Cruise Shipping Miami 2015: Perspectives of top four helmsmen on cruise industry

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Written by Teijo Niemelä Teijo Niemelä

Category: Top Headlines Top Headlines

Published: 17 March 2015 17 March 2015

In the State of the Industry debate, the opening session of this year’s CSM, chaired by the flamboyant Richard Quest, CNN’s International Business Correspondent, different perspectives of the cruise industry were elaborated by four current helmsmen of the business. Alan Lam reports from Miami.

The industry has experienced a stronger 2014, with global cruise passenger number reaching the record 22.1 million. Its economic impact is now estimated at $117 billion, supporting 890,000 direct employments and paying $38 billion per year in wages. 23 million passengers are forecast for 2015.

Against this background, the four distinguished personalities of the industry were quizzed, by Richard Quest, for their perceptions of the industry. While they agreed on many aspects of the business, they seemed to have perceptibly different attitudes on a number of other issues.

Richard Fain, Chairman and CEO, Royal Caribbean Cruises Ltd., was realistic about he state of the industry. “We somehow haven’t managed to break through and attract a whole new range of customers,” he said. “That’s our biggest challenge. The growth in the US is moderate, tiny in Europe and infinitesimal in Asia.” He was interested in demand growth, not just in supply increases. “The value we offer is so much better than other forms of vacation,” he went on. “It is cheaper; but this isn’t sustainable. We need more customers so the prices can rise. We are in the middle of a price deflationary period. We are charging the 2008 prices, but we offer so much more.”

“We have to grow profitably,” echoed Frank J. Del Rio, President and CEO, Norwegian Cruise Line Holdings Ltd.

Arnold Donald, President and CEO, Carnival Corporation & Plc, was less guarded and more ambitious with his objective. “We plan to grow 25% this year,” he said. “ We’ve got to give the guests what they want; then they’ll buy our products.”

Pierfrancesco Vago, Executive Chairman, MSC Cruises, spoke about the depressed state of the economy in Europe, but he pointed out that cruise industry still managed to grow against this background.

When asked about whether or not the industry is ready for Cuba. The Big Four appeared to be on different pages.

“I am not sure if any of us is ready,” said Richard Fain. “We have a lot to learn about every country we go to. Cruise industry in not a one-size-fits-all.” Royal Caribbean is not ready for Cuba. Clearly there are infrastructure and other issues to consider.

Frank J. Del Rio saw it differently. “Yes, we are ready for Cuba. The wonderful thing about cruise industry is that we bring our own infrastructure. But there are other destinations we’d like to go to, such as Eastern Mediterranean where most of the best Roman ruins are found. Eastern Mediterranean will be more profitable than Cuba.” But he was keenly aware of the geopolitical challenges for the region.

For MSC, the perspective was again different. Pierfrancesco Vago said they were already in Cuba, as his company was the only one of the four majors without the constraint of the US embargo.

The attention was then inevitably switched to China. In this subject area, we were told that the reason Norwegian an MSC were not operating in this fastest growing region was because they did not have enough ships. “It is a matter of resources deployment,” said Frank J. Del Rio. “We’ve got to deploy our ships where we can get the best returns.” But, as expected, Norwegian cannot ignore China for long. “I’m grateful for Royal Caribbean and Carnival for paving the way in China,” he went on, lightheartedly. “ We are watching them closely and learn from their mistakes. At present, like MSC Cruises, we do not have enough ships. But we have four ships on order. In the next few months we’ll make a decision.”

While everyone is heading for China, Pierfrancesco Vago, on the other hand, saw Europe as destination for the rapidly growing Chinese source market. As a European, he was also protective about Europe’s cruise shipbuilding knowhow and did not believe that it should be shared with Chinese shipyards.

The differences in perspective reflected the diversification of the industry.