Libro ingles

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Libro ingles

Delivered by http://www.e-unwto.org
Georgios Drakopoulos (307-99-294)
Wednesday, March 02, 2011 3:29:43 AM
Worldwide Cruise
Ship Activity
Copyright © 2003 World Tourism Organization
Worldwide Cruise Ship Activity
ISBN: 92-844-0610-2
Published by the World Tourism Organization
All right reserved. No part of this book may be reproduced or transmitted in any
form or by any means, electronic or mechanical, including photocopying,
recording or by any information storage and retrieval system without permission
from the World Tourism Organization.
The designations employed and the presentation of material in this publication
do not imply the expression of any opinions whatsover on the part of the
Secretariat of the World Tourism Organization concerning the legal status of any
country, territory, city or area of its authorities or concerning the delimitation of
its frontiers or boundaries.
Printed by the World Tourism Organization
Madrid, Spain
ACKNOWLEDGEMENTS
This repor t was drawn up by an outside consultant, Dr. Manuel Butler, Naval
Engineer, currently Director of the Spanish Tourism Bureau in London, under
the super vision of the WTO’s Market Intelligence and Promotion Section,
which also contributed. A number of professionals working in the tourism
and ocean cruise sectors have also contributed to the repor t, in par ticular
the Director General of ANAVE, the Spanish Shipowners Association, Dr.
Manuel Carlier de Lavalle, Naval Engineer. This repor t would not have been
possible without consent to use their statistical information graciously provided by the consulting firm GP Wild (International) Ltd., the Cruise Line
International Association (CLIA), and the Passenger Shipping Association
(PSA).
The Secretariat of the World Tourism Organization would like to express its
thanks to all those who have helped prepare this repor t for their valuable
cooperation.
3
TABLE OF CONTENTS
EXECUTIVE SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
1
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
1.1.- The cruise as a tourist resort . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
1.2.- Reference terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
2
A STUDY OF THE DEMAND: CRUISE PASSENGE . . . . . . . . . . . . . . . . . . . .27
2.1.- Quantitative aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.1.1.- Geographical origin of US cruise passengers . . . . . . . . . . . . .
2.1.2.- Duration of trip . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2.- Qualitative aspects: socio-demographic profile of cruise passengers
2.2.1.- United States and Canada . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2.2.- Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2.3.- Asia-Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.3.- Specific examples of niche markets . . . . . . . . . . . . . . . . . . . . . . .
2.3.1.- Cruises for American families . . . . . . . . . . . . . . . . . . . . . . . .
2.3.2.- The European Union's senior citizen market . . . . . . . . . . . . . .
2.3.3.- The Conferences and Incentives Segment . . . . . . . . . . . . . . .
2.3.4.- Theme cruises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.3.5.- Adventure cruises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.4.- Analysis of the supply and demand relationship . . . . . . . . . . . . . .
3
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.27
.33
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A STUDY OF THE SUPPLY: BUSINESS STRUCTURE . . . . . . . . . . . . . . . . . .55
3.1.- Main Cruise Line Associations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
3.1.1.- United States of America and Canada: CLIA, ICCL and FCCA . . . . . . . .55
3.1.2.- Europe: PSA, Croisimer and VFF . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
3.1.3.- Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
3.2.- Cruise classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
3.3.- Main Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
3.3.1.- Carnival Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
3.3.2.- P&O Princess Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
3.3.3.- Royal Caribbean Cruises Ltd. Group (RCC) . . . . . . . . . . . . . . . . . . . .76
3.3.4.- Star Cruises Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80
3.4.- Other cruise lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83
3.4.1.- Cruise lines in the US and Canadian source markets . . . . . . . . . . . . . .83
3.4.2.- Cruise lines operating in the European source market . . . . . . . . . . . . .89
3.4.3.- Cruise lines operating in the Asian source market . . . . . . . . . . . . . . .101
3.5.- Commercial middlemen in the cruise business . . . . . . . . . . . . . . . . . . . .104
3.5.1.- Cruise trip distribution channels . . . . . . . . . . . . . . . . . . . . . . . . . . .104
5
3.5.2.- Other agents: independent ship mangers, shipping agents
and ship brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.6.- Main conventions and special trade fairs . . . . . . . . . . . . . . .
3.6.1.- Seatrade Convention . . . . . . . . . . . . . . . . . . . . . . . . . .
3.6.2.- Other Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.6.3.- Activities aimed at travel agencies . . . . . . . . . . . . . . . .
4
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.113
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.119
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.145
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........
........
and crew
........
........
.161
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.168
MEDIUM-TERM TRENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .171
6.1.- Growth in European demand at higher levels than in the US . .
6.1.1.- Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.1.2.- Characteristics in the growth of European demand . . . . .
6.1.3.- Main consequences . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.2.- Entry into service of greater tonnage vessels . . . . . . . . . . . .
6.2.1.- Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.2.2.- Characteristics of the process of bringing larger tonnage
ships into operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.3.- Cruise line horizontal business consolidation. . . . . . . . . . . . .
6.3.1.- Evolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.3.2.- Characteristics of business centralization . . . . . . . . . . . .
6
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THE INTERACTION BETWEEN THE CRUISE AND ITS ENVIRONMENT . . . . .161
5.1.- Financial implications of cruises on their destination . . . . . . .
5.1.1.- Definition of main services provided . . . . . . . . . . . . . . . .
5.1.2.- Analysis of spending by ship managers, cruise passengers
5.2.- Effects on marine life: sustainability . . . . . . . . . . . . . . . . . .
5.3.- Safety aspects for cruise passengers . . . . . . . . . . . . . . . . . .
6
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THE PRODUCT: CRUISE PACKAGES . . . . . . . . . . . . . . . . . . . . . . . . . . .119
4.1.- Creating the itinerary . . . . . . . . . . . . . . .
4.2.- Cruise package cost . . . . . . . . . . . . . . .
4.2.1.- Revenue generated on-board . . . . . . .
4.3.- Main regions of operation and destination
4.3.1.- The Caribbean . . . . . . . . . . . . . . . . .
4.3.2.- Alaska . . . . . . . . . . . . . . . . . . . . . .
4.3.3.- Atlantic Europe and the Baltic Sea . .
4.3.4.- The Mediterranean . . . . . . . . . . . . . .
4.3.5.- Asia-Pacific . . . . . . . . . . . . . . . . . . .
4.3.6.- Emerging regions . . . . . . . . . . . . . . .
5
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.171
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.177
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.183
7
ANNEX I. SHIPPING TERMINOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . .185
7.1.- Relative size of tourist cruise fleets . . . . . . . . . . .
7.1.1.- Sea cruises: scheduled or tramp traffic? . . . . .
7.1.2.- Financial agents . . . . . . . . . . . . . . . . . . . . . .
7.1.3.- Tourist cruiser registration . . . . . . . . . . . . . . .
7.2.- Definitions and symbols used . . . . . . . . . . . . . . . .
7.2.1.- Explanation of symbols and abbreviations used
7.3.- Addresses and websites of interest . . . . . . . . . . .
7.3.1.- Associations . . . . . . . . . . . . . . . . . . . . . . . . .
7.3.2.- Main shipping companies: websites . . . . . . . .
7.3.3.- Other websites of interest . . . . . . . . . . . . . . .
8
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.185
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ANNEX II. NUMERIC STUDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .199
8.1.- Spending patterns in the Côte d'Azur (France) and in the Caribbean . .
8.1.1.- Spending category grouped by type . . . . . . . . . . . . . . . . . . . . . .
8.1.2.- Spending attributable to port services (SPORT) . . . . . . . . . . . . .
8.1.3.- On-land passenger spending (SON-LAND) . . . . . . . . . . . . . . . . . .
8.1.4.- Other spending patterns in destinations on the French Côte d'Azur
8.2.- Forecast of cruise demand in the European Union and
in the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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.199
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BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .213
7
EXECUTIVE SUMMARY
The Secretariat of the World Tourism Organization maintains a series of studies on different segments of the tourism market. The present report examines cruise tourism
activity.
The concept
The scope of this report is limited to ocean or sea cruises and does not cover river or
coastal cruises. Modern cruise tourism is different from traditional transatlantic voyages on ocean liners in both concept and business type. Whereas the latter was conceived mainly as transport, in cruise tourism the key element is the ship as accommodation. This is why cruise ships are often described as floating hotels or resorts. This
is evident in the fact that the normal layout of modern hotels, with a gigantic atrium
around which the various different accommodation floors are set out, is faithfully imitated in this type of ship, with crew members being given job titles like “hotel manager”. Resort-style services are also offered such as: swimming pools, interactive TV,
stores, library, golf courses, art galleries, business centres, cinemas, spas, etc. The
main difference and advantage over a conventional hotel is its mobility, which provides
greater flexibility in the geographic distribution of accommodation capacity.
All of the above means that cruises not only share characteristics that are typical of
destinations, but they are also, in some respects, destinations in themselves. One
extreme example of this can be found in the famous Florida-based “cruises to nowhere”. It is therefore reasonable to consider cruises as competitors to certain types of
land-based holidays, especially those in resorts.
Growth and diversification of demand
In the early 1970s, the first modern cruises began to operate in the Caribbean with
North American clientele. In the 1990s, the cruise phenomenon reached the United
Kingdom and the rest of Europe, and subsequently, the Asia-Pacific region. This means
that there is currently a process of globalization of the North American cruise experience. This is why cruises are still considered to be an tourism market that has yet to
reach maturity, meaning that increases in supply are followed by parallel increases in
demand.
In 2000, cruise demand reached almost 10 million trips, with North America accounting for almost 2/3 of world demand. Although North America is a relatively more developed or mature market, it still has substantial potential demand, which the CLIA has
estimated at some 43.5 million people over the next five years. The European market
is a distant second with almost 2 million trips, with the rest of world accounting for a
very small share. This gives an indication of the enormous potential for growth and
expansion, ensuring a promising future for cruises.
9
© 2003 World Tourism Organization
Table A. Worldwide cruise demand (in millions)
Passengers by region
N. America
Europe
Rest of the world
TOTAL
1989
3.29
0.53
0.20
4.02
1991
4.00
0.70
0.22
4.92
1993
4.48
0.88
0.25
5.61
1995
4.40
0.97
0.30
5.67
1997
5.05
1.36
0.46
6.87
1999
5.89
1.79
0.85
8.53
2000
6.88
1.95
0.78
9.61
Source: CLIA for the US and Canada, PSA for Europe and GP Wild (International) Ltd for the Rest of the world.
An analysis of the demand characteristics shows a high number of first-timers, that is,
tourists who are taking a cruise for the first time. Also, cruise passengers come from
all segments of the population, especially in the more developed markets (United
States and Canada). Contrary to what one may expect, a cruise is not a type of holiday that is exclusive to seniors or to wealthier demographic segments. This is borne
out by the average age of cruise passengers, which is 46, and their average household
income (approximately 50,000 dollars in the case of American cruisers). This is achieved by offering shorter itineraries, which are therefore less costly and highly compatible with the tastes and demands of all segments of the population.
Cruises as tourism supply
Table B shows the accommodation capacity provided by the cruise sector. It can be
observed that the cruise industry represents just 0.6% o the world’s accommodation
capacity. At first blush it would seem that the importance of the cruise business is minimal. However, there are other figures that must be taken into account in order to form
a clearer picture of its importance:
•
the high level of business confidence in the industry is reflected in operators’ order
books (worth over 14 billion dollars),
•
high present and future growth rates (8% per year),
•
tourist consumption generated at destinations,
•
the possibility of opening up new destinations for land-based tourism due to the
intense desire created by cruises to return to the destination, and
•
high added value of cruises.
These aspects give an idea of the effects of this new form of holiday. Therefore, its
importance lies not so much in the size of the cruise business per se, but rather in the
activity’s effects. It is also interesting to study the cruise industry from the perspective of hotel operation because of the advanced technologies used and the complex
systems needed to manage on-board hotel and complementary services, as the floating
hotel facility is usually in an isolated setting.
10
Table B. Acommodation capacity measured in thousands of berths
Region
Europe
America
East Asia and the Pacific
Africa
Middle East
South Asia
TOTAL
Cruises (*)
1980
8,542
6,436
763
269
141
126
16,277
45
1990
9,824
8,616
4,798
665
319
222
24,444
93
1998
11,869
10,329
6,974
855
442
343
30,812
177
Source: WTO; (*) CLIA for the United States and Canada, PSA for Europe, GP Wild for the rest of the world.
Table C shows a summary of the world’s most important cruise lines. Supply, as shown
in Table D, is characterized by the existence of a situation that is close to being an oligopoly, with the four largest groups (Carnival, Royal Caribbean, P&O Princess and Star
Cruises) accounting for 72% of the world supply of berths. The so-called “Big Four”
could be reduced to just three, due to the possible acquisition of P&O Princess by one
of the top two groups. All four groups use multibrand strategies to cover all the segments of the market and own very modern fleets (average age 9.9 years). The figures
of the leading group, Carnival Co. give an idea of the economic magnitude of these companies. With a market capitalization of over 15 billion dollars (2001), Carnival is one of
the world’s largest tourism companies. It has a fleet of 46 ships with a total of more
than 60,000 berths, and annual revenues of 3.78 billion dollars.
Table C. Main cruise lines that offer passenger sea cruises (January 2002)
Carnival
Corporation
Carnival Cruise
Lines (CCL)
Holland America
Line (HAL)
Windstar
Costa Crociere
4 Main groups
Royal Caribbean
Cruises (RCC)
Royal Caribbean
International (RCI)
Celebrity Cruises
Cunard
Seabourn Cruise Line
P&O Princess
P&O
Swan Hellenic
P&O (Australia)
Princess Cruises
Aida Cruises
Star Cruises
Group
Star Cruises
United States of
America and
Canada
Clipper Cruises
Royal Olympic
Norwegian Cruise Crystal Cruises
Line (NCL)
Orient Lines
Disney Cruises
Radisson Seven
Seas
ResidenSea
Star Clippers
Source: Own study.
Europe
Asia
Louis Cruises
Cruises
Cruises (ROC)
Festival Cruises
Indian Ocean
NYK Cruises
Saga Cruises
Mitsui OSK
Airtours Sun
Japan Cruise
Cruises
Line
Thomson Cruises
Hyundai
Silversea Cruises
Fred Olsen
Page and Moy
Hapag Lloyd
Peter Deilmann
Club Mediterranée
Nouvelles Frontieres
Mediterranean Shipping
Cruises (MSC)
Valtur
Spanish Cruise Line
Pullmantur Cruises
Vistamar Canarias
11
“Minor cruise lines” in Table D includes those that are highly specialized in niche markets, and which capture mainly North American clientele. These companies own
modern ships and demonstrate that profitability is possible through specialization. The
supply represented by the European and Asia-Pacific cruise lines is in line with the size
of the demand in these two regions, which is starting to take off.
Table D. Distribution of ocean-going fleets at January 2002
Group/
Cruise Line
Total Fleet
NS
GT
GT/
Order Book
Berths
Berth
Minor cruise lines
Big Four
Europe
Asia- Pacific
Total
Ave.
NS
GT
Age
GT/
Berths
Berth
18
508,944
52.3
9,728
7.5
3
203,000
66.7
3,044
106
6,152,670
38.1
161,411
9.9
31
3,006,656
41.7
72,046
49
926,188
26.8
34,512
27.6
3
178,600
37.6
4,746
10
252,133
35.0
7,206
17.9
0
0
-
0
183
7,839,935
36.8
212,857
14.8
37
3,388,256
42.4
79,836
Source: Own study using data from PSA and Lloyd’s Cruise Int.
The cruise industry is in the midst of a profound fleet renovation process, with ever-larger vessels coming into service. The largest of the new ships have a capacity of up to
3,500 passengers and offer more on-board services, thus expanding on the concept of
cruise ships as floating resorts. This makes it possible to generate more on-board revenue. On-board revenue is also being enhanced by a move away from “all-inclusive” packages and the increasing adoption of “add-on” formulas where certain services are not
included in the price of the cruise and must be paid for separately. Another trend is greater specialization of cruise ships, as exemplified by Disney’s themed cruises. One
highly notable characteristic of the cruise industry is the highly efficient management
of resources making it possible to achieve high occupancy rates – much higher than
those achieved by the holiday hotel industry or charter airlines. At the same time, in
order to minimize risk cruise lines diversify their destinations, thus favouring the geographical expansion of tourism and this type of activity.
Destinations offered
One important aspect for tourism destinations in the analysis of cruise line operations
by region. Climate, which is tied to the seasons, is a determining factor just as it is for
land destinations. This gives rise to substantial relocation of fleets from one region to
another. The Caribbean, not surprisingly, is the busiest cruise region, especially during
the winter months in the northern hemisphere. The following chart shows that the
second most important area is the Mediterranean, especially from March to September.
Atlantic Europe and Alaska also experience a surge during this period, although to a
lesser degree. The significant share of the Asia-Pacific region is notable, indicating that
the foundations are being laid down for strong development in the region.
12
0.a. Capacities offered worldwide by season in 2002
April-September
October-March
Source: GP Wild (International) Limited.
The product and its distribution
The tourism product commercialized is the cruise package, which consists of all the
different land destinations on the itinerary, as well as the ship itself. The role of ports
of call in the creation of the package is crucial, with the determining factors being their
policy of investments in specific facilities as well as their pricing policies. It is here that
two hitherto separate economic sectors -- port services and tourism – come together
and pool their economic resources. From the point of view of port services, the role of
cruises within the context of modern port-city policies is essential.
The distribution of packages is carried out through the usual channels used for other
types of holidays, that is, travel agencies. For travel agencies, the sale of cruise packages is one of the biggest revenue generators, due to the commissions applied to
them. However, as with other tourism products, there is a trend towards eliminating
middlemen through the sale of packages using new information and communication
technologies (Internet, interactive TV, CRS and call centres). The shipping aspect of
the cruise business means that traditional sea transport agents are involved in the distribution channels. The main shipping agents, who have a long history within the cargo
shipping business, have gone on to set up their own cruise divisions. They also have a
dual role in the sale of the trip, in the guise of a GSA, and in organizing hotel accommodation and on-land activities just as a travel agency would.
The effects generated by cruises
As mentioned at the start of this executive summary, cruises generate substantial
effects, which amplify the importance of this type of holidays. The most immediate
effect is the expenditure generated at destinations. Few in-depth studies have been
carried out on this subject and so the available information is limited. The present
report discusses studies for France and the Caribbean, which estimate the economic
13
impact of cruises at 87 million euros a year and 410 million dollars per semester, respectively. Furthermore, the methodological foundations are laid down for future studies,
given the current lack of documentation. There is a clear need for this type of studies,
as they make it possible not only to quantify the impact of the business on destinations,
but also the distribution of this impact between the port community and the destination city itself.
Aside from economic effects, cruise activity also has significant environmental effects,
which are gaining prominence due to the rise in maritime traffic. Efforts are geared
mainly towards preventing undesirable impacts on the natural environment, such measures include: the definition of maritime regions of special interest, limitations on the
dumping of waste into the sea or requirements for the installation of less-polluting propulsion systems, especially in the case of Alaska.
With the advent of very large cruise ships that can carry more than 5,000 people including passengers and crew, maritime safety and security issues have attracted a great
deal of interest, especially in cases of fire or sea rescue. Due to the events of 11
September 2001, protection against acts of terrorism and piracy at sea has become a
major concern for the competent international authorities. This issue has affected cruise operations, port facilities and the configuration of cruises. This report discusses
both safety and security as issues that will shape the future of the business.
14
Short- and medium-term trends
In order to form a picture of the future scenario that is emerging, the following trends
are identified and discussed:
•
The slowdown in the growth of US demand.
•
Strong growth of European demand, especially in the German, French and Spanish
markets.
•
Changes in the demographic structure of demand: younger audience, with lower
purchasing power, from all segments of the population. As repeat cruisers become
more demanding, there will be greater demand for specialized products.
•
Cruise package prices will fall due to economies of scale, technological advances
and shorter duration of cruises.
•
The commissioning of ships of ever-increasing size -- tonnage, in nautical parlance
– that are more technologically advanced, safer, more complex and with more onboard facilities will make it possible to generate larger on-board revenues. The
modernization of fleets for technical and economic efficiency reasons will continue
at the current pace.
•
The horizontal concentration of the industry will accelerate since the investment
required to build a standard modern cruise ship easily exceeds 300 million dollars.
In this scenario, only small, highly specialized cruise lines can survive alongside
the large groups.
If we consider that demand will grow in parallel with supply, given that the market has
not yet reached maturity, it is possible to project future cruise demand in the main
generating markets. Table E shows the results of this projection. Among the most notable aspects of this projection are the extremely high growth rates expected for Europe,
over 20% in the case of France, Germany and Spain, with world demand expected to
easily surpass 13 million cruise passengers in 2005. This gives an indication of the
dynamic nature and growth potential of the cruise business, as mentioned earlier. This
substantial rise in demand will be accompanied by an expansion in the regions where
cruises operate, with greater activity in established destinations and the strong entry
of emerging destinations such as South America, Africa, India and Oceania.
Table E. Demand for ocean-going cruises measured in thousands of cruise passengers
Country
1995
1996
1997
1998
1999
2000
340
United Kingdoma
c
217
Germany
151
Italya
100
Francea
a
24
Spain
134
Othersa
966
European Uniona
b
4,378
United States
416
235
174
112
34
141
1,112
4,656
522
283
200
126
41
185
1,357
4,864
631
306
230
154
52
187
1,560
5,243
740
327
250
224
82
167
1,790
5,894
747
380
273
266
87
200
1,953
6,880
95-00
Aannual
17.05%
11.86%
12.57%
21.61%
29.38%
8.34%
15.12%
9.46%
2005d
1,155
825
522
622
265
8,008
01-05d
%annual
11.51%
21.38%
17.57%
25.62%
32.14%
3.87%
Source: (a) PSA, (b) CLIA, (c) DRV, (d) own study.
In short, as we have already pointed out, the importance of this modern tourism product lies in the effects it generates and its prospects for future growth. Both aspects
are analysed in depth in the present report.
15
CONTENTS
The object of this report is to examine the activity of sea cruises. River cruises and
coastal cruises that form such an important part of the US and German markets have
not been taken into consideration. Special attention has been paid to the US and
Canadian markets with regard to sea cruises, for the following reasons: as a source
market it represents two thirds of the world market share, the renaissance of cruise
holidays began in the area, and US capital almost exclusively dominates the sea trade's business structure.
The concept of the modern tourist cruise is defined in chapter 1, and is very different
from the traditional transatlantic ocean cruise. There is also a brief note on methodology.
Chapters 2 and 3 analyze in greater detail the current demand for tourist cruises within
a global context and from a socio-economic viewpoint, followed by a similar examination of supply and cruise line business structure.
Chapter 4 is a study of the tourist product itself, including the main itineraries, which
are of major importance given the direct impact on ports and destinations and in cruise line operations.
Chapter 5 is devoted to the interaction between the cruise and its surroundings, analysing financial aspects, the sustainability of the marine environment and passenger
security. Spending patterns at the destination and the price or fare of cruise trips are
also considered in the first section of the chapter.
Chapter 6 forecasts medium term macro-trends. For the purposes of this report medium
term is considered as a period of 4 years, as the sector is developing rapidly, which is
reflected in the cumulative annual growth rates. The analysis of this four year period is
considered a reasonable time period, given that it is very difficult to realistically forecast events over a longer period of time and that necessary business decision times
have been taken into account within the specified time frame (building a new ship
takes between a year and a half and two years).
The understanding of the current situation and the medium term macro-trends of cruises clarifies and identifies the worldwide opportunities in relation to this new maritime
trade. It is hoped that these findings will help to give potentially useful information to
the National Tourism Associations (NTA) and the managers within the various relevant
sectors to adopt suitable strategic decisions to successfully handle their incorporation
into this major and renewed tourism activity.
Chapter 7 deals with and defines terms from the shipping world such as tonnage, cabotage, moulded breadth, moulded depth, length, displacement, etc. The symbols and
acronyms used throughout the report are also listed in this section.
Chapter 8 details two examples of important figures within the cruise tourism sector,
which are the spending carried out at the destination and the possible future demand
of these types of trip.
17
1
INTRODUCTION
During the last decade, the cruise industry has been the tourism sub-sector that has
experienced the most rapid growth of all. While the world demand for international trips
during the period 1990-2000 grew at an annual cumulative rate of 4.3%, the cruise market grew at 7.9%, as can be seen in table 1.II.
Three basic facts typify a tourist cruise:
• It is another category within leisure travel as a whole, which is in direct
competition with on-land holiday resorts.
• It is a product that is growing, and as it increases its supply so it generates an
equal and corresponding demand. Up until the present its non-cyclical character
makes it a very attractive economic proposition.
• It is immersed in a process of worldwide promotion based on the experience
gained from the US market. This is the very market that designed the modern
concept of the tourist cruise, from the points of view of both supply and demand.
In table 1.I the capacity of sea cruises, measured in berths, is 0.6% of the whole of
available hotel space worldwide, while table 1.II shows that it represents 1.4% of international arrivals. The importance of these observations lies in the economic weight and
potential for growth of sea cruises rather than in their relative weight in the Tourism
Sector.
Business confidence in this subsector is reflected in the order book1, which has not
undergone any major shrinkage, in spite of the worldwide economic downturn. On 31st
January 2001 the order book was at its highest figure (18.5 billion dollars2, 53 new
ships and 98,162 additional berths), with a slight reduction in quantities on 1st
November of the same year (14.8 billion dollars, 41 new ships, and 79,658 additional
berths). In spite of the drop, the figures are a clear indication of business commitment
towards the sub-sector.
The relevance of these findings for tourist destinations lies in the following:
1) tourist consumption generated in secondary ports3 (shopping, guided tours, sightseeing) and especially in base ports4 (mainly overnight stays in hotels).
2) sea cruises are also a means of transport, capable of provoking an intense desire
to return to the same destination (according to CLIA market research, almost 50%
1 Order book: ships awaiting delivery and under construction at the shipyards. For a fuller description of shipping terminology see section 7.2.
2 In this report the figures and references to dollars are understood to be US dollars unless otherwise stated.
3 Secondary port: from which the passenger disembarks, to subsequently embark and continue the cruise.
4 Base port: also known as the head or main port, it is used for embarking and disembarking at the beginning and at
the end of the cruise.
19
of cruise passengers are convinced that they will return to the same geographical
region for some other type of holiday).
3) the relationship established with the Port Authorities, for financial reasons (the revenue generated by the cruise ships during their stays in the port) and because it is an
essential element for connecting the port to the city.
Table 1.I. Accommodation capacity measured in thousands of ber ths
Region
1980
1990
1998
Europe
8,542
9,824
11,869
America
6,436
8,616
10,329
763
4,798
6,974
Africa
269
665
855
Middle East
141
319
442
South Asia
TOTAL
Cruises (*)
126
222
343
16,277
24,444
30,812
45
93
177
Source: WTO; (*) CLIA.
Table 1.II. International arrivals in millions
Region
1980
1990
Europe
2000
212.0
282.7
403.2
400.5
America
64.3
92.8
128.3
119.3
31.1
54.6
110.6
114.9
9.7
15.0
27.6
28.5
Africa
Middle East
7.5
9.0
21.2
19.4
South Asia
2.5
3.2
6.4
6.0
327.1
457.2
697.5
688.5
n/a
4.5
9.6
n/a
TOTAL
Cruises (*)
Source: WTO; (*) CLIA; (**) Preliminar y WTO estimation. Data Januar y 2001.
20
2001**
Table 1.III. International and cruise tourism (in millions of trips)
Geographical region
Expected
annual growth (%)
International arrivals
2000
2010
Africa
5.6
27
47
America
3.9
130
190
7.7
93
195
Europe
3.0
393
527
Middle East
7.0
18
36
South Asia
6.7
6
11
Cruises
5.8
8.8
13.05
(US, Canada and Europe)*
Source: WTO. (*) GP Wild (international) Ltd forecast for 2007.
1.1 The cruise as a tourist resor t
The business strategy that inspires a project for ships of this kind is clearly reflected in the feedback from Bob Dickinson, Carnival Cruises' executive president, who states: "The main key to Carnival's success was to
position itself in the holiday market and not in the cruise market. This
way, if Las Vegas attracts 28 million tourists and Orlando attracts some
40 million, then Carnival only attracts 1.5 million, with a holiday market
share of 0.5%. The main competitors are the land resor ts and not the
other cruise line companies." This is why they are considered as and
called floating resor ts.
There are two key elements in this asser tion:
• The first is the concept of the ship as a floating hotel and not as a mere
means of transpor t. This formula has been extremely successful in the
Caribbean, although it cannot be simply transferred to other regions or
settings in which the destination plays a major role. Never theless it has
helped to completely modernize facilities on board cruise liners.
• The second is having adapted a formula to the cruise that has been so
successful in the US city of Las Vegas, where the main element is the
casino. The interior decoration of the ships is also similar to the city’s
hotels. This is why some ships are referred to as having been "Las
Vegasized".
The Disney experience is also wor thy of note. They are considering that if the
two formulas that work in the US holiday market are Las Vegas and Orlando,
and if only the first city has been transformed into the cruise format, then
21
why not tr y the formula with the second. This has given rise to theme cruises.
The notion of "Cool Cruising" is a concept for the future, and its objective is
to attract the younger section of the population. This concept requires a
large platform and consequently long journeys. It would incorporate a large
number of leisure facilities of an electronic nature and of a more outdoor and
active nature. To a cer tain extent these possibilities are being explored in
the VLCVs 5, especially in Royal Caribbean International's (RCI) Eagle-class,
which of fers ice-skating, mini golf, climbing areas, spas, etc. during its trips
around the Caribbean.
The key to the success of the modern tourist cruise lies in its capacity to
adapt itself to market trends, and move away from the excessive rigidity
imposed by social norms on classic transatlantic cruises. This basically
entails: informal dinners, food ser vice available 24 hours a day, vegetarian
meals, diet meals, non-smoking areas, beauty salons, a variety of on-board
shops, etc.
The size of the cruise ship depends on commercial and economic factors.
Given that the price of construction of a VLCV varies between 300 and 500
million dollars, the management and commercialization of the VLCV represent
a major challenge, with a high level of risk involved due to the major investment in only one ship. The new ships must be flexible and capable of operating in dif ferent settings, or else they should be designed for a specific and
lucrative destination. Cruise ships are designed and constructed to operate
in specific areas, which implies a cer tain rigidity in the relationship between
ship and area of operation. It has been the norm over the last few years to
consider the limit for the first condition as having a tonnage of 70,00080,000 GT 6 (a transcanal ship), while for the second condition the lower level
is set at 100,000 GT. Shipbuilding on this scale, however, can only be undertaken by the four main cruise line groups. The current order book shows that
the figure of 140,000 GT for the Eagle-class ship will only be surpassed by
the "Queen Mar y 2" in the period 2002-2004. The "Phoenix / American World
City" project has set a ceiling of 250,000 GT that will be dif ficult to surpass,
with discussions that have been on-going for over 10 years, although as yet
no concrete decision has been made, mainly because of financial problems.
The tourist cruise has two facets: one as a ship and the other as a floating
hotel. With regard to the distribution of space, 75% is considered as a hotel,
while the remaining 25% is a ship.
The modern cruise liner, therefore, is also a floating hotel. The normal layout
of modern hotels, with a gigantic atrium around which the various dif ferent
22
5 VLCV: Ver y Large Cruise Vessel. For the definition please see section 7.2.
6 GT : Gross Tonnage.
accommodation floors are set out, is faithfully imitated in this type of ship.
The ser vices associated with a hotel are also incorporated on-board: jacuzzi,
sauna, gym, massage rooms, jogging track, casino, librar y, cinema, interactive TV in the cabins, children's activities, disco, meeting rooms, restaurants, bars, duty free shops and swimming pools. The most innovative element on the most modern cruise ships is that all the cabins are connected to
the Internet. Par ticularly wor thy of note is the P&O Princess Grand Class,
with its own Broadway style theatre with 748 seats, and a medical centre
connected via satellite to specialists in Houston.
As well as the rise in the amount of facilities, there is also a greater deal of
comfor t during the cruise, which is mirrored in the increased size of the
cabins. They have increased in size over the last five years from 12 m 2 to 18
m 2. The market trend calls for a larger amount of cabins with windows and/or
balconies, which are also more profitable, hence the adoption of the previously mentioned atrium layout. The ser vice is essentially measured in relation to passengers/crew that varies between 2 and 3 to 1, depending on the
cruise categor y. In order to guarantee the quality of the ser vice, as par t of
the modern philosophy that states a "happy crew means happy guests", special facilities for the exclusive use of the crew have been installed, and include: a TV in each cabin, dif ferent types of restaurants, discos and swimming
pools. The general layout has been closely studied in order to reduce distances and thereby give the best possible ser vice.
The impor tance of the human factor is clear, which is why it is essential that
the passengers and the crew must be well looked after. One of the main problems is seasickness, which is caused by the boat's pitching and rolling 7, as
well as other influencing factors such as L tot 8, B 9, whereabouts on the ship,
age and sex of the person, as well as the activity being per formed immediately beforehand. According to recent research, ver tical acceleration is the
primar y cause. Normally the cabins that are located in the bow are the most
expensive, as there tends to be less noise and fewer vibrations, as they are
fur ther away from the engine room. Never theless, the movement of the ship
and the likelihood of getting seasick are increased in this area. Computercontrolled stabilizers are a usual feature installed in order to help reduce
rolling movements on the ship.
Other major elements to be taken into consideration given the vast amount
of people on-board, which can be over 5,000 passengers on a VLCV, are environmental problems, including waste treatment, safety (fire, flooding, stability) and hygiene (meals, swimming pools, etc.) systems, which are discussed in sections 5.2. and 5.3.
7 Pitching: ship rocking from bow to stern, dipping and climbing alternately. Rolling: the ship's
movement from por t to starboard or vice versa.
8 Ltot: overall length.
9 B: moulded breadth.
23
The operation of sailing in dif ferent areas may require a greater number of
trips, and this is when the sailing speed figures heavily in the equation. This
may entail greater cruise speeds, going from 18-23 knots 10 to 20-26 knots.
To increase the speed by 5 knots from a speed of 20 knots requires at least
a doubling of the ship's power. This has given rise to new propulsion systems,
new propulsion plants and new designs for the underside of the hull.
1.2 Reference terms
In accor dance with the United Nations/World Tourism Or ganization
Recommendations on Tourism Statistics:
A) Tourism is defined as "the activities of persons travelling to and staying
in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes."
B) Visitors are defined as all types of travellers related to tourism.
International visitor is the term applied to "any person travelling to a
countr y dif ferent from that of his/her usual residence, outside his/her
usual environment, for less than twelve months, and whose main purpose
of trip is other than the exercise of an activity remunerated from within
the place visited". International visitors may be tourists ("visitors who
stay for at least one night in public or private accommodation in the
countr y visited") and sightseers or day-visitors.
C) Cruise passengers are also included within the definition of day-visitor,
as they are "persons who arrive at a countr y on board a cruise ship and
who return each night to spend the night on the ship, even though it may
stay in the por t for several days".
Throughout this repor t it shall be considered that:
D) Tourist cruises are only sea cruises, and include neither coastal cruises,
ferr y crossings nor river cruises.
E) The occupancy levels are an indicator of productivity. The occupancy
levels may be greater than 100, as the of ficial accommodation capacity
does not take extra ber ths or third ber ths in double cabins into consideration.
F) The occupancy summaries are based on two people sharing a cabin.
G) Supply is based on the capacity of the transpor t, that can be measured
either by gross tonnage (GT) (shipping concept) or else by the number of
10
24
Knot: unit of speed, equal to one nautical mile per hour (1,852 Km/h).
ber ths or ber ths x day (tourist concept). Although demand is normally
considered in terms of transpor t measurements (ton-mile), this repor t is
based on overnight stays, which once again benefits the concept of
accommodation over that of transpor t.
.
25
2
A STUDY OF THE DEMAND: CRUISE PASSENGERS
2.1. Quantitative aspects
In 2000 the worldwide demand reached 9.61 million passengers (see table 2.I). Graph
2.a details the sector's evolution in the 1989-2000 period, indicating a clear increase
in the growth of these holidays, with demand growing by 50% in a seven year period
between 1989 and 1996. A similar increase was then repeated in just 4 years (19962000).
Table 2.I. Worldwide cruise demand (in millions)
Passengers by region
1989
1991
1993
1995
1997
1999
2000
N. América11
3.29
4.00
4.48
4.40
5.05
5.89
6.88
Europe
0.53
0.70
0.88
0.97
1.36
1.79
1.95
Rest of the world
0.20
0.22
0.25
0.30
0.46
0.85
0.78
Total
4.02
4.92
5.61
5.67
6.87
8.53
9.61
Source: CLIA for the US and Canada, PSA for Europe and GP Wild (International) Ltd for the Rest of the world.
2.a. World demand for cruises 1989-2000 (millions of passengers)
Source: CLIA, PSA, GP Wild (Internacional) Ltd.
This trend is expected to be maintained in the future, and it is estimated that the
demand from North America and Europe will comfortably surpass the 13 million passenger mark towards the end of the first decade of the twenty first century. One of the
keys in the evolution of the demand for cruises is that it grows when the supply increases. The report on the relationship between both variables can be seen in section 2.4.
It must not, however, be forgotten that the market share of cruise holidays is relatively
small within the worldwide market of international holidays, standing at about 1.4%, as
11 Nor th America: the cruise demand from residents in Mexico is not significant, while the
corresponding demand from the residents of Canada rose to 300,000 in 2000. The influence of
the US in the world and in Nor th America is ver y strong.
27
cited in section 1 of this report. In section 8.2 the author includes a written forecast
on demand for 2005. The past and future booms in growth are tangible evidence of the
great economic strength that lies in these kinds of holiday.
The demand of the three major regions is studied in greater detail in the following paragraphs.
United States and Canada. Graph 2.b details annual demand, with a clear and continued
growth trend with the exception of the two-year period of 1994-95. The unusual behaviour of demand during these two years was due to commercial stagnation of the supply
put on the market by the cruise line companies.
2.b. Cruise demand in the US and Canada (thousands of passengers)
Thousands
Source: CLIA.
In spite of the pessimistic forecasts made by the majority of analysts who signalled a
slowing down of the market after the boom of the previous years, the 6 million trips
mark was clearly surpassed in 2000, reaching a record annual growth of 7%. A major
cause of this boom was the availability of a large number of berths, together with the
successful marketing and selling efforts of the cruise lines.
The potential demand over the next 5 years in a study carried out by CLIA12 can be seen
in graph 2. c. The potential figure cited in the graph is 43.55 million people, which gives
an idea of the growth possibilities of cruises in the medium term.
12 CLIA: Cruise Lines International Association. See section 3.1.
28
2.c. Potential demand for the next 5 years in the US and Canada
(Target customers are defined as being over 25 with a family income of >20,000 dollars/year)
% Target audience
68,810,000
people
Interested
43,552,000
people
Potential
Source: CLIA 2000.
The European market has a major lack of available data in addition to a considerable
statistical problem, with no one sole institution to compile and regulate information,
and consequently no standard criteria that can be used for these purposes. The most
reliable source of information is the British PSA13, for demand generated in the UK as
well as for the main European source markets. The consultancy firm GP Wild
(International) Ltd is an excellent source of information for the smaller markets (see
bibliography 56). The data supplied by both sources differs slightly with regard to the
UK, and can be seen in the comparison between tables 2.II and 2.III.
European demand in the world market reached a total share of 20% in the year 2000,
totalling almost 2 million passengers. All analysts agree that the European market has
the highest potential rates for growth in the short term, easily surpassing the US and
Canada. It is headed by the UK, largely thanks to its seafaring tradition, its business
connections with the US and the clear commitment of the large tour operators to the
business.
13 PSA: Passenger Shipping Association. See section 3.1..
29
Table 2.II. European demand for cruises (measured in number of trips)
Country
United Kingdom
1995
1996
1997
1998
1999
2000
340,000
413,400
518,400
630,600
739,500
739,100
Germany
217,000
235,300
283,500
306,200
327,000
379,500
Italy
151,000
174,000
200,000
230,000
250,000
273,400
France
100,000
150,200
164,500
154,000
224,000
266,000
24,000
33,800
40,800
52,500
81,700
87,400
Spain and Portugal
Benelux
45,000
50,200
56,500
68,600
71,000
75,000
Scandinavia
34,000
34,000
41,000
51,000
55,000
59,400
Russia14
50,000
50,000
75,000
50,000
15,700
11,000
Cyprus15
5,000
7,500
12,500
17,500
25,000
55,000
Total Europe
5,000
1,148,400
1,392,200
1,560,400
1,788,900
1,945,800
Source: GP Wild (International) Ltd.
2.d. Demand in the European market
Source: CLIA.
The most recent developments within the European source markets can be seen in
table 2.II and in graph 2.d from GP Wild (International) Ltd. data. As has already been
stated, it is clear from the figures that the main European source market is the United
Kingdom with 739,000 sea cruise trips in 2000 (+0.9%) and 65,000 river cruises. Note
that the first figure, although similar in magnitude, differs from that given by PSA in
table 2.III. The said association expects that the one million barrier for trips will be surpassed by 2003. It is followed in order by: Germany, Italy, France and Spain. The fact
that German demand is half of the British demand, when the demand for international
14 Includes Eastern Europe.
15 Cruise passengers depar ting from Cyprus, without taking nationality into account.
30
trips as a whole is the exact opposite, suggests that there is great potential for growth
in the German market. The importance of these figures is taken into account in section
8.2 for the calculation of future demand. The following are considered as secondary
markets as far as demand is concerned: Scandinavia, the Netherlands, Belgium and
Switzerland.
As far as recent developments in demand are concerned, the previously mentioned UK
boom stands out, along with Spain, although they depart from completely different
bases, along with the curious slow growth of German demand. The lower level of
German development within the sector can be explained by the language barrier and
local legislation, which is more regulated than the British, making it a market that is
much harder for foreign competition to penetrate. Added to this fact is the dominant
stranglehold that the German tour operators have on the holiday market.
The demand in the British source market is detailed in table 2.III, differentiating between the number of passengers that depart from ports in the UK and passengers who
fly in order to arrive at their cruise departure port. It can be seen that the growth of
the latter is spectacular and is the main cause for the major increase in demand for
cruise holidays. In round figures, the demand in 1986 was just over 50% while in 2000
it reached 75%. The cumulative annual boom of 17% stands out in the table, compared
to the North American demand, which stands at 7% for the same period of time.
Table 2.III. British demand (measured in thousands of trips)
Year
From British
Cruise and
Others
Total
4,1
91,5
Ports
Aeroplane
1986
40,9
46,5
1988
50,3
81,5
20,3
152,1
1990
47,2
125,5
13,8
186,5
1992
66,9
142,6
19,2
228,7
1994
80,7
165,5
37,2
283,4
1996
117,9
283,8
14,4
416,1
1998
166,2
482,8
14,2
663,2
1999
143,9
588,7
13,6
746,2
2000
177,2
560,8
16,5
754,4
Source: PSA.
Asia. It has been calculated that the regional demand for 2000 reached 500,000 passengers, with Japan, Taiwan (Chinese province) and the Republic of Korea at the fore.
The real potential of this market is based on selling Asian products to Asian customers.
The main source market is Japan, whose development is reflected in table 2.IV. The
sluggish growth was due to the fact that only local cruise lines were operating in the
market up until 1999, and they were obliged to have their ships registered in Japan.
31
This involved high running costs, as the crew had to be Japanese. The increase noted
in the year 2000 is due to the fact that the cruise line Star Cruises entered the market, attracting a younger sector of the population with shorter cruises. Unfortunately
the economic slow-down, along with the events of 11th September 2001, have driven
this cruise line to reduce its operations during 2001-2002, which will probably entail a
reduction in demand over the next few years.
Table 2.IV. Japanese demand for cruises
Year
International cruise trips
In Japanese
In non-Japanese
ships
ships
Internal
Subtotal
Total
cruise
trips
1987
29,800
9,000
38,800
84,900
123,700
1992
46,400
30,400
76,800
120,300
197,100
1997
33,300
49,000
82,300
103,300
185,500
1998
26,700
46,100
72,800
102,900
175,700
1999
22,700
48,000
70,800
98,500
168,900
2000
21,100
109,400
130,500
95,400
225,900
Source: Japanese Ministry of Transportation.
Potential demand. Ken Trippe, in his paper entitled Globalization of the Cruise Industry,
(see bibliography 54), analyzes the world demand and the potential for growth by
region. In the paper he establishes the conversion factor as an indicator of development
within a given market; he defines this factor as the quotient between the demand for
cruises and the population of a market. The main source markets and respective conversion factors are detailed in table 2.V.
Table 2.V.
Market
Conversion factor
Population
Demand
United Kingdom
0,013
60,000,000
754,000
United States
0,023
280,000,000
6,580,000
European Union16
0,004
300,000,000
1,133,000
0,001
430,000,000
430,000
Japan
0,002
120,000,000
226,000
Total
0,008
1,190,000,000
9,123,000
Source: Ken Trippe, with author's updated data for the year 2000.
It can be seen from the above table that US and Canadian demand represents over two
thirds of the world total. This is due to the fact that the cruise renaissance took place
in the US, starting with destinations to the Caribbean. This is the reason why whatever
happens in this market has a huge worldwide impact. As the market is a lot older the
conversion factor is more than five times that of the European Union and more than 11
times that of Japan. This is an indication of the development potential that lies within
32
the aforementioned source markets. This is particularly true of Europe, which has developed strongly since 1995, while the economic situation in Japan and the general Asian
economic crisis is merely postponing a similar boom.
