Growth in the cruise travel industry in 2009 is forecast to be the weakest in five years as the recession holds down household spending and widespread job loss hurts operations of the major cruise lines. However the industry’s leaders remain upbeat.
We are facing unprecedented challenges, Kevin Sheehan, president of Norwegian Cruise Line Corp., said Tuesday at Cruise Shipping Miami, the industry's annual convention in Miami Beach.
Worldwide, about 13.35 million passengers are expected to cruise in 2009, up about 2.6% from last year. That compares to a 3.6% growth rate in 2008 and a long-term growth rate of 7.4%, according to the Cruise Lines International Association.
Now is not the time for the industry to hold back, Sheehan said during the round-table discussion with cruise executives from other major lines. We need to showcase the phenomenal value of our product.
There's a 100 percent chance that the trend of global expansion of the cruise industry will continue Royal Caribbean International President Adam Goldstein said at the conference. This isn't made easier by current conditions, but it isn't going to be stopped by them.
Goldstein, whose line is a unit of Royal Caribbean Cruises Ltd, said a sure sign of the sector's future beyond North America came in the last three weeks, when neither a Royal Caribbean ship nor a Celebrity ship could find an open berth at Sydney, Australia, a city that once saw few cruise liners.
Most of the other markets are virgin, in a sense, compared to North America, said Richard Sasso, president of privately held MSC Cruises USA Inc.
Executives at the Seatrade Cruise Shipping conference said yearly cruise penetration even in significant markets such as Britain and Germany was much lower than North America's 3.5% and was lower still in other regions.
”If the United Kingdom and Germany had the US cruise penetration of 3.5%, there would be an additional 2 million (cruise passengers a year), just from those two countries alone” said Stein Kruse, chief executive of Holland America Line, a unit of Carnival Corp (CCL.N).
Australia's cruise passengers would double to about 1 million a year, if the 3.5% penetration rate was met there, Kruse said. Furthermore according to Godlstein cruise lines were being welcomed in many Asian destinations, where officials were investing in ports and other infrastructure.
It's very refreshing to see these beginning to happen in Singapore, Hong Kong and other places. That will allow the biggest and greatest cruise ships in the world to frequent those destinations, Goldstein said.
But deteriorating consumer confidence, a pull-back in discretionary spending and widespread job loss has hurt operations, forcing slash fares and pump up onboard spending bonuses, said Seatrade Communications Ltd.
Cruise lines are willing to add extras to avoid empty cabins. You always are going to get to a point where you want to fill the ships, said Gerald Cahill, president of Carnival Cruise Lines.
Carnival and other companies are committed to marketing to attract first-time cruisers, he said. That approach also helps to grow the base of repeat cruisers even after the economic tempest has passed.
But despite the looming economic challenges, ships are expected to sail at a 102% occupancy rate this year, said Rick Sasso president of MSC Cruises USA Inc.
Ships can exceed 100 percent of their capacity when some cabins carry more than the standard two passengers.
This year, 14 new ships will be delivered to CLIA members, Sasso said, double the number introduced in 2008. The new ships include Royal Caribbean International's one billion US dollars Oasis of the Seas, which will launch at Port Everglades in the late 2009.
Together, those ships are helping to fuel the passenger growth and innovation in the industry, which underlines Sasso is poised for long-term growth. ”We have an extremely bright future”.