of products the industry can offer in the future, as many of the smaller ships currently in service are becoming old and have limited life left. A danger looms that cruising will soon be perceived as Benidorm-at-Sea, with reference to a crowded, mass market resort in Spain.

Finally, we think that the industry's heavy reliance on travel agents in retail feeds price driven purchasing - it is in their interest to obtain a commission, but from whom it comes is of lesser importance to them. They are also keen to offer deals. All this dilutes strength of brands and again drives commodisation of cruising: it would be detrimental to the cruise industry if price became virtually the only factor affecting consumer choice. This development, however, appears to be well on its way and it already is largely the case with airlines.

Changing conceptions will not happen by introducing new ships alone, no matter how innovative they might be. In our opinion, Royal Caribbean officials should be congratulated for making the admissions Travel Weekly reported; now the industry should launch a soul searching programme to work out how to put things right!

UK cruise sector “under pressure to fill capacity” unless conceptions change - report

The cruise sector will be under increasing pressure to fill capacity unless consumers start considering a holiday at sea as on a par with regular land-based holidays, a senior industry executive in the UK was quoted as saying.

Royal Caribbean International sales director Ben Bouldin issued the warning just days before taking trade partners to the shipyard in Germany where the line’s three new ships are being built, according to a daily news bulletin of Travel Weekly.

“Over the last few years the industry has struggled to grow the [UK] cruise market beyond 1.7 million people. This has to change if every line is to fulfill its aspirations – Royal Caribbean included – or else we’ll be really up against it.”

Industry challenges do not seem to be limited to the UK alone, however.

The combined 2013 net profits of Carnival Corp & plc and Royal Caribbean Cruises Ltd (RCCL), parent company of Royal Caribbean International, were only slightly higher than the figure they reached in 2003 and down by almost half from the peak year 2007, according to Odo Maritime Research report on the cruise industry.

The total number of passengers the two groups carried was 77% higher in 2013 compared to 2003 and the two majors control about two thirds of all berths in the industry.

Norwegian Cruise Line, the industry’s number three, achieved net yields in 2013 that exceeded those it reached any time in the 10 year review period, while both Carnival group and RCCL still had not caught up with pre-crisis levels, the figures gathered by Odo Maritime Research show.

Royal Caribbean International is preparing to launch Quantum of the Seas in November, followed by sister ship Anthem of the Seas in spring 2015. The last named vessel will replace Independence of the Seas as the line’s principal ship in the UK next year

The line claims the two new vessels will begin to “change people’s perceptions of cruising” due to their technical and entertainment advances. But, taking a sideswipe at Princess Cruises, which recently allowed one of its ships to be featured in a reality TV show, Stuart Leven, Royal Caribbean UK director, cautioned.

“Clearly the hardware alone won’t be enough to dispel the myths of cruising, which unfortunately continue to be reconfirmed by others, if we’re to really open up our products to the broader land-based marketplace – the 28.3 million outside of those who cruise regularly,” he was quoted by Travel Weekly as saying.

Leven added: “We’ll be approaching things quite differently. We worked the social space hard during the recent Princess fly-on-the-wall documentary with the message ‘Cruising doesn’t have to be this way!’, and this is really just the start.”

Bouldin said: “Our two new ships will provide holidays like no other and, as such, the strapline we’re using for Anthem is ‘This changes everything’. There is no aspect of our business we are not reviewing to improve for both our trade partners and our consumers.”

Tallink issues profit warning after sharp deterioration in second quarter and first half results

AS Tallink Grupp, the Estonian cruise ferry company, has warned that its full year results would be weaker than those in 2013 on competition and demand woes.

“Due to increased competition and continuously weak Nordic economic environment the Management expects the results to be weaker for the 2014 financial year compared to the last year,” the company said in a statement. 

Tallink unveiled a second quarter net profit of €6.1 million, down from €9.3 million in the same period last year. Revenue fell to €246.4 million from €249.0 million. For the first half of 2014, the group’s net loss widened to €17.3 million from €8.3 million on revenues of €434.7 million, down from €439.6 million a year earlier.