Although the conversion factor is a clear indicator of potential demand and on an initial
level gives very useful information, it is nevertheless possible to introduce another
more precise indicator that measures the level of development. It is defined as the coefficient between the real demand (Vrti) and the corresponding potential demand (Vpti)
for a specific source market "i" at a given moment "t".
git = (Vrti) / (Vpti)
(1)
The closer the figure is to the value of 1 the more developed the source market will be,
taking all values between 0 and 1. The only calculation that has been made so far has
been for potential demand in the United States. The result published by CLIA in their
report which is cited in the bibliography (12), is as follows:
gUS;2000 = 0,158
which suggests that only 15.8% of the potential demand is being tapped. The possibility for increased cruise demand is thus clear to see, taking into account that this source market is the most developed.
2.1.1. Geographical origin of US cruise passengers
As reflected in table 2.VI, the three main source markets in the US are:
-
New York (the largest consumer in the whole country).
-
South Atlantic (it must not be forgotten that Florida is home to the three main cruise ports: Miami being the world's most important, and Port Everglades and Port
Canaveral serving as a base for the Caribbean and the Bahamas).
-
Pacific (with the cities of San Francisco and Los Angeles and base ports for cruise destinations in the Pacific).
The effect of the base port on local demand is strong, a fact that has been noticed by
the industry, which has attempted to stimulate demand in non-traditional base ports.
The most representative case is that of the cruise line Norwegian Cruise Line (NCL)
with its resounding success obtained in Houston. The events of 11th September have
strengthened this tendency, with the use of flights in the fly & cruise package being
reduced, in conjunction with the opening of new cruise base ports. It should be noted
that approximately 75% of US demand comes from states that border the coast.
33
Table 2.VI.
Origin
1990 Share
1999 Share
Difference
(%)
(%)
(%)
New England
5.78
5.84
0.06
Mid-Atlantic
16.21
16.35
0.14
Northeast Central
14.03
11.24
-2.79
Northwest Central
4.50
4.57
0.07
South Atlantic
24.16
30.67
6.51
Southeast Central
2.86
3.00
0.14
Southwest Central
5.42
7.26
1.84
Mountains
3.86
4.70
0.84
Pacific
23.18
16.37
-6.81
TOTAL
100,00
100,00
0,0
Source: CLIA Passenger Carryings Reports 2000.
The breakdown of the regions by states is as follows:
a) New England: Connecticut, Maine, Massachusetts, New Hampshire, Vermont and
Rhode Island.
b) Mid-Atlantic: New Jersey, New York and Pennsylvania.
c) Northeast Central: Illinois, Indiana, Michigan, Ohio and Wisconsin.
d) Northwest Central: Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota
and South Dakota.
e) South Atlantic: Delaware, District of Columbia, Florida, Georgia, Maryland, North
and South Carolina, Virginia and West Virginia.
f) Southeast Central: Alabama, Kentucky, Mississippi and Tennessee.
g) Southwest Central: Arkansas, Louisiana, Oklahoma and Texas.
h) Mountains: Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and
Wyoming.
i) Pacific: Alaska, California, Oregon, Washington and Hawaii.
2.1.2. Duration of trip
Depending on the original source market, the average duration of a cruise is closely linked to consumer's available free time and the ever increasing tendency to split holi34
days, with variations between different source markets: in the US and Europe it varies
between 6 and 9 days, while in Japan it is only 3 to 6 days.
In the US, the average duration of a trip from 1988 onwards became shorter, with the
point of inflection reached in 1991 and an increase in the following years, as seen in
graph 2.e. The decrease in length for the period 1988-1991 was due to the increase in
demand for cruises to the Bahamas, which are typified by their short duration: 3-4 days.
New ships that entered service from 1991 were located in the Caribbean, with an average itinerary of 7 days, and in Europe (9.5 days). The decrease in the average cruise
duration in 1999 and 2000 is merely anecdotal, given the importance of the short itineraries of the cruises to the Bahamas, which last between 2 and 5 days. The longterm trend is for longer average duration, until it reaches saturation point in the US and
Canadian-Mediterranean markets. The average cruise duration in the year 2000 was
6.5 days.
2.e. Average cruise duration in the US and Canada
Days
Source: CLIA.
In the distribution of cruise times, see graph 2.f, it can be seen that the most popular
cruise durations are 2 to 5 days and 6 to 8 days, and combined they have increased
their share in the last 16 years from 84% to 89%. The majority of the 2 to 5 day itineraries obviously takes place in the Caribbean, although this duration is also offered in
other regions. The 12 day cruise in Europe is the most popular for many companies, as
they coincide with the 2 week holiday of the average US family, taking into account
that 2 days are lost during the flight time to and from the cruise destination. In order
to reach a wider public there is a general tendency to promote short duration cruises.
For example, after September 11th, Holland America Line (HAL) chose 15 base ports
in the US for 2001-2002, including Port Canaveral, San Diego and Fort Lauderdale,
offering 360 itineraries and promoting the 2-4 day cruises, reaching 40% of US homes
within a half-day car-trip radius. Carnival and Royal Caribbean International (RCI) have
also adopted similar strategies.
35
2.f. Distribution of cruises by duration in days in the US market
1980
2000
Source: CLIA.
Similar information regarding Europe's two main source markets, the UK and Germany,
can be seen in graphs 2.g and 2.h. It can be seen from the graphs that short duration
cruises are very popular, helping greatly to increase and capture the younger end of the
market. The season also has an influence on the duration of the cruise. As can be seen
from graph 2.g, the British take more longer cruise holidays (14% are over 15 days in
length) between the months of October and March than in the months between April
and September (only 7%). This is due to the type of customers and the specific product
on offer. In general, retired people tend to travel during the October - March period.
They have a high purchasing power and no employment commitments to hamper their
free time, which is why the senior citizens segment should be studied in greater detail.
2.g. Distribution of cruises by duration in days in the british market (2000)
April-September
Source: PSA.
36
October-March
2.h. Distribution of ocean going cruises by duration in days in the german market
1987
1998
Source: DRV. Alf Pollak.
Table 2.VII. Distribution of cruises by duration for the year 2000
France
Nights
<7
7
8-12
> 12
%
26
50
19
5
Average 7,2 nights
United States
Days
%
1-5
37
6-8
51
9-17
11
> 18
1
Average
6,5 days
United Kingdom
Days
%
<5
18
5-7
36
8-14
37
15-21
7
> 22
2
Average
9,3 days
Source: Croisimer, CLIA and PSA.
According to a report by PATA, (see bibliography 33), the most popular cruises in Asia
are weekend cruises and 4-day cruises. This is a result of available free time, which is
normally 14 days a year and which tends to be divided up. Cruise duration in Japan is
slightly higher for two reasons: round-the-world cruises offered by the cruise line NYK,
along with local legislation which forces cabotage cruise liners to be registered in
Japan. There are consequent cost implications, as the crew has to be Japanese, and
the revenue generated from gambling is less, given the stricter on-board regulations.
As there are no port calls in Japanese ports, itineraries offered tend to be longer.
2.2. Qualitative aspects: socio-demographic profile of cruise passengers
"The value that is given to the "ostentatious" quality of a product, linked to the notion
of "spending power", is rife in the holiday world, affecting those people who believe
themselves to be superior. A great many people are linked to what has recently been
described as the "status-oriented" classification in the Vals consumer scale. These peo37
ple travel in order to be able to tell others that "they were in such and such a place"
and "they did what few people can do" as opposed to travelling for the intrinsic value
of the holiday itself. It is more commonly known as the Veblen effect." (See
Bibliography 24).
In more recent economic studies on Tourism, cruise holidays have been considered a
part of this category, which is especially true of the European and Asian markets, which
have not yet developed fully. In the case of the British and US source markets it is more
difficult to see it in this way, as the demand curve in relation to price does not behave
exactly according to the patterns set out by Veblen.
2.2.1. United States and Canada
The general public that takes cruise holidays represents a wide spectrum of the population, and it is not possible to state that a clearly defined public exists. It can safely
be said that it does attract almost all demographic groups(see tables 2.VIII and 2.IX).
Trends have remained stable since 1992, including a percentage reduction at the older
end of the market (over 60 years old) with consequent reduced use of the terms "unemployed/retired" along with a smaller percentage participation of university graduates.
CLIA has identified six segments within the market (graph 2.i), details of which can be
found in the bibliography (12) and which are as follows:
a) "Restless Baby Boomers". They are eager for new experiences and new ways of travelling. This segment is the most recent addition to the market. They represent
33% of total cruise holidays and 59% are first-timers.
b) "Baby Boomer enthusiasts". This is a segment of people who have already been
convinced, and who are attracted to cruise holidays and the variety of activities
that this entails. The cruise itself represents a break from the daily routine, and
they tend to travel with their family. They represent 20% of total cruise holidays
and 46% are first-timers.
c) "Lovers of luxury". They are prepared to spend money on very high quality goods,
which the majority of specialized cruise lines offer. They represent 14% of total
cruise holidays and 30% are first-timers.
d) "Demanding buyers". They are in search of the best price-quality ratio. They are the
most faithful customers with regard to cruise holidays. They appreciate special
promotional offers and discounts. They represent 16% of total cruise holidays and
20% are first-timers.
e) "Explorers". They are well informed and have a vast holidaying experience. They are
very interested in the destinations and regions through which the cruise will pass.
They represent 11% of total cruise holidays and 20% are first-timers.
38
f) "Boat enthusiasts". This is the oldest segment. They have already taken several
cruises and enjoy the on-board stay, finding it pleasant and very comfortable. They
represent 6% of total cruise holidays and 13% are first-timers.
2.j. Companion types on cruise holidays within the last five years (in the US and Canada)
Source: CLIA 2000.
Closer analysis reveals that the cruise passenger tends to travel in company, normally
with their husband/wife, (graph 2.j) and that the amount of families with small children
is still very low, in spite of agents' best efforts to attract this group.
2.k. Type of holiday taken by US and canadian cruise passengers in the last five years
Source: CLIA 2000.
39
The great potential of the segment can be seen in graph 2.k, in spite of the degree of
development already reached in the US. Stays in holiday complexes or resorts, which
are its nearest competitor, reach 34%, while cruise holidays are at 15% (although they
are on the rise, from 11% in 1990).
Table 2.VIII Demographic profile of cruise passengers in the Caribbean
%
Country of residence
United States
Canada
Age
8.5
United Kingdom
5.5
Others
3.7
25 years or under
17.6
26 to 35 years
13.1
36 to 45 years
18.7
46 to 55 years
21.2
56 to 65 years
16.7
66 years or over
12.8
Annual income
Less than 25
(thousands of US$)
25-40
16.0
40-60
17.3
60-75
13.9
Education
Marital status
Employment status
22.6
Over 100
23.4
GCSEs
15.6
A-Levels
23.7
University Degree
37.9
Postgraduate
20.6
2.3
Single
17.2
Married
76.3
Widow(er)
3.2
Divorced
3.3
Employed
Unemployed
Retired
Source: FCCA. 2000.
6.7
75-100
Technical College
40
82.3
70.8
3.5
25.7
On-land Activities. Graph 2.l details the on-land activities that take place during the
cruise. These activities include panoramic visits, shopping, visits to tourist sites, sightseeing, trips to museums, monuments, and churches and going to the beach. A significant point is that almost 50% of first-time cruise passengers and over 60% of repeat
passengers go to restaurants at the destination, in spite of the fact that the package
always includes meals on-board and that gastronomy is one of the reasons why the
cruise is chosen in the first place.
2.l. Participation in on-land activities of US and canadian cruise passengers
Source: CLIA 2000.
Other factors when choosing a cruise are as follows:
a) the price-quality ratio,
b) the itinerary,
c) the good service of the crew.
Average age. At the beginning of the seventies, it was 65 years old. At present the average age is between 43 and 45. This radical change has arisen thanks to the offer of
shorter duration cruises (3 or 4 days) that are more suitable for the younger segment
of the population, with regard to both available leisure time and disposable income. The
great advantage of attracting a younger customer base as opposed to senior citizens
lies in the fact that their consumer window is prolonged, and they also tend to be very
satisfied with the holiday, ensuring a greater possibility of repeated trips over a period
of time in comparison to the older segment of the market.
41
Table 2.IX. Demographic profile of cruise passengers in the US and Canada
Sex (%)
Age (%)
1992
2000
Men
45
51
Women
55
49
25-39 years
44
43
40-59 years
35
44
60 years or over
21
13
44.3
43.0
Yes
43
51
Holiday with children
65
52
1-2
47
48
3-4
41
38
5 or more
12
13
Average
2.9
2.9
Average age (years)
Children in the Family Unit (%)
Number of Family Members
Annual income
20-39
45
30
(thousands of US$)
40-59
34
31
Education (%)
Marital Status (%)
Employment Status (%)
Over 60
21
39
Average
47.7
60.4
GCSEs
25
24
A-Levels
75
76
Single
30
31
Married
70
69
Employed
74
76
Unemployed/retired
26
24
Source: CLIA. August 2000.
Level of first-timers. In the mature destinations holiday market a high level of repetition
must be maintained. In the sub-sector of the cruise holiday, however, the booms in
occupancy levels mean that new customers must be attracted. An important variable
to be taken into account is the share of first-time cruise passengers, or first-timers, to
this type of holiday. The four main cruise lines, known as the Big Four, are the ones that
are creating the demand. Consequently, the level of first-timers for Carnival is 58%, and
for RCI 50%, and this is in spite of the considerable increase in fleet capacities for both
cruise lines. The average level for CLIA is 48% and, given the enormous influence of the
"Big Four", it can be said that the average CLIA share without them is 30%. It is worth
making a special mention of Disney, who have set a first-timer quota target of 70%.
42
This is why business initiatives are geared towards capturing new customers. It is also
the reason why Carnival have created the "Carnival’s Vacation Guarantee" programme,
allowing customers who are not satisfied with the cruise the opportunity to disembark
at the first port of call and have their money refunded for the remaining days of the cruise. Operating from non-traditional ports in order to stimulate local demand is another
initiative. On this subject, it is worth noting the experience of NCL, who, in 1997, in an
attempt to offer a better service than other companies, included Houston amongst its
operating ports and thereby increased its first-time customers to 65% of its total.
2.2.2. Europe
The same trends are repeated in all the major source markets: the lowering of the average age of the cruise passenger (although this is still way behind the US market) and
the high level of first-timers, are both characteristics of a market in its initial growth
phase. Nevertheless, not all European countries are growing at the same rate, which
is why it is necessary to briefly analyze the three main markets.
The market in France is beginning to grow considerably, with a trend towards a wider
and younger client base. According to Croisimer data, the potential demand is 5 million
holidays, and the typical profile of the average French 7-10 day cruise passenger is "a
couple with no children, between 40 and 60 years old", representing 40% of the customer base. In spite of this, the family with children segment is beginning to grow substantially, thanks to price-related promotional offers. The over-sixties represent 60% of
the total demand and they corner the long (over three weeks), and especially luxury,
cruise trip market.
Table 2.X. Demographic profile of British cruise passengers
Sex
Men
Women
%
46.3
53.7
Age
12 years or under
13 to 17 years
18 to 25 years
26 to 34 years
35 to 44 years
45 to 54 years
55 to 64 years
65 to 74 years
75 years or over
Average age (years)
2.1
1.6
2.1
5.5
11.4
22.6
24.9
20.9
8.9
53.9
Groups
1 person
2 people
3-4 people
5-6 people
7 or more people
7
77
12
3
1
Source: PSA. 2000.
43
In table 2.XI segments are studied by cruise passenger age in Germany and the UK. The
average age of the UK market is lower because of the younger section of the population that is attracted to short Mediterranean cruises. The level of first-timers in the UK
has recently decreased from 62% (1994) to 37% (2000) because of the boom in the
demand of cruise holidays during the cited period. It is therefore possible to say to a
certain extent that the market "is taking a breather". Nevertheless, the level of firsttimers is higher in the fly & cruise holidays, which is the largest growing category. The
average age has notably decreased in Germany over the last two years, which indicates a major development within this market.
Table 2.XI.
Age Groups
(years)
GERMANY
1996
2000*
(%)
(%)
20 – 40
15
10
40 – 60
46
52
> 60
Average age
39
56
38
50,9
Age Groups
(years)
< 25
25 – 34
35 – 44
45 – 54
55- 64
> 65
Average age
UNITED KINGDOM
1992
2000
(%)
(%)
4
4
5
5
9
11
18
23
25
25
40
30
59,1
53,9
(*) Breakdown of ages from 1997.
Sources: Own study with data from Alf Pollak and PSA.
2.2.3 Asia-Pacific
This is very different from the European market, especially with regard to demographic
profile and demand. Behaviour and tastes are also very different. Cruise lines tend to
use add-ons for Asian customers, who pay extra for on-board activities, as opposed to
the all-inclusive package preferred by Western customers. It must not however, be forgotten, that the younger section of the population imitate the American lifestyle, which
is a sure guarantee for the success of cruise holidays.
Table 2.XII. Asian demand in 1998
Ages
< 25 years
25 to 39 years
> 40 years
Distribution
20%
40%
40%
Source: PATA.
Japanese cruise passengers of 70 to 80 years of age are very important, and they are
fully at ease with their own language and customs. Star Cruises, on the other hand, is
attracting young people between the ages of 20 and 30, and it is only a matter of time
before they reach the baby boomers.
44
2.3. Specific examples of niche markets
2.3.1. Cruises for American families
One of the ways to win over the youngest end of the market is to attract families, in
the hope that the children will remember the cruise holiday as a wonderful experience.
In the US, this segment includes the very important baby-boomer generation that represents over 40% of homes, of which 60% have children. Given that the majority of families look for moderately priced holidays, it also ensures that they tend to purchase allinclusive package holidays. As they are considered one of the main target groups, the
cruise line sector is very well placed to satisfy family wishes by offering moderately priced packages along with interesting complementary activities.
Carnival is considered to be the cruise line that carries the most children within the
business and the number one family cruise line. It is estimated that in 1999 over
250,000 children took part in its programmes. It began its children's programme some
25 years ago and currently offers Camp Carnival programmes that have been classified
for different age groups, from toddlers up to 15 year olds.
The other two main groups, RCI and P&O Princess, focus their attentions on children,
and offer packages for 5 to 17 year olds which include a great variety of on-board activities. Star Cruises, which is the fourth in the group, also pays special attention to families with children, given the large base of the population pyramids in the majority of
Asian countries. The majority of companies have recognized the importance of families
and have separate children's swimming pools, play areas, children's programmes, discos and meeting places for teenagers, video rooms, etc. It must not be forgotten that
cruise ships are a completely safe environment for families with teenagers as they are
an enclosed environment. Other companies have included the "Single Parent Plan" for
single-parent families.
The efforts to attract families have to be interpreted within the context of a general
desire to attract young groups onto cruises. It is an attractive proposition to lure the
younger sections of the population, as it is believed that over time they will be highincome earners. Hence they offer discounts for air travel, such as 50% discounts for
the under 12s and free flights for children under 2 years of age.
The majority of companies include these special offers for families with children during
the peak season, due to the school holidays. As a result of the seasonality of purchases, cruise lines are not excessively dependent on this type of consumer. In spite of the
fact that, since entering the market in 1998 Disney has geared itself towards the family
market (each of its ships can accommodate 1,750 adults and up to 1,000 children),
targets set for cruise passengers travelling without children are 44%.
45
The Berlitz guide (55) states that the following cruise lines are geared towards this
segment: Aida Cruises, Carnival Cruise Line, Celebrity Cruises, Cunard, Disney,
Norwegian Cruise Line, P&O Cruises, RCI, Star Cruises and Thomson Cruises.
2.3.2. The European Union's senior citizen market
This is the largest growing niche, which is why other economic sectors pay special
attention to it, especially in the short-term consumer goods sector. Senior citizens have
considerable purchasing power, although questions must asked about how long this
situation is likely to last, with an ever-shrinking base within the population pyramid and
an increasingly ageing population.
In the report cited in the bibliography (49) it is calculated that this segment undertook 95 million international trips in 1996, while this figure was 60 million in the EU,
exceeding the 1993 demand by 22%. Table 2.XIII measures the senior citizen population divided into their respective European Union (EU) countries. In table 2.XIV international trips are measured according to senior citizen age groups. The table clearly
reflects the ever-growing importance of this section of the population when it comes to
purchasing holidays.
Table 2.XIII. Population over 55 within the European Union
Data measured in thousands for 1996
Country
Total
Population
Germany
84,068
Austria
8,054
Belgium
10,204
Denmark
5,269
Spain
39,224
France
58,470
Finland
5,109
Greece
10,583
Netherlands
15,653
Ireland
3,556
Italy
57,534
Portugal
9,868
United Kingdom
58,610
Sweden
8,946
TOTAL
375,148
55-59
60-64
65-69
6,072
507
519
294
1,840
2,716
282
595
800
153
3,548
519
2,984
488
21,313
4,866
353
532
247
2,118
2,817
240
660
699
135
3,248
522
2,763
407
19,603
4,066
366
527
221
2,004
2,768
235
603
640
121
3,074
492
2,611
393
18,117
70-74
75-79
3,381 2,384
343
239
460
310
203
168
1,691 1,204
2,435 1,691
199
140
438
295
552
421
109
85
2,693 1,751
418
294
2,353 1,887
381
341
15,652 11,206
80-84
1,573
151
195
116
779
2,251
92
224
279
55
1,223
174
1,266
233
8,607
>85
>55
1,504 23,846
142 2,101
182 2,725
100 1,349
621 10,257
14,678
66 1,254
173 2,988
212 3,603
37
695
1,022 16,559
116 2,535
1,108 14,972
193 2,436
2,927 99,998
Source: Travel & Tourism Analyst.
The natural customer base for cruises has always been the older sections of the population, which is why many operators attempt to broaden the market by focusing on
young families with children, as has previously been seen. Companies, however, have
noticed that they must make the most of senior citizen purchasing power, as they have
46
a great affinity with their product. On the one hand they offer a holiday that combines
the comfort of a good hotel with a vast range of activities, and on the other hand onboard entertainment, as well as the culture on offer at the ports of call throughout the
cruise. In fact, the British tour operator Saga has gone one step further, by not allowing anybody under 50 years of age on board its ships. Like Saga, Swan Hellenic also
advertizes itself as a child-free cruise line.
Table 2.XIV. International trips of the over 55s in the EU in 1996
Segment
55-59
60-64
65-69
70-74
>75
Total
Population
(thousands)
21,340
19,628
18,141
13,318
23,434
95,861
Holiday Trips
(millions)
17.0
13.7
10.9
6.7
11.7
60.0
Per capita
holiday trips
0.8
0.7
0.6
0.5
0.5
0.6
Table 2.XV shows the modes of transport used by this segment of the European population, with the highlight being that cruise/ferry, with 10%, is used more often than the
train (7%). Cruises with no flights involved, as offered by the cruise lines Fred&Olsen
and P&O, are more geared towards senior citizens.
Transport used by senior citizens in the EU in 1996
Mode of transport
Aeroplane:
- scheduled flight
- charter flight
Car
Coach
Train
Cruise/Ferry
Others
TOTAL
Market Share (%)
31
17
14
27
24
7
10
1
100
2.3.3. The Conferences and Incentives Segment
The major and continual increase of cruise offers means that is necessary to search for
new customers, which is why the cruise is a suitable product for this segment. The reasons are as follows:
47
a) being a novelty,
b) its all-inclusive nature,
c) reservations can be made up to 18 months before departure, and entire ships can
be chartered,
d) it has the added advantage of housing all delegates within a closed space, which
greatly facilitates the arrangement of functions.
In spite of the fact that cruises tend to convey an image of pure luxury, they can be
more competitive in the benefits/costs ratio than other more traditional on-land holidays. Given the increase in ship sizes and consequent increase in accommodation capacity, one of the disadvantages is that the set of incentives may be diminished among
the vast quantity of passengers on board. This disadvantage can be resolved by organizing specific cocktail parties and receptions for the group as well as placing special
distinctive notices on the cabin door of each of the group members.
The majority of long-journey ships are well equipped for this. A noteworthy example is
reflected in the facilities that have been installed by Sony in the new "Celebrity" ship
belonging to the cruise line of the same name. It has a hall that can accommodate 242
people and can be used as a cinema or as a conference hall. It is also equipped with
the most up-to-date audio-visual systems: simultaneous translation booths for different
languages, the capacity for multimedia presentations, computer-generated graphics,
video conferences via ship-to-earth satellite, conference calls, etc.
With regard to capacities, most large ships have large 700 to 800 capacity assembly
rooms. RCI's "Voyageur of the Seas" has the largest hall that has been built to date,
with a 1,350 capacity, slightly surpassing the "Paradise" (1,300 seats) and easily surpassing the "Vision" which caters for 1,171 people.
Cunard estimates that 15% of its business is from Incentives and Conferences. Other
more conservative companies speak of 5% in Europe and a somewhat higher percentage in the US. Groups tend to be made up of 50 passengers for itineraries of 4/7 nights,
or else an entire ship is chartered for 3 nights. RCI forecasts that it will establish a 19%
market share in the US within the next 3 years, 7% in the UK and 5% in continental
Europe. Cruises organized by large companies are widely approved of in Japan with a
formula that is known as the study-tour. The cruises are shorter in duration and are geared towards training and allowing staff to get to know each other.
2.3.4. Theme cruises
As the market grows it becomes more specialized, with a need to offer frequent passengers new products, which can be achieved by introducing new itineraries-destina48
tions or by adding specialized products. An example of this specialization is Carnival's
very own "Paradise" ship, which is exclusively dedicated to non-smokers. Nearly all the
cruise lines offer theme cruises in ever greater measures. HAL, for example, offers a
cruise in the Caribbean with the screening of films from the forties, while other cruises
are dedicated to the Bavarian Oktoberfest or even to wine tasting. Disney cruises are
fully integrated in the theme cruise.
They are also very common in Northern Europe, and include: the "Viking Theme" that
calls at the ports of Aalborg and Aarhus in Denmark, and the ports of Visby and
Stockholm in Sweden; the "Amber" itinerary or the "Golden Baltic Sea" itinerary that
calls in at the ports of Bornholm (Denmark), Gdynia (Poland) and Kaliningrad (Russia);
the Hanseatic cruise that calls at the ports of the famous Hanseatic trading league:
Lübeck, Hamburg and Rostock.
2.3.5. Adventure cruises
They can be divided into three sub-divisions:
a) Expedition/exploration. This entails using "zodiacs" to reach areas which are difficult to access. The most popular itineraries are the poles. The demand is modest
but not insignificant: for example, Antarctica attracts 63,000 Americans and
Canadians every year. The companies that normally operate this niche market do
not belong to the big groups, with the exception of Orient Lines (Star Cruises/NCL)
and Hapag-Lloyd (with its ships the "Bremen" and the "Hanseatic"). The following
specialized cruise lines stand out: The World Cruise Company and
Abercrombie&Kent with their ship the "Explorer". Clipper, Marine Expeditions and
Quark Expeditions are notable because they offer itineraries through the Arctic,
Greenland and Antarctica, and use Russian icebreakers. Altogether it is estimated
that the offer comprises 63 ships and 5,500 berths.
b) Partial or complete sailing ships that offer all manner of comforts, such as the
Windstar, along with cruises that encourage passenger participation with the
crew, such as the Windjammer. The world offer comprises 19 boats, with a total
of 2,300 berths.
c) Other specialized ships. Itineraries on these ships have a strong educational element, similar to the German cultural visits or "Studienreisen", with a slight adventure element included (soft adventure). Swan Hellenic and Orient Lines are the
cruise lines that specialize in this niche market.
2.4. Analysis of the supply and demand relationship
The demand and the supply are studied respectively in section 2.1 and in chapter 3 of
this report. The study into the relationship between both variables provides a series of
49
economic keys on the performance of this market, which are essential for a greater
understanding of the subject. Perhaps the most important element is that the tourist
cruise is a product that has not yet entered its maturity phase, not even in the more
prosperous US source market, which will be discussed a little later.
It is well known that all economic theories attempt to establish the ideal conditions
required for each market in order to prove the equation:
Supply = Demand
(2)
The above equation is a demonstration of a dynamic equilibrium. The production capacity is ever changing, and has no constant variable as far as the supply of cruise berths
is concerned. The variable is instead discreet, with the capacity for accommodation in
each cruise representing a step or leap in the supply. First of all, the relationship between supply and demand must be fully considered, as the general balance that corresponds to several similar goods that satisfy an identical need must also be taken into
account. In this case there is a multitude of causal connections that are difficult to define and incorporate into one single pattern. Nevertheless it is possible to highlight the
following:
-
An increase in demand for cruises can be compensated for by the fall in demand of
other substitute holidays, above all resort holidays. On this point, according to
data from the CLIA 2000 report, the demand for resort holidays amongst cruise
passengers themselves is far greater (35%) than for cruise holidays (14%) in the
1993-2000 period (see graph 2.k).
-
The supply of all goods tends to increase when new advances in technology take
place that are of sufficient and significant force. The construction of the VLCVs is
a case in point, having allowed economies of scale to be applied to the lower-middle segment of the market. A dense network of flight connections has also improved accessibility to a greater number of towns and cities. This fact has assisted
the expansion of fly + cruise packages and shorter duration cruise holidays, both
of which are in great demand.
-
The increase in the disposable income of families, coupled with cruise prices, have
a considerable influence on the supply-demand dynamic and on the corresponding
elasticity rates. The effect of supply on the latter can be clearly seen in graph 2.n.
A strict initial analysis between supply and demand reveals average occupancy levels,
which are detailed in table 2.XVI for the period 1989-2000. It can be seen that very
high occupancy levels of between 90% and 100% are achieved, figures which are very
similar to charter flight levels and higher than holiday hotel levels. The fact that in some
cases the figures exceed 100% can be explained by the fact that extra berths in the
cabins are not taken into account, while the ship's real occupancy levels are taken into
account by the actual demand. The turnover values of passengers by berth also indicate an intensive use of the ship facilities.
50
Table 2. XVI.
Sample
Passenger per day (millions)
Berth supply (thousands)
Berth per day supply
(millions)
Passengers per berth
Occupancy
1989
1991
1993
27.74
32.96
36.47
81.00 100.65 114.11
28.34
31.98
36.25
49.60
48.90
49.17
97.88 103.09 100.59
1995
1997
1999
2000
38.72
47.23
58.64
66.96
132.53 160.10 194.28 212.62
42.10
43.05
92.01
50.86
42.54
92.85
60.86
66.60
n.d.
n.d.
96.35 100.53
It is well known that a product is not considered mature when increases in supply are
followed by parallel increases in demand, without there being a fall in prices. Trippe's
conversion factors, defined in section 2.1 and set out in table 2.V, support the fact that
development within European markets, especially on the continent (0.004), and in the
Japanese market (0.002) are substantially less than in the US (0.023).
Focusing attentions on the US market, on which a great deal of detailed research has
been done, it has been established that the potential yet unattended demand is very
high. Estimates from CLIA's report from the year 2000 place the figure for this at 43.6
million people over the next 5 years, when the real volume of trips/year is 6.9 million
(see graph 2.c), resulting in a degree of development of gUSA ; 2000 = 0.158. This
means that only 15.8% of potential demand is being served. The other indicator defined in section 2.1 is the level of first-timers, set around the 50% mark (see section
2.2.1), in a market in which the supply is growing at an annual cumulative rate of 12%.
GP Wild (International) Limited's figures (see bibliography 56) and table 2.XVII and
following tables, set out the full data for past world supply and demand along with forecasts for the future. A study of the data reveals the following:
a) From the period 1992-2000, the increase in the net supply (∆supply = +93%, or
+8.55% cumulatively per year) has been less than the demand (∆demand = +97%,
or +8.87% cumulatively per year), which is why the average occupancy levels have
improved slightly from 98.18% to 100.53%. The large cruise lines are the major
protagonists offering additional capacity and have maintained their occupancy
levels stable, although RCI figures are slightly better than those of Star Cruises
and P&O Princess (see table 2.XVIII), with Carnival figures the worst of all. This
situation is different from that of two years ago, which indicates that the excess
tonnage of the smaller cruise lines has either been removed (bankruptcies of
Premier and Commodore Cruises), or has been absorbed by more efficient management of assets.
b) Graph 2.m shows that over the same period major variations in supply are followed
by parallel movements in demand. This is a clear indication of the success of the
marketing efforts that have been made by the sub-sector.
51
2.m. Variation in world supply and demand of cruises 1992-2007 (by percentage)
c) For the period 2001-2007 a slightly lower increase is forecast in supply (+38.2%)
than in demand (+39.6%), which will inevitably ensure that the current business
structure is maintained.
d) The increase in nominal terms of 19,6% for the 1992-2000 period for average revenue per cruise passenger and an almost identical level in real terms (-5%), clearly
indicate that the tourist cruise has not yet reached its maturity phase.
e) Nevertheless, the forecast for 2001-2007 suggests that the revenue per cruise
passenger will remain constant with the dollar figure set in 2001.
Table 2.XVII. Evolution of supply and demand 1992-2000
1992 1993 1994 1995 1996 1997 1998 1999 2000
Demand (mill. nights)
33.92 35.82 36.77 38.47 42.22 47.07 53.75 58.64 66.96
Total supply (thousands of berths) 108.76 114.11 122.20 132.53 147.54 160.10 177.04 194.28 212.62
Net supply (thousands of berths)1 98.72 103.58 110.92 120.30 133.92 145.32 166.42 173.88 190.29
Supply (thousands of berths x days) 34.55 36.25 38.82 42.10 46.87 50.86 58.25 60.86 66.60
Occupancy (%)
98.18 98.79 94.71 91.37 90.06 92.54 92.28 96.35 100.53
1 Considering that the inactive tonnage up to 1997 is 9.23%, 6% in 1998 and 10.5% in 1999.
52
Table 2.XVIII. Occupancy levels of the main cruise lines
1996
107.6
101.3
n.d.
n.d.
Carnival
RCI
P&O Princess
Star Cruises
1997
108.3
104.2
98.8
n.d.
1998
106.3
105.2
99.0
88,1
1999
104.3
104.7
100.0
100.9
2000
105.4
104.4
99.3
90.6
Table 2.XIX. Supply and demand forecast 2001-2007
Demand (berths)
Net supply (berths)
Occupancy (%)
2001
184,329
198,110
93.04
2002
195,339
223,025
87.59
2003
207,851
246,725
84.24
2004
220,646
264,458
83.43
2005
234,006
258,957
90.37
2006
246,399
271,549
90.74
2007
257,320
273,688
94.02
Table 2.XX. Estimated revenue per cruise passenger 1992-2000
Total cruise passengers (mill.)
Average revenue / cruise
passenger (US$)1
Total Revenue (mill.US$)
1992
5.14
1993
5.51
1994
5.57
1995
5.74
1996
6.30
1997
7.03
1998
7.79
1999
8.62
2000
9.70
1,121
5,760
1,197
6,660
1,199
6,720
1,167
6,750
1,135
7,160
1,160 1,368 1,478 1,341
8,180 10,690 12,920 13,010
1
Revenue generated by the shipping companies but which is not related to the cruise line business
has not been included.
Table 2.XXI. Revenue per cruise passenger forecast 2001-2007
Total cruise passengers (mill.)
Average revenue / cruise passenger (US$)1
Total Revenue (mill.US$)
2001
9.35
1,340.7
12,540
2002
9.91
1,340.7
13,290
2003
10.54
1,340.7
14,130
2004
11.19
1,340.7
15,000
2005
11.87
1,340.7
15,910
2006
12.50
1,340.7
16,760
2007
13.05
1,340.7
17,500
1
Prices calculated with data from the year 2000.
Two years ago it was possible to say that the cruise market had excess supply, whereas currently it seems that a balance has been reached between supply and demand,
without having generated a price reduction. This fact is reflected in the maintenance
of revenue generated per cruise passenger (see graph 2.n), due to the tourist cruise
going through its phase of expansion, and, given the existing potential and unattended
demand, it is possible that it may remain like this for the medium term (2007).
53
2.n. Evolution of supply and world revenue per cruise passenger 1992-2000
Source: Own, with data by GP Wild (Internacional) Ltd
In spite of the balance that currently exists, a situation may arise that disturbs the
balance between supply and demand, such as the situation in the world economy in
2001 that was temporarily aggravated by the events of September 11th. This may
cause problematic situations for short periods of time. There are three reasons why the
room for manoeuvre of the big companies is greater:
a) They have experienced a boom outside their traditional source market of the US.
The main focus for this lies in the UK and Scandinavian markets, and allows the
big companies to spread the risks.
b) Their growth, which has been based on multiple mergers between companies. leaves only the smaller companies at a disadvantage. Given their larger size they have
a better financial position, which may be because they find funding at better rates,
or thanks to their own large volume of resources generated (cash flow).
c) Should they be faced with a drop in demand, the size of their fleets enables them
to realistically postpone the commissioning of new orders by one to two years. It
must not be forgotten that they control 85% of the order book for 2001-2006.
54
3 A STUDY OF THE SUPPLY: BUSINESS STRUCTURE
3.1. Main Cruise Line Associations
Existing associations do not, under any circumstances, set common pricing and transportation policies, which is why these associations are not Conferences. Nevertheless,
they all have very similar objectives:
a) to promote cruise holidays collectively, through advertising programmes, market
research, publications, etc.
b) to train the selling agent: travel agents, with corresponding training certificates.
c) sometimes they join forces to lobby governments and international organizations.
ICCL and FCCA are a case in point.
3.1.1. United States of America and Canada: CLIA, ICCL and FCCA
3.1.1.1. Cruise Lines International Association (CLIA)
It was founded on 7th July 1975. Cruise Lines International Association (CLIA) is an
organization devoted to marketing and training, whose main objective is "to provide a
forum where companies engaged in the marketing of passenger cruises in the United
States and Canada can meet and discuss matters of common interest and develop and
agree on policies aimed at promoting the concept of cruise holidays."
The 23 largest cruise line companies -representing 95.1% of the total market share and
81.2% of the ships- are members of the CLIA, as well as 19,000 travel agencies (66%
of the total within the United States). See table 3.I CLIA's headquarters are in New
York.
The directors of all the member companies make up the Managing Committee, which
is headed by an elected Chairman who serves a two-year term and is assisted by a Vice
Chairman. A seven-member Executive Committee (including the Association President)
provides the link between CLIA staff and Managing Committee meetings. A Marketing
Committee also works closely with CLIA staff in developing CLIA's programmes.
Its main activity is focused on the following: travel agent training seminars and corresponding certification (ACC = Accredited Cruise Counsellor and MCC = Master Cruise
Counsellor), public relations campaigns, a major advertising campaign, as well as the
publication of several different periodicals, the most notable of which are: "The Cruise
Industry. An Overview." and the "CLIA Cruise manual", geared towards travel agents.
55
Table 3. I. Distribution of shipping fleets in the US and Canadian markets
CLIA Member
Capacity
Companies
(berths)
American Hawaii Cruises
867
1
26,885
14
Celebrity Cruises
8,218
Commodore Cruise Line
1,177
Carnival Cruise Line
CLIA Non-Member
Capacity
Companies
(berths)
244
3
American West Steamboat
163
1
5
Classical Cruises
140
1
2
Clipper Cruise Line
240
2
7,047
6
Club Med
Crystal Cruises
1,884
2
Delta Queen Steam Boat
Cunard Line
3,131
5
Europamerica River
Disney Cruise Line
3,508
2
Renaissance
3,622
4
Star Clipper
11,742
9
Holland America Line
Mediterranean Shipping C.
3,449
4
Norwegian Coastal Voyages
4,263
11
Norwegian Cruise Line
Orient Lines
Premier Cruises
12,306
8
845
1
5,022
5
Princess Cruises
14,670
9
Radisson 7 Seas
1,524
5
873
1
Royal Caribbean International 24,714
12
Regal Cruises
Royal Olimpic Cruises
3,277
612
3
Silversea Cruises
592
2
TOTAL
386
1
1,024
3
792
5
3,692
9
572
3
7,253
28
6
Seabourn Cruises
Windstar Cruises
NS *
American Canadian
Costa Crociere
First European
NS *
756
4
140,984
121
TOTAL
(*) NS: number of ships.
Source: CLIA August 2000.
3.1.1.2. International Council of Cruise Lines (ICCL)
It acts as a lobby group in Washington, D.C. and represents the main 18 US companies
(Carnival Cruises, Celebrity, Commodore, Costa, Crystal, Cunard, Disney, Dolphin,
Holland American, Majesty, Nor wegian, Princess, Regal, Renaissance, Royal
Caribbean, Royal Olympic, Seabourn and Windstar). In 1997/98 it launched its
Associate Membership Programme, in order to extend its market reach, encompassing
the 500 main travel industry suppliers (airlines, hotels, car hire companies, tour operators). Its newsletter "Even Keel" is published every three months.
It comprises an array of different committees split into: technical, legal, public relations and legislative activities. They deal with issues of security, public health, insurance, medical facilities, environmental awareness, consumer/passenger protection
and promoting changes in the law.
56
One of its most important roles is representing the industry's best interests before key
US and international organizations with the power to establish new international maritime laws that may affect its members. They include the IMO (International Maritime
Organization) that sets the recognized safety standards known as SOLAS (Safety of Life
at Sea) and the basic regulations for training crews, STCW (Standards of Training
Certification and Watchkeeping) and the ISM Code (International Safety Management).
The US Coast Guard is responsible for monitoring compliance with these standards in
the US.
It also has close links with other organizations such as the CDC (Centre for Disease
Control and Prevention), which regulates the health and safety conditions in all ships
that enter US ports, as well as with US Customs Services, US Immigration and
Naturalization Service, Federal Maritime Commission, Department of Agriculture and
the US Congress.
3.1.1.3. Florida-Caribbean Cruise Association (FCCA)
Founded in 1972, its main objective is to promote good working relations between the
US cruise industry and the port authorities and governments of the Caribbean islands.
Since 1992 it has commissioned the Cruise Line Impact Study, which analyzes the economic effect of the sub-sector of cruise ship tourism on the countries of the area. It is
made up of the following member lines: Cape Canaveral Cruise Line, HAL, Carnival,
NCL, Celebrity, Premier Cruises, Costa, Princess, Cunard, Regal Cruises, Disney and
RCI.
3.1.2 Europe: PSA, Croisimer and VFF
3.1.2.1. Passenger Shipping Association (PSA)
A British Association whose members include the 35 cruise lines and 19 ferry
companies that operate in this market. It was established in 1958 under the name of
Ocean Travel Development (OTD), the very year when aeroplanes overtook ships in
volume of transatlantic passenger traffic. Its objectives are to promote sea travel
among the general public, to boost sales within the sector and to fight against all
manner of restrictions, above all tax restrictions. It acts as a lobby group before the
British Government and the European Union, and works closely with ABTA (Association
of British Travel Agents) as well as with other tourist associations. Since 1987 it has
helped in the training of travel agents via its subsidiary PSARA (Passenger Shipping
Association Retail Agents Scheme).
Cruise companies have their own representation in the UK, which is known as GSA
(General Sales Agent). Ferry companies serve routes from or within the UK. It is run by
the Management Council which has representatives from 7 cruise companies and 5
ferry companies. Annual meetings are normally held in July. The PSA is split into two
57
sections: ferries and cruise ships. It publishes an annual report on the state of the
market entitled "Annual Cruise Market Digest".
3.1.2.2. Croisimer
A French Association, established in 1970 in Paris by American Express, CIT, Havas,
Transcar and Wagon Lits, with the initial aim of providing information to its members,
(e.g. travel agents), on sea trade. It currently comprises seven cruise and ferry
companies, making up 95% of the market share.
Its main activities are organizing conferences, promoting the sale of cruises and
publishing the brochure entitled "Bien vendre le maritime". It also helps in the
university training of professionals, having helped establish the Maritime Marketing
Institute in the Sorbonne.
3.1.2.3. Verband der Faehrschiffahrt und Faehrtouristik e.V. (VFF)
VFF was founded 4 years after the disappearance of Seepassage-Komitee Deutschland
(SPKD) in 1991. Its headquarters are in Hamburg, its role is identical to its
predecessor, and it has 31 ordinary members and 12 non-ordinary members. Its
objectives are to promote the image and sales of cruise trips among travel agents and
tour operators, unify booking systems and train travel agents.
3.1.3. Asia
3.1.3.1. International Cruise Council Australasia
The association is made up of 15 companies and is dedicated to promoting the cruise
experience all over the world. The 15 company members are: Captain Cook Cruises,
Carnival Cruises, Celebrity Cruises, Crystal Cruises, Cunard, MSC Cruises, Norwegian
Cruise Line, Orient Lines, P & O Cruises, Radisson Seven Seas Cruises, Royal Caribbean
International, Royal Olympic Cruises, Seabourn, Silversea Cruises, and Star Cruises.
In 2001 it had 670 travel agent members, thanks to the CLIA agent-training
programme. This programme is called the Cruise Counsellor Certification Programme
and awards two different qualifications: the Accredited Cruise Consultant (ACC) and
the Master Cruise Consultant (MCC).
3.1.3.2. Japan Oceangoing Passenger Ship Association
It was founded in May 1990. The cruise ship companies are regular members, while
other suppliers including banks, insurance companies, airlines, travel agents, shipyards
and local governments are classified as associate members. It has a total of 9 regular
members and 40 associate members, of which 11 are local authorities. In November
58
2001 the regular members were as follows: Camellia Line Co., Kampu Ferry, Kyushu
Railway, Japan Cruise Line, Mitsui O.S.K. Lines, Mitsui O.S.K. Passenger Line, NYK
Cruise and Orient Ferry.
