“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!