In the full year 2013, the group made a net profit of €43.3 million on revenues of €941.8 million.

“In the second quarter the Estonia-Finland route showed a slight decline with passengers numbers decreasing by 2.7%, cargo units transported increased by 6.6%, the sales numbers remained on the last year’s level,” the company said.

Tallink’s operations were affected by the shuttle vessel Star being out of operation for 68 trips in April, undergoing car deck ramp repairs. The ship was only partially replaced during that time. In the same time the competitors on the route have increased the number of departures.

“In the second quarter the segment result for the Finland-Sweden segment was €4.9 million lower than last year. The decline came from the Turku-Stockholm route, where revenue decreased due to the vessels Galaxy and Baltic Princess being out of operations for scheduled maintenance works and passengers’ spending showing weaknesses in an overall weak macroeconomic development,” Tallink ststed.

Meanwhile the recently upgraded cruise ferry Silja Serenade on the Helsinki- Stockholm route has delivered positive developments. Higher customer satisfaction and on-board spending levels are confirming that the investment was successful and has a positive effect to the business in the longer run.

The group’s vessels carried nearly 2.4 million passengers,which is 0.5% more compared to the same period last year. The number of cargo units transported decreased by 1.0% and the number of passenger vehicles transported increased by 0.7% for the same period as last year.

TUI AG cruise operations improve results as Hapag-Lloyd recovers and TUI Cruises shine

TUI AG, the German tourism group, has reported an improved performance for its cruise operations that comprise of Hapag-Lloyd Kreutzfahrten and a 50% stake in TUI Cruises on the recovery of the first-named company and continued strength of TUI Cruises.

“Following a weak performance in the first half of the year, additionally impacted by two dry-dock periods of Europa, Hapag-Lloyd delivered a positive development in the third quarter of 2013/14. TUI Cruises continued to record a very successful business performance, also driven by the commissioning of Mein Schiff 3 in June 2014,” the company said in a statement.

In the third quarter of its financial year, TUI’s cruise operations generated revenues of €63.9 million, slightly down from €67.4 million in the same period a year earlier. Operating result (EBITA) improved to €1.7 million from €0.8 million.

Fos the first nine months of the 2013-14 financial year, the revenues reached €213.1 million, an increase from €188.0 million year-on. EBITA improved to negative by €1.7 million compared to a figure negative by €59.2 million in the same period a year earlier.

“TUI Cruises commissioned the first new built vessel, the ‘Mein Schiff 3’; the fleet expansion is now being turned into action with the two vessels on order to be delivered until 2017. The rising demand for the luxury cruise segment of Hapag-Lloyd Kreuzfahrten in the third quarter, sup- ports the turnaround in the Cruise Sector in the full financial year,” the company said.

Sharp increase in turnover in the nine month period was driven by the capacity expansion due to the commissioning of the Europa 2 that joined the Hapag-Lloyd fleet in the summer of 2013. “As the joint venture TUI Cruises is measured at equity in the consolidated financial statements, no turnover is shown for TUI Cruises,” TUI AG said.

“In the first nine months of 2013/14, the Cruises Sector had to carry adjustments of €16.0m for the utilisation of provisions formed in the prior year for pending losses from occupancy risks at Hapag-Lloyd Kreutzfahrten,” TUI AG pointed out.

In the first nine months of 2013/14, occupancy of the fleet operated by Hapag-Lloyd Kreuzfahrten declined by 4.1 percentage points versus the prior year to 66.8%. “A total of 314,993 passenger days were generated, up 10.0% year-on-year. This was mainly attributable to the operation of Europa 2, which had been commissioned in May 2013 and therefore not yet been fully included in the relevant prior-year reference period. The accumulated average rate per passenger per day grew by 3.2% to €422 in the first nine months,” TUI AG said.