Its main objectives are: to improve security on cruise lines, to protect the people on
the ships, to carry out market research and establish marketing guidelines. In order to
do so it has developed the following lines of work: measures to ensure the safe
operation of passenger liners and measures to protect users, in the areas of
transportation and insurance.
3.2. Cruise classification
It is a difficult task to classify cruises by category. Nevertheless the best and most
widely accepted is the Berlitz Guide's classification. See bibliography reference (55).
The aforementioned guide classifies cruises in 10 different categories: from 5 stars
plus to 1 star. It carries out 400 inspections in 20 specific areas with each being
scored out of 100 points, giving a maximum score of 2,000 points. The 5 major areas
taken into account are:
- the ship (weighting 25%),
- the accommodation (15%),
- the cuisine-gastronomy (15%),
- the service (20%),
- the programme, i.e. the itinerary plus on-board activities (25%).
This is also the same classification system that is used by Lloyd’s. The corresponding
categorization is Super Deluxe for Lloyd’s which is equivalent to 5 stars plus for Berlitz,
Deluxe plus (4 stars plus and five stars on the Berlitz scale), Deluxe (4 stars), and
Standard and Economy (the equivalent of 3 stars plus or less). It is quite interesting to
compare these categories with the corresponding tariffs as set out in point 4.2.
According to its "life style" classification, Berlitz classifies cruise lines in three groups:
-
Standard: lower band in price scale.
-
Premium: middle band with better restaurants, services and facilities than the
previous group.
-
Luxury: upper band with the best on-board facilities, excellent service and
restaurants and undoubtedly the best cruise experience of all.
59
The cruise lines under examination here are classified, according to the aforementioned
bibliography reference 55, as follows:
-
Standard: Aida Cruises, Disney Cruises, Festival, Hapag-lloyd, Louis Cruises,
Mediterranean Shipping Cruises, P&O, Pullmantur Cruises, RCI, Spanish Cruise
Line, Star Clippers, Thomson, Airtours, Carnival Cruises, Costa, First Choice,
Norwegian Cruise Line, P&O (Australia), Princess Cruises, Royal Olympic Cruises
and Star Cruises.
-
Premium: Club Mediterranée, Fred Olsen, Holland America, NYK, Orient Lines,
Saga, Swan Hellenic, Windstar, Celebrity, P&O and Radisson Seven Seas.
-
Luxury: Crystal Cruises, Hapag-Lloyd, Radisson Seven Seas, Seabourn, Cunard,
Sea Cloud and Silversea Cruises.
The main cruise lines are listed in table 3.I a.
Table 3.Ia. Main cruise lines that offer passenger sea cruises (January 2002)
Carnival
Corporation
Carnival Cruise
Lines (CCL)
4 Main Groups
Royal Caribbean
P&O Princess
Cruises (RCC)
Royal Caribbean
P&O
International (RCI)
United States of
America and
Canada
Clipper Cruises
Royal Olympic
Cruises (ROC)
Europe
Asia
Louis Cruises
Indian Ocean
Cruises
Holland America Celebrity Cruises
Line (HAL)
Swan Hellenic
Norwegian Cruise Crystal Cruises
Line (NCL)
Festival Cruises
NYK Cruises
Windstar
P&O (Australia)
Orient Lines
Disney Cruises
Saga Cruises
Mitsui OSK
Costa Crociere
Princess Cruises
Radisson Seven
Seas
Airtours Sun
Cruises
Japan Cruise
Line
Cunard
Aida Cruises
ResidenSea
Thomson Cruises
Hyundai
Silversea Cruises
Star Clippers
Fred Olsen
Page and Moy
Hapag Lloyd
Peter Deilmann
Club Mediterranée
Nouvelles Frontières
Mediterranean Shipping
Cruises (MSC)
Valtur
Spanish Cruise Line
Pullmantur Cruises
Vistamar Canarias
Seabourn Cruise
Line
Source: Own study.
60
Star Cruises
Group
Star Cruises
3.3. Main Groups
In the cruise ship tourism subsector there are very rapid moves in horizontal concentration in line with the accelerated process of globalization, as seen in table 3.II.
Europe is the only region in which the four main groups do not control over 50% of the
market share. As can be seen in chart 3.a, they hold 78% of the world supply of berths.
These groups are: Carnival Corporation, Royal Caribbean Cruises (RCC), P&O Princess
and Star Cruises. These multibrand companies are known as The Big Four.
3.a. World market share of the main cruise line groups
Source: Lloyd’s Shipping Economist 2001.
Table 3.II. Market share (%) of offer in destination regions
Group
Caribbean
2000
1999
Alaska
2000
Europe
Far East
1999
2000
1999
2000
1999
Carnival
37,8
38,5
31,2
31,0
23,6
19,1
0,4
4,5
RCC
25,7
24,0
23,7
25,0
4,1
3,8
0,2
0,5
P&O Princess
5,9
5,5
29,0
32,0
9,1
5,8
3,5
3,5
Star Cruises
7,5
7,0
12,9
9,0
4,3
3,1
74,4
66,0
76,9
75,0
96,8
97,0
41,1
31,8
78,5
74,5
Total
Source: Christiania Bank og Kreditkasse ASA.
The process of consolidation is an indicator of the degree of maturity which is being
reached17. To give an example of the ever-changing situation that currently dominates
the industry, one need only look back at the last four years, in which there have been
many major changes:
17 For the companies it is a more economical way of expanding than mere organic growth. Compare the figures that are detailed in every takeover or merger, with the price of each new vessel, which varies between 200 and 500 million dollars.
61
A) RCC purchases Celebrity Cruise for 1.3 billion dollars, in spite of Carnival's takeover bid.
B) Carnival Co. buys 50% of Costa Crociere for 452 billion lira.
C) Carnival Co. takes over Cunard, for the price of 500 million dollars.
D) Star Cruises purchases NCL for 600 million dollars, exceeding Carnival's initial bid.
E) P&O Princess purchases 51% of Aida Cruises in Germany.
F) The start of merger talks between P&O Princess and RCC towards the end of 2001
were cut short by the 5.4 billion dollars offer made by Carnival Co. in February
2002.
In 1998, the all-powerful Walt Disney entered the cruise line market, acting as a
catalyst by improving the image of cruise holidays and increasing the number of customers, especially in the family segment.
62
The Big Four operate on occupancy levels around or above the 100% mark, which is not
mirrored in any other sector within the holiday market. It is this statistic that has driven the shipping companies into a policy of intense growth. In order for the market to
grow there needs to be more ships, which is why the level of new boats being built has
soared. As has already been cited in section 2.4, all passenger capacity levels stated
within this study are based on the occupancy of a double cabin, when it is a known fact
that they are often used by families with children. This explains why Carnival or RCI, for
example, can publish passenger numbers on their ships at over 100%. All the groups
operate in the US holiday market.
Fleet data for the Big Four is set out in table 3.III, and allows the reader to make comparisons between them. The market leadership of the Carnival group is clear for all to
see. RCC stands out as having the market's most modern fleet, and efforts made by
Princess (P&O Princess) are also evident in the doubling of its capacity in the space of
three years. Chart 3.b details capacities for 2002 and how things are expected to look
in 2004. Chart 3.c shows projected sales for 2001.
3.b. Main cruise company groups: capacities
Source: Own study.
Table 3.III. Position of main groups (January 2002)
Group/
Cruise Line
Total Fleet
18
NS
GT
18
GT/
Order book
berths Average NB
Berth
GT
Age
GT/
berths
Berth
CCL
16
1,175,806
35.5
33,126
6.62
5
502,000
38.2 13,146
HAL
10
556,257
41.7
13,346
6.90
5
420,000
45.5
9,240
Windstar
4
30,666
40.6
756
14.00
0
0
0
0
Costa
8
389,300
38.0
10,245
15.62
3
295,700
38.9
7,594
57.3
2,620
Cunard
8
171,081
41.5
4,124
17.50
1
150,000
Carnival
46
2,323,110
37.7
61,597
10.78
14
1,367,700
P&O
6
295,144
39.6
7,448
13.33
1
110,000
42.3
2,600
Aida Cruises
2
57,191
34.3
1,666
10.50
2
82,400
32.4
2,540
42.0 32,600
Princess
10
730,727
39.9
18,306
8.50
5
511,000
43.7 11,700
P&O Princess
18
1,083,062
39.5
27,420
10.33
8
703,400
41.8 16,840
RCI
15
1,248,866
37.8
33,066
6.20
5
529,556
8
592,378
42.0
14,118
4.50
1
91,000
RCC
23
1,841,244
39.0
47,184
5.61
6
620,556
NCL
8
540,743
36.5
14,806
10.25
1
91,000
Celebrity
42.0 12,606
47.9
1,900
42.8 14,506
43.3
2,100
Orient L.
2
56,322
29.6
1,902
24.5
0
0
0
0
Star Cruises
9
308,189
36.2
8,502
11.67
2
224,000
37.3
6,000
35.9
25,210
8.50
3
315,000
38.9
8,100
38.1 161,411
9.88
31
3,006,656
Star Cr. Group
TOTAL
19
905,254
106
6,152,670
41.7 72,046
18 NS: number of ships. GT: Gross Tonnage.
63
3.c. Main cruise company groups: projected sales 2001
Source: Christiana Bank og Kreditkasse ASA.
These four main groups are described below in alphabetical order.
3.3.1. Carnival Corporation
It is the undisputed leader in both the US and the world market, although if the merger
between RCC and P&O Princess goes ahead it will no longer be the biggest company.
Figures are based on a market capitalization in 2001 of 15,583 billion dollars. Micky
Arison owns 22% of the share capital, and holds 38% of the votes, thanks to Arison
Holdings Ltd., and the Arison family also owns an additional 25% of the share capital.
It has 33,000 employees. Its dynamic expansion policy is reflected in the fact that, of
85,512 berths that will be put on the market between 2002-2005, 38% will belong to
Carnival. In 2000 it carried 2,669 million passengers, and generated 3.78 billion dollars
worth of business, with 99% of the revenue coming from cruise activities (84% in the
US) and 1% from tour operating activities.
One of the keys to its rapid growth is its heavy investment in marketing and
advertising, with the latter rising to 181 million dollars in 2000, mainly in the US and
Canadian markets. It has a major building programme and its order book will total
6,195 billion dollars in 2002. It is the parent company of Carnival Cruise Lines (see
point 3.3.1.1), Holland America Line/Windstar Cruises (see point 3.3.1.2), Costa
Crociere (see point 3.3.1.3) and Cunard Line/Seabourn (see point 3.3.1.4). Its global
expansion strategy is based on the following:
a) Northern Europe and Canada: With the purchase of Cunard and its association with
the Canadian company Sunquest. During 1996-2001 it had 26% of the share
capital of the British tour operator Airtours.
64
b) Latin America. It launched the Fiesta Marina brand in 1993, which did not have the
expected success and was consequently wound down the next year. It is currently
using Costa Crociere to concentrate its efforts within this market.
c) Southern Europe: the purchase of Costa Crociere in 1997 (Carnival 50%-Airtours
50%) was successfully completed in July 2000.
d) Asia-Pacific: it signed a joint venture (50-50) with the South Korean company
Hyundai Merchant Marine to begin business from 1998, as Carnival Cruises Asia,
which was subsequently cancelled. The failed joint offer with Star Cruises for NCL
was with a view to operation in this area. All of this is a clear indication of its
interest within this market.
It has acted aggressively in its previous takeover bids within the sector, though not
always successfully, as in the case of NCL, Celebrity Cruises and Aida Cruises, and the
most current case regarding P&O Princess.
Since 1998 it has had a marketing association for its 6 cruise companies called The
World’s Leading Cruise Lines.
In the words of Bob Dickinson (Carnival's CEO) the successful combination of so many dif ferent brands is as follows: "It is based on the theor y of elasticity of price/demand. All the brands can be envisaged
within a triangle with Cunard-Seabourn at the top, as it is a super deluxe product (850-1,000 dollars/day) with relatively small package sales
of 30,000. Carnival is located at the base of the triangle, and of fers a
popular and large selling product with over 1.5 million package sales.
As HAL has a slightly higher daily price (330 dollars) it lies halfway up
the triangle, with lower package sales figures of 350,000. Costa is a
mass-tourism product for the European market, while Windstar is a ver y
specialized luxur y product".
Carnival Group Organization Chart
CARNIVAL CORPORATION
Cruise Operators
Tour Operators
Carnival Cruise Lines
Holland America Line
Holland America Westours
Windstar Cruises
Costa Crociere
Cunard
Seabourn Cruise Line
65
3.3.1.1. Carnival Cruise Lines
The business began in 1972 and is based in Miami. A clear example of its success can
be seen in the occupancy figures over the last few years that stand at over 100%
(104.3% in 1999, 105.5% in 2000 and 107% in 2001), and it transports over one
million passengers per year. The undoubted success of the company lies in the Fun Ship
concept that helps create a relaxed and informal atmosphere, along with a wide variety
of activities and entertainment, to attract people of all ages and social class. The
concept revolves around the ship as a holiday destination in itself, competing with
resorts on land. This is why Carnival can offer all-inclusive package holidays in the
broadest sense of the word.
It had a fleet of 16 Fun Ships at the beginning of 2002, (see data in the attached table)
with a capacity of 33,126 berths. The relationship between GT/berth varies between
40 and 31. It is one of the youngest fleets (the average age of its ships is 6.6 years)
and one of the market's most uniform (it has only 4 different types of ship, with
capacities of 1,500, 2,000 and 2,600 berths), which both simplifies management and
makes it extremely competitive. The Fantasy-class ship (70,367 GT, 2,040 berths) is
the most numerous cruiser ever built. Carnival is the company owner, ship owner and
cruise line all rolled into one and only registers its vessels under flags of convenience
(Liberia and Panama). The crew are international and the officers are exclusively
Italian. It is the first company to enter the VLCV segment for ships weighing over
100,000 GT: its Destiny-class ship (101,353 GT, 2,642 berths) sails throughout the
year in the Caribbean. It is also the first and only company that has a ship solely
reserved for non-smokers: the "Paradise".
In 2001 it launched the new Carnival Spirit class (85,900 GT, 2,124 berths), which
represented a true landmark by taking industrial car manufacturing techniques, with a
shared platform for different models, and applying them to cruise liners. Carnival Spirit,
the Costa Atlantica and HAL's Zuiderdam class all have the same basic hull, the same
machine room layout and the same engineering areas. They are Panamax19 class, with
80% of the cabins looking out onto the exterior and 70% having balconies20. The waste
treatment systems ensures that waste products are not tipped into the sea. As a result
it has received the environmental "Green Star" RINA rating.
19 Panamax: name given to those vessels that can pass through the Panama Canal, with a beam length of no greater than 32.25 m being the principal restriction.
20 It is diesel-electric powered, as it was built to sail in the waters of Alaska, which is why it has a no smoke option.
When sailing in other parts of the world it is propelled by other methods. It also has the revolutionary propulsion
system called Azipod, that gives greater manoeuvrability and a shorter emergency stopping time, thereby improving the ship's safety.
66
Table 3.IV. Carnival Fleet (January 2002)
Ship
Holiday
Jubilee
Celebration
Fantasy
Ecstasy
Sensation
Fascination
Imagination
Carnival Destiny
Inspiration
Elation
Paradise
Carnival Triumph
Carnival Victory
Carnival Spirit
Carnival Pride
Current Fleet Total
Carnival Conquest
Carnival Legend
Carnival Glory
Carnival Miracle
Carnival Valor
Order Book
Future Fleet
GT
Berths
46,052
47,262
47,262
70,367
70,367
70,367
70,367
70,367
101,353
70,367
70,367
70,390
101,509
101,509
85,900
82,000
1,175,806
110,000
86,000
110,000
86,000
110,000
502,000
1,677,806
1,452
1,486
1,486
2,040
2,040
2,040
2,040
2,040
2,642
2,040
2,040
2,040
2,758
2,758
2,124
2,100
33,126
2,974
2,100
2,974
2,124
2,974
13,146
46,272
Year of
Construction
1985
1986
1987
1990
1991
1993
1994
1995
1996
1996
1998
1998
1999
2000
2001
2001
Classification
3+
3+
3+
3+
3+
3+
3+
3+
4
3+
3+
3+
4
4
4
Pend.
2002
2002
2003
2004
2004
Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.
In 1996 it introduced a revolutionary clause called the "Vacation Guarantee", aimed
mainly at first-time cruise passengers, which stated that if a client was not satisfied
with the cruise experience he or she could disembark at the first port of call and have
the full amount of the cruise refunded by the cruise line. In the source markets of the
US and Canada it has very close ties with the travel agencies who distribute the product. In Europe it markets its Caribbean cruises with stays in Orlando or in the surrounding islands through a GSA (General Sales Agent), which is different from those promoting Costa Crociere cruises and may even be competing against them. In the French
market it shares a GSA with Costa. It gives the local GSA free reign to fix prices,
although the basic price is the same in all markets, given that the GDS21 and the
Internet would invalidate any other option. It also has two major commercial offices in
London and Frankfurt am Main.
The international share of the market works out at 13%, which is double that of 7 years
ago. In Europe it focuses mainly on the Spanish, German and Italian markets, while in
the Americas it focuses equally on the US and Canada and Latin America, as the languages spoken on the boats are English, Spanish and Italian.
21 Global Distribution System: computer distribution system for all elements of the tourist package, including:
flights, hotel, care hire, etc.
67
It began by operating 7-day Caribbean cruises up until 1984. In 1996, it was already
offering 3 to 16 day cruises in the Bahamas, the Caribbean, Western Mexico (7 days),
the Panama Canal, Alaska and Hawaii (11-12 days). It currently operates 3-4 day cruises in the Bahamas, 7 day cruises in the Caribbean and it began cruises in Alaska in
1996. In its drive to conquer the West Coast of the US it has set aside the "Elation"
that operates from the port of Los Angeles. It does not operate in the Mediterranean,
which is reserved for HAL and Costa Crociere, although the management does not rule
out Carnival Cruise Line ships sailing in the area.
3.3.1.2. Holland America Line (HAL)/Windstar
Table 3.V. Holland America Fleet (January 2002)
Ship
Maasdam
Noordam
Rotterdam
Ryndam
Statendam
Veendam
Volendam
Westerdam
Zaandam
Amsterdam
Current Fleet Total
Zuiderdam
Oosterdam
[HAL 3]
[HAL 4]
[HAL 5]
Order Book
Future Fleet
GT
55,451
33,930
59,652
55,451
55,451
55,450
63,000
53,872
63,000
61,000
556,257
84,000
84,000
84,000
84,000
84,000
420,000
976,257
Berths
1,266
1,214
1,316
1,266
1,266
1,264
1,440
1,494
1,440
1,380
13,346
1,848
1,848
1,848
1,848
1,848
9,240
22,586
Year of
Construction
1993
1984
1997
1994
1992
1996
1999
1986
2000
2000
Classification
4
3+
4
4
4
4
4
3+
4
4
2002
2003
2004
2004
2005
This cruise line has a great tradition, having been founded in 1873. It was taken over
by the Carnival Corporation in 1989. It forms part of the Holland America Line-Westours
group, and is the largest tour operator in Alaska and the Yukon. As well as owning the
cruise line it also owns Westmark Hotels & Inns (14 hotels), Gray Line of Alaska (150
luxury coaches) and Gray Line of Seattle (the biggest tour operator in the Pacific
Northwest with 150 coaches and 13 train wagons). It is based in the luxury segment
of the market, with Princess being its main competitor. The World Ocean & Cruise Line
Society regularly votes it the Best Cruise Value of the year.
It has been undergoing a major modernization programme since the year 2000, expanding its fleet size and lowering the average age of its vessels to 6.9 years from 11.9 in
1999. Its current capacity is 13,346 berths. It also has a highly uniform fleet, with two
basic types of ship with capacity for between 1,200 and 1,500 passengers, to which
68
five new class ships (Zuiderdam) will be added between 2002 and 2005. The GT/berth
ratio is high, at around 45, with the exception of its two older boats. All of its ships are
registered in the Netherlands, with the exception of the "Veendam" which is registered
in the Bahamas. The crew tends to be Indonesian and Philippine, while the officers are
Dutch.
It holds a dominant market position in the Alaskan market that it shares with Princess.
The cruises combine sailing with excursions to the Yukon, Alaska and even East
Russia. Other destinations apart from those previously mentioned are: South America,
the Panama Canal, the Mediterranean, the Baltic Sea, the Caribbean, Bermuda, Hawaii,
the South Pacific, South East Asia and round the world cruises.
Windstar Cruises, a subsidiary of HAL, is a pioneer in luxury sailing ship cruises. Its
advertising slogan is "180 degrees from ordinary". It has 30,000 customers per year
and caters for young honeymoon couples to retired people over 70 years old. Its fleet
has an average age of 14 years, with a total capacity of 756 berths that works out as
a GT/berth ratio of 41. It has three four-mast sailing ships: the "Wind Star", the "Wind
Song" and the "Wind Spirit". All of them are 5,307 GT and have 74 double cabins; a
more recent addition is the "Wind Surf" (ex "Club Med I") with five masts, 312 berths
and 14,745 GT, which has been operating in the French market since May 1998. It
offers special holidays, as well as an array of different itineraries that vary from 6 to
14 days, and which explore the many exotic ports of the Mediterranean, the Caribbean
and French Polynesia. The most notable new destinations for 2002 are: the Far East,
Australia, New Zealand and South East Asia. Travel Holiday magazine awarded it the
title of Best of the Best for Small Ship Cruises Experiences in 1998.
3.3.1.3. Costa Crociere
It is one of the oldest companies, founded in 1924 in Genoa (Italy) as Costa Crociere,
which merged with the cruise line division of the French group Accor (Croisières
Paquet) in 1993. It held business talks with RCC in 1996 without success, and was
subsequently purchased by Carnival Corp. and Airtours (50%-50%), with the former
acquiring the other 50% in July 2000 for a figure of 510 million dollars. It is the market
leader in Europe with a share of 25%, as well as in Latin America. All of its ships are
based in Europe over the summer. Despite the international character of its client
base, it stands out with its own Italian style, reflected in the interior decoration of the
ships as well as in the on-board activities: the famous "Roman Bacchanalian" party,
Italian classes, Italian cooking classes, Italian wine tasting, etc.
It is renowned for its wide experience of dealing with a multinational clientele and several different languages at the same time. In some cases the crew can speak up to five
languages fluently and know the diverse customs of each of the different countries. The
national breakdown of its clientele in 1998 was as follows: 42% Italian, 22% French,
14% US and Canadian, 7% German, 6% South American, 4% Spanish and 3% British. In
order to avoid any linguistic obstacles the on-board entertainment programme always
69
has universally recognized themes such as magic, singers and dances. Multinational
theme nights are organized and include: Siberian Circus, Arabian Nights, etc. The
utmost care is taken to avoid linguistic obstacles, so that guests tend to be seated in
linguistic blocks in the restaurants, receive the menu in their native language, and have
waiters who speak their language assigned to their tables.
The average age of the ships is quite old (15.6 years) and its berth capacity is 10,245,
having been streamlined after Carnival took control of the business. Nevertheless there
are a great many types of ship, and its GT/berth ratio stands at around 32-41. The first
VLCV geared towards the European market and Mediterranean cruises is due to enter
service in 2003. It is registered in Liberia. After the injection of US capital, the building
of terminals in Cuba had to be suspended because of the Helms-Burton law.
Costa's international fleet offers 7-day cruises in the following areas: the Caribbean,
the Mediterranean, the Baltic Sea and South America. The main source markets are
France, Italy and Spain, where it began to operate in 1993 with resounding success
(see point 3.4.2) and it also has a major slice of the German market.
Table 3.VI. Costa Crociere Fleet (January 2002)
Ship
Costa Riviera
Costa Allegra
Costa Tropicale
Costa Marina
Costa Classica
Costa Romantica
Costa Victoria
Costa Atlantica
Current Fleet Total
[Costa Atlantica2]
[Costa UL1]
[Costa UL2]
Order Book
Future Fleet
GT
Berths
30,361
28,430
36,674
25,558
52,926
53,700
75,951
85,700
389,300
85,700
105,000
105,000
295,700
685,000
958
800
1,022
763
1,306
1,356
1,928
2,112
10,245
2,154
2,720
2,720
7,594
17,839
Year of
Construction
1963
1969
1981
1990
1991
1993
1996
2000
Classification
3
3
3
3
3+
3+
4
4
2003
2003
2004
3.3.1.4. Cunard Line/Seabourn
This is a company with a great tradition, founded in 1840 by Samuel Cunard. It has
grown thanks to a series of mergers and takeovers. It belongs to the Norwegian industrial group called Kvaerner PLC, and was purchased in 1998 by a group of investors
headed by the Carnival Corporation. Operating under the name of Cunard Line Ltd., it
has incorporated the Cunard and Seabourn fleets and is aimed at the deluxe end of the
market. The first is based around the US and Canadian markets while the second fleet
70
is more European in outlook. The last big ship to be built was the Queen Elizabeth 2 in
1969. In the last 20 years it has merged with Norwegian American Cruises (1983) and
Sea Goddess Cruises (1986). The average age of the fleet stands at 15.5 years (in
1999). It invested over 70 million dollars in 1999 in modernizing its three oldest ships.
The Cunard fleet is made up of only two ships. The Queen Elizabeth 2 is the company's
flagship and is the only one that regularly crosses the Atlantic. Cruises can be combined with Concorde, with the outward journey being made by boat and the return by
plane or vice versa, which makes this a unique and highly prized package. It also has
an annual three-month round-the-world cruise, and sails in the Caribbean, Bermuda,
Canada and Europe.
It also has a major project in the pipeline to construct another genuine transatlantic
ship similar to the Queen Elizabeth 2. The order has gone to Chantiers de l’Atlantique
and has been named Queen Mary 2. The ship's main details are as follows: 150,000
GT, cost 780 million, approximate speed 27 knots, capacity for 2,600 passengers and
projected entry into the market set at 2003. It will be the world's largest and most
expensive cruiser. The fact that it will be a true transatlantic vessel makes it very different from what people are used to nowadays, and is an attempt to return to the old
tradition of the Queen Elizabeth 2 and the France.
It is one of the largest cruise lines in the north of Europe, and had a selection of 10,000
berths to choose from in the region in 1997, and a total market share of 9.5%. At present its fleet visits over 300 ports around the world.
Table 3.VII. Cunard Line Ltd. Fleet (Cunard + Seabourn) (January 2002)
Ship
Queen Elizabeth 2
Caronia
Seabourn Goddess I
Seabourn Goddess II
Seabourn Sun
Seabourn Pride
Seabourn Spirit
Seabourn Legend
Current Fleet Total
Queen Mary 2
Order Book
Future Fleet
GT
Berths
70,327
24,492
4,253
4,253
37,845
9,975
9,975
9,961
171,081
150,000
150,000
321,081
1,778
716
118
118
758
212
212
212
4,124
2,620
2,620
6,744
Year of
Construction
1969
1973
1984
1985
1988
1988
1989
1992
Classification
5/3+
4+
5
5
5
5
5
5
2003
Seabourn Cruise Line is 100% owned by the Carnival Corporation. The Norwegian businessmen Atle Brynestad founded the company in 1987. Its fleet and the Seabourn
71
brand are marketed under the Cunard umbrella, after it was purchased by the Carnival
Co. Since the company began it has been aimed at the super luxury end of the market
(5 star), with special emphasis being placed on a personal and exclusive treatment of
the client. The typical client tends to be in a couple and 35 years of age or over.
It travels all around the world as well as sailing through the Americas, Alaska, the
Caribbean, the Mediterranean, the South Pacific, the Amazon, Australia, the Indian
Ocean, the Baltic Sea and South East Asia. The "Seabourn Goddess I" and "Seabourn
Goddess II", originally owned by Cunard, are the ultimate in superyacht cruises, and are
ideal for sailing into ports (for example along the Amazon river) that are inaccessible
to the larger cruisers.
3.3.2. P&O Princess Group
It belongs to the cruise line P&O (Peninsular & Oriental), that was originally British
owned and funded. The group also has other shipping enterprises, mainly involving
ferries (the largest ferry operator in Northwest Europe, with a total of 50 ships serving
19 different routes) and container ships. It began merger talks with the RCC group
towards the end of 2001, but Carnival Co's counter-offer may jeopardize the deal. It
attracted 8.7 million passenger days, 5.9 million from the US and Canada and 2.8
million from Europe and Australia. Its market capitalization in 2001 rose to 3.6 billion
dollars. It only entered the US cruise market in 1974 with the takeover of Princess. At
the beginning of 2002, the cruise division had a total capacity of 28,096 berths and
the average age of its fleet was 11.9 years.
Below is a breakdown of the main P&O group cruise lines and owners, before the breakaway of the P&O Princess cruise division.
Peninsular and Oriental Steam
Navigation Co.
72
Cruise Lines
P&O Princess
Ferries
Container Ships
P&O Cruise
Swan Hellenic
P&O Stena Line (60%)
Assoc. Bulk Carriers (50%)
P&O Cruises
(Australia)
P&O European Ferries
P&O Nedlloyd (50%)
Princess Cruises
P&O North Sea Ferries
Aida Cruises (51%)
P&O Scottish Ferries
Its plans for expansion are very ambitious, reflected in an order book that means the
delivery of 8 ships for the 2002-2004 period, at a total cost of 2.85 billion dollars. This
is a clear indication of the company’s commitment to expansion in both economic and
capacity terms (see table 3.III). Two facts stand out from the company's 1998 annual
report (see bibliography 38):
•
The three main businesses in which the group will concentrate its future efforts
will be exclusively sea trade based: cruises, ferries and port, although, as its
Chairman Lord Sterling points out: "with an ever greater focus on the cruise market". This strategic decision for the group can be understood by looking at table
3.VIII with its breakdown by activities, with cruises being the most profitable of
all. This fact led to the break-up of the group and the floating of the cruise division of the company on the stock market in October 2000, under the name of P&O
Princess.
•
The new UK company tax legislation for cruise line companies based on gross tonnage (tonnage tax), which is awaiting approval, means that the company will be
able to register at least 50 of its large vessels from its fleet in the UK, ensuring
a 50% increase in the number of its UK registered ships. This would allow the
company to double the number of British officers that it trains.
It transports around 700,000 passengers a year (about a third that of its two nearest
rivals). It has a large British customer base, who take 14 day cruises, as opposed to
the 3-4 and 7 day cruises preferred by US and Canadian customers, who make up the
core customers of RCC and Carnival Co. This is why the number of berths per day is
approximately only half of the other two groups. P&O Princess total sales rose in the
year 2000 to 2,605 billion dollars and the average occupancy level on its ships increased to 99.7%. It is made up of four brands: P&O and Swan Hellenic (see section
3.3.2.1), Aida Cruises (see section 3.3.2.2), set up in 1999 and committed to the
German market, and Princess (see section 3.3.2.3).
Table 3.VIII.
Activity
Cruises
Ferries
Container ships(#)
Bulk carriers
Other cargo ships
Real Estate
Ports and logistics
TOTAL
NS
16
50
58
25
25
174
%
9.2
28.7
33.3
14.4
14.4
100.0
Amount of Business (*)
1141.1
472.2
44.9
2727.7
1525.8
5911.7
%
19.3
8.0
0.8
46.1
25.8
100.0
Net Profit (*)
216.1
81.0
8.2
193.6
80.0
578.9
%
37.4
14.0
1.4
0
0
33.4
13.8
100.0
(*) In million pounds sterling. (#) The data on the amount of business and net profit refer to container ships, bulk
carriers and other cargo ships combined.
Source: P&O Annual Report 1998.
73
3.3.2.1. P&O Cruises
It is the leader in the British source market in the cruise sub-segment. It has entered
a phase dedicated to the modernization of its fleet, by introducing the "Arcadia" (Ex"Star Princess"), which replaced the "Canberra" in 1997 and by commissioning the
"Aurora" (76,000 GT and 1,870 berths), which entered service in the year 2000. The
highlight is the 2004 launch of the second VLCV designed for the Mediterranean and
European demand. The normal sailing areas are: the Arabian Gulf, Australia, the
Mediterranean, the Indian Ocean and the Baltic Sea.
Table 3.IX. P&O Fleet (January 2002)
Ship
Victoria
Pacific Sky
Arcadia
Minerva(*)
Oriana
Aurora
Current Fleet Total
[Grand Class 6]
Order Book
Future Fleet
GT
27,670
46,314
63,524
12,331
69,153
76,152
295,144
110,000
110,000
405,144
Berths
728
1,184
1,448
392
1,822
1,874
7,448
2,600
2,600
10,048
Year of
Construction
1966
1984
1989
1992
1995
2000
Classification
3+
3+
3+
4
4
4
2004
(*) It is assigned to Swan Hellenic.
Its business divisions are: P&O Cruises (based in the UK and aimed at European customers), P&O Cruises (Australia) (based in Australia), and Swan Hellenic (specializing
in cultural trips). In the UK market it has built the first ship specifically designed for
British customers, the "Oriana". The fleet itself is not uniform, neither in size, nor in the
countries where the ships are registered (Liberia, UK and the Bahamas), nor in its
GT/berth ratio (ranging from 27 to 42).
3.3.2.2. Aida Cruises
Deutsche Seetouristik GmbH, with its headquarters in Rostock (Germany) and its subsidiary Deutsche Seereederei Touristik GmbH, owns a cruise division and various holiday resorts. It is the German market leader and the most active German cruise line,
having taken over the specialized cruise tour operator Seetours in 1998. With the concept of the ship "Aida" it attempted to revolutionize the German market, but after poor
financial results, it had to look for outside funding. With the aim of developing the market, in September 1999 it formed a new cruise line with P&O Princess called Aida
Cruises, with the British company holding 51% of the company share capital. This ensured an injection of capital that enabled the company to continue with its proposed plans
as well as offering a modern product in the 3-4 star category.
74
Table 3.X. Aida Cruises fleet (January 2002)
Ship
Arkona
AIDAcara
Current Fleet Total
Aidavita
[Aida 3]
Order Book
Future Fleet
GT
18,591
38,600
57,191
41,200
41,200
82,400
139,591
Berths
480
1,186
1,666
1,270
1,270
2,540
4,206
Year of
Construction
1985
1996
Classification
4
4
2002
2003
It currently has two ships (2002): the "AIDAcara" and the "Arkona", both with German
officers, the first registered in the Bahamas and the second in Germany. In 2002 it
underwent a major change with the launch of the A’ROSA brand, aimed at the Germanspeaking market of first-timers and over forties. It will have an ocean-going cruise ship
called the "A’ROSA BLU" (the reconverted "Crown Princess") and two river cruise
ships. The "Arkona" is being retired from service this year. Two twin vessels on the
order book will be incorporated into the AIDA brand, aimed at the under forties. It is
hoped that this will help to substantially increase the number of packages (72,000)
sold in 2000, with a customer base which is 95% German and the remaining 5%
Austrian and Swiss. The ships sail all round the world, calling at and using Palma de
Majorca as their base port when operating in the Mediterranean.
3.3.2.3. Princess Cruises
It was founded in 1965 and is based in Los Angeles. Stanley McDonald was the founding father who started the business to satisfy the demand for cruises from California
to the West Coast of Mexico. After 2 years he chartered a new ship for the developing
market of the Gulf of Alaska. He popularized the cruise in the TV series The Love Boat
(1977), which is why he used the slogan "It’s more than a cruise, it’s the Love Boat"
in his advertisements. In 1974 and after the takeover by the British company P&O, it
began its expansion, and ten years later it was operating four boats. In 1988 it took
over Sitmar Cruises and added three more ships to its fleet. In 1997 it reached the half
a million trips mark, and hopes to double that figure by the year 2002.
Its fleet is very uniform, having standardized its ships as of 1995. It registers its ships
in the UK and Liberia, and the ship's officers are Italian and British. It has one of the
sector’s largest order books, with a figure of 11,700 berths.
75
Table 3.XI. Princess fleet (January 2002)
Ship
Pacific Princess
Royal Princess
Crown Princess
Regal Princess
Sun Princess
Dawn Princess
Grand Princess
Sea Princess
Ocean Princess
Golden Princess
Current Fleet Total
Coral Princess
Diamond Princess
Star Princess
Island Princess
Sapphire Princess
Order Book
Future Fleet
GT
20,636
44,348
69,845
69,845
77,000
77,441
108,806
77,000
77,000
108,806
730,727
88,000
113,000
109,000
88,000
113,000
511,000
1,241,727
Berths
646
1,200
1,590
1,590
2,022
2,022
2,592
2,022
2,022
2,600
18,306
1,950
2,600
2,600
1,950
2,600
11,700
30,006
Year of
Construction
1971
1984
1990
1991
1995
1997
1998
1998
2000
2001
Classification
3+
4
4
4
4
4
4
4
4
4
2002
2002
2002
2003
2004
The "Grand Princess" has broken yet another record in cruise ship tonnage, with the
third and fourth vessels of the series still under construction for 2002 and 2004. It has
formally unveiled its Grand-class cruising concept that includes a full range of facilities
and entertainment.
Princess has a wide range of itineraries and offers cruises in the Caribbean, Bermuda,
Alaska, the Panama Canal, Mexico, the South Pacific, Hawaii, the Mediterranean, the
Baltic Sea, Asia/the East, the Indian Ocean, South America/ the Amazon and
Canada/New England. It shares the market leadership with HAL for cruises in the Gulf
of Alaska, where improvements are being made to its on-land facilities.
3.3.3. Royal Caribbean Cruises Ltd. Group (RCC)
It is the second largest group in the world, and the company is registered in Liberia.
The shareholding is divided as follows: Wilhelmsen (41%), Pritzker (Hyatt Hotels)
(41%), small shareholders (16%) and its president Richard Fain (2%). It operates two
brands: Royal Caribbean International (RCI) and Celebrity Cruises and has a 20% stake
in the British tour operator First Choice in a marketing and selling partnership for
Europe. Its market capitalization in 2001 was 3.1 billion dollars. In 2000 it registered
a total of 13,014 million passenger days, just over 2 million passengers, at a value of
2,866 billion dollars. Its occupancy levels are similar to those of Carnival Co. (104.7%
in 1999 and 104.4% in 2000). Unlike Carnival Co, it based its expansion in organic
growth, but when faced with the aggressive strategies of its rivals, it took over Admiral
76
Cruises (1988) and Celebrity Cruises (1999). On 20th November it announced its merger with P&O Princess, taking a 49.3% share of the newly formed group. Nevertheless,
as has already been stated, the counter offer from Carnival Co. has momentarily halted
the proposed merger (February 2002).
It focuses strongly on the US and Canadian markets, in spite of its efforts to keep up
with the trend for globalization. The fact that the company was renamed in 1997 and
became Royal Caribbean International, even though the corporation keeps its Royal
Caribbean Cruises Ltd. name, is a clear indication of the company's globalization wishes.
3.3.3.1. Royal Caribbean International (RCI)
Based in Miami and founded in 1969. A total of 85% of its customers come from the
US and Canada and 10% come from the UK. Nevertheless, its objectives for 2004 have
been set at capturing 24% of the European source market, which explains the strong
involvement of both RCI and Celebrity on the European continent.
At the beginning of 2002, the average age of its fleet was 6.2 years, with a capacity
of 33,066 berths that will rise to 45,672 in 2004. The average size of its ships is 1,680
berths, which is similar to Carnival's size and suggests that both have similar strategies. Nevertheless, its more recent constructions indicate a strategy aimed at faster
ships that are capable of covering wider areas, which is a slight departure from the
cruise-destination concept and more akin to a mix of cruise-destination and cruisemeans of transport. However, with its "Voyageur of the Seas" class (five vessels) of
137,000 GT, post-Panamax22, operating in the Caribbean and incorporating a great deal
of complementary facilities, it is reorienting itself towards the notion of Carnival's cruise-destination. Its advertising slogan is in keeping with these ships: "We’re not just a
cruise, we’re a vacation". The commitment in the Caribbean is therefore clear and completely independent of on-land tourist destinations.
With the launch of the 6 vessels in the "Vision" class (70,000 GT), it has increased its
capacity by 94% in only three years. The occupancy levels have also increased at a
parallel rate. The Vision-class has 11 decks, which can be used during the voyage by
1,950 passengers, which can be increased to 2,446, with a 760-man crew. Of the 976
cabins, only 399 are interior. The largest hall can accommodate 1,171 people, making
it ideal for medium to large conferences and meetings. It has a casino, a fitness centre, a spa, a shopping centre, a library, 2 swimming pools, 6 jacuzzis, a beauty salon,
video-games, facilities for children, etc.
22 Post-Panamax: refers to a ship with a maximum breadth measurement of over the permitted 32.25 m allowed
for passage through the Panama Canal.
77
Table 3.XII. Royal Caribbean International Fleet (January 2002)
Ship
Viking Serenade
Sovereign of the Seas
Nordic Empress
Monarch of the Seas
Majesty of the Seas
Legend of the Seas
Grandeur of the Seas
Splendour of the Seas
Enchantment of the Seas
Rhapsody of the Seas
Vision of the Seas
Voyager of the Seas
Explorer of the Seas
Radiance of the Seas
Adventure of the Seas
Current Fleet Total
Brilliance of the Seas
[Voyager 4]
[Voyager 5]
[Vantage 3]
[Vantage 4]
Order Book
Future Fleet
GT
40,132
73,192
48,563
73,941
73,941
69,130
74,140
69,130
74,137
78,491
78,491
137,278
136,000
85,000
137,300
1,248,866
85,000
137,278
137,278
85,000
85,000
529,556
1,778,422
Berths
1,514
2,276
1,600
2,354
2,356
1,804
1,950
1,804
1,954
2,000
2,000
3,114
3,100
2,126
3,114
33,066
2,126
3,114
3,114
2,126
2,126
12,606
45,672
Year of
Construction
1982
1987
1990
1991
1992
1995
1996
1996
1997
1997
1998
1999
2000
2001
2001
Classification
3+
3+
3+
3+
3+
4
4
4
4
4
4
4
4
4
Pend.
2002
2002
2003
2003
2004
The new Radiance-class23 was introduced only 18 months after the Voyageur. In reality
it is a hybrid of the two classes. Its importance lies in that it has brought about a substantial change in tourist cruise management: work titles are more similar to those given
to people who work in resorts. For example, now there is no such thing as a hotel
manager or a cruise director, instead they are known as general manager with a wider
remit, covering all aspects of customer services. Of the crew, 60% are new additions,
as opposed to the normal 20% on new RCI ships. The aim is to implement the new personnel structure more successfully. It includes a whole host of new developments,
including a modern spa, swimming pools with 5-metre high waterfalls and modern coffee shops with personal computers, books and pastries. Another highlight is the inclusion of two paying restaurants, adding to the element of the add-on formula, and 71%
of cabins with balconies.
The Viking Serenade ship will be incorporated in April 2002 into Island Cruises, a joint
venture between RCC and the British tour operator First Choice.
23 It has been designed to sail all over the world, while the Voyageur only operates in the Caribbean, which is
why half of the outside areas of this superstructure are glazed. It has Azipod propulsion and a powerful transverse propeller in the bow. Gas turbines help reduce gas exhaust emissions by 95% along with a significant
reduction in oil waste compared to the diesel engine. It uses the same propulsion mechanism as a B-747,
which is why there are fewer vibrations.
78
Its main focus lies in the on-board activities, offering tried and tested standard programmes throughout its fleet, including: Art Auctions, Passenger Talent Show,
Masquerade Parade, Country & Western Jamboree, etc.
The majority of its business is based in the Caribbean, but the increase in its fleet has
allowed it to expand into the European and Alaskan markets, with its 70,000 GT ships.
It operates the 7-day and 4-3 day segment in the Caribbean and the 12-day segment in
the Mediterranean, with excellent results. The company's ships make port calls in
more than 130 destinations spread over four continents. Its itineraries include the
Caribbean (East and West), the Bahamas, Bermuda, Lower Mexico, The Mexican
Riviera, the Panama Canal, Alaska, the Pacific Coast, the Mediterranean, Europe, the
British Isles, Norway, Scandinavia, Russia and the East. The base ports are: Miami, San
Juan, Los Angeles, along with the major ports in the East, and New York, Acapulco,
Barcelona, Venice and Harwich, depending on the season.
3.3.3.2. Celebrity Cruises
Its headquarters are also in Miami (Florida). Profits in 1996 reached only 100,000
dollars, which provoked its sale to RCC. It has always been an innovative company,
introducing the fly & cruise concept, and pioneering the short cruise. Under the guidance of the world-renowned chef Michel Roux, it has also shown a special interest in
haute cuisine, and has received many awards for it. With the incorporation of the
"Century", it has introduced more advanced information systems and leisure facilities,
thanks to its relationship with Sony Corporation of America. This system is being installed throughout the entire fleet.
It has a very uniform fleet, with three basic ship types: a GT/berth ratio of 42, registered in Liberia, with an international crew and Greek officers.
Table 3.XIII. Celebrity Fleet (January 2002)
Ship
Horizon
Zenith
Century
Galaxy
Mercury
Millennium
Infinity
Summit
Current Fleet Total
[Millennium 4]
Order Book
Future Fleet
GT
46,811
47,255
70,606
77,713
77,713
91,000
90,280
91,000
592,378
91,000
91,000
683,378
Berths
1,354
1,376
1,784
1,896
1,870
2,038
1,900
1,900
14,118
1,900
1,900
16,018
Year of
Construction
1990
1992
1995
1996
1997
2000
2001
2001
Classification
4+
4+
4+
4+
4+
5
5
Pend.
2002
9
79
It operates the 7 to 10 day itineraries. In autumn and winter its ships currently set sail
from San Juan de Puerto Rico towards the inner Caribbean.
During the spring and summer seasons (in the Northern hemisphere) cruises to the
Bermuda Islands set sail from New York and from other East coast US cities. It entered
the Alaskan and Pacific coast markets in 1996. It has committed itself heavily to
expansion outside the Caribbean, with a considerable rise in its capacities. It has been
present in the European market since 1998, introducing its Horizon ship (1,354 berths)
from May to October and increasing the number port calls from 55 to 110.
3.3.4. Star Cruises Group
Headquartered in Hong Kong (China), although the capital belongs to the Malayan company Genting International Group. The Lim Goh Tong family has a 45% share in Genting
International Group. It operates the cruise line Star Cruises (see section 3.3.4.1) in the
Asia-Pacific region and Norwegian Cruise Line (see section 3.3.4.2), which it took over
in April 2000. In the year 2000 the group had consolidated sales of 1,493 billion dollars
and 6.75 million passenger days, incurring a net loss of 29.6 million dollars, which
reflected the cost of taking over NCL, and is the group with the greatest financial leverage. Sales for the first nine months of 2001 were 1,042 billion dollars (+6.2%). The
occupancy levels for 2000 were 96.7%.
The majority of analysts believe that it is the largest growing company in the current
decade. Its order book has risen to 1.28 billion dollars, which will enable it to exceed
34,000 berths by 2004.
3.3.4.1. Star Cruises
The company began operating in 1993 with the purchase and subsequent refurbishment
of two modern European ferries that operated in the Baltic Sea. It dominates the supply
and demand of the Asia/Pacific region, attracting 88% of overnight stays. It sold over
500,000 trips in 1998. It is aimed at the short length itinerary segment, in accordance with the available leisure time of Asian customers: 2-3 days from Singapore and
Hong Kong (China). In March 2001 it began business in the Japanese market, offering
mini-cruises of 2 to 3 nights, aimed at a mass-market. The majority of its customers are
Asian and Australian with the remainder from Europe (British and German), the US and
Canada.
80
Table 3.XIV. Star Cruises Fleet (January 2002)
Ship
GT
Berths
Year of
Construction
Classification
Norwegian Star I
28,018
766
1973
3+
SuperStar Aries
37,012
678
1981
3+
Megastar Aries
2,928
82
1989
n/a
Megastar Taurus
Star Pisces
2,928
82
1989
n/a
40,012
1,196
1990
3
SuperStar Taurus
25,036
974
1992
3+
Superstar Gemini
19,089
804
1993
3+
SuperStar Leo
76,583
1,960
1998
4
Superstar Virgo
76,583
1,960
1999
4
Current Fleet Total
308,189
8,502
SuperStar Sagittarius II
112,000
3,000
2003
SuperStar Capricorn II
112,000
3,000
2004
Order Book
224,000
6,000
Future Fleet
532,189
14,502
The casino and gambling in general, originating with this company, form an integral part
of the overall package on offer. It plans to have 12 ships, one for each sign of the
zodiac. It is the only cruise line that has an on-land navigation simulation centre for its
officers.
Given its undoubted prominence in the region, it plays a major role because of its heavy
investment in cruise terminals in the ports of Port Klang (Kuala Lumpur), Langkawi
(Malaysia) and Phuket (Thailand). The regions in which it sails are: the Arabian Gulf,
Australia and Southeast Asia.
At the beginning of 2002, the average age of its fleet was 11.7 years. The fleet is classified into three categories: Star for short cruises (1-3 days) for the Asian market,
Superstar for a more sophisticated public and repeat passengers, lasting 7 days, and
Megastar which is for smaller groups, aimed at the company Conferences and
Incentives segment.
3.3.4.2. Norwegian Cruise Line (NCL)/ Orient Lines
Founded by Arison and Kloster in 1966 as Norwegian Caribbean Lines (NCL), it revolutionized the cruise industry with the introduction of the "single class" concept sailing
for the Caribbean in an informal yet luxurious setting.
81
Table 3.XV. NCL Fleet (January 2002)
Ship
Observations
Norway
GT
Berths
Year of
Construction
Classification
76,049
2,130
1961
3+
Marco Polo
Orient Lines
22,080
850
1965
4
Crown Odissey
Orient Lines
34,242
1,052
1988
4
42,276
1,518
1988
3+
Norwegian Sea
Norwegian Dream
50,760
1,726
1992
3+
Norwegian Majesty
40,876
1,460
1992
3+
Norwegian Wind
50,764
1,726
1993
3+
Norwegian Sky
80,000
2,002
1999
4
Norwegian Star 2
91,000
2,244
2000
Pend.
Norwegian Sun
78,200
2,000
2001
Pend.
566,247
16,708
91,000
2,100
Current Fleet Total
[NCL 2]
Order Book
91,000
2,100
Future Fleet
657,247
18,808
2002
It has been experiencing financial difficulties since 1993, which prevented it from competing in the shipbuilding race along with the other main companies in the sector such
as RCI, Princess and Carnival Cruises. The injection of Norwegian capital along with
the 20% participation of the Norwegian industrial giant Kvaerner plc in the company
enabled it to temporarily recommence its expansion policy with the building of new
ships and its entry into niche markets (the acquisition of Orient Lines for 30 million
dollars). Nevertheless, the failure of the joint ventures with Australian Cruise Project,
and consequent creation of Norwegian Capricorn Line for operating in Australia, and
with Trasmediterránea and Barceló in Spain, coupled with the high cost of lengthening
the Norwegian Dream and the Norwegian Wind, and the fall of occupancy levels, meant
that their financial situation did not improve. This instigated the takeover (for 600
million dollars in 2000) by Star Cruises, after a failed attempt to establish a joint venture between Star Cruises and Carnival Co., with a corresponding 60%-40% share.
The occupancy levels were 99.5% in 2000. At the beginning of 2002 the fleet had an
average age of 10 years. Its flagship the "Norway" (ex-"France") is the longest ship
currently in service, which will be surpassed by the Queen Mary 2 in 2003. It has renamed all of its vessels with the exception of the Norway, placing the company name
Norwegian in front of all the ship names.
Its ships sail in the Caribbean, Bermuda, Alaska, New England/Canada, the Bahamas,
Mexico, Hawaii and the Mediterranean. After increasing its presence in Northern
Europe, where it believes there is a great potential for growth, its poor financial performance has led it once again to concentrate on the Caribbean. It provides a product
suitable for an active, cheerful, sport loving and carefree public.
82
Orient Lines has its headquarters in London and a regional office in Fort Lauderdale
(Florida), having been taken over by NCL in 1998, although it remains an independent
brand. It specializes in "destination cruises", which is based around allowing the passenger to get to know the destination fully, whilst at the same time enjoying the comforts of a traditional cruise. It has 33,000 customers per year (80% from the US and
Canada and 20% British and Australian), mainly within the demographic segment of the
over 55s, although the 35-55 segment has grown recently. Its financial results are very
good (17.8 million dollars in profits on a sales volume of 65 million).
Itineraries are packaged as "cruise and tour" and include hotel stays, sightseeing in
the ports of call, detailed information on the port and on-board entertainment with a
local flavour. Groups form 40% of its customers, and include school groups or friends of
museum associations.
Its fleet is made up of two ships: the "Marco Polo" and the recently incorporated
"Crown Odyssee". The first ship offers 7 to 25 day cruises in five continents, with port
calls in the Mediterranean, the Indian Ocean, the East, the South Pacific and
Antarctica. Bought from the former Soviet Union, it was completely refurbished in 1993
and is reinforced for sailing through ice, having originally been built for sailing in the
Russian Baltic. In 1996 the company introduced a series of new routes around the
Greek islands and Turkey. Cruises of 7 days or more include conferences, with guest
speakers, who discuss the culture, history and religion of the places visited. The company is also keen on the Conferences and Incentives segment.
3.4. Other cruise lines
3.4.1. Cruise lines in the US and Canadian source markets
This section details the cruise lines which are independent of the major cruise lines
described in section 3.3, and who operate mainly in the US and Canadian source markets, although their itineraries include destinations all over the world. They are characterized by the following features:
a) a) Their need to invest heavily in order to maintain their independence, faced with
the accelerated growth and consolidation imposed by the Big Four. Seabourn,
Windstar and Sea Goddess (Cunard) are companies that could have been included
in this category, but having been taken over by Carnival Corporation, they are instead described in section 3.3. The clear exceptions of independently financed companies are Disney Cruises, which forms part of the powerful leisure group of the
same name, and Crystal Cruises, owned by the Japanese cruise line NYK.
b) The precarious financial situation of the independents is reflected in the bankruptcy
of the following cruise lines in 2000 and 2001: Renaissance, Commodore Cruises
and Premier Cruises, for different reasons in each case.
83
c) Most of the independents are aimed at the luxury end of the market (4+/5 star),
where the profitability threshold is reached with capacities of around 100 to 300
berths. This segment, as with the major cruise lines, follows the general trend to
increase cruise liner tonnage, in order to add to the berth capacity of the shipand
thereby increase the GT/berth ratio. A general characteristic of the luxury segment is that the majority of berths are made up of suites, and all the cabins look
out onto the sea.
d) The destination and itinerary of the cruises are of much greater importance than
for the bigger cruise lines. This, together with the lower draught of their ships,
allows them greater flexibility.
e) They concentrate their efforts on very specific products: Disney competes in the
interesting niche market that combines theme parks with cruises based around
Orlando (Florida), Star Clippers concentrates on sailing boats, Radisson Seven
Seas focuses its attentions on incentives and adventure-expeditions, Crystal
Cruises on single themed cruises and ResidenSea on time-sharing.
f) Combined they represent around 5% of the world supply of berths. Forecasts indicate that they will maintain this share in 2004.
Table 3.XVI. Distribution of ocean going fleets (January 2002)
Group/
Cruise Line
Clipper Cruises
Crystal
Disney
Radisson 7 Seas
ResidenSea
Silversea Cruises
Star Clippers
TOTAL
Total Fleet
NS
2
2
2
5
0
4
3
18
GT
9,582
100,404
166,646
130,747
0
89,854
11,711
508,944
GT/
Berth
40
51
48
63
66
21
Order book
berths Average
242
1,966
3,500
2,088
0
1,368
564
9,728
Age
18.5
8.5
2.5
8.4
3.5
6.7
7.5
NB
GT
0
0
1 68,000
0
0
1 45,000
1 90,000
0
0
0
0
3 203,000
GT/
berths
Berth
0
63 1,080
0
61
732
73 1,232
0
0
3,044
3.4.1.1. Clipper Cruise Line
The company's headquarters are in St. Louis, Missouri (United States) and its customers are North American. It has belonged to the Swiss tour operator Kuoni since 1998,
and is a cruise line that specializes in expedition cruises. The fleet is not uniform, neither in category nor in age, as can be seen from the table below. The first ship comes
from the former Soviet Union, with a strengthened hull for sailing through icy waters and
the second ship is designed to operate in the Japanese market. It sails in the following
regions: Alaska, Antarctica, round the world, Canada/New England, the Caribbean, the
fiords of Chile, the Mediterranean and South America.
84
Table 3.XVII. Clipper Cruise Line Fleet (January 2002)
Ship
Clipper Adventurer
Clipper Odyssey
Total Fleet
Order Book
Future Fleet
GT
Berths
4,364
5,218
9,582
0
9,582
122
120
242
0
242
Year of
Construction
1976
1989
Classification
3
4+
3.4.1.2. Crystal Cruises
Its headquarters are in Los Angeles, and it belongs to the Japanese cruise line NYK
Yusen KK, the majority of whose business is geared towards merchant shipping. Its customers are mainly North American senior citizens (89%), with the rest made up of
British (3%), Australian (1.8%), Mexican (1.5%) and Japanese customers (0.4%). It has
annual sales of 50,000 packages. It has two ships in its fleet, registered in the
Bahamas, with Norwegian and Japanese officers. It has a very high GT/berth ratio of
51, which corresponds to the market sector in which it operates.
Both cruisers have gained high ratings in the best publications within the subsector.
Over the last three years, Fielding’s Guide to Worldwide Cruises has awarded the company prizes for its excellent quality. The company's product is notable as it specializes
in theme cruises: the "Big Band Show", the food and wine festival, in which master
chefs and wine experts are invited to share their knowledge during the show, Computer
University@Sea, Best of Broadway, Par Excellence Golf, etc.
Table 3.XVIII. Crystal Cruises Fleet (January 2002)
Ship
Crystal Harmony
Crystal Symphony
Current Fleet Total
[Crystal 3]
Order Book
Future Fleet
GT
49,400
51,004
100,404
68,000
68,000
168,404
Berths
1,006
960
1,966
1,080
1,080
3,046
Year of
Construction
1990
1995
Classification
5
5
2003
In the 2002 season, its nautical days range from 7 to 16 nights through Alaska, Africa,
Australia, the Indian Ocean, the East, the Mediterranean, Canada/New England, the
Panama Canal, the Caribbean, the Bahamas and Bermuda. It also offers a round-theworld cruise that lasts 96 days.
85
3.4.1.3. Disney Cruises
It is owned by the famous Walt Disney group, and began operating in 1998 with its ship
"Disney Magic". Its main asset is its own Disney brand, with abundant use of the parent
company’s logo: three black circles representing Mickey Mouse's head. This is without
doubt the guarantee of its success, proof of which can be seen in the fact that in
February 1997, over a year in advance of the trip, all the tickets for the maiden voyage of the "Disney Magic" were sold.
They hope to extend their market reach, which is currently based on 70% first-timers.
Its target public are families (55-60%), senior citizens and newly-weds. There is almost
an entire deck reserved exclusively for children, with over 200 programmed activities.
The honeymoon niche market is very important to the company, as its parks are the
number one honeymoon destination in the US.
Table 3.XIX. Disney Cruises Fleet (January 2002)
Ship
Disney Magic
Disney Wonder
Total Fleet
Order Book
Future Fleet
GT
83,338
83,308
166,646
0
166,646
Berths
1,750
1,750
3,500
0
3,500
Year of
Construction
1998
1999
Classification
4+
4+
They offer their cruises as an extension to visits to their theme parks. They calculate
that they need half a million customers to fill their ships, which is only a fraction of the
amount of visitors that the parks receive. The package offered lasts 7 days and combines the Walt Disney Resort for 3 or 4 days with another 3 or 4 days on the "Disney
Magic". The tourist is given a shopping credit card that forms part of the whole package and which is valid in both Disneyworld and on board the ship. Disney has also built
its own terminal in Port Canaveral, which has been decorated in Art-deco style.
Both ships are the largest existing ships that can travel through the Panama Canal.
They are registered in the Bahamas, and the officers are European. Safety has been calculated down to the last detail and it is the only company that has a mooring quay on
its own private Caribbean island ("Castaway Cay") for its ships, which is why it does
not need to use transfer launches. Given the proximity to its theme park in Annaheim
(California), on the outskirts of Los Angeles, it is possible that a third vessel may be
built in the near future to exploit the US West Coast.
86
3.4.1.4. Radisson Seven Seas Cruises
Created by the merger between Radisson Diamond Cruises (Helsinki, Finland) and
Seven Seas Cruise Line, and forms part of the US group Carlson Hospitality Worldwide.
Having signed a management agreement with V Ships from Monaco, it rapidly increased its capacities in order to remain competitive. It is aimed at the new super-deluxe
segment. Its customer base is 90% over-50s from the US, although it has begun to commit part of its business to other source markets in countries with high per capita incomes, such as the UK, Germany and Australia. The level of first-timers is low, only 15 to
20%. In 1998, 20,000 cruises were sold, and the company hopes to reach a figure of
50,000 for 2002.
As well as the ships that appear in table 3.XX, it also operates the "Bremen" and the
"Hanseatic", both of which belong to the German company Hapag-Lloyd and are aimed
at the adventure segment. The latter is possibly the best passenger ship for sailing
through icy waters, with cruises to the Arctic and the Antarctic and other unusual
regions such as the Spitsbergen Archipelago, Greenland and Iceland.
Table 3.XX. Radisson Seven Seas Fleet (January 2002)
Ship
Song of Flower
Radisson Diamond
Paul Gauguin
Seven Seas Navigator
Seven Seas Mariner
Current Fleet Total
Seven Seas Voyager
Order Book
Future Fleet
GT
Berths
8,282
20,295
19,170
33,000
50,000
130,747
45,000
45,000
175,747
202
354
320
504
708
2,088
732
732
2,820
Year of
Construction
1974
1992
1997
1999
2001
Classification
4+
4+
4+
4+
5
2003
The "Radisson Diamond", initially designed for the conferences and incentives segment, has a catamaran hull that reduces the ship's rolling. It also has a much larger
deck than normal ships, but the cost of construction was so high that it is unlikely to
be repeated. Its large draught measurement (7.92 m) and low cruise speed (13-14
knots) mean that it does not have much flexibility in itineraries, and its customers are
destination orientated. The ship sails through the Panama Canal from December to
April, with port calls in Costa Rica and other Caribbean countries. During the summer
it cruises through the Mediterranean and the Baltic Sea. Cruises set sail from
Barcelona, Rome, Athens, Istanbul, Dover, Stockholm, Copenhagen and Lisbon.
The ships' registration is closely linked to the itineraries. For example the French registered "Paul Gauguin" operates in French Polynesia and the Italian registered "Seven
Seas Navigator" cruises through the Mediterranean.
87
3.4.1.5. ResidenSea
This is a unique case, as its marketing is similar to the real estate market. It uses a
variety of formulas, from the sale of cabins to individuals, with prices ranging from 2 to
6.8 million dollars, to time-share deals through the "Tailored Time Fares" programme,
sold in blocks of 30 to 300 days. A total of 88 suites can also be hired. It is estimated
that the average level of occupancy will be 300 passengers, and after many delays it
will enter into service in March 2002. The ship has all manner of complementary services such as swimming pools, a video library, a library, a golf course with real grass,
an art gallery, a business centre, a cinema, a casino, a spa, etc.
Its ports of call on its maiden voyage will be Hamburg, London, Lisbon, Port Everglades,
New Orleans and Houston. A trip around the world has also been planned.
Table 3.XXI. ResidenSea Fleet (January 2002)
Ship
Total Fleet
The World of ResidenSea
[ResidenSea 2]
Order Book
Future Fleet
GT
Berths
0
40,000
50,000
90,000
90,000
0
616
616
1,232
1,232
Year of
Construction
Classification
2002
2003
Pend.
Pend.
3.4.1.6. Silversea Cruises
V Ships recently sold its share in the company, and it is now owned exclusively by the
Italian Lefebvre family. Cruises are characterized by the fact that all passengers travel
in suites, 75% of which have their own balcony, a basic requirement for the super-deluxe segment. The business generated 117 million dollars in 1998. 70% of its customers
are from the US.
After its expansion it now boasts one of the most modern fleets on the market.
Itineraries have been devised to include destinations all over the world, the most notable of which are the exotic cruises that travel through the East, India and the Red Sea,
the Caribbean, South America, including the Amazon, and sightseeing trips along the
East Coast of the United States, Canada and New England. Both ships also sail through
the Mediterranean, the Baltic Sea, the East coast of Africa and the Canary Islands.
It is characterized by a full commitment to the all-inclusive package, with prices including: return flights in tourist class, luxury hotel at the point of embarkation prior to
departure, all drinks (including wines and spirits consumed on board, which is unusual
for cruises), transfers, port taxes, tips and an event called the "Silversea Experience".
88
Table 3.XXII. Silversea Cruises Fleet (January 2002)
Ship
Silver Cloud
Silver Wind
Silver Shadow
Silver Whisper
Current Fleet Total
Order Book
Future Fleet
GT
Berths
16,927
16,927
28,000
28,000
89,854
0
89,854
296
296
388
388
1,368
0
1,368
Year of
Construction
1994
1995
2000
2001
Classification
5
5
5
Pend.
3.4.1.7. Star Clippers
It is owned by the Swedish businessman Mikael Krafft, and is headquartered in Coral
Gables (Florida, US), with ships registered in Luxembourg. It operates within a real
niche market: sailing boats, attracting over 70% of its passengers from outside the US.
Table 3.XXIII. Star Clippers Fleet (January 2002)
Ship
GT
Star Flyer
Star Clipper
Royal Clipper
Total Fleet
Order Book
Future Fleet
3,325
3,325
5,061
11,711
0
11,711
Berths
168
168
228
564
0
564
Year of
Construction
1991
1992
2000
Classification
3+
3+
4
Its fleet is made up of two twin four-mast sailing boats that are quite modern (199192): the "Star Flyer" and the "Star Clipper" (both 3,325 GT), as well as a third vessel:
the "Royal Clipper" (5,061 GT), which entered service in 2000. They offer itineraries
through the South Caribbean, the Far East, the Indian Ocean, the Mediterranean (Las
Palmas, Malaga and the Balearic Islands) and the North Atlantic.
3.4.2. Cruise lines operating in the European source market
As has been stated in previous sections, the cruise sub-sector is undergoing a period
of strong growth that has triggered a process of globalization in both supply and
demand. Europe also forms part of this dynamic. Culture, history and economy (similar
purchasing power) are just some of the many reasons, together with language in the
UK and Ireland, why Europe forms natural extension of the US consumer market, with
some slight differences. The process may be described simply as follows:
89
excess supply from the large North American cruise lines → increase in European
demand → increase in European supply.
In real terms the first and third phases are just beginning to superimpose themselves
within the process.
The first phase will remain this way as long as the Big Four continue to expand their
fleets. The "destination-Europe" market is currently becoming very important (see
sections 4.3 and 2.1) for US companies. An example of this is the "Grand Princess"
that began its maiden season in European waters with resounding success. It returned
after 1999 with equal success, and was the only VLCV outside the Caribbean. NCL has
also located the "Norway" there. RCC has followed suit with the Celebrity, in the hope
that it will double its share of European tourists by 2004 (the share is currently 12%)
along with its own share in First Choice (tour operator). Carnival is also present in the
market thanks to Costa.
It is interesting to note the breakdown by source market of customers on ships in
European waters. European participation is increasing considerably, a fact that is being
noted by the North American companies, given the greater flexibility of transporting
passengers from other European destinations than transporting them from the US. A
clear example is that of Costa. When operating in Europe its North American customer
base is 10%, but when it cruises in the Caribbean this figure rises to 85%.
While the US market is dominated by a small number of large companies creating a
virtual oligopoly, the European market is extremely fragmented, with many companies
often operating only within their own national borders, some with very old fleets which
they are in the process of renewing, and much lower tonnage levels than the US
competition.
Nevertheless, over the last few years it has become an extremely active market,
especially with the addition of the big British tour operators to the market, from the
1997-98 season onwards. Traditional operators such as P&O, Cunard, Hapag Lloyd,
Royal Olympic Cruises and Costa still hold a major share of the market, but are
nonetheless a long way behind the comfortable position of their North American
counterparts within their own US source market. Competition is fierce, with new
operators entering the market, the main one being Festival, along with the expansion
of already established fleets and the arrival of the big US groups.
The reaction of the traditional companies to this new outlook has been swift:
•
90
The merger of Royal Olympic Cruises (ROC) and Louis Cruises has created a large
group which has brought together the biggest Greek companies. They can now
consider themselves as one of the big world players.
•
P&O have concentrated their efforts exclusively on their shipping business, with
cruise activities being taken on by the new P&O Princess company. They are
awaiting entry into the German market with Aida Cruises.
•
All the major European companies are undergoing a period of expansion. P&O
Cruises, Festival, ROC and Costa are all renovating their fleets. Hapag Lloyd have
incorporated a fourth ship into their fleet and Fred Olsen has taken over a third
ship from the defunct Premier Cruises.
The arrival of the pan- European Festival is of major importance, establishing itself as
the first true European cruise line. The joint venture with Trasmediterránea in Spain
forms part of this process, as well as its ambitious plan to renovate and expand its
fleet.
As has already been stated, one of the main features of European cruise lines is that
they rarely venture outside their national borders, which is why a study into the
European market needs to be based on the five main markets. There are, of course panEuropean companies such as Louis/ROC and Festival Cruises, both funded by Greek
capital, which will be examined separately. Another feature that distinguishes it from
the US market is that normally the ship owner and the cruise line are not the same. As
explained in section 7.1.3, the cruise line is responsible for commercial exploitation of
the ship, although it may not be the actual owner of the ship.
The fleet of ocean-going ships studied represents 10% of the world fleet. See table
below. In graph 3.d, the major European cruise lines have been classified by their
capacities (number of berths).
3.d. Smaller european companies. Number of berths to 2002
91
Table 3.XXIV. Distribution of ocean-going fleets (January 2002)
Group/
Cruise Line
Louis C. + ROC
Festival Cruises
Saga
Airtours Sun C.
Thomson Cruises
Fred Olsen
Page and Moy
Hapag Lloyd
Peter Deilmann
Club Mediterranée
N. Frontieres
MSC
Valtur
Spanish Cruise L.
Pullmantur
Vistamar Canarias
TOTAL
Total Fleet
NS
18
4
1
4
2
3
1
4
3
1
1
3
1
1
1
1
49
GT
270,955
138,259
24,474
100,396
51,851
58,790
10,417
58,470
32,320
14,745
15,402
72,782
15,000
16,107
38,722
7,498
926,188
GT/
Berth
23
33
41
23
27
30
20
50
32
38
14
29
29
21
34
25
Order book
berths Average
11,969
4,252
592
4,358
1,955
1,968
523
1,176
1,015
392
1,100
2,512
520
761
1,124
295
34,512
Age
34.5
15.3
36.0
30.2
44.0
24.3
35.0
6.7
10.3
9.0
26.0
30.7
53.0
33.0
35.0
12.0
27.6
NS
GT
0
0
1 58,600
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2 120,000
0
0
0
0
0
0
0
0
3 178,600
GT/
berths
Berth
0
37 1,566
0
0
0
0
0
0
0
0
0
38 3,180
0
0
0
0
4,746
Source: Own study based on data from PSA and Lloyd’s Cruise Int.
3.4.2.1. Louis Cruise Lines / Royal Olympic Cruises (ROC)
It is owned by the main family-based Greek-Cypriot hotel and tourism holding company.
It took over the majority shareholding in ROC in 1999. The takeover pushed the companies’ combined berth capacity to 11,969, thereby creating a group that may be a big
player in the cruise line industry in the future, but which at present is still an amalgamation of several small companies. It still maintains its Greek essence, reflected in the
fact that almost all of its ships are either Greek or Cypriot registered.
The group is in reality the result of a concerted effort by the main Greek cruise lines
(Epirotiki -the oldest with over 150 years of history-, Royal Olympic Cruises and Sun
Line), who dominated the market in the seventies, to pool together their resources.
Unfortunately, due to the lack of investment in new vessels they were soon surpassed
by the North Americans and the Norwegians. Notable features of the company are the
age of its fleet (ROC with an average of 28.2 years and Louis with an average age of
40.7 years), along with the size of its vessels and the fact that they bare boat charter24
whole ships to British tour operators, who then run the whole operation. Together, these
two cruise lines have a 35% share of the Mediterranean market and they dominate the
Eastern sector.
Louis ships operate short 2 and 3 day cruises from Cyprus. ROC currently focuses its
operations on the Greek Islands, with over 100 3-4 day cruises in the Aegean Sea each
92
24 Bare boat charter: the ship is surrendered by the owner to the leaseholder for a set period of time. The leaseholder then fits out and commissions the ship, thereby becoming the ship owner and taking on the shipping and
commercial management of the ship.
summer. It also offers cruises in the Red Sea in winter, with ports of call in Egypt, Israel
and Jordan. The area in which the company specializes (Eastern Mediterranean with its
own political instability), along with the fleet structure, ensure poor financial results.
Its occupancy levels were 75% in 1999 and 84% in 2000.
Table 3. XXV. Louis Cruises/Royal Olympic Cruises Fleet (January 2002)
Brand
Louis
Cruise
Lines
Royal
Olimpic
Cruises
Current
Ship
Princesa Victoria
Princesa Amorosa
Ausonia (*)
Emerald (^)
Princesa Cypria
Princesa Marissa
Sapphire
Calypso
Serenade
Current Fleet Total
Order Book
Future Fleet
Stella Solaris
Apollo
Odysseus
Stella Oceanis
World Renaissance
Triton
Olympia Countess
Olympia Voyager
Olympia Explorer
Current Fleet Total
Order Book
Future Fleet
Fleet Total
GT
14.583
5.026
12.609
26.431
9.984
10.487
12.263
11.162
14.173
116,718
0
116,718
17.382
28.574
12.000
3.963
11.724
14.110
17.593
24.391
24.500
154,237
0
154,237
270,955
Berths
566
284
701
1,172
548
628
650
486
507
5,542
0
5,542
658
1.256
452
318
479
754
840
840
830
6,427
0
6,427
11,969
Year of
Construction
1936
1957
1957
1958
1968
1966
1967
1967
1967
Classification
2
2+
2+
3
1+
2
3
2+
2
1953
1961
1962
1965
1966
1971
1976
2000
2001
3
n.d.
2+
2+
2+
2+
3
4
4
Observations: (*) Bare boat charter to First Choice. (^) Bare boat charter to Thomson Travel Group.
Source: Own study based on data from Berlitz, PSA and Lloyd’s Cruise Int.
3.4.2.2. Festival Cruises
Greek owned (Poulides and Sarantitis families). The total volume of sales was 165,000
passengers in 2000, but it expects to reach a figure of 300,000 passengers within two
years. Sales in 2000 were 200 million euros (+39%). It can be described as the only
pan-European company, as its customers come from all the major European source markets (95%), divided up as follows: France (22%), Italy (18%), Spain (15%), Germany
(20%), United Kingdom (5%). The ship's decoration and the cuisine is 100% European,
and only euros are accepted for payment on-board. In 2001 it set up Spanish Cruise
Line, a joint venture with Trasmediterránea and the tour operator, Iberojet, for its
Spanish side of the business.
It basically offers Mediterranean cruises combined with cheap flights(less than 100
dollars), although it prefers not to use the fly & cruise package, with the majority of its
93
customers embarking in the ports of Marseille, Barcelona, Genoa, Naples, Venice and
Kiel, which are well connected with major towns and cities by road and rail.
Its fleet (see table 3.XXVI) is made up of 4 ships. Normally, they sail in the
Mediterranean, the Black Sea and the Caribbean. They are registered under flags of
convenience (Bahamas and Panama), with the exception of the "Mistral", which is
registered in France for tax reasons. The "European Vision" accommodated European
leaders during the G-8 summit in 2001.
Table 3.XXVI. Festival Cruises Fleet (January 2002)
Ship
The Azur
Flamenco
Mistral
European Vision
Current Fleet Total
European Dream
Order Book
Future Fleet
GT
Berths
14,717
17,042
47,900
58,600
138,259
58,600
58,600
196,859
698
792
1,196
1,566
4,252
1,566
1,566
5,818
Year of
Construction
1971
1972
1999
2001
Classification
2+
3
4
Pend.
2002
Source: Own study based on data from Berlitz, PSA and Lloyd’s Cruise Int.
3.4.2.3. The British market
The market is very dynamic and fluid, as previously seen in section 2.1 of this report.
Demand has increased over the last five years at a cumulative yearly rate of over 15%.
The reason for this rise can be found in the actual increase in ship capacities, mainly
thanks to the commercial policies of the main tour operators in keeping prices low, thereby completely revolutionizing the market. The market catalysts were the arrival in
1995 of Airtours PLC (MyTravel Group as of November 2001) along with the entry into
service of P&O's cruise ship the "Oriana", which was the first ship assigned to operate specifically within the British market.
Typical features of the market are:
94
-
The long-established dominance of P&O (see section 3.3.2) currently operating
under the name of P&O Cruises.
-
The recent arrival of the main tour operator cruise line subsidiaries: Airtours, Saga,
Thomson and First Choice. Their vertical integration (travel agency + tour operator
+ hotels + charter airline) allows them to compete with the traditional cruise lines
by offering lower prices. This means that not only can they corner more of the market share, but also expand their market base.
-
The large US companies are also experiencing a substantial increase in their
British passenger numbers, especially: a) RCC with its strong commercial division
based in London and through its ties with First Choice; and b) Carnival via
SeaVacations, who sees the Mediterranean as a natural location for its ships
during the summer.
The main operators apart from the big groups are:
-
First Choice is the fourth largest tour operator in the UK and has a sound economic foundation. It began selling cruise packages in the Mediterranean from April
1999, leasing the ship "Ausonia", owned by Louis Cruises. RCC and the Barceló
group have been the organization's main shareholders since 2001, each holding
20% of the share capital. It has set up a joint venture with RCC called Island
Cruises whose role is to operate the "Island Escape" ship (ex -"Viking Serenade":
40,132 GT, 1,514 berths, 1982, 3+ star) through the Western Mediterranean as
of April 2002. Its base port will be Palma de Majorca (Spain).
-
The tour operator Saga, which specializes in the senior citizen segment, was founded in 1952, and has a market presence in the US and the UK. It owns only one
ship ("Saga Rose", 24,474 GT, 592 berths, built in 1965, 4 star), and does not
allow anyone over 50 years of age on board. Since 1997 it has also had a large
quota of berths on Cunard's ships.
-
Sun Cruises began operations as a cruise line in 1995, and is another of the many
divisions of the MyTravel Group that occupies third place in the European rankings.
Its ships operate in the Mediterranean in the summer, and are based in Palma de
Majorca, while in winter they operate in the Caribbean. In 1996 they reached an
occupancy level of 100% in the Mediterranean. The company bought Direct
Cruises (cruise line) in 1998. It offers a 3+ star product thanks to the incorporation of the "Sunbird", which is a higher level of luxury than had previously been
offered. The aim was to instil brand loyalty into first time passengers, who tend to
look for a better quality product in second and subsequent trips. Its customer base
can be broken down by nationality as follows: British (60-65%), Scandinavian
(25%) and North American (8%). The company's fleet is registered in the Bahamas,
and all the ships are under ownership. The vessels are : the "Carousel" (23,200
GT, 1,056 berths, year 1971, 3 star), the "Seawing"25 (16,607 GT, 790 berths,
year 1971, 3 star), the "Sundream" (23,005 GT, 1,080 berths, year 1970, 3 star)
and the "Sunbird" (37,584 GT, 1,432 berths, year 1971, 3+ stars).
-
Thomson Travel Group (TUI UK), has been the leading tour operator in the UK market since 1974, and belongs to World of TUI (Former Preussag), which is also the
European leader. After an unfortunate foray into the cruise business 11 years ago,
until 2000 it operated a fleet of four ships, which it reduced to just two in 200126,
operating all year round. They are the "Topaz" (27,000 GT, 978 berths, year 1956,
25 In 2001 it undertook a sale and lease back option with ROC for 5 years. The leasing is on a bare boat charter
basis.
26 which explains the reason for stagnation in British cruise demand in 2001.
95
2+ star) based in Majorca, Malaga and Cyprus and the "Emerald" (24,851 GT, 977
berths, year 1958, owned by Louis Cruises, 3 star). It owns no ships as such, chartering them from Louis Cruises or Kyan Shipping (bare boat charter lasting 7 years
with an option to buy). An unusual feature of the "Topaz" is that it is marketed
with the all-inclusive package, which is more normally seen in the super-deluxe
segments of the market (5 and 5+ stars). The fact that one of its ships operates
in the Caribbean all year round is also a unique feature.
-
Fred Olsen, a Norwegian cruise line, with 3 ships: the "Black Prince" (11,209 GT,
446 berths, year 1966, 3 star), the "Black Watch" (28,492 GT, 772 berths, year
1972, 3 star) and the "Braemar" (19,089 GT, 750 berths, 1992), which have all
been recently refurbished. They operate in the Mediterranean, the Caribbean, the
Baltic, and the Far East.
-
Other operators working in niche markets include: Swan Hellenic (owned by P&O,
see section 3.3.2) aimed at the cultural segment of the market with the
"Minerva", and Page and Moy, which has a quota of berths on Fred Olsen's more
prestigious vessels and also operates the "Ocean Majesty" (10,417, GT, 523
berths, 1966, 3+ star).
3.4.2.4. The German market
There are no major cruise line companies in Germany. The large number of German tourists using foreign cruise lines, however, play a very important role within the market.
A survey with all the relevant data relating to the sector has been carried out by Alf
Pollak on behalf of DRV, a German association of tour operators and travel agencies.
See bibliography reference (50). Almost a quarter of the market is made up of river cruise passengers who are not taken into consideration in this report. There are three different types of company within the market: German cruise lines, international cruise
lines (through their GSAs) and tour operators.
Table 3.XXVII. Sea cruises
Number of
%
Clients
German cruise lines
International cruise lines
102,650
Sales
%
(DM thousands)
31.00
504,195
39.90
96,555
29.16
281,565
22.28
Tour Operators
131,880
39.84
478,039
37.82
TOTAL
331,085 100.00
1,263,799100.00
Source: Alf Pollak. DRV. 1999.
Table 3.XXVII details the breakdown of sales of these three groups. It must, however,
be stated that the total number of clients does not coincide with the data in table
3.XXVIII, as the figures in the second table include some river cruises. The main feature of the market is the strong presence of specialist tour operators and the relatively
96
small role of the North American cruise lines. The reasons for this can be attributed
to the strength of the tour operators within the German holiday market, where booking
conditions are much stricter than in other markets, and the language barrier. It is
worth pointing out that the two main groups, World of TUI and Thomas Cook AG, have
had to abandon the shipping business for the time being because of the poor results of
their subsidiaries; this market has yet to become fully developed and the cruise itself
is still a very expensive product. The growth rates are high (number of customers in
2000 rose 14.8% and sales rose 13.1%), but they are lower than those in the UK (17%),
as the German market is still not as developed as the UK market.
The most important cruise lines are: Deutsche Seetouristik GmbH (DSR) via Aida
Cruises (see section 3.3.2), Hapag Lloyd Seetouristik, Köln-Düsseldörfer-Deutsche
Flubkreuzfahrte (specializing in river cruises) and Peter Deilmann Reederei. The partnership between P&O and DSR is a most significant factor, which may provoke a definitive take off within the market, leading to similar levels of development to the US
and British markets. In the last three years, 2,650 berths have been added to the market (+26%). As a source market it dominates the North Atlantic (based in Iceland), the
Norwegian fiords and the Baltic Sea.
• Hapag Lloyd Seetouristik. This is a brand of cruise ships owned by the tourism company Hapag Lloyd AG, based in Bremen, which in turn is controlled by the World
of TUI group, the main European tourism consortium. It was founded in 1970 with
the merger between the companies Hamburg-Amerikanische Packetfahrt AG
(HAPAG) and Norddeutscher Lloyd (NDL). It currently has business interests in the
airline sector (Hapag-Lloyd Flug GmbH, founded in 1972) as well as in the travel
agency business. Cruise business in itself represents only 6% of its total. It recorded figures of 46,000 customers in 1999-2000, with sales of 3.2 billion euros.
After the takeover of Hanseatic Tours in 1996, three divisions were created:
-
Hanseatic Tours (for adventure and expeditions onboard the "Bremen" and
"Hanseatic"),
-
Hapag Lloyd Tours (for groups and holiday packages sold through the press,
onboard the "Colombus") and
-
Hapag Lloyd Kreuzfahrten (for super-deluxe cruises).
Its passenger cruise liners are as follows: the "Bremen" (6,752 GT, 164 berths,
year 1990, 4 star), the "Hanseatic" (8,378 GT, 184 berths, year 1991, 5 star), the
"Columbus" (14,903 GT, 420 berths, year 1997, 3+ star) and the "Europa"
(28,437 GT, 408 berths, year 1999, 5+ star). All are registered in the Bahamas
and have German officers. The "Columbus", which is bare boat chartered , sails in
the Mediterranean, the Baltic and the Great Lakes in the US. The remaining two
ships are 5 star vessels. The "Europa", is specially aimed at the deluxe market
97
with all of its cabins looking out onto the sea and with a smaller capacity than its
predecessor. One of its main features is that it has one of the highest GT/berth
ratios (70.1 as opposed to 36.1 of its rival the "Deutschland") as well as being the
only cruise ship with a 5+ star category in the Berlitz Guide 2002 (see bibliography
5).
• Peter Deilmann Reederei was a cruise line mainly devoted to cargo in the sixties,
entering the passenger business in the seventies. Its volume of sales in 1998 was
200 million DM and 43,000 customers. It operates in the three star segment. Its
ocean-going fleet is made up of the "Berlin" (9,570 GT, 420 berths, year 1980),
the "Lili Marleen" (750 GT, 50 berths, year 1994) and the "Deutschland" (22,000
GT, 545 berths, year 1998), which has an interior decor similar to the grand transatlantic cruisers of the twenties and thirties, with its art-deco decoration. It also
gives special importance to food on-board, aimed at the traditional and older customers. They sail through all the seas, including the Mediterranean, and the
"Deutschland" is even designed to be able to sail in the Arctic. All the ships are
German registered and have German crew and officers. It also has a major river
cruise fleet comprising six ships.
Table 3.XXVIII. Distribution of cruise lines within the German source market
Cruise Line
Phoenix Reisen
Number of clients
1997-1998
1998-1999
1999-2000
45,500
75,000
70,658
DSR / AIDA Cruises
39,500
48,907
79,350
Hapag-Lloyd Seetouristik
39,500
43,000
43,000
Mediterranean Shipping Cruises
27,500
n/a
n/a
Peter Deilmann
26,800
35,000
38,000
Costa
24,000
32,000
37,000
Seetours
26,000
-
-
Transocean
21,000
21,000
23,907
Festival
12,600
15,000
20,000
Hurtigruten
11,400
17,400
19,400
Others
74,400
n/a
n/a
TOTAL
348,200
n/a
n/a
Fuente: FVW International.
The main tour operator companies sell packages for the big cruise lines (NCL and RCI)
as well as chartering and contracting berths on different vessels. The most notable of
these are Transocean Tours and Phoenix Reisen. The first has chartered the "Astor"
(20,158 GT, 590 berths, year 1986, 4 star) and the "Arkona" for ten years and it also
has a major river cruise division. Phoenix Reisen runs two ships, the "Albatros"
(24,803 GT, 940 berths, year 1957, 3+ stars) and the "Maxim Gorkiy" (24,981 GT, 650
berths, year 1969, 3+ star). All of these ships sail throughout the world and normally
use Genoa as a base port in the Mediterranean.
98
3.4.2.5. The French market
The main features of the market are the lack of a market-leading cruise line and the
difficulty experienced by the main international companies in penetrating the market
because of the language barrier. Despite this, the tour operators are nevertheless interested in the market, which may be a key element for its future growth . There is a
weak national cruise line presence, the most notable of which is Club Mediterranée. In
order to protect and strengthen its shipyards and to promote its overseas territories,
the French government grants tax benefits to ship investors, along with added benefits
should the ship be French flagged and registered in the Kerguelen Islands (overseas
territories in the South Pacific). Several companies have benefited from these policies
to date, in particular the North American cruise line Radisson. Festival has the
"Mistral" registered in France, having leased it out directly from the shipyard that built
it: Chantiers de l’Atlantique.
The most representative national company in the business was Club Mediterranée,
owned by the holiday group of the same name, but it sold one of its sailing ships ("Club
Med I") to Windstar halfway through 1997. It holds a 7% share in the French cruise
market, and it still owns "Club Med II" (14,745 GT, 392 berths, year 1992, 4 stars), a
5-mast sailing ship that sails in the Caribbean and the Mediterranean.
The source market is dominated by Costa, who sell Caribbean and Mediterranean cruises directly on the market. One of its ships is based in Marseille throughout the summer. During the winter it organizes charter flights from Paris to Guadeloupe for cruises
on its ships in the Caribbean.
Nouvelles Frontieres is the number one tour operator in France. The German group
World of Tui owns 41.4% of the business. It has a comparative advantage, like its
British and German counterparts, of having considerable vertical integration within the
market (airline, tour operators and hotels). It chartered the "Van Gogh" (15,402 GT,
1,100 berths, year 1975) during 2001 through the Caribbean, using Havana (Cuba) as
its base port.
3.4.2.6. The Italian market
Italy has a great cruise tradition, and it also has some major cruise lines, including
Costa and MSC. The market is clearly dominated by Costa Crociere, which is not only
the absolute market leader in Italy, but also in Southern Europe (see section 3.3.1.4).
The second company is Mediterranean Shipping Cruises (MSC), with its headquarters
in Naples, which has increased its available capacity in the last few years, based not
only on Italian customers (reducing its share to 20%), but also on German and British
customers, and since 1998 it has been very active in the US source market. The company's fleet is made up of the following ships: the "Monterey" (20,046 GT, 592 berths,
year 1952, 2+ star), the "Rhapsody" (17,593 GT, 822 berths, year 1977, 3 star), and
99
the "Melody" (35,143 GT, 1,098 berths, year 1982, 3+ star) which operates in the US
market. All of them are registered in Panama and use the Mediterranean ports of Genoa
and Naples as their base. There are several Spanish and French ports of call during the
cruises. It is consolidating its market position by creating its own catering company
called Italcatering. During the winter months its ships are transferred to the Caribbean,
where it competes with Costa and Carnival. It has two twin vessels on the order book
[MSC1] and [MSC2], (60,000 GT, 1,590 berths, 2003 and 2004).
The entry of the tour operator Valtur into the market in November 1999 is also worthy
of note. Its headquarters are in Rome, and it has chartered the "Valtur Prima" (15,000
GT, 520 berths, year 1948, 3 star) for five years. This vessel is the property of the cruise line N.I.N.A. SpA., and is based in Cuba for cruises in the Caribbean.
3.4.2.7. The Spanish market
Table 3.XXIX details the main information on total sales, with Costa cornering a third
of the market, followed by Royal Hispania, with a share of around 25%. The rest is shared out among Festival, MSC, Royal Caribbean and Silversea. Passenger cruise line
sales for 1998 rose to 63,050 billion pesetas, an increase of 21%.