Following the scheduled decommissioning of Columbus 2, which has  been redelivered to Oceania Cruises and for whom it has re-entered service as Insignia following a refit, from the fleet in the third quarter 2013/14, Hapag-Lloyd will focus on luxury and expedition cruises in future. “It will engage in international marketing activities in each of the segments with Europa 2 in the luxury segment and Hanseatic in the expedition cruise segment. Europa and Bremen will only be offered in the German-speaking market in future,” TUI AG said

In the first nine months of 2013/14, TUI Cruises continued to record a very positive development of the operating indicators of its fleet. At 101.0%, occupancy rose by 0.9 percentage points year-on-year (based on double occupancy). The continued high load factor was driven by Mein Schiff 1 and 2 with their trade lanes Caribbean and Canaries (winter season 2013/14) and Nordland/Baltic Sea (summer season 2014). Mein Schiff 3, the third ship of the fleet, started its operation towards the end of the period under review in June 2014 with its maiden voyage to

10 Majorca. In the first nine months of 2013/14, TUI Cruises recorded a total of 1,070,835 passen- ger days. The average rate per passenger per day was €158, up 7.5% year-on-year.

Regal Princess to be named by original Love Boat cast members

It’s been nearly forty years since the iconic television show The Love Boat went on the air and introduced viewers to modern day cruising and, in the process, made Princess Cruises and its ships synonymous with vacations at sea.

As Princess prepares to celebrate its milestone 50th anniversary year in 2015, the company is honoring the role that The Love Boat played in its history by selecting the original Love Boat cast members to serve as godparents for its new cruise ship Regal Princess. All six Love Boat cast members - who played the roles of Captain Stubing, Gopher, Isaac, Doc, Julie and Vicki – will reunite to christen the new ship on November 5 in Fort Lauderdale.

The ceremony will officially launch the golden year anniversary celebrations for Princess Cruises, which will celebrate five decades of operation throughout 2015.

The actors include Gavin MacLeod (Captain Stubing) Fred Grandy (Gopher, the chief purser), Ted Lange (Isaac, the bartender), Bernie Kopell (Doc, the ship’s doctor), Lauren Tewes (cruise director Julie) and Jill Whelan (Vicki, the captain’s daughter).

“We can think of no more suitable godparents for our newest ship than the cast of the show that put Princess Cruises on the map,” said Jan Swartz, the line’s president. “The show has been such a visible part of our company’s history, it made sense to kick off our anniversary celebrations with this special tribute.”

The pilot episode of The Love Boat, shot aboard Princess’ 730-passenger original Sun Princess in 1977, began the relationship between Princess Cruises and the show, which for ten seasons eventually became one of the highest rated and longest-running shows on television. The Pacific Princess and Island Princess were the primary floating stars of the show, while later episodes and specials were filmed aboard many of Princess’ other cruise ships in destinations around the globe.

“I’m absolutely thrilled that my former cast mates and I will be part of Regal Princess’ U.S. debut,” said Gavin MacLeod, who has been Princess Cruises’ ambassador since the show ended in 1986. “The fact that The Love Boat continues to air in international syndication around the globe is a testament to the show’s longevity and the world’s fascination with romance on the high seas.”

The 3,560-guest Regal Princess, which entered service in May of this year, is arriving in Fort Lauderdale to begin her maiden season of Caribbean cruise vacations. Among the special features found on board is a dramatic multi-story atrium serving as the social hub of the ship, offering a host of dining and entertainment options; an over-water SeaWalk, a top-deck glass-bottomed walkway extending 28 feet beyond the edge of the ship; plush private poolside cabanas that appear to be floating on water; the Princess Live! television studio; the largest pastry shop at sea; a special Chef’s Table Lumiere, a private dining experience that surrounds diners in a curtain of light; and balconies on all outside staterooms.

“The ship’s naming ceremony is just the beginning of the celebrations that will mark our company’s golden anniversary,” said Swartz. She added that beyond the Regal Princess festivities, guests sailing on any of the line’s fleet of 18 cruise ships during 2015 will enjoy a wide range of anniversary experiences.