Table 3.XXIX.
Company
Year 2000
Year 1998
Turnover (mill. euros)
Clients
Clients
Costa Crociere
19.1
30,500
20,000
Royal Hispania
15.0
n/a
12,000
Festival
2.1
7,000
2,500
Others (MSC, RCI, Silversea)
n/a
n/a
10,500
Source: Nexotur.
The traditional gap with regard to other similar markets, such as the French or the
Italian market, is mainly due to three causes:
-
the lack of cruises with Spanish base ports,
-
the weak peseta and
-
the lack of a major national company.
The first two causes have completely changed. The third cause has begun to change
over the last two years and there are now clear business initiatives in place that suggest it will disappear . These initiatives are described below.
The main Spanish passenger cruise line within the market is Cía. Trasmediterránea, and
it has made in-roads into the cruise business. Firstly, with Royal Hispania, which had
100
only one ship in operation, the "Don Juan" (9,805 GT; 448 berths; year 1967), until
October 1999. In October 2000 it set up a joint venture called Spanish Cruise Line
(SCL) with Festival Cruises and the majority Spanish company Iberojet, with each company holding a third of the share capital. Packages are sold to source markets in
Spain, Portugal, Holland and Germany, and the ships have a distinctively Spanish feel
to them, in a similar vein to the Italian influence in Costa Crociere. Operations began
in April 2001, with a programme of 32 7-day cruises around the Western
Mediterranean. Expected sales in Spain are 39,000 customers in the first year. It has
chartered the Festival Cruises-owned ship the "Bolero" (16,107 GT, 761 berths, year
1968, 3 star) for three years.
In 2001, the tour operator Pullmantur (Marsans group) bought the "Oceanic" (38,722
GT; 1,124 berths; year 1966) from the now defunct Premier Cruises. It operates in the
Mediterranean and in the Bahamas on seven-day cruises.
The hotel chain Hoteles Playa, thanks to its participating cruise line Vistamar Canarias
(formerly Marline), owns the "Vistamar" (7,498 GT; 295 berths; year 1989). It was
registered in the Canary Islands Special Register at the beginning of 2001, and sails
along the South American Pacific coastline, the Mediterranean and the Caribbean, and
is run by Plantours & Partner, with 95% of its customers being German.
3.4.3. Cruise lines operating in the Asian source market
According to WTO figures (see bibliography 29), the tourist demand in Eastern Asia and
the Pacific is that which exhibits the highest growth levels of all. In the 1995-2020
period it is hoped that international tourism will grow cumulatively at a rate of 6.5% per
year, with Japan being the main source market. The WTO's paper entitled Global
Tourism Forecasts to the year 2020 and beyond, (see bibliography 28), states that
"there are three key development areas within the sphere of transportation", with air
traffic being the obvious one, but another being "the growth of the cruise business, not
only in the Caribbean but throughout the world, and above all in the Far East and
Europe".
This is a clear example of the enormous possibilities for future cruise demand that are
running in parallel with development of local business structures, all of which are in
their infancy, with the exception of Star Cruises. One might think that, as the UK is
the European leader, so then Australia should lead the way in this region. However, its
long distance from the US ensures that not many ships are assigned to these waters,
as the cruises which are sold have to be over seven days long and are normally 14 days,
which greatly reduces the growth potential of the supply. Added to this is Australia's
low population density, which is why Australia does not have the dominant position
that may be expected of it. Therefore it is more difficult to transfer the US experience
to the area.
101
As well as the main reasons cited in the above paragraph, there are also other reasons
detailed below which stem partly from those above. The information has been set out
in conjunction with data from the PATA paper, cited in the bibliography (33):
-
The general lack of adequate infrastructures,
-
High operating costs (port tariffs, ship supplies, taxes, flights),
-
The lack of information among potential clients.
The same paper also cites the following as strengths in the region that help promote
its potential:
-
The growing interest in local demand,
-
A growing attraction as a holiday destination,
-
Being a unique destination.
Business structure is characterized by the following:
-
The absolute dominance of Star Cruises (see section 3.3.4), which is acting as a
catalyst with a notable effect on the port of Singapore.
-
Local business attempts in the major source markets of India and China, which
at present are limited to coastal cruises.
-
The fragmentation by market is much greater than in Europe, mainly because of
language, ethnicity and culture.
-
As far as Japan and the Republic of Korea are concerned the interconnection between markets is nil. For cultural and linguistic reasons the markets are based on
national monopolies. Large corporations play a major role in the market, through
the Incentives and Conferences segment.
-
The slow but growing presence of the big operators: HAL, Orient Lines, Princess
and Silversea. The limiting effect of the distance away of the main source markets
has already been stated, but it is worth highlighting the only local company, with
the exception of the Star Cruises Group, which is P&O Cruises Australia: it
belongs to the P&O Princess group (see section 3.3.2) and operates the "Pacific
Sky" (46,087 GT, 1,200 berths, year 1984) from Sydney.
The fleet within the region represents a 3% total of the world ocean-going cruise line
fleet. There are no ships currently under construction, which suggests that the figure
will drop over the next few years. See table 3.XXX.
102
Table 3.XXX. Distribution of ocean-going fleets (January 2002)
Group/
Cruise Line
Total Fleet
NS18
GT18
GT/
Order Book
Berths Average
Berth
P&O (Australia)
1
46,087
38
NS
GT
0
0
Age
1,200
17.0
GT/
Berths
Berth
-
0
Indian Ocean C.
1
10,400
17
613
34.0
0
0
-
0
NYK Cruises
1
28,856
48
600
10.0
0
0
-
0
Mitsui OSK
2
45,243
37
1,210
11.5
0
0
-
0
Japan Cruise L.
2
54,518
41
1,326
4.0
0
0
-
0
3
67,029
30
10
252,133
Hyundai
TOTAL
2,257
29.0
0
0
-
0
7,206
17.9
0
0
-
0
Indian Ocean Cruise Lines is the most influential company in India, offering coastal cruises from Mumbai. Since the year 2000 the "Ocean Majesty" (10,400 GT, 613 berths,
year 1967) has been operating in the Indian Ocean during the winter. Its customers are
mainly Indian and to a lesser degree American.
The most recent business initiatives within the Chinese market have been aimed at
coastal cruises, which, in spite of not forming part of this study, are detailed below as
an example of an incipient business in this country.
China Shipping Group operates the "Xin Shang Hai" (3,857 GT, 648 berths, year 1983)
that sails around Asia. Star Cruises has bought the "Wasa Queen" (16,546 GT, 1,100
berths), which, as of January 2002, has begun business in the Chinese market through
Cruise Ferries. It sails from Hong Kong (China) to Xiamen.
3.4.3.1. Japan
The lack of available free time for the working section of the population, cited in section 2.1, makes any development in demand very difficult. Nevertheless, taking into
account that it is a country with a rapidly ageing population, the outlook is very promising. Seafaring conditions make cruising all year very difficult. As has been previously stated in this report, Japanese people wish to travel on Japanese cruisers, for
cultural and linguistic reasons. Approximately 75% of the total demand sail on
Japanese cruisers, although this high percentage is gradually decreasing . The cruise
market began in the eighties thanks to the study tour, a major feature of this market,
which is basically an incentive and training trip, in which it is quite normal for employees to share up to 4-bed cabins. Below is a description of the ocean-going cruise lines:
-
NYK Cruises. It belongs to NYK Yusen KK, the biggest shipping company in the
world, which had sales of over 9 billion dollars in 2001. Crystal Cruises also
belongs to the same group (3.4.1.1). It has the "Asuka" (28,856 GT, 600 berths,
103
year 1991, 4 star), which was the first Japanese cruiser to sail around the world
in 1996.
-
Mitsui OSK Passenger Line. It owns two ships: the "Fuji Maru" (23,340 GT, 603
berths, year 1989, 3+ star) and the "Nippon Maru" (21,903 GT, 607 berths, year
1990, 3+ star). The first deals with the corporate segment (incentives,
conferences and personnel training), and does not deal with individual customers.
The second cruiser is largely aimed at senior citizens. Both ships sail in Southeast
Asia and also sail around the world.
-
Japan Cruise Line is owned by SHK Line Group, a joint venture between Shin
Nohonkai, Hankyu and Kampu, all of which are ferry companies. Their fleet is made
up of two ships: the "Pacific Venus" (28,000 GT, 720 berths, year 1996) and the
"Orient Venus" (26,518 GT, 532 berths, year 1998, 4+ star). The first ship is aimed
at the individual market and the second at the incentives and groups segment.
The ships operate in Alaska, Australia and Southeast Asia.
3.4.3.2. Republic of Corea
This market has the same limitations as the Japanese market as far as culture and
language are concerned. The most notable operator is Hyundai Merchant Marine. After
the failure of its initiative with Carnival Co., it began a joint venture with the North
Korean state company of Asia-Pacific Peace Committee in order to improve relations
between the two countries, adopting the name of Superstar Capricorn Ltd. It is advised
by Star Cruises, from whom it purchased two ships, while V Ships supplies the ships’
crews.
It has a total of three ships: the "Pongane" (18,455 GT, 882 berths, year 1972, 3 star),
the "Kumgang" (28,388 GT, 1,375 berths, year 1973, 4 star) and the "Hyundai
Pungak" (20,186 GT, 751 berths, year 1971, 3+ star). It uses the port of Changon
(Democratic People’s Republic of Korea), where it has invested 72 million dollars, in
order to carry out three-day cruises to Mount Kumgang (Diamond Mountain), which is
a sacred shrine for pilgrimage. The base port is Tonghae (Republic of Korea).
3.5.- Commercial middlemen in the cruise business
3.5.1. Cruise trip distribution channels
Cruise lines normally sell cruise trips through travel agencies and, to a lesser degree,
directly. The change in the travel agency’s source of income, caused by the increase of
the cruise business and the cutting of flight ticket sale commissions, has favoured this
general trend. Nevertheless the situation is changing, mainly because of two reasons:
104
-
The considerable growth of tourist cruise sales requires a more complex selling
structure, strengthened with the rise of CRSs27 and call centres.
-
New technological advances, and above all the Internet, open up new distribution
channels.
The result is a greater penetration of tourist cruises in the leisure holiday market, which
in turn accelerates the process of business expansion and consolidation.
3.5.1.1. Travel agencies
Nearly all cruise companies sell reduced quantities of tickets directly to their
customers so as not to alienate the travel agencies. Of all the trips on the market, the
cruise, unlikely as it may seem, is the sector that most widely uses retailers as a
distribution channel for its product, as can be seen clearly in table 3.XXXI for the US
and Canada. As proof of the sector's reliance on them, one need only take a look at the
slogan of the sub-sector's largest company, Carnival, which states "Carnival loves
travel agents", and is aimed at 15,000 US travel agents, ensuring that they get to
know the company's ships and even sail on them.
The category and quality of the product is a determining factor when establishing
distribution channels. As the big cruise lines have a massive product, they rely on travel
agencies, whereas specialist cruise lines prefer to maintain direct contact with the
customer, and avoid travel agencies completely. The reason lies in the fact that a sound
knowledge of the product is required in order to sell it.
Table 3.XXXI. Travel agency participation in the US in relation to total sales
Component of the trip
%
Cruise
95
Aircraft
90
Train
40
Hotels
10-20
Hirecar
20-60
Source: CLIA 1999.
It is also worth noting the opposite case scenario, in other words the importance of
the cruise for travel agencies. Table 3.XXXII reflects a very low weighting (10%), which
is why not all travel agencies are keen to sell cruise packages. Of the total of 33,000
travel agencies in the US, two thirds are CLIA members; in other words they sell crui-
27 CRS: Computerized Reservation System. They originated with US airline companies. They offer customers the
possibility of not only booking their flight tickets, but also other tourist services that include: car-hire, hotel, tour
operator packages, cruises, etc. They differ from GDSs in that they offer no information about the destinations.
105
ses, and of these only 34% are specialized in exclusively selling cruises. Graph 3.e
shows the evolution of CLIA member agencies. The decrease that starts in 1994 can
be explained by the process of consolidation in the retail sector.
3.e. Evolution of the number of CLIA member travel agents 1980-1999
Source: CLIA.
It is a well-known fact that the productivity of specialist agencies is much greater than
that of those which are not (see table 3.XXXIII). This phenomenon also applies to the
cruise market, which explains why the total amount of specialist agencies has grown
exponentially in the last few years (from 500 in 1988 to over 7,500 in 2001).
Table 3.XXXII. Percentage distribution of agency sales in the United States
Component of the trip
Sales volume
Cruise
10%
Aircraft (national)
50%
Aircraft (international)
10%
Hirecar
Tourist packages
7%
8%
Hotels
12%
Others
3%
Source: ASTA281999.
28 ASTA: American Society of Travel Agents: US travel agent association.
106
Added obstacles to the increase of cruise sales are the fact that they are not an
essential product for travel agencies and that commissions are very complicated and
constantly changing. It must be remembered that the typical American travel agency
offers over 1,000 products, making it very difficult for the agent to know all of them.
CLIA's efforts are aimed at training travel agents through courses and seminars, and
at directing the customer to the retail middlemen, mainly through advertising campaigns.
In 1985, in Coral Gables (Florida), the National Association of Cruise Oriented Agencies
(NACOA) was founded. It has 780 US and Canadian travel agency members and 23 cruise lines, mainly North American. Like the CLIA, its mission is not to negotiate contracts between travel agencies and cruise lines, but rather to achieve the following
objectives: a) to promote excellence and sound knowledge in the field of sales and marketing of cruise trips; b) to improve the training and communication of and between its
members; c) to improve member communication with other agents on the market, such
as airlines, cruise companies, suppliers and associations within the sub-sector.
NACOA's success is fundamentally based on the high profitability of its members. See
table 3.XXXIII.
The current situation can therefore be summarized as follows: cruise lines are very
dependent on retail sector distribution, although the opposite is not the case. The
situation, however, is changing, with the weakening relationship between cruise line
and retailer, and the increasing importance of the opposite case scenario: the importance of the retail sector-cruise line relationship. As stated at the beginning, specialist
cruise lines tend to opt for direct selling to the customer, given the complex nature of
their product.
Table 3.XXXIII. Productivity of US and Canadian travel agencies specializing in cruises
CLIA member agencies
Non-specialist
Productivity*
170
Only cruises:
- Traditional business (shop)
- From home
"Only cruises" average
240
67
203
CLIA average
181
NACOA average
425
(*): measured in dollars gross/hour for each booking.
Source: CLIA.
During the nineties, airline companies noticeably reduced their sales commission paid
to travel agencies in the US, causing 2,300 agencies to close down and leading to an
increase in the difference between sales commission paid by the cruise sector and the
107
airlines of about 5 to 7 percentage points29. This has resulted in the consolidation of
large agency groups in the US. The two biggest are: The Travel Company (TTC) and
Travel Associates Network (TAN). The latter is a consortium of 5,800 independent
agencies and the cruise sales leader, with a sales volume of one billion dollars per year,
while TTC is the second largest, bringing in 600 million dollars worth of business. These
mega-agency chains are facilitating the substantial increase in sales of the cruise product, in the lower and middle categories.
Carnival President Bob Dickinson predicts that within 10 years direct bookings will
increase from their current 5% share, rising to 10-20%. It must not be forgotten that
the hotel sector, for example, distributes 90% of its product in this way. Up until now it
has been common practice for all cruise lines to include the number for direct bookings
in their advertising material. The response is minimal, representing, as we have already
said, only 5% of total sales on average. Figures are even lower for the big cruise lines,
with Carnival for example, having only 1% of total sales deriving from direct bookings.
This is mainly due to Carnival's policy on selling directly, as its call centres do not offer
discounts or lower rates for groups over the telephone, thereby passing on many bookings to travel agencies.
On the other hand, CLIA states that within the last five years, 10% of cruise customers
have never used a travel agency, in other words they have made the booking directly,
while the remaining 90% book through travel agents. Of this figure, 57% took advice
from the travel agency, using the agency as more than a mere ticket-issuing service.
The fact that 70% of bookings are made during the weekend or in the evening, falling
outside normal working hours for most agencies, is helping to promote other forms of
distribution, such as the Internet and the direct selling through the call centres. A
notable shift in this area can be seen in Carnival group's franchises.
The Carnival franchising system
The system began in 1998, with the concept of "Vacation Stores", which attemp
ted to change and relax the strict rules on opening times and personnel of traditional travel agencies, in the hope of breaking through the 2% participation ceiling
of cruises within the holiday market. Franchise requirements are as follows: a) the
location must be in a busy public thoroughfare (such as shopping centres); b) the
shop must be open until 9pm as well as opening during the weekend, as 70% of
customers shop during the 6pm to 9pm period and at weekends; c) the personnel must be selling experts and not merely ticket dispensing agents, and should
be remunerated according to their productivity.
29 After the 11th of September 2001, cruise lines have reduced their commission to US agencies
selling flights on the fly&cruise package of a cruise from 10% to 5%.
108
The success of these holiday shops is inversely proportional to the number of products and directly proportional to the seller's knowledge of the products he/she
is selling. Holiday shops need to be lively places, as opposed to the traditional travel agencies. Other retail branches have experienced resounding success with this
formula, with a notable example being the largest bookshop chains in the US. The
holiday business is also beginning to experiment with the formula, and Dynamic
Travel & Cruises is a celebrated case in point. Its shop is about 500 square metres
in size, with a children's play area, a cafe, a bookshop and an area dedicated to
selling holiday accessories. Great attention to detail is paid to the music played in
the shop, evoking exotic locations, to the smell of the shop (ranging from pine
trees to orange trees). Each night there is a book presentation by a renowned
author, or a photography presentation given by a famous photographer within the
industry, etc.
United Kingdom
There have also been cuts in flight commission rates, just as in the US market, and the
use of new technologies, in particular the Internet. There is also consolidation within
the retail sector, although the reasons are not the same as for the US. The reason lies
within the main role played by the tour operator in the UK, a fact that does not affect
the US. The tour operator has become an essential factor in the development of the
cruise in the British market. The process of vertical integration began in the eighties,
by virtue of which the tour operator controls or tends to control all the elements in the
value chain, so as to increase its profits. There are basically four big groups in a rapidly
changing business environment. Each group is made up of the following elements: the
tour operator itself (the parent company), an airline charter company, a cruise line, one
or several hotel chains and a network of travel agencies. The table below details the
main agency chains.
Table 3.XXXIV. Tourist groups in the UK in 2000
Tour operator group
Distribution channels
Travel agency
chain
Number
Total*
of Agencies
Agencies
Thomson Travel (TUI UK)
LunnPoly
791
835
Airtours (MyTravel)
Going Places
717
1.191
Thomas Cook UK
Thomas Cook
772
772
Travel Choice
n.d.
300
Direct sale
Portland
Direct Holidays
Thomas Cook Direct
First Choice
Eclipse
(*) includes associated travel agencies.
Source: Travel Weekly UK.
109
Tour operators also run their own call centres, used for selling direct to the public, many
of which are open 24 hours a day. A noteworthy case, in a similar vein to the previously
mentioned Carnival franchises, is the Holiday Hypermarkets, of which First Choice has
a 25% share. They are very similar to a traditional supermarket: large surface area and
long opening hours.
The re-entry of tour operators into the cruise business has entailed the following:
-
Sales of cruise trips benefit immediately from the CRS systems that are greatly
used by tour operators.
-
Stimulating retail interest in the product, given the close links between the tour
operators and the travel agencies. Thus, for example, Lunn Poly has become the
market leader in cruise sales (10-15% share), not only marketing sales for
Thomson Cruises, but also for other cruise lines, such as P&O Princess.
The actions of the PSA in training agencies has been crucial to success. They have
used guidelines set out by PSARA (Passenger Shipping Association Retail Agents),
which has over 1,300 members. Just as in the US, once the cruise business began to
grow, the specialist agencies formed their own association in 1999 called the Guild of
Professional Travel Agents.
Tables 3.XXXIV to 3.XXXVI are a breakdown of data regarding the UK retail sector. It
can be concluded that the observations made for the US market are valid in general
terms in relation to the interdependence of the cruise lines-agencies, with the added
and unique presence of the tour operator serving as a central axis within the travel
industry.
Table 3.XXXV. Distribution of travel agency sales in the UK in 1999
Business
Sales
(billion dollars)
(%)
6.06
66.90
All-inclusive packages
Ferries
0.33
3.60
Cruises
0.42
4.60
Aircraft
2.25
24.80
TOTAL
9.06
100.00
Source: Association of British Travel Agents (ABTA).
110
Share
Table 3.XXXVI. Distribution of cruise sales in the UK in 1999
Middleman
Travel agencies
General Sales Agent (GSA)
Cruise sales
Share
(million pounds)
(%)
256.6
85
15.1
5
Direct
15.1
5
Tour operator
15.1
5
301.9
100
Total
Source: ABTA.
3.5.1.2. New technology in distribution: Internet, CRS and digital TV
There are a number of different opinions with regard to what impact the Internet may
have on the industry, given the complexity of the cruise in relation to other travel elements, such as hotels or flights. At the moment the Internet is not used on a large
scale for the purposes of selling cruises. It is instead used mainly as a source of information, much like an electronic brochure. According to CLIA, 9% of repeating cruise
passengers state that they have used the Internet for their next cruise trip, but only 5%
of cruise passengers and potential travellers have ever booked a trip via the Internet,
and this has never been for a cruise.
It is evident that it will not become the sole distribution channel, but it will nonetheless co-exist with agencies, becoming a powerful tool for them in the long run. It is
expected that first time cruise passengers will go to an agency, while frequent passengers will look to the Internet for booking cruises in the middle to low category
(equating to 3 to 4 star in accordance with Berlitz classification), with an estimated
quota of 3 to 5% expected for cruise sales with RCI, Carnival, Princess and similar cruise lines.
What is certain is that the Internet:
a) has a multiplying effect, both in direct sales and via agents.
b) will make the whole process more efficient, with a consequent increase in profits.
It is hoped that within the next ten years, 20%-40% of bookings will be made via the
Internet, with a third corresponding to direct sales, and the remainder coming from
Business to Business (B2B), in other words through the agencies. CLIA believes that
the B2B portion of the market will develop even more than is expected, which is why
it is gearing its training sessions towards this area.
111
It is already a well-known fact that the Internet has a greater impact on the market in
the US than in Europe. The reason is simple: 40% of US homes are on-line, compared
to only 9% of European homes, although it is expected that this will rise to 13% by the
year 2001. According to the German international market research institute, IPK
International, the situation for holiday booking via the Internet in Europe is as follows:
-
5 million bookings by Europeans in 1998, which is 2% of total travel sales.
-
Growth in comparison to the previous year was spectacular: +300%.
-
Sales and bookings are not only for flights, but include booking of accommodation,
and car hire (500,000 bookings made).
-
As can be seen from graph 3.f, the forecast is very impressive, with sales figures
expected to increase fourfold for the 1999-2003 period. Cruise bookings will evidently form part of this increase.
3.f. Evolution of holiday bookings made in Europe by internet 1996-2003
millions
Forecast
Source: IPK International - European Travel Monitor 2000, Munich
Sample: 400,000 Europeans, over 15 years of age.
Details of more recent commercial initiatives involving the Internet are as follows:
a) The start up of digital TV, and above all the interactive Travel Channel, allows
Internet users to make on-screen bookings.
b) The Travel Shop, which began in 1998 with a telephone booking system, has
recently accepted Internet bookings.
112
c) The Travel Company has created an Internet-based system called "Cruise Control"
for travel agencies. It comprises two basic elements: a client database and a
Cruise Information Guide (ships, itineraries, ports of call, availability, prices, etc.)
d) RCC has created the "CruiseWriter" on the Internet, allowing the travel agent to
tailor make brochures for each customer.
The introduction of the CRS has been sluggish in distributing cruises, because of its
low penetration in source markets, and the relative complexity of its product. This
explains the reason why it has fallen behind the airline, hotel and car-hire sub-sectors
in the application of these booking centres, to which only travel agencies have access.
Amadeus stands out as the market leader, having launched the Amadeus Cruise in
October 2000. The following cruise lines are connected to it: Celebrity, RCI and
Princess Cruises, with Carnival Cruises and NCL expected to join shortly.
The RCC group is the most advanced in the use of the CRS, having introduced its own
CRS system in 1991, called "CruiseMatch 2000". Approximately 7,000 of the 27,000
travel agencies that sell cruises use this new system. Celebrity Cruises, which was
bought by RCC, also took on the same system. A consequence of its application is the
notable increase in the number of bookings that each company has made. The importance of the system in 1999 was clear for all to see, with 27% of its bookings from the
US source market being made via this system.
3.5.2. Other agents: independent ship managers, shipping agents and ship
brokers
There are a number of agents that play a very important role within the actual running
of the ship. They are as follows:
a) Independent ship managers
The way in which ships are operated within the sub-sector differs depending on the
size of the company and the area of operation (see section 7.1). Unlike other
types of shipping traffic (oil, grain, containers, pallets, etc.) passenger cruise
liners and ferries rarely employ the services of an independent ship manager.
Businesses have been undergoing a process of consolidation and centralization
over the last few years, resulting in a lower number of larger cruise companies. The
situation for the smaller companies is more precarious within the current climate,
and they have to ensure that the business is run on better cost/efficiency ratios.
These circumstances have favoured an increase in the use of these managers.
113
The management of passenger ships is very different from the management of
cargo ships, which is why independent ship managers tended not to be used by the
sub-sector. A wide knowledge of specific regulations is required along with an
excellent level of service and a great deal of experience. Given the lack of independent ship managers until relatively recently within the business, some companies had taken on the management of other company's ships, in spite of the potential conflict of interests that this might entail. Independent ship managers supply
officers and crew for the ship's three areas (deck, machines and hotel). They also
manage the purchasing of ship supplies, ship maintenance, insurance, dry dock
placements, and even improvements in performance and user complaints. They
can also get involved in the buying, selling and chartering of ships through brokers.
This enables the smaller cruise lines to do away with an operations department, in
an act which can be classified as out-sourcing, which only recently has become
accepted business practice.
b) Shipping agent (also known simply as agent)
They act as correspondents and local representatives for cruise companies in base
and secondary ports. They take care of the ship as well as the passengers once
the ship is in the destination port. Their main job is to supply the ships with all they
need during their port calls, including provisions, supplies, stocks30, fuel, etc. They
are also in charge of making all necessary payments and collecting payment for all
cruise trips that were sold locally by the ship manager. In general, these companies register ships from several ship managers. They also have a dual role in the
sale of the trip, in the guise of a GSA, and in organizing hotel accommodation (if
the port is a base port) and on-land activities (sightseeing, meals, sports, etc.)
just as a travel agency would.
Normally, the main shipping agents, who have a long history within the cargo shipping business, have gone on to set up their own cruise divisions. They play an
important role in the development of the cruise trip package.
c) Ship broker
Acts as a middleman in the chartering, buying and selling of ships. For obvious reasons they are not responsible for finding the passengers to fill the boat, as this is
left to travel agencies, tour operators and occasionally shipping agents. The broker's job is to keep in contact with buyers and sellers of ships, and sometimes act
as a go-between, informing both parties of any offers and counter-offers that have
been made, in the hope that the business will be completed with the signing of contracts. In order to gain some sort of idea of the extent of their business, table
3.XXXVII provides data on the major deals that were brokered in the 1996-2001
period. The financial value of the business deals that are made are not fully known,
30 Stocks: naval term for spare par ts.
114
although it can be stated that nine deals made in the first six months of 2001
accounted for 145 million dollars, while nine of the deals made in the year 2000
were for 165 million dollars.
Table 3.XXXVII. Buying, selling and chartering of ocean-going cruisers
1996
1997
1998
1999
2000
20
42
14
12
12
2001***
Buying and selling
NS
11
Average capacity*
594
705
458
540
453
587
Average age**
29,4
28,4
25,4
34,4
27,0
25,9
5
18
12
6
10
10
306
542
678
752
470
470
Chartering
NS
Average capacity*
(*) Capacity in berths; (**) Age in years. (***) First six-month period.
3.6. Main conventions and special trade fairs
This section will deal solely with the most important events devoted exclusively to the
tourist cruise sector. All events are exclusively for industry professionals and are therefore closed to the general public. They are attended by different agents from within
the market that include: airlines, IT companies, consultancies, equipment manufacturers, food & beverage suppliers, government organizations, shipping equipment suppliers, the press, port authorities, ship brokers, shipyards, cruise operators, ship managers, cruise lines, tourist offices, incoming agencies, financial services, travel agents,
tour operators and interior designers.
3.6.1. Seatrade Convention
The Seatrade Cruise Shipping Convention is held every March in Miami Beach (Florida,
US) in the city's Convention Centre, and is sponsored by the FCCA (Florida-Caribbean
Cruise Association). It is the tourist cruise sector's most important world meeting.
Visitors to the event are big players in the sector. The convention programme lasts for
four days, and covers a wide range of topics from marketing to distribution, as well as
trips, ship projects, food & beverage and human resources.
Given the success of the event in Miami and the expansion of the cruise market, its
organizer, Miller Freeman, has set up regional Seatrade conventions, with the same format as the Miami convention, including conferences and an exhibition site, as well as
a "Travel Agent Training Programme", aimed at travel agents and tour operators. These
regional conventions are as follows:
115
-
Seatrade Mediterranean Cruise and Ferry Convention in Genoa (Italy), which is
also aimed at the ferry segment. It is held in September in every even-numbered
year with backing from the ports' association MedCruise.
-
Seatrade Europe, in Hamburg (Germany), is held in every odd-numbered year and
is devoted to cruises, ferries and river cruises. It is sponsored by Cruise Europe.
-
Seatrade Asia Cruise Convention in Singapore or in Hong Kong (China), every two
years in odd-numbered years.
-
Seatrade Pacific Cruise Convention in Cairns (Australia), is held in alternate years
to the above-mentioned convention, (i.e. in even-numbered years).
-
Seatrade Middle East, Dubai (United Arab Emirates), is held every year in January.
3.6.2. Other Conventions
-
The Annual Conference & Trade Show Information, organized by the Marine Hotel
Association (MHA), is attended by the main companies, who send high-ranking
delegates. It is held every year, usually in Florida. Cruise lines, buyers and suppliers all attend the convention. It is geared more towards the commercial aspects
of the industry rather than tourist related topics.
The Marine Hotel Association is an international organization, based in Sausalito,
California (US) that is run by and for the cruise sector. Its objective is to improve
the general quality of the cruise experience. For this purpose it has the Onboard
Management Development Programme, jointly managed by Johnson & Wales
University of South Florida and The Maritime Hotel Academy of Salzburg, Austria.
They offer basic to advanced on-board hotel management programmes.
-
The Cruise + Ferry Conference is a biennial affair and is held in London in the
month of May. Some 4,000 professionals and over 250 companies attend the conference.
3.6.3. Activities aimed at travel agencies
As well as the aforementioned programme of Seatrade fairs and the PSARA programmes (see section 3.5.1), mention must also be made of the efforts undertaken by the
market leader for demand: the US.
The tourism magazine "Travel Trade" organizes three meetings a year aimed at the
retail sector. They are as follows:
116
a) "Passport to profits Idea-A-Thon" that is always held in Las Vegas (Nevada) during
the month of September.
b) "Leisure Travel Conference & Winter Cruise-A-Thon".
c) "Cruise-A-Thon", which includes ship inspections and a high-level panel of speakers.
It also convenes the Travel Summit Conference, every year during the first quarter,
which is attended by the highest-level executives within the tourism sector along with
strong representation from cruise line companies. It has no fixed location.
ASTA also pays the product a great deal of attention by organizing seminars for travel
agents, with the most notable being the ASTA Cruise-Fest, normally held in Miami in
March/April.
NACOA normally holds its annual conference in June, alternating between Fort
Lauderdale (Florida) and San Juan de Puerto Rico. It also organizes seminars and
workshops in the US.
117
4
THE PRODUCT: CRUISE PACKAGES
The traditional concept of "product" is linked to substance and format. In the case
under study, the product is made up of the itinerary that the cruise line offers on the
market. The specific, structured and marketed itineraries, along with the port
infrastructure, the ships and the distribution channels, all combine to make up the
tourist cruise offer.
4.1. Creating the itinerary
The selection of an operation area, which partially or totally contains the so-called destination regions, is considered in the preliminary phase of examining the itinerary to
be offered. The following are factors which influence selection: a) the degree of attraction for potential clients; and b) the medium-term growth prospects. This explains why
the Port Authorities and the destinations join forces to promote different operating
areas, as the cruise must be considered as a multi-destination or multi-port business.
Normally there are six main destination regions (that will be studied in detail in section
4.3), which are: Alaska, the Caribbean, Nor thern Europe/the Baltic, the
Mediterranean, the Middle East and Asia. The selection of an area for operation must
be combined with an optimum distribution of the cruise line's total fleet.
Once the area of operations has been decided, the determining factors in creating the
itinerary are:
-
the beginning and end of the holiday season for the region in question;
-
the choice of base port or ports, depending on whether it is an open or closed itinerary; and
-
the number of times a year the said itinerary is offered (frequency).
There are two seasons: winter and summer. The average frequency of itineraries varies
between two and eight, depending on the duration of each itinerary. Itineraries are normally closed loops, except for those that are called repositioning itineraries. The itinerary can be offered as a whole or just part of the journey may be reserved, which is
why some secondary ports may be used for the embarkation and disembarkation of passengers. The product normally includes stays before and after the actual cruise.
The main idea is to make the itinerary appealing for potential customers, with the ports
and destinations of the beginning and end of the itinerary of utmost importance.
The category of ports is selected as follows: a) main ports; and b) secondary ports.
Base ports are ideal locations for ship maintenance and providing basic and essential
supplies, which is why the term technical port of call is also used. Secondary ports
have a greater tourist appeal (culture, beach, leisure, fashion, shopping, etc.) in order
119
for them to be included in the itinerary. The choice of base port is made according to
three main criteria:
A) Commercial aspect, taking into account:
A1) the potential client profitability,
A2) the economic aspect and quality offered by the port,
A3) the prices to be published in the brochure,
A4) the existing competition in the area,
A5) the available sales network of: shipping agents, travel agencies and tour
operators.
B) Logistics, taking into account:
B1) the technical conditions of the infrastructure's facilities (passenger terminal,
depth of water, dock length, dock width, supplying the ship without disturbing
the passengers, manoeuvrability) and port services (navigation, ship on tow),
B2) the saturation level of docking berths,
B3) the proximity to other secondary ports,
B4) the tourist services and leisure facilities in the city and its surroundings,
B5) the accessibility to other modes of transport: proximity to the international
airport and possible connections to main cities, in the case of fly+cruise, and
the accessibility of land transport, including access to the city centre and rail
links,
B6) the possibilities of provisioning and supplying fuel,
B7) political and religious holidays, opening times of museums and city attractions
in each city visited.
C) Target customers' wishes:
C1) preferences of on-board passengers,
C2) preferences of on-land passengers: tourist attractions in the city and the
possibility of sightseeing on terra firma,
120
C3) market potential of local passengers: purchasing power, size of demand,
C4) security matters, with regard to actual physical security and political stability.
The choice of secondary ports is made according to the same basic criteria as the base
port, as previously discussed, with points B6 and C3 obviously not really being relevant, and to a lesser degree points A5, B1 and B4.
Times at sea should be balanced with port stays, as the modern concept of the cruise
ship as a destination in itself must not be forgotten. The tourist must be given the
opportunity to enjoy the on-board restaurants, service and entertainment, while never
getting bored due to an overly long voyage. The perfect distance between two secondary ports is normally set at one sailing night.
In the development and programming of itineraries, experience gained from the same
company and other companies on the chosen destination is very important.
It is interesting to note the breakdown of how an itinerary is designed, provided by
Sainz de los Terreros, Director General of Spanish Cruise Lines, in his work cited in the
bibliography (46). He believes that there are five phases that complement the marketing process, as can be seen in the graph below.
Itinerary design and marketing process
1 and 2
8 and 9
Number of months...
Phase
Phase
Phase
Phase
1
2
3
4
Itinerar y design
Market research
Make-up and cost of itinerar y
Designing the brochure
Phase
Phase
Phase
Phase
Phase
5
6
7
8
9
Promotion and distribution
Formalizing the itinerar y
Carr ying out of the itinerar y
Payment of the itinerar y
Quality control
Source: Sainz de los Terreros.
The first phase has already been discussed and its complexity depends on the complexity of the cruise line business structure and the size of its fleet. The financial aspect
of the company stems to a greater or lesser degree from the decision-makers, technical directors and marketing managers in each port, along with local authorities and the
Chamber of Commerce. Evidently, the port's own interests in actually having this type
of traffic is also an influencing factor. Initially there is a sounding out of the likelihood
121
of the port accepting inclusion in the itinerary, followed by on-site assessment of the
facilities, services, docking berths and availability of the same, links to airports, onland transport terminals, tourist areas, etc.
The cruise line must assess with regard to the points set out previously, what are its
strong points when doing business with the Port Authority. When dealing with local
authorities, given that the arrival of the cruise ship will be very beneficial to them, the
cruise lines attempt to gain greater assistance and special conditions that will benefit
their cruise passengers.
During the second, market research phase, as much information as possible is requested from the Port Authority regarding cruise forecasts, mainly dealing with possible
saturation of the facilities, to gauge whether or not the passenger will like the location,
the obtaining of discount fares from the tourism authorities, information about local
holidays, etc.
With the previously gathered information, the definitive selection of base and secondary ports is begun, which constitutes the third phase or the make-up and cost of the
itinerary. Negotiations with the Port Authorities are based on two areas: docking
berths and tariffs. With regard to the first area, the following basic concepts must be
considered:
-
the security in granting docking berths,
-
the awarding of more suitable docking berths with better operating conditions
(proximity to sea terminals, accessibility, esplanades, parking for both coaches
and accompanying vehicles, fuel and water outlets), which reflect positively on the
image and services that the cruise passengers are likely to form of both the ports
and the company itself.
The success of the independent ship manager with regard to the awarding and granting
of the most suitable docking berths depends on the following factors: the saturation
level of the port, the existing infrastructure and degree of use, and the Port Authority's
interest in capturing or consolidating the client. This is motivated by:
122
-
the pressure exerted on the port by the city.
-
the optimization of facilities.
-
the generation of business for services indirectly linked with the port.
-
the conditions and project presented by the cruise line.
-
the number of passengers in each port call and the frequency of the calls.
-
the duration of the port calls.
-
the requested services.
-
the forecasts for future operations.
-
the season of operation: winter or summer.
-
the length of time the cruise line has been a client.
-
the prestige of the company and of the ship, in so much as it influences the promotion of the port.
The fourth phase is the brochure design and production, which in tourism marketing
terms is called the packaging of the product. It is normal practice to divide the financing of this packaging between the destinations, the port authorities and the cruise
line.
The fifth phase is defined as distribution channel or network collaboration. If the programmed itinerary is completely new and it is during the off-season, then the most
important relationship is with the tour operators. This is not the only element to be
taken into account, as approval ratings amongst customers with regard to the new itinerary must also be considered. The importance of the relationship with receptive travel agencies is also paramount, as they must be able to offer suitable sightseeing trips.
The annual planning of itineraries is a great deal more complex for the larger cruise
lines. It depends on each company's structure, but more often than not it involves five
different departments. The Port Planning Department takes on a central role, and must
work closely with the other four departments, which are:
a) The Sightseeing Department, which must be involved in establishing the complementary attractions that will be offered at the base ports and the ports of call,
b) The Sales Department, which gathers information to gauge the acceptance of the
proposed itinerary among potential customers and distribution channels, especially travel agents,
c) The Fare Costing Department: which calculates the fares that will eventually be
published in the brochures,
d) The Yield Management Department, which has become ever more accepted in the
world of the tourist cruise, and which tries to avoid the pernicious and yet customary matter of discount policies.
The initiative lies firmly in the hands of the Port Planning Department, which develops
the previously examined phases, with the full support of other departments along the
way.
123
4.2. Cruise package cost
The sales price of the cruise (SPC) is the sum of the following concepts:
1. Cost of direct raw materials
2. Cost of external services
3. Direct labour salaries
4. Marketing costs
5. Indirect salaries
6. General costs
7. Profit
8. Marketing and distribution costs
The cruise line is obviously looking for the following equation to be fulfilled:
SPC > Costs
Profit > 0
(3)
in the hope of maximizing profit. In spite of the fact that cruises tend to be traditionally
sold as an all-inclusive package, the tendency is for cruise lines to obtain additional
revenue as detailed in section 4.2.1, which is why the balance (3) cannot be considered on its own. The aim is to always achieve a sales volume that is greater than the
profitability threshold (in other words to get past breaking even). It is important to note
that costs in relation to sales volume is in itself discontinuous, which explains why the
price fixing mechanisms are very complex.
Any system used for calculating tourist fares has to include the risk factor of not being
able to store the actual product. Solutions tend to improve the occupancy levels of
berths, as well as improving the degree of rotation, by using repositioning itineraries.
A major facet, due to the fact that the product cannot actually be stored, is the offer
price (discount), which many cruise lines offer when the product is close to its expiry
date, when normal sales have not reached a profitable occupancy level.
The pricing system may vary in the following:
a) Prices offered to the public, as in the case of regular lines.
124
b) In block prices that are fixed by the normal operation of the cruise. Mainly using a
method such as part-charter, which may involve Bulk Tariffs (BT), consisting of net
rates for a specific number of berths.
In the first case, the cruise lines market their own berths in accordance with a segmentation strategy, grouping cabins together to form several different price bands.
Modern management techniques, such as yield management, ensure that the berths
on offer are allocated a great deal better, thereby increasing occupancy levels, which
is the variable that most affects profitability. Each fare is given its own characteristics
defined by: the moment in which the booking was made, when payment is made, the
category of cabin and the itinerary.
The use of GDSs by some cruise lines means that the setting of prices may change,
making it more and more problematic to establish the real market price. The prices
assigned to GDS products change many times throughout the day. The situation is
almost that of an ideal market and similar to the most apt for shipping traffic.
Something similar occurs with the auctioning of holiday trips on the Internet, a process
that is slowly beginning to spread throughout the US, constituting what is called price
setting based on demand.
Cruise lines establish financial and operating conditions with:
A) Tour operators, both in selling cruise packages which include flights to and hotel
stays in the base port, and when tour operators sell pre-established quotas. The
latter scenario is very popular among European cruise lines and more often than
not tour operators hire berths with a firm commitment to buy. Quotas may also be
hired, stipulating the price according to the time when sales are closed and not
from the moment when the marketing pre-agreement was made. In this case, the
hiring is risk-free for the tour operators, which means that they have been assigned a quota at a special price, which they can sell as they choose.
The following are negotiated: commissions, special discount rates on sales, sharing the cost of advertising campaigns, advertising exchanges, financial help for
producing a brochure, integrated discounts in tour operator packages, methods of
payment, etc.
B) Recipient travel agencies, especially sightseeing tours that are not included in the
package price, as they are optional features.
C) Port Authorities. It is not only port tariffs that are negotiated, as their capacity to
act and persuade with regard to tariffs for services provided by other local suppliers must also be taken into account.
A great improvement in sales management is the companies’ use of yield management. During the eighties and at the start of the nineties, discounts were used
widely, particularly for Caribbean products. This process became more acute with
125
the US recession in 1991. Demand was stimulated by low prices. The sector continues in its use of discounts, but this is done in a more moderate way. Basically,
the mechanisms devised for calculating price variations have
changed. In the eighties, prices were raised or lowered the
Carnival Cruises President
same for all customers. This is now done by groups, thereby
Bob Dickinsonbelieves that
reducing the total amount of the discount.
the cruise product is undervalued: "Holidays in a hotel
Halfway through the nineties RCC introduced a new system
cost 50% more than on a
called breakthrough, in which the prices in the brochure were
cruise. Cruise lines could
lower for those clients who booked their trip in advance. This
increase their profits by up
has been improved and now shows "from-to" prices for each
to 50% and still be on a
cabin category and for each itinerary.
par. They could even lower
prices by 20%, given that
There is currently a range of prices for cruises, depending on
the hotel sector suf fered
when the booking is made. The market is not experiencing
so much during the ninetie
overcapacity, but rather demand is low. It is absolutely necesthat it can no longer redusary to create demand with better offers such as, for example,
ce its prices and still make
three for two deals, as the North American consumer simply
a profit.
does not expect to pay full price for anything."
Table 4.I. Comparison between different 7-night holidays (in dollars)
Component
Basic price
Flight
Transfers
Meals
Service charges
Tips
Taxes
Excursions
Entertainment
Drinks
Total
Per day
On-land holiday
680
400
Inclusive
350
93
n/a
76
35
55
150
1,839
263
Eastern Caribbean cruise
1,475
Inclusive
Inclusive
Inclusive
n/a
60
89
40
Inclusive
100
1,764
252
Source: CLIA.
It is interesting to note the comparison between both types of holiday made by CLIA in
table 4.I. The cruise's "all-inclusive" feature is well reflected in the table. Cruise lines
from the upper end of the market segment, 5 and 5+ star, use all-inclusive formulas to
the full, but this is not the case with the others, as the loss of on-board revenue would
have to be reflected in the price published in the brochure. Nevertheless, there are allinclusive experiences within the 3 and 4 star segment: tips are included in the cruise
sale price and drinks may also be included. Thomson, hoping to repeat the success of
the all-inclusive formula of its hotels, has announced that it will begin all-inclusive packages in the Caribbean and then in the Mediterranean for its ship the "Topaz". It is a
126
little early to judge its success, but this initiative has not been copied by any of its
rivals. The trend seems to be the opposite, as reflected in section 4.2.1.
Table 4.II registers published brochure prices of the main cruise lines, measured in
dollars/day, based on a double cabin, with no flights included and taking an average of
peak and low seasons for the US source market. Examination of the table reveals a
decrease in the general average price that can be attributed to the price cut in the
offers of RCI and Carnival, due to the improved profitability of the modern and larger
cruise ships. NCL's drop in prices however, derives from another source, as it is a clear
attempt to capture quotas by price, but without changing the platform of operation. The
tariff bands defined in the table coincide with the berth classification that was made
in section 3.2.
Table 4.II. Prices published in the US (in dollars)
Company
Carnival Cruises
Celebrity
Costa
Orient Lines
Disney
RCI
Star Clippers
Princess
HAL
Norwegian
Crystal
Windstar
Cunard
Radisson
Seabourn
Silversea
Average
Price brackets
1997-1998
188-246
205-268
158-413
225
209
237-346
215
300-375
291-368
261-355
448-465
471-489
410-925
550-613
767
850
158-925
1999-2000
143-231
201-360
172-416
225
209
168-343
275
300-375
255-375
110-170
468-475
390-415
509-632
650
589-907
850
110-907
Average price
1997-1998
217
236.5
285.5
225
209
291.5
215
337.5
329.5
307
456.5
480
667.5
581.5
767
850
425.5
1999-2000
Carnival Cruises
Celebrity
Costa
Orient Lines
Disney
RCI
Star Clippers
Princess
HAL
Norwegian
Crystal
Windstar
Cunard
Radisson
Seabourn
Silversea
Average
Tariff band
1997-1998
188-246
205-268
158-413
225
209
237-346
215
300-375
291-368
261-355
448-465
471-489
410-925
550-613
767
850
158-925
Source: Own study based on data from the magazine Travel Trade.
It can almost be said that the brochures merely give a rough idea of prices, given that
the published prices apply to only 25% of packages sold. The market has a capacity for
accommodation that is growing rapidly and there are a multitude of prices thanks to
the use of yield management and discount offers such as: 2 for the price of 1, advance booking, last minute bookings, etc. These aggressive discount policies have reached such an extent in the US market that the Mediterranean has been offered for 100
dollars/day, when the normal minimum price was 120 dollars/day.
Another important factor in cruise+flight package growth has been the creation of airline company loyalty programmes. Flights can be obtained by the customer in exchan127
ge for accrued air miles, which is why many US companies opt to publish only the cruise portion of the price. This explains the reason for the drop in fly & cruise sales in the
US market. Some airline companies, such as British Airways, offer special cruise discounts within their loyalty programmes in association with P&O Cruises, Carnival
Cruise Line, etc.
Events which affect the tourist's feeling of security also have an effect on prices, as
there is a drop in demand. This was the case with the war in the Balkans, which provoked a drop in 1999, to 399 pounds/package for the summer in the Mediterranean on
a fly&cruise package and 599 pounds/package for the Caribbean.
In the UK, the ratio between price/cost is more advantageous for tour operators than
for traditional cruise lines, because of the competitive edge arising from their vertical
integration, as reflected in tables 4. III and 4.IV. Tour operators have their own airlines
and combine cruises with their holiday programmes in their own resorts or contracted
hotels. Discounts become more widely available thanks to the entry of British tour operators into the market, using the same sales techniques they apply to other tourism products.
Table 4.III. Prices* of fly & cruise packages in the Caribbean (winter 1998/1999)
9 nights
15 nights
Airtours Sun Cruises
669
979
Thomson Cruises
799
1,159
TOUR OPERATORS
TRADITIONAL CRUISE LINES
P&O
n/a
1,695 (13 nights)
Princess
1,095
1,645
RCI
NCL
999
995
1,281 (13 nights)
1,885
(*) calculated in pounds sterling from UK brochures.
Source: Anthony Peisley
According to PSA data, almost half of the cruises booked in the UK in 1997 (44%) were
sold for less than 1,000 pounds. It is interesting to compare this to 1993 figures, when
only a quarter were sold for less than 1,000 pounds. This trend continued in the year
2000, with 51% of packages being sold for less than 1,000 pounds, which drove the
average price down by 8.7%, from 1,169 to 1,081 pounds. The reason for the drop in
average prices in the last few years can be found in the increase in fly & cruise packages to the Mediterranean, which tend to be shorter in duration.
128
Table 4.IV. Prices* of cruises in the Mediterranean (summer 1999)
TOUR OPERATORS
Aitours Sun Cruises
Thomson Cruises
First Choice
Traditional cruise lines
P&O
Fred Olsen
Cunard
7 nights
499
499
589
14 nights
829
899
999
695
1,128020
1,148 (8 nights)
1,395
1,440
3,040
(*) calculated in pounds sterling from UK brochures.
Source: Anthony Peisley
The general reduction in prices over recent years has been more notable in summer
(28% of holidays cost less than 500 pounds in the year 2000) than in winter (8%). This
is explained by the shorter average cruise duration, which implies lower prices, coupled
with the arrival of packages that are accessible to the public at large and are therefore a great deal cheaper. Basically this is the same public that also books on-land packages with tour operators. This can be seen more clearly in the summer season (see
table 4.VI.) in the northern hemisphere, than in the winter season (also northern hemisphere), which attracts a great deal more senior citizens.
The German market is, however, different, with an increase in prices since 1996.
According to data supplied by BRD Kreuzfahrten, who measure average prices in the
German market that also include flights within the package, prices rose by 5% in 1998,
reaching 362 DM/day or 3,872 DM/package. In 1999 this was 379 DM/day, an increase of 4.7%, and 3,905 DM/package (+0.9%) and in 2000 it was 381 DM/day (+0.5%)
and the package worked out at 3,848 DM/day (-1.5%), given that the average cruise
duration dropped by 0.2 days. Alongside this, total revenue increased by 13.1%, higher
than the number of packages sold. Along with lack of development within the German
market, its different behaviour can be attributed to the reduction in the 3 star offer, the
bulk of which were cruisers from the former Soviet Union that were retired from service in the nineties. The reverse trend of 2000 is probably down to the fact that P&O has
decided to enter the market, through Aida Cruises.
129
Table 4.V. Evolution of prices in the British market 1994-2000 (in pounds sterling)
% passengers
< 500
501-1000 1001-1500 1501-2000 2001-2500 2501-5000
>5001
2000
23
22
24
13
7
8
4
1999
24
27
29
10
4
5
1
1998
11
38
31
10
6
4
1
1997
5
39
25
15
7
8
2
1996
6
34
25
15
6
10
3
1995
3
36
22
13
9
14
2
1994
3
22
34
25
8
6
2
2000
30
23
22
9
5
6
4
1999
30
31
24
7
3
5
1
1998
12
41
31
9
5
3
0
1997
7
49
23
7
3
8
2
1996
8
43
22
8
4
11
3
1995
2
37
21
14
8
15
3
1994
2
21
35
26
7
6
3
Fly & cruise
Source: PSA
Table 4.VI. Distribution of prices in the British market by season for the year 2000 (in pounds sterling)
% passengers
< 500
501-1000 1001-1500 1501-2000 2001-2500 2501-5000
>5001
Total
Summer*
Winter*
28
21
22
12
7
7
3
8
25
29
16
7
9
5
Fly & cruise
Summer*
40
21
19
7
4
5
4
Winter*
10
28
29
14
6
8
5
(*) Northern hemisphere
Source: PSA
4.2.1. Revenue generated on-board
On-board spending is an ever more important part of cruise line revenue, with figures
often reaching 35% of the total. A recent study, carried out by the North American company Market Scope, states that, on three, four and seven-day Caribbean cruises, passengers under 45 years of age spend an average of 357 dollars, 45 to 65 year olds
spend 345 dollars and the over 65s spend 242 dollars. Most is spent on gambling and
drinking, together representing 50% of the total. Spending on sightseeing trips and playing sports on-land is 124 dollars, 144 dollars and 94 dollars for the age groups previously described, while spending in on-board franchises or shops is 103 dollars, 116
dollars and 123 dollars respectively. Europeans tend to spend less than their US and
Canadian counterparts, with an average of 30 dollars spent in on-board shops.
130
The distribution of revenue generated on-board for NCL cruises, excluding the bar and
gambling, is as follows: clothing/fashion (31.6%), jewellery (31.9%), gifts (11.5%), perfume (8.5%), spirits (3.0%), sweets (2.5%), tobacco (1.7%), cosmetics (1.3%) and
others (8.0%). See graph 4.a.
The general trend is to add an even greater number of revenue generating elements
onboard the 3-4 star categories. The "Grand Princess" has a virtual reality centre and
each of the games on offer is charged separately. On RCI's Eagle class the customer
has to pay for ice-skate hire in order to skate on the ice skating rink. The new Radiance
class also has two paying restaurants. The majority of modern ships have computergenerated golf courses, which also have to be paid for. There has also been an increase in the availability of satellite telephones, Internet and e-mail in each cabin. On-board
sales are even higher in Asia, and above all in Japan, with the generalized formula of
the add-on.
4.a. Breakdown of revenue generated on-board
Source: Norwegian Cruise Line
Cruise lines state that charging people also helps to keep consumption within reasonable limits, as well as recouping the investment of millions of dollars on facilities such
as the ice-rink and the virtual reality centre. The greater offer of activities and services and the charge for use is a direct consequence of the increase of the platform offered by modern cruises as well as the greater demands of the customers, but this comes
at the cost of undermining one of the main attractions of the sector, which is the allinclusive price.
4.3. Main regions of operation and destination
The growth in passenger fleet capacities means a parallel increase in the amount of
destinations on offer, with the most significant result being the transfer of the
Caribbean experience to other areas. This process is speeding up with the entry into
131
service of the VLCVs, which have been designed to sail exclusively in the Caribbean,
while other vessels under 70,000 GT will consequently be repositioned to other areas
where the competition is not as strong. The focus of attention will therefore centre on
other destinations, especially in Alaska and the Mediterranean.
The summer-winter season, as stated in section 4.1, is linked to the destination region.
Graphs 4.b and 4.c reflect the movement of cruise capacity from one stage to another
depending on the season, and it is interesting to note the shift from the Mediterranean,
Atlantic Europe and Alaska (April-September) to the Caribbean (October-March). The
fact that the VLCVs are post-Panamax ships means that there are several restrictions
imposed on the actual location of these vessels, especially between the Caribbean and
Alaska, and that the number of crossings through the Panama canal will be limited over
the next few years.
4.b. Capacities offered worldwide by season in 2000 (thousands of berths x day)
April-September
October-March
Another important fact is that the search for new destination regions is coupled with
the stimulation of local demand. This, along with the actual placement of the ship, are
two factors which are very closely linked in achieving optimum running of the cruise.
The large cruise lines are also trying to reduce their great dependency on US and
Canadian demand. RCI, for example, has set a target of 15% - 20% of its customer base
coming from other markets and Carnival has increased its share in non-US source markets from 5% to 10%.
132
4.c. Capacities offered in the UK by season in 2000 (thousands of berths x day)
Fly & Cruise
From British ports
Source: PSA.
The role played by the Mediterranean in all of this is the key to success, having achieved fully autonomous development which is practically independent of the US and
Canadian markets. In the face of continued increase in supply, cruise lines need to find
new destinations. The length of the flight from the US is an important factor, limiting
the appeal of cruises along the Asian coast, in spite of all the efforts that have been
made to change this. The region has been reserved for Asian cruise lines and above all
Star Cruises. This is another reason why new markets have to be found, with the South
American market the most promising of all, as it has hardly been utilized by the big cruise companies.
The destination regions of Asia-Pacific and South America will play an important role in
absorbing increases in capacity that will be incorporated within the next few years.
Over the long-term, and to a lesser extent, the same will also happen with other subregions such as: Australasia, the South Pacific, the Middle East/Arabian Gulf, South
Africa and the Indian Ocean. All of these regions are sunny during the winter (in the northern hemisphere) and can therefore potentially become a substitute for the Caribbean
during this part of the year.
The distorting effect of the events of September 11th on the deployment of fleets has
been noticeable, given that it has greatly affected the main source of cruise demand,
which is the US. Although the effects may be transitory, it is nevertheless worth
noting briefly the consequences of these events.
a) A notable increase in the sale and supply of packages that do not include flights,
given the initial fear of flying and that 75% of US demand is based around coastal
states. This has favoured the incorporation of new base ports.
b) An increase in destinations close to the US, including: Mexico, Alaska and of course the Caribbean, to the detriment of the Mediterranean. This destination, however, has been compensated by the increase in European demand, specifically
133
British, who prefer to stay in the area, and in winter (northern hemisphere), which
is an interesting line of business.
c) It has accelerated the process of business consolidation, with effects on costs
(higher levels of security), operations (slower embarkation and disembarkation and
a consequently lower turnaround of ships) and revenue (drop in demand and heavy
discounts). The bankruptcy of Renaissance is a clear case, with a consequent
reduction in US supply of 11% in 2001 and 7% in 2002.
Table 4.VII Capacities offered in the US and Canadian markets (thousands of berth days)
134
Region
Caribbean
The Bahamas
The Mediterranean
Europe
Western Mexico
Alaska
Bermuda
Trans-Canal
Hawaii
South Pacific
Africa
Far East
South America
Transatlantic
TOTAL
1987
8,828
1,922
841
358
1,131
1,715
1,141
970
603
353
0
466
620
339
20,377
%
43,3
9,4
4,1
1,8
5,6
8,4
5,6
4,8
3,0
1,7
0,0
2,3
3,0
1,7
100,0
1995
15,255
2,761
3,478
1,583
1,754
3,008
1,095
2,277
602
574
347
327
256
479
35,662
%
42,8
7,7
9,7
4,4
4,9
8,4
3,1
6,4
1,7
1,6
1,0
0,9
0,7
1,3
100,0
2000
21,510
3,200
6,277
3,745
2,680
4,197
988
2,573
2,857
1,155
503
202
826
1,016
53,863
%
39,9
5,9
11,7
7,0
5,0
7,8
1,8
4,8
1,6
2,1
0,9
0,4
1,5
1,9
100,0
Source: CLIA.
Table 4.VII shows the offer of berth days by region for the US and Canadian source markets. It can be clearly seen that the Caribbean (the Caribbean + the Bahamas) is the
number one destination, with almost half of the capacities deployed. Europe (Northern
Europe + the Mediterranean) occupies second place with 18.7%, followed by Alaska
(7.8%). The highest increases for the 1987-2000 period can be seen in the European
end of the market, rising from a share of 5.9% to 18.7%, i.e. a tripling of its share in a
market in full expansion, mainly at the cost of the Caribbean. Also see graph 4.d.
4.d. Capacities offeres in the US and canadian source markets (thousands of berths x day)
1987
1999
Source: CLIA
Given the enormous weight of North American demand over the world, it is widely
accepted that CLIA statistics can be extrapolated without reflecting a major difference in the total. However, it is interesting to note the information given by the Swedish
Marine Trading Group in their publication entitled ShipPax Information, that calculates
figures month by month and takes into account the world ocean-going fleet. This information can be seen in graphs 4.e and 4.h, which shows that the only real difference is
in the Asia Pacific region, with a share of 7.9% as opposed to a figure of 4.1% given by
CLIA for the year 1999.
4.e. Monthly distribution of global capacities in 1999
Source: ShipPax Information
These graphs give a clear indication of the importance of the season for different
regions.
135
4.f. Monthly share of capacities in Europe in 1999
4.g. Monthly share of capacities in the US in 1999
136
4.h. Monthly share of capacities in Asia-Pacific in 1999
The relationship between Europe and the Caribbean is second-to-none. A more detailed
analysis in the light of ShipPax's data allows one to state that, contrary to what it may
seem, the majority of ships in Europe which sail between April and September originate in South America, Africa, the Indian Ocean and all over the world, and not just the
Caribbean. It is worth mentioning two cases in point: those ships based in Europe that
are transferred to the Caribbean in the October-March season, and the opposite, whereby ships based in the US are transferred to Europe during the April-September season. The transfer of the VLCVs is made from the Caribbean to the Northeast Atlantic
(the "Carnival Triumph") or to Europe (the "Grand Princess") in the months of March
and April.
European demand is mainly based around the Mediterranean, which is a warm sea
during the months of October to March, playing a similar role to the Caribbean for North
America. The jump from 133,000 to 200,000 cruise passengers in the UK in just one
year is a very significant fact, with the amount of cruises having increased fivefold in
the 1994-99 period, mainly due to the tour operator push within the market, basing
their formula around the fly & cruise package, as can be seen from the table below.
137
Table 4.VIII. British source market by main destinations
Region
1995
1996
1997
1998
1999
2000
The Mediterranean
37,000
41,000
43,000
60,000
38,000
45,000
Atlantic Islands
20,000
25,000
23,000
22,000
28,000
37,000
The Baltic
18,000
24,000
34,000
37,000
46,000
37,000
Ports within the UK
100,000
118,000
126,000
166,000
143,000
45,000
The Mediterranean
104,000
133,000
200,000
226,000
333,000
288,000
80,000
91,000
116,000
160,000
143,000
141,000
Total departures from
Caribbean
Atlantic Islands
n/a
n/a
n/a
19,000
39,000
26,000
8,000
12,000
9,000
8,000
9,000
14,000
Total "Fly & Cruise"
228,000
284,000
381,000
454,000
589,000
561,000
TOTAL
340,000
416,000
522,000
635,000
746,000
754,000
The Baltic
Source: PSA.
Geographical proximity plays a major role in the source market-destination relationship,
in spite of the major price reductions in long-haul flights. In simple terms, and in light
of table 4.IX, it is possible to speak of the European Union-Mediterranean pairing and
the US-Caribbean pairing. Note also the great weight of traffic in the Europe-Caribbean
and Germany- Baltic Sea pairings.
Table 4.IX. Base and destination matrix
Base
Destination
Germany
United Kingdom
Share (%)
97
Share (%)
France
United States
Share (%)
Share (%)
2000
97
2000
97
2000
97
2000
The Mediterranean
33.6
32.7
46.6
44.2
53.6
54.5
11.3
11.7
The Baltic
20.9
19.3
8.2
7.8
12.5
10.5
6.0
7.
Western Europe/Atlantic Islands
10
11.1
4.5
8.4
0.1
0.1
-
USA/Caribbean
21
25.6
22.2
18.7
23.2
28.6
57.0
Alaska
Overseas (USA not incl.)
TOTAL
47.6
0.0
0.0
0.0
0.0
-
-
8.4
7.8
14.5
11.3
18.5
20.9
10.6
6.3
25.7
25.9
100.0
100.0
100.0
100.0
100
100.0
100.0
100.0
Sources: Own study based on data from BRD Kreuzfahrten, PSA, Croisimer and CLIA.
Table 4.IXa shows the relationship between the main cruise lines and the operating
regions that have been defined in this chapter, measured against the supply in 2002 in
accordance with the Berlitz Guide (see bibliography 55).
138
139
Source: Own study based on data from the Berlitz Guide (see bibliography 55).
Table 4.IXa. Operating regions of the main ocean-going cruise lines 2002
4.3.1. The Caribbean
The modern concept of the cruise grew up around Miami as a base port, which is why
one should not be surprised that the region maintains its dominant hold on the market,
with a worldwide share of over 50% of berths supplied. This statistic changes in the
months from April to September when the share drops to 23%. It is a typical kind of destination, which can be defined, instead of the traditional sun and beach holiday, as sun
and sea. The keys to its success are: its proximity to the world’s main source market,
its year-round temperate climate, the generalized use of the dollar as a means of payment, the vast English-speaking population, its cultural diversity (colonial, Mayan…)
and the general political stability. Nevertheless, the process of globalization is eating
away at its high market share.
Three relevant facts stand out:
a) The introduction of larger capacity ships. Examples include the introduction by
Carnival, RCC and P&O Princess of VLCVs into the region, operating all year round.
Profits increase drastically with this intensive large-scale operation. Carnival
currently has three of these ships in service and another three under construction,
Princess has two in service with another three under construction and RCC also
has three in service and another two under construction, which will add another
24,000 berths to the market for the 2002-2005 period.
b) The operation of European companies in the region. This will be examined a little
later on.
c) The relationship between the islands* and the cruise lines. The region is characterized by the fact that the ship is a destination in itself, and the ports of call are
merely additions to the trip. The ship is simply a floating hotel. This has created
major competition between cruises and on-land destinations, which are backed up
on both sides by aggressive advertising campaigns comparing the price of one
holiday option with the other.
In an attempt to ease the tense situation the Florida Caribbean Cruise Association
(FCCA)31 was created, as a forum and mutual meeting ground for cruise lines operating in the region and for island governments, in order to discuss joint problems
and highlight the financial implications that the cruises have on the islands.
The Caribbean states proposed the endorsement of passenger taxes, which were
required in order to compensate for the increase in costs of decontaminating the
environment. This is why cruise lines, with RCI at the head, have begun to incorporate gas turbines in their new vessels, which although more expensive, are less
polluting than diesel engines.
*
140
The extent of competition between on-land and seaboard holidays is such that each company has its own private
island, with the exception of Carnival, as this goes against its "Fun Ship" philosophy. These private islands have all
manner of facilities, including shopping centres, yacht clubs, scuba-diving, etc.
31 See section 3.1.
The region is normally split into five country subdivisions: the Bermuda Islands, the
Bahamas, Western Caribbean, Eastern Caribbean and Southern Caribbean. See Table
4.X. There are fluctuations in the internal sharing out of Caribbean destinations. This is
what happened in 1995, a year of considerable changes that included a 53% increase
in berths offered in the Western Caribbean and a 19% drop in the Bahamas. The reason lay in the high taxes that were imposed that year by the Bahamian Government. In
order to ease its impact, the Cruise Ships Overnight Incentives Act was approved, allowing casinos and shops to remain open throughout the stay of the ship in the port, and
offering benefits to the regular cruise lines, by reducing the tax per passenger, depending on the total number of passengers received per year.
Table 4.X. Sub-regions within the Caribbean
Western Caribbean
Eastern Caribbean
Southern Caribbean
Jamaica
American Virgin Islands
Mexico
Cayman Islands
British Virgin islands
Belize
Turks and Caicos Islands
Saint Martin
Honduras
Cuba
Dominica
Nicaragua
Haiti
Barbados
Costa Rica
Florida
Saint Lucia
Panama
Dominican Republic
Martinique
Colombia
Puerto Rico
Guadeloupe
Venezuela
Saint Vincent and the Grenadines
Aruba
Saint Kitts and Nevis
Curaçao
Antigua and Barbuda
Bonaire
Granada
Trinidad and Tobago
Anguila
Monserrat
Saba
Saint Eustatius
Source: Own study.
The Eastern Caribbean was the first sub-region to implement 7-day itineraries and
continues to be one of the highest growing areas, mainly thanks to its success in being
able to capture the first-time cruise passenger.
The Bahamas and the South Caribbean are aimed more at the seasoned cruise
passenger in search of different itineraries. Both sub-regions also have itineraries of
different durations: the Caribbean is normally offered in a 7-day package, while the
Bahamas tends to have 3-4 day trips. The Bahamas is an all-year round destination,
with hardly any difference between one season and the next. The Eastern Caribbean
has a larger ship presence during the winter, and its boats can be found in the
Mediterranean or in Alaska during the summer. These two distinctive traits begin to be
blurred with ships that operate throughout the whole year either from Miami, or San
Juan de Puerto Rico and cruises that combine three days in the Bahamas with 4 days
141
on the west coast of Mexico. Product innovation is prevalent in this setting, including
the 7-day "Texaribbean cruise" offered by NCL from Houston.
Another factor that is helping to reduce the saturated supply in the Caribbean is the
disappearance of fringe companies, who are unable to compete on price, such as
Premier Cruises and Commodore Cruises in 2000. In spite of this, there has been no
tonnage reduction in the Caribbean, nor does there appear to be any possibility of this
within the next few years. The entry into service of the new post-Panamax ships in the
2002-2005 period, along with the effects arising32 from the events of September 11th,
have helped create an increase in capacities for 2002, which means that a few years
will have to pass before supply in the Caribbean is reduced.
The main operators in the Caribbean are Carnival, RCI, Celebrity and NCL. These four
companies account for two thirds of the demand, although Disney is increasing its
short-cruise market share in the Bahamas. Princess, which only operates in the winter,
will once again operate all year round with the arrival of its "Grand Princess" class of
ships. HAL, which had also withdrawn from summer operations because of its
commitment to Alaska, has now returned with the "Zaandam". By company groups,
RCC and Carnival have absolute control of the market, with a 70% share of supply.
European operators control around 10% of the market, the most notable of which are
the Italian cruise lines Costa and MSC and the British companies P&O, Airtours and
Thomson. A common feature of these companies is that they use other base ports as
opposed to the traditional ports of San Juan de Puerto Rico, Miami, Port Everglades
and Port Canaveral. This is due to the fact that the majority of 7-day itineraries are
combined with holidays in some part of the Caribbean, mainly in the Dominican
Republic, Jamaica or Mexico, to make up a two-week package holiday, given that the
length of the flight from Europe is 8-9 hours.
4.3.1.1. Main Ports
Miami is the main port, accounting for almost 3.4 million passengers33 in 2000 (See
table 4.XII). Passenger traffic has remained almost constant since 1987, with slight
variations, as increases in traffic affecting the region have been absorbed by the
neighbouring ports of the Everglades and Canaveral.
Miami is the world’s main base port, with a total of 17 ships, including the majority of
VLCVs currently in service, which is why it can be said that it is specializing in these
types of cruises. The following companies use the port: Carnival, Cunard, NCL, RCI,
Hapag-Lloyd and Seabourn. Embarkations and disembarkations are mainly centred
around the weekend (from Friday to Sunday), as the itineraries offered normally last 3,
4 or 7 days.
According to the Official Directory on the Port of Miami (See bibliography 40), the fiveyear port improvement programme, valued at 346 million dollars, has helped to renew
142
32 The "Rhapsody of the Seas" will have its base por t in Galveston (Texas) during the summer of 2000,
instead of cruising through Nor thern Europe as had been previously planned. The "Millennium" and the
"Mer cur y" will swap the Mediter ranean/Nor ther n Europe for sailing around the South
Caribbean/Panama Canal.
33 Figures published by the por ts themselves are dif ficult to compare, as some include embarkations,
disembarkations and transfers in the total, while others only include an average of embarkations and
disembarkations. This is why the sum of these three concepts is taken into consideration for the purposes of calculation, unless other wise stated.
existing structures and installations as well as building new ones. Given the great
investment in port installations that they require, the dependence between the VLCVs
and the ports is high.
A description of the port’s main features can be found in table 4.XI. There are two main
areas of activity: container ship traffic and cruises. It has eleven terminals for
passenger traffic, which are all along the main canal and closer to the city centre,
occupying a third of the available space. RCI and Carnival have become involved in the
management and development of the terminals. As a result, terminals 8 and 9 have
been renovated and extended, at a cost of 28 million dollars, in order to accommodate
the "Carnival Destiny". Carnival has signed an agreement with the port, agreeing to pay
180 million dollars over fifteen years, obtaining a reduction in passenger tariffs in
exchange for keeping Miami as the base port for six of its ships over the same period.
Terminals 3, 4 and 5 have been renovated at a cost of 75 million dollars, in order to
accommodate the "Voyager of the Seas", and were opened in March 2000. There are
new waiting rooms, separating economy class from first class passengers, as well as
duty-free shops. They are the largest and most technologically advanced cruise
terminals in the world, able to cope with a high level of passenger embarkationdisembarkation (8,400 passengers/hour).
Table 4.XI. Main features of the Port of Miami
Surface area:
Total linear measurement
Docking:
Ro/Ro docking:
Firefighters:
Passenger terminals
301.2 ha
9,144 km
6 km in total for docking. Loading and unloading along the length of the dock
via mobile cranes of up to 200tm. Loading with 10 gantry cranes
on the container docks.
10 docks (2 platforms with 2 docks and 6 ramps) for loading from the bow
and the stern. Approx. 1.31 km of docks for articulated ramps
for side loading ships. 2 additional docks
under construction. Approx. max. cap. 18,900 –22,000 TEUs34.
County firefighters: water, extinguishers, hoses, Coastal Tug and
Barge Inc. also offer F/P35 services
11 terminals, with the following features:
Terminals 1-5 and 10: Length = 982 m Draught = 11 m
Terminal 6:
Length = 229 m Draught = 9.75 m
Terminals 8 and 9:
Length = 512 m Draught = 11 m
Terminal 12:
Length = 442 m Draught = 7.6 m
Source: Port of Miami
Revenue generated in the port of Miami is growing year on year. In 1999 the figure
reached 64.5 million dollars, with 50% coming from cruise traffic, while in 1989 it
increased by 64% and total turnover was 30 million dollars. Port business is important,
adding over 8 billion dollars per annum to the local economy.
34 Load capacity of container ships is measured by TEU (twenty-feet equivalent unit)
35 F/P: Fire Protection.
143
Other ports:
• Port Everglades lies some 33 Km to the north of Miami, and had an annual traffic
of 2.7 million cruise passengers in the year 2000. A third port is also developing
rapidly. This is P. Canaveral, to the east of Orlando, which serves as a base for
Cape Canaveral Cruise Lines, some Carnival ships, and since 1998, Disney Cruises
as well. Along with Miami they make up 50% of total traffic in the region.
• San Juan de Puerto Rico is a major base and secondary port. Its outstanding
location, the excellent port-airport connections and its attractive Hispanic colonial
culture are its strong points. It can take ships of a total length (Ltot) of 268m or
less. It is staking much on the future: a new terminal will be opened in the year
2002 at a cost of 65 million dollars, capable of accommodating six cruise ships.
RCC has invested in the Viejo San Juan terminals so that its VLCV the "Adventure
of the Seas" can use it as its base port.
Table 4.XII. Cruise passenger arrivals to Caribbean destinations. 1990-1999 (in thousands)
Country
Antigua and Barbuda
Aruba
The Bahamas
Barbados
Belize
Bermuda
Bonaire
British Virgin Islands
Cayman Islands
Cozumel
Costa Rica
Cuba
Curaçao
Dominica
Dominican Republic
Granada
Guadeloupe
Haiti
Jamaica
Martinique
Monserrat
Puerto Rico
St. Kitts and Nevis
St. Lucia
St. Martin
St. Vincent and the Grenadines
Trinidad and Tobago
American Virgin Islands
Venezuela
TOTAL
1990
227.3
130.0
n/a
362.6
n/a
n/a
n/a
n/a
361.7
n/a
n/a
n/a
158.6
n/a
n/a
183.2
n/a
n/a
385.8
n/a
n/a
n/a
n/a
101.9
515.0
74.5
n/a
1,119.6
n/a
n/a
1993
238.4
251.1
2,047.0
428.6
5.9
154.7
17.4
113.2
605.7
744.0
n/a
n/a
182.9
87.8
27.8
200.1
262.5
n/a
629.6
428.7
8.8
968.1
83.1
154.4
659.9
69.3
32.6
1,208.7
n/a
9,610.3
Source: GP Wild (International) Ltd. Quoting the Caribbean Tourism Organization/OMT.
144
1996
270.5
316.8
1,687.1
510.0
0.2
181.7
14.9
159.6
771.1
985.7
159.0
n/a
173.1
193.5
110.9
267.0
589.5
250.4
658.2
408.4
0
1,025.1
85.8
182.2
657.4
63.2
46.4
1,316.4
200.6
10,875.3
1999
328.0
289.0
1,981.5
432.9
34.1
192.7
14.8
180.7
1,035.5
1,304.1
0
0
220.7
202.0
281.4
245.5
292.7
243.3
764.3
339.1
0
1,148.6
137.3
351.2
615.6
47.7
57.2
1,402.7
115.1
12,257.7
• Barbados is building a new mooring quay for two SuperLiners in 2003.
• Bahamas Freeport Harbour will finish the building of a 10 million dollar terminal
and facilities in 2002.
• The port of Cozumel along with its associated facilities of Playa del Carmen and
Cancún (Mexico), have a promising future, given the excellent commercial area in
which it is located, its port facilities (it has mooring berths that accommodate
cruisers of Ltot ≥ 275m) and its historical and cultural interest (Mayan civilization). Its main activity is as a secondary port.
• Jamaica stands out in the Western Caribbean, and is currently undergoing major
improvements. One of these is the investment of two million dollars in Port
Antonio. Along with the ports of Ocho Rios, Montego Bay and Kingston/Port
Royal, it is estimated that it will reach a figure of 550 port calls in 2002.
• The port of St. Thomas (American Virgin Islands) in the Eastern Caribbean has one
of the highest rates of traffic in the area. It is worth noting that both RCI and CCL
are investing 20 to 35 million dollars so that the port may accommodate the new
generation of Panamax-max36 ships. Together with St. Croix and St. John, it had
1,134 port calls in the year 2000.
• The Southeast Caribbean is an area of rapid growth with a series of new facilities
from Progreso (Honduras) to Panama. Costa Maya, Belize and Progreso offer excellent possibilities for 7-night cruises because of the distances between them,
which is why there is currently talk of a new hub south of Cancun. An investment
of 120 million dollars on new facilities for 2002-2004 is currently underway in
Progreso (gateway to Merida and the Mayan ruins). It is hoped that Costa Maya
will attract 400,000 cruise passengers in 2002 and 650,000 in 2003. It is calculated that Belize, in Central America, will achieve a figure of 76 port calls in 2002,
thanks to the attraction of the Mayan ruins and the coral formations.
4.3.2. Alaska
This is the most specialized region of all, a place where the tourist is in search of nature, as opposed to the Caribbean (sun+beach+sea). European competition lies in the
Norwegian fiords. On-land excursions are a very important factor when tourists make
a decision to travel to the area.
The characteristic features of its target customers are that they are mainly young and
that it will probably be their second or third cruise trip, so they are not first-timers. This
36 Panamax-max: ships that are able to cross the Panama Canal, but whose tonnage is over 80,000
GT. The Panama Canal's sluice system restricts the maximum beam of the ship (Bmax = 32.25 m)
as well as its length (Ltot= 294 m), preventing any ships with a capacity of over 1,500 ber ths from
passing through. In order to increase this, a larger superstructure is being planned, with a reduced
beam, in order to avoid transverse stability problems, and thereby increase the number of sea view
cabins with a balcony. This solution is expected to allow ships to reach a tonnage of 100,000 GT
with 2,500 ber ths whilst maintaining their Panamax ship status.
145
is why Carnival and HAL are designing excursions with a large element of active tourism,
such as mountain biking and trekking, in order to attract the younger end of the market.
It is one of the most rapidly growing regions, and is third only to the Caribbean and
Europe, with a share of 11%. It currently attracts 500,000 cruise passengers a year,
with 80% of them coming from the US. It has grown 80% since 1990, thanks to the
region's unspoilt natural setting, the greater distances travelled by the ships and the
increase in the major city-to-city flights in the US. 1996 was when the boom began, with
a supply of 500,000 berths, exactly double that of four years previously. The increase
has dropped since then for environmental reasons.
The season has been extended, starting at the beginning of May and continuing until
September (see graph 4.g). There are two factors which limit its growth:
a) Infrastructure: ports are at full capacity, with HAL, for example, having to spread
its departures over five days a week.
b) Environment: access to the Glacier Bay reserve is already reaching its limit; even
so, the US National Park Service is considering increasing the number of entry permits it awards, from 107 to 184.
As previously stated, second-time passengers are the ones most influencing what is on
offer. The fact that it is now the third most popular destination in the world has raised
the awareness of the authorities to the dangers of pollution within the region. This is
why attempts are being made to control companies who operate in the area; HAL, for
example, was fined two million dollars in 1998 for the illegal dumping of waste products.
As wildlife protection organizations oppose the increase of cruise numbers in certain
whale mating areas, companies are forced to look for new and interesting locations
within the region.
The main base port is Vancouver (Canada), and its business activity is a sure indicator
for gauging this market (see table 4.XIII). Between 1996 and 1998 cruise passenger
traffic grew by 15% per year, reaching a figure of over 410,000 passengers in the year
2000, helped by the improvement in its accessibility by plane, after an investment of
350 million dollars from 1996.
The relationship between NCL and the port of Seattle (US) is most significant. It is a
result of the US Jones Act, which prohibits the departure of cruises to Alaska from the
nearest US port, which is Seattle, despite its excellent connections with the rest of the
country. Instead, the majority of cruises depart from and end in Vancouver. This is due
to the fact that non-US registered ships are not allowed to travel directly between two
national ports, and cruise lines do not want to incorporate an intermediate Canadian
port before reaching Alaska.
The port of Seattle has tried to attract cruise lines, which is why it signed a four-year
deal with NCL, with the aim of converting it into a base port for the "Norwegian Sky",
146
for a minimum of 19, 7-day cruises to Alaska from 2000 onwards. The port has raised
450,000 dollars in port taxes and passenger tariffs in the first year and it has promised to invest 4.1 million dollars to complete the passenger terminal and improve facilities. It also participates in cruise marketing campaigns, with the total figure rising to
half a million dollars over three years. It hopes that this will enable it to maintain passenger figures above 40,000 per year and that financial profits will rise to a total of 56
million dollars. The use of Seattle as a base port means that companies have to use
faster ships, which need to travel further before reaching the tourist areas.
The trend seems to be to use open jaw cruises, in other words, with different embarkation and disembarkation ports, combining sailing with on-land excursions. This
means in practice that ships depart alternately from Vancouver (Canada) or from
Anchorage/Seward (Alaska).
Table 4.XIII. Cruise passenger traffic in main ports in 2000
Port
Cruise Passengers
NS (*)
Vancouver
413,668
29
Seward
130,586
10
Seattle
53,923
12
San Francisco
23,140
7
Juneau
9,218
13
Whittier
3,248
2
Ketchikan
1,844
4
360
1
Glacier Bay
(*) NS: number of ships.
The two main operators are Princess and HAL and each has its own on-land tour-operator, which are Westours and Princess Tours. Both combine the seafaring experience
with glacier photography and excursions on-land by bus or by train. Capacities are increasing gradually, as new ships are replaced by more modern vessels. After the Celebrity
takeover, RCC has also become a major player in the area.
4.3.3. Atlantic Europe and the Baltic Sea
It has experienced a boom over the last ten years. Its world market share between
1995 and 2000 has almost doubled, rising to 7.5%. The participation of the German
source market is of major importance given its geographical proximity to the Baltic
Sea. It is possible to state that the current growth in the region is the same as that
of Alaska five years ago.
147
The price per night is very expensive, which means that its target public is the high
income category. Historically the region, like Alaska, has been a very profitable area,
but with the arrival of RCI and HAL-owned VLCVs, it has become very competitive, to
the detriment of European cruise lines, whose profit margins have been cut.
The market is mainly based around European companies and a customer base of
Europeans, although the presence of US operators in the area since 1997 has been felt
strongly. Europeans are coming round to the realization that cruise trips are a wonderful way of visiting various destinations, despite the excellent land connections in
Europe. The benefits are that cruise passengers can stay in the same hotel (on the
ship), with the advantage of only having to pack and unpack once and the greater
space offered by a ship compared to an aircraft.
The season begins in the second half of May and ends in September, although the trend
is for it to begin a little earlier, at the beginning of May. See graph 4.f to compare it
with the seasonality of the Mediterranean. The duration of cruises offered varies from
7 to 14 days. The market is broadening and now offers itineraries of less than a week,
in order to attract more European customers, especially the younger end of the market.
It also has the added logistical benefit that passengers can reach the port by many different means of transport, not just by plane.
The Baltic Sea's main attraction lies in its cultural diversity, with 10 countries, 8 capital cities and the natural beauty of the Norwegian fiords. This is why the area of operation encompasses the Norwegian fiords, the Baltic Sea (Scandinavian cities and St.
Petersburg), the British Isles, northern France, northern Spain and even the Atlantic
islands. Classic itineraries are: the Northern Cape (with port calls in Copenhagen and
Oslo), the Baltic (St. Petersburg, Stockholm, Helsinki, Copenhagen) and around the UK
(Ireland, Wales, Scotland, England and the Channel Islands). Theme cruises are also
beginning to take off in the area, with one example being a cruise dedicated to "The
Hidden Treasures of L’Hermitage".
The supply is extremely fragmented, with the most notable coming from Princess, P&O,
NCL and RCI. The situation by groups in 2001 was as follows: P&O Princess (24%
supply), Carnival (21%), RCC (9%) and Star Cruises (6%).
4.3.3.1. Main ports
Its strong points are:
a) Great tourist attraction, given the important cultural and historical heritage of the
region, along with an excellent infrastructure for tourists and high quality services.
b) Excellent port facilities with the vast experience gained from heavy ferry traffic in
which large numbers of passengers need to embark and disembark in short periods
of time and with the utmost safety.
148
c) Very high logistical support, both in supply of provisions and in the repair and maintenance of equipment. This is the reason why operating costs are considerably
cheaper. It should also be remembered that the main shipyards specializing in the
building of cruisers are in Western Europe.
The region's main ports have been in partnership under the name of "Cruise
Europe" since 1991. It deals with general marketing strategies, while each port
deals separately with its own direct sales. They all try and offer cruises portraying
a different image and aimed at specific population segments, given their vast
experience in selling destinations. They tend to favour pre- and post-cruise extensions. This is why the attraction of a place like London plays such an important
role. In an expanding market like this, ports also indirectly promote tourist cruises, as they attract the local population when the cruise ships make their port
calls.
The main ports of traffic are Southampton and Lisbon, followed by Copenhagen and
Stockholm (see table 4.XIV). Lisbon is the port that has undergone the largest
growth in recent years, thanks to its excellent links to the city centre and the airport. Copenhagen is also well connected with the British and German markets. It
is an excellent base port for cruising around the Norwegian fiords or the Baltic
Sea. Just like Dover (UK), it has compensated for its loss of ferry traffic, caused
by the opening of the Eurotunnel and the Öresund bridge between Denmark and
Sweden, with cruisers. All cruisers in the Baltic are obliged to call at St.
Petersburg (Russia). The archipelagos of the North Atlantic are also usually included within this region. They are the Canary Islands, The Azores and Madeira. They
have considerable traffic, as can be seen from the following table.
The most notable developments are:
• The port of Hamburg (Germany), which, from a very modest start, is now undergoing heavy investment in order to convert itself into a major base port. The highlight is the regeneration of a 162 ha neighbourhood that will take place from 2000
to 2010. The development project, known as "HafenCity", will include residential,
shopping and play areas. A specific terminal is also being constructed, called the
Hamburg Cruise Centre, which will eventually replace Grasbrook. Accessibility to
other destinations and source markets will be improved thanks to a new highspeed train link to Berlin, with a journey time of just 55 minutes.
149
Table 4.XIV. Cruise passenger movements in the main ports (in thousands)
Port
Country
1996
1997
1998
1999
2000
Southampton
UK
224
212
259
246
332
Lisbon
Portugal
113
112
139
161
189
Copenhagen
Denmark
150
151
212
148
183
Funchal
Portugal
n/a
n/a
149
157
171
Stockholm
Sweden
78
87
105
119
157
St. Petersburg
Russia
76
81
102
115
149
Dover
UK
102
120
146
155
143
Helsinki
Finland
75
64
94
99
140
Tenerife
Spain
n/a
73
132
137
126
Gdynia
Poland
n/a
54
86
94
115
Tallinn
Estonia
54
59
95
109
110
Oslo
Norway
65
59
90
117
109
Cadiz
Spain
49
53
68
109
103
Amsterdam
Netherlands
63
74
107
81
99
Bergen
Norway
Las Palmas
Spain
68
73
83
87
91
n/a
24
61
66
83
Bremerhaven
Germany
31
29
19
55
55
Kiel
Germany
n/a
20
50
40
48
Source: Cruise Europe.
• The port of Amsterdam (Netherlands), which is one of the region's main base
ports, opened a new terminal in 1999 that cost 55 million dollars. This enables the
port to operate three cruisers of up to 2,500 passengers at the same time. The
port is hoping to double its revenue per passenger from the current figure of 75
million dollars with the new terminal now in place. The impact on local employment
will be great, helping to create 1,500 new jobs.
• Port of Bilbao (Spain). It is a river and sea port. Extension works on the Abra
Exterior, opened in December 1998, will allow it to undertake an ambitious project
to separate cruise ships from ferries. A specific cruise terminal will be built on a
dock in the Abra Interior, measuring 350 m long with a draught of 14 m, in the
same area as Guecho marina.
4.3.4. The Mediterranean
It has a total world market share of 30%, except in winter when it drops to around 5%.
Its 700% growth, measured in overnight stays, for the 1987-1999 period, has been
spectacular, surpassing 11 million in the year 2001. During 2001, 38% of passengers
came from the US and Canada, while 20% came from the UK, and the remaining 43%
from other countries. Its major dependency on the US source market has had a consi150
derable effect on its development. Successive crises (the terrorist attack on the
"Achille Lauro" in 1991, the war in Kosovo in 1999 and September 11th 2001) and the
political situation in the Middle East, have always entailed the withdrawal of tonnage
from these source markets, affecting the Eastern Mediterranean more than the
Western Mediterranean. If these problems can be overcome it would then facilitate the
possible marketing of the winter season for cruises in the Red Sea and the Black Sea.
This is why it is very important that it should become a totally autonomous region, with
ships operating throughout the year, just as in the Caribbean and the Asian Pacific.
Fabio Capocaccia, the President of MedCruise, believes that this is due to: a) the great
array of tourist products on offer (culture, gastronomy, religion, shopping, etc.) that do
not require sunshine; b) the loss in revenue due to the halting of business, entailing the
transfer of ships to the Caribbean; c) the search for fine weather along with new itineraries to the west, including the Canary Islands, West and North Africa, and to the east
towards Aqaba (Petra), Shaim el Sheik through the Suez (Pyramids), Oman and Dubai
(the desert experience).
Elaborating on what has previously been said, it is possible to highlight four facts that
have been fundamental in its development:
a) The growth of the UK source market, especially with the re-entry of tour operators
in 1996. This has led to the use of the discount and the arrival of low cost operators, supported by extended commercial networks.
b) The arrival of genuine European cruise lines such as Festival and MSC.
c) The arrival of VLCVs, which mean that the Big Four are obliged to search for alternative business outside the Caribbean. The placement of large ships for first time
in 1998 was of major significance (the "Grand Princess", the largest in the world,
and the "Norway", the longest in the world).
d) The arrival on the scene in the years from 1996 to 98 of the US giants. The business ventures between Carnival-Airtours-Costa and RCC-First Choice are explained
by the powerful marketing network behind the European partners, which gives
Carnival and RCC excellent possibilities for commercial penetration of the
European market.
The region has enormous growth potential, thanks to its port facilities, its on-land tourist attractions and its mild climate. It must not be forgotten that Spain, France and
Italy are countries that border the Mediterranean Sea and are leaders in world tourism.
It has become the main destination for British citizens. It is now possible to speak of
the UK-Mediterranean pairing in the same breath as the US-Caribbean pairing. The rest
of the European source markets are not as well developed as the UK. Table 4.IX shows
that German participation is much lower, with a figure of 33% compared to a 44%
British share. The growth potential in EU source markets is therefore extremely high.
151
Another notable phenomenon is the emergence of Cyprus as an autonomous market,
with ports of call in Israel and Egypt, arising from the considerable activity of the cruise line Louis Cruises. It began its operations with old ships aimed at the three star market. Sales are either made by the company's representatives on the island or else they
are sold as a package by UK tour operators. The cruise line attempted to add some
Greek islands to the itinerary, but this was not possible, given the Greek regulations on
coastal traffic.
The season tends to last all year, mainly thanks to the region's temperate climate, as
can be seen in graph 4.f, which is similar to that of the Caribbean.
In order to attract more European customers, they are offering shorter duration itineraries for long weekends and based on the success of the US cruise lines in the
Caribbean. It can be said that there is great potential in the 3-4 day itineraries in
October-March in the Northern Europe source markets, particularly Scandinavia and
Germany.
4.3.4.1. Main ports
Destination plays a major role, which is why ports joined together in 1996 to form an
association called "MedCruise". There are currently over 70 in the group. It includes
ports from Lisbon and the Azores to the Black Sea and the Red Sea. Given the problems
that can arise between ports and cruise lines, the MedCruise association works to two
main principles:
a) the formation of a Mediterranean association of cruise lines belonging to the FCCA.
b) the creation of a federation of port associations.
The level of security in ports varies considerably and is a major problem for US cruise
lines given the sensibilities of US cruise passengers on this subject. MedCruise estimates that 400 million dollars are currently being invested in new facilities, with the
majority going to the Italian ports of Livorno and Civitavecchia (Rome). Funds are 50%
public, with the other half coming from private sources. Some of these sources include
Costa and MSC in the case of Genoa port (21%), given the ever-greater trend towards
privatization of European ports.
The main port developments are as follows:
• Livorno (Italy), the port of Pisa and Florence, has invested 12.5 million dollars in
new docks and improving existing terminals, a process that was completed halfway through 1999. Port of Livorno 2000 was set up as a new private company
established to fund the building work and run the passenger services side of the
business. It has introduced discounts for cruise lines which increase the number
of cruise passengers. Its objective is to convert itself into a base port.
152
• Civitavecchia (Italy) is involved in a 250 million dollar regeneration programme for
the whole port area. When completed, the passenger and cargo areas will be completely separate. In the summer of 2000 two new terminal buildings worth 20
million dollars were opened. There is also a 20 million dollar project underway to
build another cruise terminal.
• The government of Malta has given its approval for an international consortium to
build three new terminals in La Valetta for cruise ships and ferries, that will be
capable of accommodating three post-panamax37 cruise ships at the same time.
The terminal will be completed in the year 2001. Cruise passengers/hour forecasts are set at 2,000 for two of the terminals and 1,000 cruise passengers/hour
for the third. The required investment is 26 million dollars and building is very near
the historic city centre, and will include a shopping and leisure centre.
• Marseille (France) has built a new terminal that entered service in the summer of
2001, mainly for the embarkation and disembarkation of passengers.
• Limassol (Cyprus) has a major building plan under way, including a new terminal
capable of dealing with up to 13 cruise ships.
• Port of Barcelona (Spain), has nine mooring berths with a draught of up to 12 m
and six passenger-only terminals. Four of the terminals are being managed by
Creuers del Port de Barcelona, while the other two are managed by the Port
Authority. There is also a seventh terminal on Adossat dock, due to be unveiled in
the year 2002, with a surface area of 2,000 m2. Port Vell is considered an ideal
model of integration between port and city.
• Palma de Majorca (Spain). It has three specific shipping stations with five mooring
berths. The highlight of the port is the restructuring plan set for 2001-2004. The
west dock will have an area of 70,000 m2, freeing up cargo space in the old dock,
and allowing the housing of the scheduled passenger terminals for
Trasmediterránea. This will allow the construction of a new cruise terminal with a
coach-park.
• Port of Malaga (Spain). The lengthening of Levante Dock by 1,297 m has led to
the creation of a mooring berth for ships with a greater draught (up to 20 m) inside the dock, and was completed in the summer of 2001. The construction of a passenger cruise terminal, with an estimated cost of 9 million euros, will form the
second phase. This will give the port total of seven mooring berths.
• Port of Valencia (Spain). Following the example set by the port of Barcelona, the
new building work will turn the area into a privately managed leisure area called
"Balcón del Mar" (Sea Balcony), just next to the northern breakwater, with a change of activity for the inner dock and its surroundings. The project will be comple37 Post-Panamax: a term that refers to ships with a maximum breadth greater than 32.25 m, the maximum permitted for passage through the Panama Canal.
153
ted with a drawbridge. The area will be free of goods traffic and will be used for
docking cruise ships.
Table 4.XV shows the main Mediterranean ports. Piraeus has lost its overall leadership,
and the ports of Palma de Majorca, Barcelona and Limassol have increased in importance. The decline of the Greek cruise lines that operate mainly in the Aegean Sea
explains the reason for the decline of Piraeus.
The reason why the port of Limassol occupies first place in the Mediterranean rankings
is due to the success of Louis Cruises, as previously mentioned. The important role of
the North American cruise lines is a major contributory factor in the rise of the port of
Barcelona up to third place in the year 2000, and likewise with the involvement of
British tour operators in the port of Palma de Majorca. Cruise lines use these as base
ports, combining one week on-land with another at sea.
Of the operators, the undisputed leader is Costa Crociere. Second place is taken by
MyTravel (formerly known as Airtours), followed by ROC and then World of TUI UK (formerly known as Thomson). This is a clear indication of British tour operator power
within the region. The North American companies Princess and RCI jointly account for
over 10% of demand. It is also possible to speak of a reciprocal effect with the
European cruise lines’ representation in the Caribbean.
When considering cruise passenger and financial implications, one has to consider the
dynamic effect that the entry of RCI has had on the market, choosing Barcelona as its
base port. One must also highlight the importance of the European cruise lines Festival
Cruises and MSC. German operators have a less than 5% share, and they still do not
have the corresponding influence that their potential source market demand suggests
they should have. Nevertheless, this situation is changing thanks to the entry of Aida
Cruises using Palma de Majorca as its base port.
The Eastern Mediterranean, and above all the Aegean Sea, is dominated by the Greek
cruise line Royal Olympic Cruises.
154
Table 4.XV. Cruise passenger movements in the main Mediterranean ports (in thousands)
Port
Country
1996
1997
1998
1999
2000
Limassol
Cyprus
583
606
604
690
885
Port Said
Egypt
545
542
433
535
600
Barcelona
Spain
277
359
466
546
574
Palma de Majorca
Spain
282
422
393
582
507
Piraeus
Greece
423
420
432
335
476
Naples
Italy
195
237
335
503
405
Genoa
Italy
361
285
365
569
398
Civitavecchia
Italy
166
170
256
296
392
Venice
Italy
263
299
335
97
337
Haifa
Israel
246
255
234
255
250
Livorno
Italy
114
179
196
251
237
Nice-Villefranche
France
123
128
156
194
195
La Valetta
Malta
72
130
147
193
172
La Goulette
Tunisia
66
130
101
156
170
Marseille
France
62
66
153
149
165
Palermo
Italy
99
90
83
135
157
Malaga
Spain
99
97
106
167
134
Mesina
Italy
35
72
121
112
126
Alexandria
Egypt
53
46
43
57
121
Savona
Italy
14
98
103
89
120
Ajaccio
France
66
72
87
77
117
121
94
154
183
116
51
55
56
61
106
Casablanca
Morocco
Cannes
France
Source: MedCruise.
4.3.5. Asia-Pacific
This region experienced a growth of 134% during the 1992-2001 period. In 2001 it reached a figure of 2.1 million nights and a global market share of 3.5%. Traditionally the
region is divided into four sectors: South Pacific (Australia, New Zealand, Solomon
Islands, Indonesia, Papua Asia and New Guinea, etc.), Southeast Asia (Malaysia, the
Philippines, Singapore, Vietnam, Cambodia, Thailand, etc.), Far East (Japan, Republic
of Korea, Democratic People’s Republic of Korea, China, etc.) and Trans-Pacific
(Hawaii, Guam, Fiji, French Polynesia, etc.). The distribution in 2001 by sub-region was
as follows: Far East (0.215 million nights), Southeast Asia (0.430 million), TransPacific (0.067 million) and South Pacific (1.16 million). In spite of its distance from the
US, the effects of September 11th were noticed briefly, given the high demand from the
US. Nevertheless, the local source market was hardly affected by the events.
Within the Big Four, P&O Princess, the company with the most experience in this market, estimates that the number of cruise passengers from European and US source mar155
kets doubled in the period from 1985 to 1996, reaching a figure of 85,000. It is very
difficult to improve on this figure as there are major restrictions, including: the price of
flights, the length of the flights, US holiday availability and the lack of adequate port
infrastructures. The demographic segment of North American demand which it attracts
is focussed on the baby boomers who are quite partial to soft adventure.
Hence, the real potential for this market lies in selling products designed by Asians for
Asians. It is very different from the European market, especially with regard to the
demographic profile of demand, as has previously been stated in section 2.2.3. The fact
that Asians have less holiday time at their disposal also has to be taken into account.
However, it must not be forgotten that young people follow the example of their US
counterparts when it comes to lifestyle, which is a guarantee of success for cruise holidays.
Ship design has to be adapted to Asian requirements: it must have greater entertainment possibilities, such as karaoke and casinos, as well as having restaurants specialized in Japanese and Chinese cuisine.
It is interesting to highlight three facts that demonstrate its potential:
• Star Cruises, with its headquarters in Singapore, hopes to exceed 14,000 berths
in 2004, which would place it fourth in the world, if the additional 16,700 berths
of its holding interest in NCL are also taken into account.
• Singapore is one of the fastest growing ports in the world (see table 4.XVI). The
increase in cruise visitors in the period from 1991 to 1996 was spectacular, going
from 130,000 to 750,000 cruise passengers, thanks to the new Singapore Cruise
Centre and its international airport, which acts as a real connecting hub for the
whole of the region. If one takes into account regional cruises of only one night,
which have not been counted in table 4.XVI, the figure exceeded the one million
cruise passenger mark in 2001, in spite of the Asian economic crisis.
It is investing heavily in new facilities. In 1998 its new cruise centre opened. The
total investment was 13.8 million dollars and it can accommodate cruise ships of
up to 300 metres total length (Ltot< 300 m). The work undertaken included: the
extension of three mooring docks (from 245 to 300 m, from 190 to 250 m, from
150 to 180 m), and the high-quality regeneration of the cruise and regional ferry
terminals. Combined with Thailand and Bangkok it offers itineraries for the
Conferences and Incentives segment, with short three-day cruises.
156
• The effect of the 2000 Olympic Games in Sydney may have a similar effect to that
of Barcelona in 1992. During the games, Sydney used 10 cruise ships as additional hotel accommodation. The "Barcelona effect" may be strengthened by the fact
that many Australians choose to start their cruises from non-Australian ports, with
Singapore the most popular of all. The cruise terminal has been transformed
thanks to a 22 million Australian dollar investment. Despite having reduced port
tariffs, total revenue has increased as a result of commercial concessions.
The region's strength lies in its many destinations and it is estimated that in the near
future it will have the critical mass of world category ports, enough to be able to offer
its great cultural diversity. Apart from the previously mentioned multi-million dollar
investment in the Port of Singapore, other notable investments include the ports of
Port Klang (Kuala Lumpur), Penang (Malaysia) and Langkawi (Malaysia). In addition to
the diversity of destinations, Southeast Asia also has a temperate climate, which
allows it to offer cruises throughout the year (see graph 4.h). In the case of Australia
it has the added benefit that summer there corresponds to winter in the northern
hemisphere. Its active Cruise Down Under (CDU) association groups together national
and local Convention and Visitor Bureaux, port authorities and service providers.
The main operator is Star Cruises, with NYK, Princess, RCI and Cunard some way
behind. Cunard has stated its intention of selling at least 75% of its berths on its
"Legend of the Seas" in the markets of Japan, Taiwan (Chinese province) and the
Republic of Korea. The "Star Princess" (109,000 GT) sailed its maiden voyage from
Singapore in February 2002. The "Queen Elizabeth 2" sails in the area and as of 2003
the new "Queen Mary 2" will also be added. It also makes port calls in Colombo (Sri
Lanka), where security measures have been greatly improved.
Other operators are: Cruise West, offering 14-night itineraries from Bangkok to Hong
Kong (China) or from Hong Kong (China) to Tokyo, and HAL, with ports of call in India,
Thailand, Malaysia, Singapore, Cambodia, Vietnam and Hong Kong (China).
Table 4.XVI. Cruise passenger traffic in the main Asia-Pacific ports in 2001
Port
Sector
Port calls
Cruise
passengers*
Singapore
Southeast Asia
168
231,522
Hong Kong (China)
Far East
106
179,158
Port Kelang
Southeast Asia
110
139,510
Phuket
Southeast Asia
114
132,516
Fukuoka
Far East
90
83,516
Papeete
South Pacific
136
78,888
Bora Bora
South Pacific
119
68,096
Moorea
South Pacific
116
64,250
Sydney
South Pacific
57
62,238
Bangkok/ Laem Chabang
Southeast Asia
85
61,016
(*) Very short cruises and regional cruises are not included.
157
4.3.6. Emerging regions
Middle East / Arabian Gulf / Indian Ocean
This vast region grew by 88% in 2001, and yet still only represents 0.38% of world night
stays, from 0.10% in 1992. European cruise lines will be able to play a major role in the
region's development, as the US consumer has an unfavourable view of the area. The
target market is therefore European, with the breakdown of cruise passengers by
nationality in 2001 as follows: UK (41%), Germany (14%), Benelux (16%), local (18%),
US (5%) and others (6%).
It is seen more as a destination for seasoned cruise travellers rather than first-timers.
The cruises have an element of soft adventure about them, with on-land activities including sand-skiing, driving through the dunes and camel races. It is becoming ever more
popular during the winter season, in direct competition with the Canary Islands and the
Azores in the Atlantic. One of the main problems holding back its growth are the very
complex customs procedures.
The main port is Dubai (United Arab Emirates), from where 7-day and 14-day cruises
set sail. It has a new cruise terminal measuring 3,300 m2, which was opened in March
2001 and costed 2.8 million dollars. Its major international airport and its close links
with Cunard/Seabourn are playing a major role in its development.
Another important destination is Oman, with ports in Muscat, Salalah and Khasab in
the Musandam, which has had a cash injection of 26 million dollars. By sheer numbers
of port calls in 2000, the following ports are worth mentioning: Salalah (25 port calls),
Fujairah (United Arab Emirates, 12 port calls), and Doha (Qatar, 12 port calls). Mumbai
(former Bombay, in India) is also developing into a base port. Iran must also be mentioned, with 24 port calls received in 2001.
The main operators are: P. Deilmann, Hapag Lloyd, Cunard/Seabourn, Silversea, Crystal
Cruises, MSC, RCI and Star Cruises. The presence of RCI stands out in the Indian source market, selling 20,000 cruises per year in the country. HAL is also strongly committed for 2002 and hopes to double its port calls compared to 2001.
South America
Its importance resides in the fact that it had 1.15 million night stays in 2000, which
was considerable growth compared to the 1999 figures of 658,000 and 940,000 in
1998. The main season is winter (in the northern hemisphere). Typical products and itineraries include "Caribazon Cruises", from Port Everglades (US) and Bridgetown to the
mouth of the Amazon river. It should not be considered a peripheral region of the
Caribbean, but as an independent region in itself. However, neither Venezuela nor the
Caribbean coast of Colombia are considered part of this region, but as part of the
Southern Caribbean.
158
As of 2001 it began to attract large 1,500 berth vessels, such as the "Mercury"
(owned by Celebrity) and the "Norwegian Dream" (owned by NCL). The most important
operators are: Costa (10%), Celebrity (9.6%) and NCL (10.4%). Smaller lines include:
Orient Lines, Princess and HAL.
The main base ports are detailed in the table below and are: Buenos Aires (Argentina),
Manaus (Brazil), Rio de Janeiro (Brazil), Valparaiso (Chile) and Ushaia (Argentina). The
port of Baltra (Ecuador) is of major importance for short cruises to the Galapagos
Islands.
Table 4.XVII. Cruise passenger traffic in the main ports
Base ports
Baltra
Buenos Aires
Río de Janeiro
Valparaiso
Ushaia
NS
Cruise passengers
5
35.880
12
23.775
8
16.940
14
24.525
7
10.483
159
5 THE INTERACTION BETWEEN THE CRUISE AND ITS ENVIRONMENT
5.1. Financial implications of cruises on their destination
The great difficulty in carrying out this research is the lack of available information and
the great disparity between figures published by port and tourist organizations. Given
such a situation, one needs to approach the subject methodically, examining demand
and consumption of goods and services during the port of call in accordance with the
literature cited in the bibliography (48). This analysis is made in section 8.1, for the
Mediterranean. There is also data worthy of note from the Caribbean in the study (see
bibliography 16).
Along with this relative lack of information is the delicate nature of the subject, with
three main agents coming under consideration: the cruise line, the Port Authority and
the city. The last two share the common interest of attracting cruisers. The difficulty,
however, arises when it comes to establishing the degree of participation of each of
them in promoting and marketing the area in order to attract the cruise ships. The
debate is normally centred around investment required in the port to cater for the
cruises and the real financial return from the port calls.
5.1.1. Definition of main services provided
A port call38 by a cruise ship requires the provision of logistical, tourist and commercial
services, which will be described and studied in greater detail so as to gauge their
relative importance and quantities involved. There are three main types of activity
linked to a port of call within an actual port, city and region, and which are either
technical or tourist related.
A) Port services:
-
Technical assistance provided for the cruise ship. The first condition that must
be established in every port of call is the approach of the ship, which involves
the participation of three different categories of professionals, providing
services in navigation, ship on tow, and docking. Once the ship is secured,
(either docked or anchored), the ship then falls under the remit of the shipping
agent, who will be responsible for the ship's consignments and its passengers
(section 3.4.2 examines this person’s role).
-
Welcoming Cruise passengers. This is decisive in portraying the image of the
port and the city, and is a service provided jointly by the Port Authority, the
dock services provider and the local council. Along with welcoming cruise
passengers on-land, each port can add its own personal touch, such as
organizing exceptional welcoming parties (with fireworks for the first port of
call) and more normal events that include sampling local food and wine or a
reception with musical groups.
38 As stated in point 7.2 the traditional distinction between base por t and secondar y por t is adhered
to. Docking or anchoring of the ship with transfer to or from land of par t of the crew and/or passengers is designated a por t call, and can be made either in a base or secondar y por t.
161
B) On-land logistics:
162
-
Transporting cruise passengers. Whether dealing with a simple passenger
transfer to the city, a guided tour or an excursion, or ferrying passengers from
cruise ship to airport, the conditions that must be established for on-land
transport require special attention given their commercial impact and effect
on the image of the city. This explains why special attention is paid to taxi
driver associations in all cities. First of all, the idea is to prevent negative
reactions from cab drivers, which might result in cruise line cancellations or
complaints. Secondly, the idea is to improve services: learning English,
signposting for taxi ranks, and the setting up of guided city tours with the taxi
driver acting as the guide. The same can also be applied to coach drivers.
-
International connections. As seen in section 4.1 they play a major role in the
selection of a base port.
-
Accommodation offers. The city must have sufficient accommodation space
within its hotels, capable of catering for the large cruise ships, and which
must also be of a sufficiently high quality to enable the five to five star plus
cruise ships to dock in the port. Currently, the great improvement in the array
of available hotels in most cities is a clear threat to existing base ports.
C) Tourist activities:
-
Sightseeing and excursion programmes. This is a major component of many
itineraries, as it is a means of adding to their attraction. The nature, duration
and price of these trips have become a major source of profits for ship
managers. Cruise lines take ever greater care in their choice of receptive
travel agencies, taking great care in selecting the most suitable coach
drivers, tour guides, interpreters and restaurateurs. In the case of the
Mediterranean (see bibliography 48), the average level of passengers
participating in these trips is increasing: 44% in 1992, 64% in 1993 and 75%
in 1994. The Caribbean, however, is a much more mature destination, and
figures remain almost constant (79% in the 1995-98 period), although it must
be stated that the possibility of going on an independent on-land tour has
become one of the reasons for booking a cruise (26% in 1995 and 41% in
1998).
-
Restaurants in ports of call. This tends to be included on whole day
sightseeing trips. On the majority of half-day sightseeing trips, however, lunch
is taken on board the ship. Dinner is normally eaten during sailing time, except
when the port call is longer than one day. Base ports tend to promote this onland service, making specific reference in their information brochures to the
delicacies and specialities of the local gastronomy. Use of restaurants is often
associated with that of taxi drivers and is limited by the available time of the
cruise passengers and their eating habits.
-
On-land shopping. Normal cruise passenger activities can range from small
purchases (souvenirs such as postcards, t-shirts) to larger purchases such as
electronic goods, perfumes or watches, which is all dependent on the socioeconomic class and nationality of the customers in question, along with the
shopping on offer at the destination. These purchases arouse the interest of
not only the cruise companies, who edit and distribute shopping guides, but
also of local councils, who organize shopping tours. Local traders are also very
interested in these occasions and at times even pay commission to the cruise
lines.
The share of passengers who actually purchase goods is greater in the
Mediterranean (90%) than in the Caribbean (76%). This can be explained by
the greater influence that destination plays on the cruise within the
Mediterranean, as previously stated in section 4.3. It is interesting to
understand the reasons behind shopping. The FCCA, in its report entitled
Caribbean Cruise Shopping (see bibliography 43) states: "lowest prices" (63%
in 1998 as opposed to 61% in 1995) and "greater selection", which dropped
from 26% in 1995 to 18% in 1998. A figure of 54% were recommended things
to buy by other cruise passengers, compared to 38% in 1995, which is a clear
indication of growth within the market. The main recommendations come from
family and friends (70%).
5.1.2. Analysis of spending by ship managers, cruise passengers and crew
5.1.2.1. Port services
-
Provided by the Port Authority. Tariffs (TPA) vary depending on ship tonnage and
number of cruise passengers.
-
Provided by port industry professionals (SPIPROF):
-
1.
Practical service, usually compulsory and depending on cruise ship GT.
2.
The ship on tow service is charged depending on passenger capacity and the
number of tugs required, although this is used less and less, as modern
cruisers are equipped with transverse propellers.
3.
Boat service for anchored cruise ships.
Shipping agents remuneration (SSHIPA). Profitability is low, given the extensive
competition that exists, along with the progressive disappearance of revenue from
services and additional supplies that generate a substantial additional income.
163
Total cost per port call for the ship manager depends on the ship's tonnage and the
total number of passengers.
Other less frequent complementary services and supplies must also be taken into
consideration:
-
Fuel supply, which normally takes place in large ports.
-
Provisioning, which forms part of the ship's general supplies along with the supply
of parts as well as oils and grease for main and back-up engines, and food
provisions for the on-board restaurants and catering. As the ship is both a means
of transport and a hotel, it generates a considerable need for supplies, fulfilled by
specialized suppliers. This is why ship managers have their own management
service. This is the case of Zerbone, a subsidiary of Costa, which is responsible for
guaranteeing and organizing these basic supplies, either directly, or by a series of
catering subcontractors, or with the help of shipping agents.
The nature and amount vary a great deal depending on the different supply
categories. Given the diversity of situations and the needs of each vessel,
depending on its importance, it is not really possible to make an objective
calculation or work out an average figure.
-
Ship maintenance and repairs have similar features to the provisioning of the
vessel, with extremely varying degrees of need and intervention costs. This is not
the case, however, for the purchase of spare parts that are not available on-board,
or small and light equipment, which is normally carried out by the shipping agent
and subcontractors.
-
Major intervention, such as the annual technical stop or major careening, are only
carried out in ports that have specialized shipyards.
5.1.2.2. Services provided by the retail and tourism sector
These two sectors are the main beneficiaries of cruiser port calls, as confirmed by
available data on the subject. Chambers of Commerce and Tourist Offices attempt to
improve the information given to cruise passengers, which can be seen in the on-board
information leaflets that are given to the tourists before they disembark.
-
164
On-land shopping. The amount of shopping varies considerably depending on the
socio-demographic profile and the nationality of the cruise passenger and the
category of the cruise (the star rating) making the port call. British passengers
have a reputation of not spending very much in cities, which is the opposite of
German passengers. The Russians are a case apart and have a very high spending
average. The Japanese are also seen as very good customers for shops within the
ports that are visited. The spending of US customers varies a great deal depending
on the type of cruise.
-
On-land restaurants also comprise a major spending block. When considering these
levels of spending it must not be forgotten that potential customers tend to be
cautious when it comes to spending at a port of call.
-
Spending per crew member is based purely on the port of call itself and on the type
of merchandise sold and services offered.
-
Sightseeing trips. They have become an essential service for ship managers, who
recoup a third of the sale price, while travel agency margins vary between 8% and
12%. The sightseeing market is undergoing a major change thanks to the
diversification in demand, and this is especially the case of small luxury cruise ship
managers, who are keen to offer their passengers exceptional sightseeing trips.
This has gone on to generate the creation and sale of other high-level formulas,
such as gala dinners with music in historical or unique locations.
-
Other specialized services. There are specialist agencies that organize visits with
a high cultural and artistic content. During the provisioning of the ship, there are
also specialist suppliers who are able to respond to the specific detailed requests
of these ships, whose needs (in quality, quantity and in speed of delivery) are
comparable to large vessels.
5.2. Effects on marine life: sustainability
The very fact that cruise ships accommodate a high number of people on-board (crew
and passengers) means that the level of waste products is high. If one also adds to this
the high volume of traffic in some regions (as detailed in section 4.3), it is easy to
understand the growing importance of environmental issues that are being taken into
consideration by the sector.
International, national and local authorities establish measures to limit both air and sea
pollution, which are mainly concerned with the treatment of solid and liquid waste. The
main international organizations are the International Maritime Organization (IMO),
which is a specialist UN agency, and the ICCL (see section 3.1).
The IMO has two committees: Marine Environment Protection (MEP) and Maritime
Safety (MS), see section 5.3. Regulations help protect the interests of coastal regions
and countries in which the ships are registered, environmentalist groups and the
shipping transport sector, taking into account scientific, technical, economic and
environmental issues.
The IMO, in its International Convention for the Prevention of Pollution from Ships
(MARPOL 73/78 annexes I, II and V), defines the concept of "special areas" as "any
area of sea which, for recognized technical reasons related to its oceanographic and
ecological conditions along with its particular shipping traffic features, requires the
165
adoption of special compulsory regulations in order to prevent sea pollution by
hydrocarbons, harmful liquid substances and waste products, as the case may be".
The request to be considered an extremely sensitive marine area or special area must
be presented to the Marine Environment Protection Committee (MEPC), who will
consider whether the area can be added to the World Heritage list, or if it can be
declared a Biosphere Reserve, etc. Examples of extremely sensitive marine areas are
as follows:
-
The Great Barrier Reef (Australia), that stretches over 2,300 Km. along the East
Coast of Queensland. Ships transport in the region of 1.2 million passengers a
year, either on one-day excursions or on longer cruises through the area. Pilotage
is required for all ships whose total length is greater than 70 m.
-
The Sabana-Camagüey (Cuba) archipelago, lying in the middle of the Northern part
of Cuba, and extending 465 Km. between Hicacos peninsula and Nuevitas bay. It
has over 2,515 islands and keys. It has been classified as a maritime area that
should be avoided by ships.
The criteria taken into account are as follows:
a) Ecological criteria: singularity or rarity, endangered habitats, representative
features, diversity, productivity (egg-laying or reproduction areas), integrity,
vulnerability and bio-geographic importance.
b) Socio-economic and cultural criteria: financial profitability, tourism and human
dependence.
c) Scientific and educational criteria: research, reference, protection and educational
studies.
With regard to shipping traffic, the following features are taken into account:
-
Operational factors: ship types, traffic characteristics and the transportation of
harmful substances.
-
Natural factors: hydrography, meteorology and oceanography.
Corresponding protection measures for extremely sensitive marine areas as defined by
the IMO are:
166
-
Controlling emissions of sulphur trioxide and the application of special restrictions
imposed on ships travelling in the said areas.
-
Adopting notification systems for ships and organizing shipping traffic in
accordance with the International Convention for Safety of Lives at Sea (SOLAS).
-
The creation and adoption of other measures designed to protect specific marine
areas against environmental damage caused by ships, including compulsory
pilotage systems or systems to regulate maritime traffic.
Evidently, the dumping of waste into the sea is strictly regulated by the IMO40.
Nevertheless, it is interesting to note ICCL's development of waste management
practices and procedures. The NWCA (North West CruiseShip Association) is involved
in this, as Alaska is considered to be one of the most sensitive areas. The said
measures were approved at the end of 1999 and included the following aspects:
a) Solid waste. This involves the on-board collection of recyclable waste products
(which cannot be burned), which will be off-loaded in ports with appropriate
facilities. Off-loading at ports in Southeast Alaska is minimal, and this normally
takes place in Vancouver. Cruise lines attempt to keep these waste products down
to a minimum for financial reasons.
b) Ballast water41. The concern lies in releasing non-native species contained in the
ballast water, which is why discharged water must come strictly from the north
western Pacific and nowhere else.
c) Response to crude spills. Each ship follows a programme of prevention and
response that has been approved by the US Coast Guard, with procedures detailed
in the "Shipboard Oil Pollution Emergency Plan". It includes aspects of crew
training, ship equipment and planning to ensure an effective cleaning process in
the case of a spill. Cruise lines which are members of NWCA, along with
Southeast Stevedoring and SEAPRO, have developed a common response
programme. SEAPRO has cleaning craft in strategic locations for a fast response.
Yearly drills take place with the aforementioned US Coast Guard service.
d) Air emissions. These are of major importance in coastal areas and in Juneau,
because of its unique geographical setting. Restrictions affect the ship's
propulsion system, the type of fuel used, manoeuvrability requirements,
maintenance and operation, the number of ships in port, etc.
In June 2001 the state of Alaska approved the strictest US environmental protection
laws for cruise ships, authorizing the state to analyze atmospheric and sea emissions,
and charges an eco-tax of one dollar per cruise passenger to fund the programme.
The operational area has an influence on the type of propulsion mechanism that is
chosen. In Alaska ecological restrictions force ships to release fewer gas emissions,
which is why the most appropriate type of propulsion mechanism for the area is a
40 Bilge water is a mixture of salt water and leaks from water cooling circuits, fuel, lubricating oil, drainage from sedimentation tanks and par ticles of dir t and soot. Bilge water can only be discharged
when these impurities have been removed, in accordance with IMO resolution – MEPC 60-33.
41 Ballast: weight transpor ted by the ship that ser ves only to improve its stability. It is normally salt or
sea water.
167
combination of gas turbine and electric engine. Gas turbines are being used more and
more, in spite of their higher fuel consumption, because they use cleaner fuel than a
diesel propelled engine. The higher maintenance costs for gas turbines are
compensated to a degree by the smaller space they occupy, creating valuable extra
room for generating extra revenue. The Millennium and the Vantage, which are the
newest class of ships belonging to the cruise line leaders, have adopted a COGAS
combination (gas and steam turbines).
In order to satisfy the strictest requirements on gas emissions and fumes in the more
delicate regions such as Alaska, ships are installing specially designed diesel engines.
For example, Carnival has jointly developed with the manufacturer Wartsila a diesel
engine that emits non-visible gases. The German company MAN B&W has developed
the IS system (Invisible Smoke) for Star Cruises.
Examples of the efforts being made to minimise solid waste products are highlighted
in two recent projects: the Complete Green Ship Philosophy 21, which has systems that
limit and treat burnable waste material, fuel exhaust gases, glass and cans, organic
waste and grey and black waters; and the Norwegian Green Ship Concept, which
adheres to three principles in the treatment of waste: incineration, recycling and
storage.
5.3. Safety aspects for cruise passengers
This section will consider the two main aspects of safety: the first is safety against
accidental risks such as fires and the sinking of the ship, and the second is the threat
of external forces such as hijacking or terrorism. The importance of the first aspect is
based on the growing GT size of ships, which does not permit a lineal extrapolation of
current procedures. The second aspect has been brought to the fore after the terrorist
attack of 11th September 2001.
Although VLCVs have been designed to incorporate safety systems and equipment that
go beyond the safety standards required by the SOLAS41 and MARPOL conventions, and
even though they have an excellent safety record, the IMO is extremely worried about
the possible consequences (with regard to loss of life, loss of goods and environmental
damage) of a serious event that could be considered a disaster. Work has only recently
begun on these matters, and as yet the IMO has still not come up with an adequate
definition of what a VLCV really is. Consideration is being given to basic criteria that
are used as guiding principles or as a declaration of intent. For current large sized
passenger ships, work will continue to revolve mainly around the human factor
(operations, management and training).
The IMO's Maritime Safety Committee (MSC) set up a working group coordinated by
the US in November 2000. The concern lies in emergency response procedures for
41 The SOLAS convention began as a document which came into force in 1914, resulting from a
Conference held to study the consequences of the sinking of the Titanic in 1912.
168
cruise liners. A Mass Rescue Operation would have to be organized. The group
understands the subject, and has established the following guiding principles along
with some others based on an extensive study by ICCL:
a) Future guidelines and regulations should firstly serve as a means of avoiding such
disasters.
b) Future very large passenger ships should be designed with improved floatability,
so that in a disaster case scenario, passengers could remain safely on-board while
the ship heads towards the port.
c) Very large cruise vessels must have the necessary equipment in order to
guarantee the health, medical assistance and security of the passengers on board
until specialist assistance can be given.
Other factors to be taken into consideration are evacuation problems, which are mainly
concerned with how to control large numbers of people, as well as passenger
demographics during an emergency. Nevertheless it is believed that the ship itself is
the best lifeboat of all. Consequently, new ideas must be considered to reduce to an
absolute minimum the need to abandon the ship.
The London Conference entitled "The future of Large Cruise Ships, Safety and
Environment" of May 2000 was organized42 by the IMO. There was growing concern
with IMO regulations, especially SOLAS and to a lesser extent the Load Line
Conventions. There was also a need to review crew training requirements, more
commonly known as STCW (Standard of Training, Certification and Watchkeeping).
SOLAS was agreed in the seventies, and facilities for aiding mass evacuation are being
studied, as alternatives to the traditional lifeboat. The agreement established the DSD
system (Dedicated Safety Deck) that integrates the so-called DSMs (Detachable Safety
Modules), which, when joined together in sufficient numbers, form a platform that can
act as a heliport. The evacuation en masse via inflatable tubes or slides was first
installed on the "SuperStar Leo" in 1998. Another innovative system that is currently
being studied is SAT (Sound Alert Technology), which sends out distress alerts.
According to Peter Wild, when the new SOLAS regulations on the use of on-board
combustible materials comes into effect in 2010, it is estimated that 80 ships totalling
some 43,000 berths will have to be taken out of service, as the cost implications of
adhering to the new regulations will not be financially viable. It will affect those ships
built before 1960, although they could always be used for domestic traffic, in a
navigation area that is not covered by the SOLAS regulation. Other major milestones
drawn up by SOLAS have been or will be: the obligation to install smoke detectors on
all cruise ships (1997) as well as the provision of sprinkler systems (October 2005).
42 jointly with the British Institute of Marine Engineers and the British Maritime and Coastguard Agency.
169
LSA (Life Saving Appliances) regulations state that lifeboats must have a capacity
equal to 75% of the maximum permitted total number of people on the ship (passengers
and crew), with a 37.5% share on each side of the vessel, with the remaining 25%
coming from MESs (Marine Evacuation Systems, e.g. slides) and life rafts (for the crew
only).
A combined study group of the IMO and the ICAO is responsible for harmonizing air and
sea search and rescue services known as "life-saving at sea operations".
The second element of safety is centred on aspects such as: the taking of hostages,
bomb threats, terrorism, hijacking and crime. This is why maritime life-saving coordinators must establish links with national crime prevention organizations.
International Maritime Security determines the order of priority for risks as follows:
crime, illegal drugs, stowaways, hijacking and terrorism. As can be seen, terrorism
occupies fifth spot, and even after the events of September 11th, the order of priorities
remains the same. This can be understood considering that hijackings and robberies
increased greatly in the year 2000 according to IMO data, above all in the Indian
Ocean, the Malacca Straits and the Caribbean. The MSC, which deals with these
matters, states that the incidents normally took place near the coast with the cruiser
either anchored or moored.
The number of safety personnel is dependent upon the number of passengers and crew
on board, varying between 5 and 14. The industry is pursuing an internationally
recognized set of standards to be adhered to in the training of such personnel. Modern
systems are also being installed on ships, including CCTV, electronic access areas, etc.
Security measures are also being applied to Port Authorities.
Nevertheless, after September 11th, the IMO is continuing to review methods and
procedures for preventing acts of terrorism, which may endanger both passenger and
crew safety and that of the ships. The measures put forward by the US are: automatic
identification systems, security plans for ports and ships, checks on sea personnel and
inspection of container contents transported by sea. Before the events of September
11th the US Coast Guard spent 1% of its budget on sea and port security, a figure which
has since risen to 57%.
Within the current climate of concern for security, in January 2002 MedCruise launched
a jointly funded project with the EU called "Improved security measures in
Mediterranean ports".
170
6 MEDIUM-TERM TRENDS
Once an analysis of the three basic elements has been made: demand, supply and
product (itineraries), the results will enable the observer to identify medium-term
trends. This period of time spans four years, as changes occur very quickly, as can be
seen in the annual cumulative growth rates. The four-year time span is believed to be
sufficient, as longer term forecasts are difficult to predict with any degree of certainty
and because major business decisions have been accounted for within the selected
period of time (the building of a new ship takes between 1.5 and 2 years).
An influencing factor upon macro-trends that will be studied below is the process of
globalization affecting the North American cruise experience: what happens in the US
invariably applies to the rest of the world, after a slight time delay. This is why variables
in the US market are taken as basic references for the market as a whole. The three
trends that have been identified separately are closely interlinked.
6.1. Growth in European demand at higher levels than in the US
The tourist cruise market is currently experiencing a boom. The European source
market has greater potential in the short to medium-term as it currently has the
highest growth rates (1988-2000 measured at +13,4% cumulative per annum). The
most important source markets are the UK, Germany, Italy, France and Spain.
6.1.1. Evidence
The two basic principles that will be used to estimate medium-term European demand
are as follows:
-
The tourist cruise is just another category within leisure trips as a whole. This
point has been dealt with in section 1.1 and stated by Bob Dickinson, President of
Carnival Cruises, who is one of the driving forces behind the modern cruise.
-
The tourist cruise as a product is undergoing a period of growth, where the
creation of supply is accompanied by a corresponding and parallel demand, as
demonstrated in section 2.4.
The first principle permits a relationship to be established between the main national
demands, especially those already established in section 2.1 (North American, British,
German, Italian, French and Spanish). The second principle allows world demand to be
calculated. Demand in the main European markets in the medium-term can be
calculated by using a combination of the two principles.
43 For a fuller analysis please see Manuel Butler's 2002 Doctoral Thesis from the Polytechnic University
of Madrid (Universidad Politécnica de Madrid) in Spain, entitled " Economic analysis and oppor tunities for Spain in the tourist cruise market."
171
A forecast of demand in European markets for the period 2000-2004 is calculated on
the basis of these hypotheses, and in accordance with calculations that are detailed in
section 8.2. See table 6.I.
Table 6.I. Demand for ocean-going cruises measured in thousands of cruise passengers
Country
1995
a
1996
1997
1998
1999
2000
1995-
2005d
2001
2000
2005d
annual
annual
340
416
522
631
740
747
17.05%
1,155 11.51%
Germany
217
235
283
306
327
380
11.86%
825 21.38%
a
151
174
200
230
250
273
12.57%
522 17.57%
100
112
126
154
224
266
21.61%
622 25.62%
24
34
41
52
82
87
29.38%
265 32.14%
134
141
185
187
167
200
8.34%
-
-
966
1,112
1,357
1,560
1,790
1,953
15.12%
-
-
4,378
4,656
4,864
5,243
5,894
6,880
9.46%
8,008
3.87%
United Kingdom
c
Italy
a
France
a
Spain
Others
a
a
European Union
United States
b
172
It must be remembered that there may be deviations within a specific year, which is
why these forecasts should be considered as such, indicating a medium-term trend.
This trend coincides with:
-
The commitment of Carnival Corporation (the market leader) to the European
market as stated in its Annual Report 2000.
-
Forecasts made by the Executive President of Fincantieri, the main shipyard
specializing in the construction of cruise ships which, as cited in the reference in
the bibliography (2), states that the majority of new contracted berths belong to
cruise ships that are specifically aimed at European demand.
6.1.2. Characteristics in the growth of European demand
THEORY
WHEN: Will it have an effect:
Probability (Value scale)
Long-term
1 2 3 4 5
(over 6 years)
NOVELTY.
The effects will be:
1 2 3 4 5
Completely known
FIELD: The number of affected
people will be:
X
Very large
X
Very significant
1 2 3 4 5
Very small
CERTAINTY. Will be presented
with a degree of certainty:
Completely unknown
1 2 3 4 5
Not very significant
FORESIGHT.
Public interest will be:
X
1 2 3 4 5
Very small
SEVERITY.
The effects may be:
Immediately
X
X
Very large
1 2 3 4 5
Very low
X
Very high
6.1.3. Main consequences
a) The average age of the European cruise passenger is falling: this is due to the
inclusion in cruise consumption of the European generation of baby boomers that
is currently experiencing very high family incomes. This generation has changed
its leisure needs as it is no longer constrained by its children, and tends to be
formed of very well informed and demanding customers.
b) A rapid increase in the supply of short duration cruises (less than 7 days) within
the European source market: according to data from the British PSA and the
German DRV, the commercialization of short duration cruises is becoming widely
accepted, thereby opening the market to a younger generation of customers.
c) An increase in the Mediterranean as a destination: the development of European
demand is centred around the Mediterranean (see table 4.IX), which is similar to
the Caribbean's effect on North America. The main ports in terms of sheer amount
of traffic and investment in cruise facilities are: Piraeus (Greece), Barcelona and
Palma de Majorca (Spain), Civitavecchia and Livorno (Italy), La Valetta (Malta),
Marseille (France) and Limassol (Cyprus).
d) France and Germany will take over from the UK as faster growing source markets
within the period that is being studied. Spain, given its low level of demand, will
have the highest growth levels of all.
173
6.2. Entry into service of greater tonnage vessels
The entry into service of a larger number of ever bigger SuperLiners is a fact. A
SuperLiner is a vessel that has a tonnage of over 70,000 GT while the term VLCV is
reserved for ships that exceed 100,000 GT.
6.2.1. Evidence
The position at the beginning of the year 2002 is detailed in table 6.II below, and is
defined by an average tonnage of 42,841 GT. The future position will change with
additions arising from the order book (OB), which are detailed in table 6.III. It shows an
increase in the number of cruisers in the >100,000 GT and 100,000 to 70,000 GT
segments. Meanwhile, the 70,000 to 30,000 GT segment remains stable. In the 20022005 period, 31 vessels of at least 70,000 GT, belonging to the Big Four, will enter
service. Each ship has a capacity of over 2,000 berths. The general trend is therefore
towards greater tonnage ships, averaging around 91,500 GT and 2,150 berths, which
are considerably higher averages than those of two years ago when figures were
75,000 GT and 1,800 berths.
Table 6.II. Position of main cruise lines (January 2002)
Group/
Cruise Line
Total Fleet
NS
GT
GT/
Berths Average
106
6,152,670
38.1
Smaller North American
18
508,944
52.3
Smaller European
49
926,188
26.8
10
252,133
35.0
7,206
17.9
25,213
721
183
7,839,935
36.8
212,857
14.8
42,841
1,163
Berths Average
GT
Berths
Berth
4 Main Groups
Smaller Asian
TOTAL
GT
Berths
age
average average
9.9
58,044
1,523
9,728
7.5
28,275
540
34,512
27.6
18,902
704
161,411
Table 6.III. State of order book (January 2002)
Group/
Cruise Line
Total Fleet
NS
GT
GT/
Berth
4 Main Groups
average average
3,006,656
41.7
72,046
96,989
2,324
Smaller North American
3
203,000
66.7
3,044
67,667
1,015
Smaller European
3
178,600
37.6
4,746
59,333
1,582
Smaller Asian
TOTAL
0
0
-
0
0
0
37
3,388,256
42.4
79,836
91,574
2,158
174
age
31
A more detailed analysis of this trend by cruise categories reveals some very
interesting results. The three major cruise line categories are taken into account for
this, details of which can be found in chapter 3: the big groups, the smaller North
American groups which are 5/5+ star, the Europeans and the Asians.
-
The trend towards larger tonnage ships was most noted in the US, with the
Europeans taking some time to copy the trend and the Asians even further behind.
-
The fact that European and Asian source markets are maturing is reflected in the
fact that P&O and Costa Crociere have ordered the construction of their own
VLCVs aimed exclusively at European demand (they will enter service in 2004 and
2003), and that Star Cruises has two in the order book, also scheduled for 2003
and 2004.
-
This general trend is also affecting cruise lines that exploit niche markets and the
higher-class categories of 5 and 5+ stars. The profitability threshold in application
of economies of scale is fixed by the building of vessels of 30,000 GT. New
displacements tend to lie in the gap [20,000 GT; 50,000 GT]. The importance of
this lies in the fact that they are placed at the higher and more expensive end of
the market. This explains why the 30,000 GT–70,000 GT segment remains stable,
as the construction of 3-4 star vessels is becoming less and less, with more 5/5+
star vessels being built instead.
The reasons for the increase in cruise capacity are twofold:
a) Financial. The need to increase productivity means lowering the price of the ticket
and return to economies of scale. The market will soon be dominated by ever-larger
ships that can only be funded by the large cruise lines, given the massive amount
of initial investment that they entail. This figure is over 300 million dollars and it
is only the big cruise lines that can cope with such a financial risk. In other words,
the phenomenon of the large ships is undeniably linked to the process of business
consolidation, which is analyzed is section 6.3. The correlation between the two
can be clearly seen in the table below.
Table 6.IV. Position of main groups (January 2002)
Group/
Cruise Line
Total Fleet
NS
GT
average
Berths
NS
Average
GT
Berths
average
average
Carnival
46
50,502
1,339
14
97,693
2,329
P&O Princess
18
60,170
1,523
8
87,925
2,105
RCC
23
80,054
2,051
6
103,426
2,418
Star Cr. Group
19
47,644
1,327
3
105,000
2,700
106
58,044
1,523
31
96,989
2,324
4 groups
175
Relationship between GT/berth ratio and date of construction
Source: Own study.
b) Technical. Tourist demands and the financial running of modern cruise ships require
there to be a wide range of on-board attractions throughout the ship's voyage (see
section 4.2.1). Revenue generated on-board plays a very important role in future
revenue and profitability, which is why a greater platform is required to hold an ever
greater array of services for passengers such as casinos, designer shops, perfume
shops, shops which sell alcohol and tobacco, cosmetics shops, etc. The need for
a larger platform means that the GT/berth ratio must increase. This concept is
known as a floating resort, competing with on-land resorts, as stated on many
other occasions throughout this report. This is what the customer actually wants
and is the reason why it is so successful. The maximum exponent of the concept
is the VLCV, which requires an investment of 400-500 million dollars, a cost which
can only be met by the Big Four (RCC, Carnival, StarCruises and P&O Princess).
The entry of the VLCVs into service is most noteworthy, as they were originally
designed to sail only in the Caribbean. The success of the "Grand Princess" (109,000
GT) in the Mediterranean throughout the summer of 1998 brought about a radical
operational change, with Star Cruises also thinking of doing the same from Singapore.
US and European cultural differences find a common denominator in this new
generation of ships, clearly inspired by the Las Vegas hotel model, which is the most
successful in the US. In 2002 there are 14 VLCVs on the order books, of which 2 are
to operate exclusively in Europe, with another two set for Asia-Pacific.
As far as the upper tonnage limit is concerned, the order book up until 2006 shows that
at the moment the largest ship is Cunard's "Queen Mary 2" (150,000 GT), which
cannot really be considered a VLCV, but rather a gigantic cruise liner (see section 1.2).
It must not be forgotten that the restrictions imposed on the ships are neither technical
nor constructive, but instead operational and financial, essentially based on ship length
for docking and the sheer amount of investment required to begin a project of this
scale. The "America World City" project, consisting of 6,200 berths and 250,000 GT
and dating back to 1986, still has the latter two restrictions imposed upon it: the lack
of sufficient funding and the problem of its great length (387 m). In order to save the
project, it is envisaged that four ferries will be incorporated into the cruise for
transporting passengers from the ship's anchorage point to the actual port.
176
It is interesting to note the vision of the future as envisaged by Corrado Antonini,
the Executive President of Fincantieri Shipyards, who states (see bibliography 2)
that: "the mass-market development will be served by three types of ship: a)
cruisers of 20,000-40,000 GT for the luxury segment; b) Panamax – which is
currently set at up to 85,000-90,000 GT; and c) some VLCVs of over 100,000 GT."
6.2.2. Characteristics of the process of bringing larger tonnage ships into
operation
THEORY
WHEN. Will it have an effect:
Long-term
NOVELTY. The effects will be:
Completely known
(over 6 years)
1 2 3 4 5
Immediately
X
1 2 3 4 5
Completely unknown
X
FIELD. The number of affected
1 2 3 4 5
people will be:
Very small
SEVERITY. The effects may be:
X
Very large
1 2 3 4 5
Very significant
X
FORESIGHT. Public interest
will be:
1 2 3 4 5
Very small
X
Very large
1 2 3 4 5
Very low
X
Very high
6.2.3. Main consequences
This major increase in average cruise capacities is leading to:
a) The need to have the necessary docking berths at the ship's disposal at the right
times. The size of the ship, the number of passengers and baggage handling are
three important variables.
b) The distinguishing feature of this trend is that it entails a major demand in tourism
services, which are more keenly observed in the case of port calls (which last
approximately from 7 to 10 hours) and in disembarkations. As embarkations are
staggered, they are less demanding.
c) The amount of investment required for port facilities (required draught levels for
VLCVs and the sheer volumes of passenger traffic), may be extremely high and not
at all profitable over the short-term. This is why private funding comes into play at
this juncture. Examples of this include Carnival at the port of Miami, Disney, who
designed their own Port in Canaveral, and RCC, who invested in the building of new
docking berths for its Eagle class in Miami. The port of Barcelona, the Italian ports
and the port of Singapore are also following this private funding initiative. The
177
result is considerable rigidity in the selection of destinations and ports capable of
catering for these large cruise ships.
d) The feature of the VLCV ship as a destination in itself is not as essential in Europe
or in Asia, where the destinations are very important for the customers.
Nevertheless, in spite of this, the model that has been so successful in the
Caribbean for the US is initially being applied to the Mediterranean, and to a lesser
degree to the Asia-Pacific region. These large ships have a vast array of additional
facilities (RCI's VLCVs even have a mini golf course, aquariums and an ice-rink),
making them a product that is in direct competition with on-land resorts.
e) The large ships (> 70,000 GT) are exclusive to the Big Four cruise lines.
f) Dealing with large volumes of cruise passengers in a short time period may have
implications for environmental quality.
g) The growth in the Mediterranean has created a transatlantic traffic derived from
the association between destination and season (Mediterranean-summer45,
Caribbean-winter). In the case of VLCVs, their great breadth (B>32.25 m) prevents
them from passing through the Panama Canal, which is why they can only be easily
placed in the Mediterranean. These itineraries, which are borne of the need to
change the ship setting based on seasonality, are offered to the public as unique
itineraries which are very expensive (due to the duration, as the average daily price
tends to be considerably lower than the company average) which is why its
customers generally have very high spending power.
6.3. Cruise line horizontal business consolidation
Horizontal business consolidation began in the US towards the end of the eighties in
the 3-4 star segment, involving large group consolidation and expanding into the
European and Asian markets.
The trend described in section 6.2 is very closely linked to this, as both feed mutually
off one another. The sector is becoming ever more concentrated and with an ever
increasing global mentality. The need to lower cruise prices triggers off a very simple
process: the large cruisers that are currently entering service ensure a financial
operation that is very competitive, providing excellent quality services at very tight
rates. The smaller, non-specialist cruise lines (3-4 star segment) are unable to compete
with such competition. This means that the smaller companies are disappearing or
being taken over, thereby increasing the consolidation. The events of September 11th
have speeded up the process of consolidation, affecting not only cruise lines, but
suppliers of equipment and goods as well.
45 in the Nor thern Hemisphere.
178
6.3.1. Evolution
Supply is dominated by the Big Four (Carnival Co., RCC, P&O Princess, and Star
Cruises). The figures in table 6.V. are very significant with regard to this subject,
denoting a centralization process in which actual supply is clearly involved. This is
reflected in the period from 1989-2001, when the four groups went from controlling
54.9% to 71.7% of world berth capacity. Section 3.3 reflects the main business
activities within the last few years. In March 2002 there were still two major business
proposals to be resolved: the proposed merger between RCC and P&O Princess, or the
takeover of the latter by Carnival Co., all of which means that soon we may be talking
of the Big Three rather than the Big Four.
Probable forecasts indicate that this consolidation will increase over the coming years,
regardless of what business activities may occur. A clear indication of this can be
gleaned from examination of the order book, in which 90.2% of berths ordered for the
2002-2005 period belong to the Big Four. The result is a forecasted increase in share
of total berth supply for the 2001 - 2004 period from 71.7% to 76.5%.
Table 6.V.
Group
Capacity by berth at year end
1989
1991
1993
1995
1997
1999
2001
2004*
13,482
18,424
22,088
26,528
42,565
49,812
61,597
94,197
8,992
13,504
14,326
15,168
29,314
29,310
47,184
61,690
P&O Princess
10,353
13,533
13,321
16,242
16,184
20,818
27,420
44,260
Star C.
13,144
13,007
15,831
14,097
14,968
20,824
25,210
33,310
TOTAL
45,971
58,468
65,566
72,035
103,031 120,764 161,411 233,457
World
83,800 100,650 114,110 132,530
160,100 174,845 225,000 305,000
Carnival
RCCL
(%) World
54.86
58.09
57.46
54.35
64.35
69.07
71.74
76.54
(*): in accordance with order book.
Source: Own study based on data from Lloyd’s Cruise International and GP Wild (International) Ltd.
This forecast has been based on the presumption that there will be no further business
activities such as takeovers or mergers, and that no non-specialist or medium sized
cruise lines will be dissolved, as in the bankruptcy cases of Premier Cruises and
Commodore Cruises in 1999 and 2000. It is therefore clear to see that the world supply
of cruises is becoming more and more centralized, revolving around the dominant
position of the Big Four, in a situation that can be described as an oligopoly.
It is interesting to note that the progress of the relationship between supply and
demand also favours this process, as previously stated in section 2.4:
179
f) In the 1992-2000 period, the increase in net supply (∆supply = +93%, or +8.55%
cumulatively per annum) was less than the demand (∆demand = +97%, o +8.87%
cumulatively per annum), which logically means that average occupancy levels
have improved slightly from 98.18% to 100.53%. In these circumstances the main
cruise lines, who are the real protagonists when it comes to additional supply, have
maintained their occupancy levels, with RCI showing the best results, followed by
Star Cruises and P&O Princess to a lesser degree (see table 2.XVIII), and Carnival
the worst of all. This situation is different from that of two years ago, suggesting
that the excess tonnage of the smaller cruise lines has either been removed
(bankruptcies of Premier and Commodore Cruises), or else it has been taken over
by more efficient management of assets.
g) The outlook is similar for the 2001-2007 period, in that a slightly lower increase is
expected in supply (+38.2%) than demand (+39.6%).
In the face of such growth in world berth supply, the strategy of the big groups has been
based on committing heavily to a major expansion programme outside their traditional
North American source market, particularly towards Europe (United Kingdom,
Scandinavia and southern Europe), thereby obtaining greater risk diversification. It
must also be remembered that the big groups have greater room in which to
manoeuvre, as their financial standing gives them easier access to funding at more
beneficial rates, as well as having a greater volume of their own generated resources
(cash flow).
Table 6.VI. Share of the big 4 groups in 2000
Region
Share
Region
Share
Caribbean
76,9%
Europe
41,1%
Alaska
96,8%
Far East
78,5%
Source: Christiania Bank og Kreditkasse ASA.
There is strong competition among the existing four main groups, with a clear business
strategy aimed at the Mediterranean as well as the European source market. The
reason can be seen in table 6.VI, as the opportunity for actual growth is greatest in this
region. As has been stated throughout this report, it can be asserted that Europe/the
Mediterranean has become the main area of competition for the four main cruise line
groups. The activities undertaken bear witness to this fact. These groups have either
deployed their most modern vessels to this area, or else they have increased the
capacities of cruise lines in Europe in which they own a holding. Hence:
-
180
In the summer of 2001 Costa (Carnival Co.) placed five ships from its fleet,
totalling 7,000 berths, as well as accelerating the expansion of its fleet.
-
P&O Princess continues to deploy the "Grand Princess" (2,600 berths), without
forgetting the Festival takeover attempt that was a clear bid to convert it into the
Mediterranean leader.
-
RCC, through Celebrity, introduced the "Millennium I" (1,900 berths) and still has
the "Legend of the Seas" (1,800 berths). Added to this is the recent joint venture
with First Choice, which takes the form of the offer of "Island Escape" based in
Palma de Majorca.
The arrival of two of the big US cruise groups in Europe, both in terms of market and
destination, is helping to act as a catalyst for additional business enterprises that are
greatly benefiting the development of the European market. Recent business activities
in Europe speak for themselves:
-
Carnival Co.'s purchase of 50% of Costa Crociere in 1997, which was completed
in the year 2000.
-
Carnival Co.'s 26% holding in the share capital of the tour operator Airtours (now
known as MyTravel) in 1997.
-
P&O Princess sets up a joint venture with Arkona Reisen called Aida Cruises
(1999).
-
The creation of the ROC cruise line (1997), from the merger between Sun Line and
Epirotiki (both cruise lines).
-
The merger between ROC and Louis Cruises (1999).
-
P&O Princess's failed attempt to buy Festival in the year 2000.
-
The joint venture between the British tour operator First Choice and RCC (2000)
and the acquisition of 20% of the share capital of the tour operator.
-
The establishment of Spanish Cruise Line through a joint venture between Festival,
Trasmediterránea and the Spanish tour operator Iberostar (2000).
Table 6.VII. shows the evolution in the market share controlled by the Big Four and
other relevant cruise lines:
a) The situation has changed drastically in just six years, as in the period from 1995
to 2001, the Big Four have gone from controlling 44.1% to 50.0% of total berth
supply.
b) The influence of local and independent operators, mainly Greek and Italian
(Festival, MSC, Louis & ROC). The major push to modernize fleets, as detailed in
chapter 3, should not be underestimated.
181
c) The German-speaking source market is a world unto itself. The relatively low share
of German operators (Peter Deilmann and Hapag Lloyd) is only an indication of the
poor development in cruise demand. It has already been stated (in point 6.1) that
this market will take over from the British market in the medium-term.
d) The importance of the tour operator in the European holiday market is reflected in
the notable presence of British tour operators (World of TUI UK and MyTravel).
The majority of holidays taken by Europeans are in southern Europe, above all along the
Mediterranean shores, where people are searching for good weather. It can also be
noted that the dominance of the Big Four is most marked in Italy, thanks mainly to the
dominant market position of Costa Crociere, part of the Carnival Co. group since 1997.
It is much weaker in Germany, which is something of a sealed market, due to the
language and legal barriers and the economic strength and control of the major tour
operators (World of TUI and Thomas Cook AG)46.
Table 6.VII. Classification of cruise lines by share in the Mediterranean
Cruise line
Carnival
Costa
Cunard
Airtours
Carnival Co.
P&O
RCI
NCL
4 groups
June 1995
Berths
%
1,580
3.68
7,157
16.67
3,061
7.13
1,836
4.28
13,634
31,76
2,241
5.22
1,022
2.38
2,054
4.78
18,951
44.1
Epirotiki
Louis Cruises
Festival
Crystal
Hapag Lloyd
TOTAL
2,717
2,026
665
960
1,440
42,931
6.33
4.72
1.55
2.24
3.35
100.0
Group/
Cruise line
NS
November 2001
Berths
Carnival Co.
P&O Princess
RCC
Star Cruises
4 groups
Airtours
MSC
Thomson
Radisson
P. Deilmann
23
10
4
3
40
4
3
2
3
3
19,037
12,376
7,596
3,626
42,635
4,358
2,512
2,040
1,060
1,002
22.3
14.5
8.9
4.3
50.0
5.1
2.9
2.4
1.2
1.2
Louis Cruises
Festival
Crystal
Hapag Lloyd
TOTAL
10
5
1
3
122
6,467
5,022
960
1,012
85,242
7.6
5.9
1.1
1.2
100.0
%
Source: Own study based on data from GP Wild (International) Ltd.
Business centralization is also noticeably marked in Europe, but with two distinct facts
influencing events. They are the importance of tour operators, because of the absolute
182
46 World of TUI (previously known as Preussag), a German industrial and tourism group, is the main
European tour operator group, occupying first place in both the major European markets of Germany
and the UK, with sales of over 13 million holiday trips. Thomas Cook AG (previously known as C&N)
belongs to Lufthansa and the German distribution group Karstadt, and is the second largest European
tour operator, with over 8 million holiday sales. As can clearly be seen, the dominance of German
capital within the European holiday business is ver y great.
control they have over distribution channels, and multilingualism. This explains the
existence of medium-sized independent cruise lines in the 3-4 star segment, such as
Thomson, Festival and MSC.
The response of the big groups to these two challenges has been to create
associations, by means of exchanging shareholdings, with the big tour operator groups
(e.g. MyTravel-Carnival Co. and First Choice - RCC) along with the creation or takeover
of specific brands for the main national markets (e.g. P&O Princess - Aida Cruises,
Carnival Co. - Costa).
At present, only Germany remains outside this integrating current, with the exception
of the joint venture instigated by P&O Princess. For as long as the two main German
tour operators (World of TUI and Thomas Cook AG) remain on the business periphery,
the demand for cruises will not take off in German speaking countries, and when they
do enter the market fully it will have to be with the help of the big cruise lines.
Consequently, the market outlook will be one dominated by the Big Four with strong
links with the three main European tour operator groups (World of TUI, Thomas Cook
AG and MyTravel plc), and duly adapting their multi-brand structure in order to respond
to European multilingualism. An alternative to this scenario would be the incorporation
of a fifth German group based on the holiday holding company World of TUI and its
cruise line Hapag Lloyd.
6.3.2. Characteristics of business consolidation
THEORY
WHEN. Will it have an effect:
Long-term
(over 6 years)
NOVELTY. The effects will be:
1 2 3 4 5
Immediately
X
1 2 3 4 5
Completely Known
FIELD. The number of affected
X
Completely unknown
1 2 3 4 5
people will be:
Very small
SEVERITY. The effects may be:.
X
Very large
1 2 3 4 5
Very significant
X
FORESIGHT. Public interest
will be:
1 2 3 4 5
Very small
X
Very large
1 2 3 4 5
Very low
X
Very high
6.3.3.- Main consequences
This powerful development of business centralization is creating the following effects:
183
a) The disappearance of medium-sized independent cruise lines in the 3-4 star
segment in the medium to long-term. Only specialist cruise lines that have a niche
market and sound financial backing will survive.
b) The modernization of medium-sized European cruise line fleets in the short-term.
c) The reinforcement of this situation makes it difficult for new independent operators
to enter the market. Those who wish to enter the market must do so hand in hand
with the established players if they wish to guarantee their own success. This is
not only for financial and technological reasons, but also commercial reasons, as
they would need to be able to count on the support of the distribution channels
that the latter control.
d) A transfer of US and European capital into the Tourist Sector. The clearest
examples have been the acquisition of holdings by Carnival Co. in the tour operator
group MyTravel plc (third European group) and by RCC in First Choice.
184
e) The greater bargaining power of the big groups on destinations. In spite of the fact
that cruise lines are adopting a multi-brand policy, when it comes to doing business
with the port authorities it is the group's synergies that are of major importance.
On the other hand, there are also greater restrictions on itineraries offered, which
are related to the heavy investment in cruise terminals required for handling VLCV
traffic.
f) The cruise lines that operate in very specific niche markets (adventure cruises,
expeditions and sailing boats) may possibly escape this powerful business
consolidation.
7 ANNEX I. SHIPPING TERMINOLOGY
7.1. Relative size of tourist cruise fleets47
In terms of fleet volume and traffic, the tourist cruise sub-sector occupies a very small
percentage of merchant shipping. It must be remembered that the dominant shipping
activity by quite some way is the traffic of crude oil. It represents a third of transported cargo in the entire world, in mt, and almost 50% of transport demand, in mt x nautical mile.
The importance of tourist cruisers lies in their high technological value, their rapid
growth, and huge impact on the population, which plays a major role in public relations.
Table 7.I clearly shows the relative importance of tourist cruisers in global merchant
fleets, measured in terms of gross tonnage (GRT48 -GT). In the same table, drawn up
using data from Lloyd’s Register, in the section entitled "Other passenger ships", both
cruise ships and exclusively passenger carrying ferries are included (mixed passengercargo ferries not included).
On the other hand, according to data from CLIA, which groups together the majority of
the main cruise lines, the increase in berth capacity between 1991 and 2000 was over
90%. Taking into account that the GT/berth ratio has tended to grow throughout the
nineties, it can also be stated without a shadow of a doubt that the increase in cruise
ship tonnage (GT) increased considerably more than 90%. Therefore, in relative growth
terms, cruise ship fleets have only been surpassed in the last decade by container
ships.
Table 7.I. Distribution and evolution of merchant fleets worldwide
July 1989
∆ (%)
January 1999
NS
GRT
NS
GT
NS
GT/ GRT
Oil tankers
6.4
129.6
7
151
9.38
16.51
Liquefied gas tankers
0.8
10
1.1
17.2
37.50
72.00
Combined
0.4
20
0.2
10
-50.00
-50.00
Bulk carriers
4.7
109.5
6.2
148.6
31.91
35.71
General cargo
19.5
72.1
18.9
65.7
-3.08
-8.88
Container ships
1.1
22.7
2.4
53.2
118.18
134.36
Passenger/ro-ro
6.5
6.5
2.5
12.5
-61.54
92.31
Passenger/general cargo
0.4
0.8
0.3
0.6
-25.00
-25.00
Other passenger ships
2.7
6.2
2.9
7.8
7.41
25.81
Other merchant ships
2.2
10.9
4.1
38.3
86.36
251.38
40.1
388.3
45.6
504.9
13.72
30.03
TOTAL
NS= number of ships (thousands); GRT = GRT millions; GT = GT millions.
Source: Lloyd’s Register.
47 Throughout this section there will be prolonged reference made to the work cited in the bibliography (39), which is why it will not be cited continually.
48 GRT : Gross Registered Ton, referring to the ship's tonnage. See section 7.2.
185
Given that, on 1st January 1999, the cruise ship fleet comprised 337 ships with a total
of 6.5 million GTs, it represented 1.2% of the tonnage of the merchant fleet worldwide.
Figures are very similar to those of 2002. Nevertheless, as has already been stated,
their technological and financial importance is far superior.
7.1.1. Sea cruises: scheduled or tramp49 traffic?
Maritime transportation can be clearly divided into two separate fields: tramp traffic
and scheduled service lines. It is interesting to establish into which category the service offered by ocean-going tourist cruises falls.
The most characteristic feature of the scheduled line market is its cartelization, which
is not present in tramp traffic. In nearly all major trading routes there is a group of shipping operators that have established a conference, which is a shipping company association that works in a set trade or within a certain geographical area. The conference
also reaches common agreement on policies regarding cargo, frequency and supply
capacity.
The majority of countries permit and even support conferences in their own legislations.
In 1916, the US approved the Shipping Act exempting them from anti-cartel legislation,
although the conferences themselves must be open. In the European Union, the
Commission’s Directorate General for Competition (DG IV) maintains this exemption,
although only with regard to shipping tariffs, as on-land tariffs are not applicable.
Conferences are characterized by the following:
-
Establishment of common fleet tariffs which must be adhered to.
-
They are normally exclusive associations, although US legislation states the opposite.
-
They frequently form pools, sharing cargo rights or income from freight among the
members in accordance with a set of established criteria.
From what has previously been stated, it can be said without a shadow of a doubt that
in the tourist cruise business such freight conferences do not exist, although there are
cruise liner associations (CLIA, Croisimer and PSA, see section 3.1) in the most developed countries (United States, France, United kingdom, Germany and Japan), which
cover the following objectives:
-
To generally promote this new type of holiday.
49 Tramp traf fic, the shipping equivalent of char ter traf fic.
186
-
Represent common interests before other agents in the market and act as a lobby
group before governments of respective countries.
-
Focus the majority of its activities on marketing and joint publicity.
-
Look after the holiday retail sector's training: travel agents.
Other features that distinguish tramp traffic from scheduled service lines are as
follows:
a) Itineraries. Scheduled traffic has the same itineraries occurring at regular time
intervals, while tramp does not. Tourist cruise supply is advertised annually in their
brochures, and although this may vary from year to year, tourist cruises are still
nevertheless closer to scheduled passenger traffic than tramp traffic.
b) Freight and conditions. In scheduled traffic, tariffs are made public and act as a
standard-form contract, which is what occurs in the case of tourist cruises.
Nevertheless, it is necessary to clearly distinguish between a tariff published in a
brochure and the tariff actually paid, as a result of discount policies applied by the
cruise lines.
c) Market transparency. Tramp traffic can be characterized as a transparent market,
while scheduled traffic is far from being so. As previously stated, tourist cruises
are a more transparent market than the scheduled lines and they function in accordance with the specific features of the Tourist Sector.
In conclusion, it can be asserted without doubt that the tourist cruise is closer in
essence to scheduled line services, but nonetheless with its own unique features which
prevent it from being considered purely as a scheduled line service.
7.1.2. Financial agents
In the shipping business a number of figures stand out:
-
Proprietor: the person or entity which owns the ship.
-
Ship manager: the person or entity which supplies or fits out the ship by contracting the crew.
-
Ship owner: commercially exploits the ship, being the borrower of the service from
third parties.
-
Passenger: the person who receives a transport service.
187
In the sub-sector currently being studied, business practice differs depending on the
size of the company and the geographical field. The Big Four, who also operate in the
US and Canadian markets, are proprietors, ship managers and ship owners all rolled
into one, given their immense financial capacities. The situation in Europe is very
mixed: tour operators play a major role, either as proprietor, ship owner or ship manager (as in the case of Airtours-MyTravel) or else they may just be a cruise line company
(as in the case of World of TUI-Thomson), or may even reserve or buy capacity quotas
on the ship (in the case of the German tour operators). In the smaller cruise companies
there is also a whole range of possible situations: they may be proprietors, ship owners
and ship managers all at once (as in the case of Radisson), or else they may just be
ship owners and ship managers (as in the case of World of TUI-Thomson with Louis
Cruises) or they may even be just proprietors and ship managers (as in the case of VShips).
With regard to ownership and management of the ship, there are several possibilities:
-
Bare boat charter50: assigning of the ship by the proprietor to the leaseholder for a
specific length of time, with the leaseholder fitting out the ship and thereby becoming the ship manager and acquiring the nautical and commercial management of
the ship.
-
Chartering: The ship manager or proprietor undertakes to place a fully assembled
and manned ship at the disposal of the charter carrier.
-
Shipping transport contract. This is the legal format used by the scheduled lines,
whereby the ship owner assumes control of the charter in exchange for transporting goods or passengers from one place to another.
Within the business that is being examined in this report, the three types of operation
are widespread and accepted, depending on the financial organization and the risks a
company can assume. Details of the main operations undertaken during the year 2001
follow in the table below.
50 In reality it is a financial lease.
188
Table 7.II.
Ship
Operator
Proprietor
Type of
Ocean Majesty
Majestic
Page and Moy
Part-time
Lanzhuanshi
Pacific
Tropical Island
n/a
n/a
Boulos Gad
Part-time
n/a
Tourism and
chartering
Name
Period
Options
contract
International
2001-2005
chartering
Cruises
Serenade
Louis Cruise
Hotels
Princesa
Louis Cruise
Victoria
Arcadia
Pacific
G8 Summit,
Part-time
9 days,
Genoa
chartering
July 2001
n/a
n/a
Bare boat
August 2001 to
Sale and
charter
November 2002
lease back
April 2001- 2004
Attika
Great Lakes
Shipping
Cruises
Italian buyers
P&O Princess
Princess
Bolero
Seawing
Festival
Spanish Cruise
Part-time
Cruises
Line
chartering
Royal Olympic
Airtours
Part-time
5 years
Sale and
chartering
from
lease back
Cruises
January 2001
7.1.3. Tourist cruiser registration
The International Convention on the High Seas drawn up in Geneva in 1958 states
that the Register to which a ship belongs determines its nationality and thus the
legislation applicable to it on all subjects.
The selection of a flag is therefore important for the commercial and operational
success of the ship. It is a well-known fact that running costs can be reduced substantially (by over 25% and even 40% in some cases) by running a ship under a flag
of convenience (Panama, the Bahamas, Cyprus).
The nationality of the proprietor is being used less and less as the determining factor for choosing where the ship is to be registered: at the beginning of 1998, 53%
of total tonnage of the worldwide merchant fleet of ships over 1,000 GT (734.5
million dwt) was registered under flags of convenience, compared to only 35% nine
years ago.
There are certain links between free registrations and the actual ownership of vessels, determined amongst other things by the existence or not of bilateral agree189
ments on double taxation. For example, the relationship between the Cypriot register and Greek ship owners or the relationship between US proprietors and
Panamanian and Liberian registers, or between Panama and Japanese ship owners.
It is well known that over the last 20 years, due to the proliferation of open registrations, the change in origin-destination matrices of global commerce and the
increase of protectionist policies of developing countries, there has been a major
drop in OECD registrations, along with a parallel increase in fleets from recently
industrialized countries (NIC51) and the People's Republic of China.
Faced with this situation, European countries reacted by creating an additional and
alternative framework with a second registration under their own national flags of
convenience, without modifying the traditional registration. This is how off-shore
and special registrations arose.
Ferries and shuttles basically operate in areas reserved for flags from the coastal
state52, which is why flags of convenience are not really seen in this type of traffic. A
major difference of the cruise ships, as previously stated, is the high number of personnel, which often exceeds 1,000 crew members, and is an important factor given
that crew costs play a major part in the running costs. Consequently, flags of convenience are used very often and this can also be a determining factor in the choice of
sailing route. For example, Seabourn and RCC register their cruises in the Norwegian
International Register (NIS), in the Bahamas or in Liberia, while Carnival mainly registers its ships in Panama, and Holland America Line in the Dutch Antilles.
As can be seen in table 7.III, 23.7% of the total cruise ship fleet is registered in
Panama, 23.3% in Liberia and 22.3% in the Bahamas. Of the world fleet, a total of 69%
of vessels are registered in Free Registers and only 28% are registered in OECD countries. Norway and the Netherlands account for 16%.
Nevertheless, if the ship owner's nationality is taken as a rule, then 85% of ships are
controlled by OECD countries, with the US top of the list, followed by the UK in a distant second place. The dissociation between actual ownership and the country of registration is even higher than the average of the world merchant fleet, which, as has been
stated previously, is mainly because of the very high personnel costs of the crew on
board a cruise ship. These costs are considerably reduced by the non-application of
employment legislation from OECD countries.
51 New Industrialized Countries: Singapore, Taiwan (Chinese province), Republic of Korea.
52 Thus, for example, EEC Regulation 3577/92 reser ves EU national cabotage traf fic to ships that
fly the flag of the said countries.
190
Table 7.III. Cruise fleet by country of registration
Flag
of registration
Panama
Liberia
Bahamas
Norway
Netherlands
United Kingdom
Greece
Cyprus
Germany
Italy
France
United States
Wallis&Futuna
Bermuda
Croatia
Finland
Isle of Man
TOTAL
NS
Passenger
Share
34
33
38
12
10
7
11
6
5
3
1
1
1
1
1
2
2
168
capacity (berths)
38,527
37,520
36,231
13,574
12,991
7,646
5,045
3,918
2,468
1,418
1,196
818
320
300
300
300
232
162,804
%
23.7
23.1
22.5
8.3
8.0
4.7
3.1
2.4
1.5
0.9
0.7
0.5
0.2
0.2
0.2
0.2
0.1
100.00
GT
1,267,184
1,567,135
1,163,450
575,312
514,085
297,997
116,217
65,995
107,789
63,541
47,900
30,090
18,800
12,500
5,650
4,922
8,500
5,867,067
Share
%
21.6
26.7
19.8
9.8
8.8
5.1
2.0
1.1
1.8
1.1
0.8
0.5
0.3
0.2
0.1
0.1
0.1
100.00
Source: Own study based on the Official Cruise Guide 1999.
7.2. Definitions and symbols used
• Tonnage: volume of closed spaces on a ship, measured in accordance with the
1969 International Convention on Tonnage Measurement of Ships. The reason why
ships' tonnage is measured is so that they can adhere to fiscal legislation and
International Maritime Law.
• Bare boat charter: assigning of the ship by the proprietor to the leaseholder for a
specific length of time, with the leaseholder fitting out the ship and thereby becoming the ship manager and acquiring the nautical and commercial management of
the ship. It is basically a financial lease.
• Port side: the left side of the ship looking from stern to bow.
• Rolling: the ship's movement from port to starboard or vice versa.
• Pitching: the ship's movement from bow to stern, alternately rising and falling.
• Cabotage: word deriving from the French caboter, which means to sail from cape
to cape.
• Draught measurement: (D) distance between the waterline and the upper edge of
the keel.
191
• Order Book: (OB), ships that have been commissioned and are pending delivery.
• Catamaran: a boat with twin hulls joined by at least one deck.
• Cruise passenger: term referring to the tourist that partakes of a tourist cruise.
• Displacement: amount of water displaced by the ship, measured in metric tons.
• Port Call: (PC) refers to the ship's anchoring or mooring at either a base port or a
secondary port.
• Length (perpendicular): (Lpp) length of the ship measured at the waterline.
• Length (total): (Ltot) length of the ship measured between the two ends of the ship.
• Starboard: the right side of the ship looking from stern to bow.
• Ferry: term generally applied to passenger and private vehicle transport vessels
that travel from one location to another.
• Fleet: group of ships. Fleet definitions are as follows:
a) Total Fleet (TF),
b) Inactive or moored fleet (IF).
c) Operational fleet (OF): the difference between total fleet and inactive fleet.
d) Scrap Fleets (SF): fleet that has been decommissioned.
e) New contracts (NC): firm ship contracts within a year.
f) Future fleet (FF): FF = TF – S + OB + NC – C, (C being order book cancellations).
• GT: unit of measurement of ship volume, meaning gross tonnage. It measures the
total volume of closed spaces on the ship, using a standard formula.
• HP (horse power): unit of power equal to 745.7 W.
• Ballast: weight transported by the ship that serves only to improve its stability. It
is normally salt or sea water.
• Long ton (British): unit of weight, equal to 1.01605 metric tons.
• Moulded breadth: (B) maximum ship's breadth measured from the internal sides of
the gangways.
192
• Maximum breadth: (Bmax) maximum ship's breadth measured from the external
sides of the gangways.
• International nautical mile: unit of length equal to 1,852 metres.
• Knot: unit of speed, equal to 1,852 km/h.
• Deadworks: part of the ship that is not submerged.
• Underwater body: part of the ship that is submerged.
• IMO. The International Maritime Organization is a UN organization focused exclusively on maritime matters. The Organization's objectives are summarized in article 1 a) of the Articles of Agreement, which are: "to aid co-operation between
governments in relation to regulations and government initiatives on all technical
matters regarding international commercial navigation; to encourage and promote
the general application of regulations as and when required for maritime safety, for
improved shipping methods and the prevention and restraint of marine pollution by
ships".
• Panamax: ships that can pass through the Panama Canal.
• Panamax-max: ships that can pass the Panama Canal, although they have a tonnage of over 80,000 GT. The Panama Canal’s system of sluices restricts ship breadth (Bmax = 32.25 m) as well as length (Ltot= 294 m), which equates to a cruise ship with a maximum capacity of 1,500 berths. In order to increase capacity,
there are plans for a greater superstructure with a smaller breadth, thereby avoiding transversal stability problems and providing a larger number of outside cabins
with a balcony. This solution is expected to allow 100,000 GT ships with 2,500
berths through the Canal whilst maintaining their Panamax status.
• Lightweight: is the sum of the weight of the hull, the superstructures, and the main
and back-up machinery, equipment, etc. without counting consumption products
(e.g. cargo, fuel, lubricating oil, ballast water, fresh water etc.).
• Deadweight: is the difference between displacement and the lightweight of a ship.
It is used mainly for merchant ships.
• Stern: the rear part of a ship’s hull.
• Post-Panamax: refers to ships with a maximum breadth of over 32.25 m, the upper
limit allowed for passing through the Panama Canal.
• Bow: the front end of the ship’s hull.
• Base port: also known as berth port (PBASE), head port or main port. It is the place
where the embarkation and/or disembarkation of passengers takes place at the
start and/or end of a cruise.
193
• Secondary port: also known as port of call (PCALL), and is a concept that is related
to the cruise industry, whereby passengers disembark, and then re-embark to continue with the cruise. The financial impact in the port is less than at the base port
(see section 4.4).
• Moulded depth: (D) distance measured between the upper edge of the keel and the
point defined by the intersection between the main deck extensions and the ship's
side.
• Stocks: supplies.
• Ro-ro: a flush deck ship that permits the loading and unloading of vehicles by its
own means. Modern ferries are normally ro-ro. The term is short for roll-on, roll-off.
• Short ton (US): unit of weight, equal to 0.90718 metric tons.
• Superstructure: the part of the ship that is above the hull.
• TEU: or twenty-feet equivalent unit, a unit used to measure cargo capacity of container ships based on a container measuring 20 feet.
• DWT: deadweight ton. Refers to the load and consumables of a merchant ship measured in metric tons.
• Tramp: type of shipping traffic that is the opposite of scheduled traffic. Similar to
airline charter traffic.
• GRT: gross registered ton, a unit of measurement of a ship's tonnage.
• VLCV: Very Large Cruise Vessel, refers to a cruiser of over 100,000 GT. At present
the largest is RCI's Eagle class, with a weight of 140,000 GT.
7.2.1. Explanation of symbols and abbreviations used
As well as symbols used and explained in each equation and in the footnotes, the following abbreviations and symbols have also been used throughout this study:
PA = Port Authority
ABTA = Association of British travel Agents
ASTA = American Society of Travel Agents
B = moulded breadth
CC = Carnival Cruises
194
CLIA = Cruise Lines International Association
OB = order book
PC = port call
FCCA = Florida-Caribbean Cruise Association
FF = future fleet
TF = total fleet
g it = degree of development of the market "i" at a specific time "t"
GSA = General Sales Agent
GT = Gross tonnage
HAL = Holland America Line
Ltot = total length
NS = number of ships
NCL = Norwegian Cruise Line
WTO = World Tourism Organization
PBASE = Base or main port
PSA = Passenger Shipping Association
PCALL = secondary port
RCC = Royal Caribbean Cruise Line
RCI = Royal Caribbean International
ROC = Royal Olympic Cruises
D = average draught
VLCV = Very Large Cruise Vessel, cruise ships of over 100,000 GT
Vij = cruise demand from source "i" to recipient "j"
195
7.3. Addresses and websites of interest
7.3.1. Associations
Cruise Lines International Association (CLIA)
Address:
500 Fifth Ave.Suite 1407
New York, NY 10110 (USA)
Tel:212-9210066
Fax:212-9210549
www.cruising.org
International Council of Cruise Lines (ICCL)
Address:
1211 Connecticut Avenue, Suite 800
Washington, DC 20036 (USA)
Tel.: 202-296-8463
Fax: 202-296-1676
www.iccl.org
Florida-Caribbean Cruise Association (FCCA)
Address:
2701 Ponce de León Blvd., Suite 203
Coral Gables, FL 33134 (USA)
Tel.: 305- 446 7297
Fax: 305- 448 0931
www.f-cca.com
National Association of Cruise Oriented Agencies (NACOA)
Address:
7600 Red Road, Suite 128
South Miami, FL 33143 (USA)
Tel.: 2305-663-5626
Fax: 305-663-5625
www.nacoa.com
Passenger Shipping Association (PSA)
Address:
4th Floor Walmar House
288-292 Regent Street
LONDON W1R 5HE (United Kingdom)
Tel.:0171-436 2449
Fax:0171-636 9206
www.psa-psara.org
196
Association des Compagnies de Croisières et Ferries. Croisimer
Address:
8, rue Halévy
75009 Paris (France)
Tel.:01 40 07 99 94
Fax:01 42 66 11 21
www.croisimer.com
Verband der Faehrschiffahrt und Faehrtouristik e.V. (VFF)
Address:
Mattenwiete 8
20457 Hamburg (Germany)
Tel.:49-40-36 01-215
Fax:49-40-36 01-217
www.faehre-vff.de
International Cruise Council Australasia
Address:
P.O. Box 509
Harbord NSW 2096 (Australia)
Tel.:02-99 05 9001
Fax:03-99 05 9856
www.cruising.org.au
Japan Oceangoing Passenger Ship Association
Address:
Kaiun Bldg. 2-6-4, Hirakawa-cho, chiyoda-ku
Tokyo ( 102-0093) (Japan)
Tel.:03-5275-3710
Fax:03-5275-3317
www.jopa.or.jp
The Marine Hotel Association
Address:
P.O. Box 1659, Sausalito, CA 94966 (USA)
Tel.:+1 415 332 1903
Fax:+1 415 332 9457
www.mhaweb.org
7.3.2. Main shipping companies: websites
Aida: www.aida.de
Airtours: www.airtours.co.uk
American Hawaii Cruises: www.cruisehawaii.com
197
Carnival Cruises: www.carnival.com
Celebrity: www.celebrity-cruises.com
Club Med: www.clubmed.com
Costa Crociere: www.costacruises.com
Crystal: www.crystalcruises.com
Cunard: www.cunard.com
Disney: www.disney.com/DisneyCruise
Festival: www.festivalcruises.com
Fred Olsen: www.fredolsen.co.uk
Holland America Line: www.hollandamerica.com
Hapag-Lloyd: www.hlkf.com
Louis Cruises: www.louiscruises.com
Mediterranean Ship Cruises: www.mscruisesusa.com
Norwegian Cruise Line: www.ncl.com
NYK (Nippon Yusen Kaisha): www.asukacruise.co.jp
Orient Lines: www.orientlines.com
P&O: www.pocruises.com
Peter Deilmann: www.deilmann-cruises.com
Phoenix Reisen: www.phoenixreisen.com
Princess: www.princesscruises.com
Royal Caribbean International: www.royalcaribbean.com
Radisson Seven Seas: www.rssc.com
ResidenSea: www.redisensea.com
Royal Olympic Cruises: www.royalolympiccruises.com
Saga: www.saga.co.uk
Sea Cloud: www.seacloud.com
Seabourn: www.seabourn.com
Seetours: www.seetours.de
Silversea Cruises: www.silversea.com
Star Clippers: www.star-clippers.com
Star Cruises: www.starcruises.com.my
Thomson: www.thomson-holidays.com
Transocean Tours: www.transocean.de
Valtur: www.valtur.com
Windjammer: www.windjammer.com
Windstar: www.windstarcruises.com
7.3.3. Other websites of interest
Seatrade Europe: www.seatrade-europe.com
Seatrade Mediterranean Cruise & Ferry Convention: www.seatrade-global.com
Seatrade Cruise Shipping Convention (Miami, USA): www.cruiseshipping.net
Travel Trade Productions, Inc.: www.traveltrade.com
198
8. ANNEX II. NUMERIC STUDIES
8.1. Spending patterns in the Côte d'Azur (France) and in the
Caribbean
At the end of 1994, in-depth and unique research was carried out in the cities of
Cannes, Nice and Villefranche (Côte d'Azur), based on spending at destination generated by cruise traffic. (See bibliography 48). The research is based on a survey of a
representative section of the population in each of the ports and on a series of statistics from the corresponding Chambers of Commerce and Industry. Tables 8.I, 8.II and
8.V reflect the main results of the study. Values have been updated to 2001, taking
inflation into account.
The FCCA regularly analyzes the economic effects of cruises on the Caribbean islands,
with the last report published based on the first quarter of 2001. (See bibliography 16).
This section uses the methodology developed in section 5.1.
8.1.1. Spending category grouped by type
Total spending
(S
)
TOTAL
can be defined by the sum of the following spending groups:
S
=S
+S
+S
+S
TOTAL
PORT
ON-LAND
CREW
SUPPLIES
(4)
8.1.2. Spending attributable to port services (SPORT)
a) On the Côte d'Azur:
-
Provided by the Port Authority (TPA). For the purposes of the study the figures
set out are as follows: in the port of Le Havre a cruise ship with 500 berths
is billed for 4,600 euros as a base port or 600 euros as a secondary port, with
no taxes for passengers. In Marseille, tariffs are 7,600 euros for being a base
port for the "Costa Romantica" (embarking and disembarking 500 of the
1,700 cruise passengers it accommodates) and 6,100 euros for the "Bolero"
(200 embarking and disembarking of a total of 800 passengers) and 2,300
euros as a secondary port for the "Splendour of the Seas" (1,500 cruise
passengers).
-
Provided by por t industr y professionals
(S
PIPROF
)
:
4. The pilot receives 1,500 to 3,000 euros on average for entering
or exiting.
5.
Ship on tow is billed at 1,500 to 7,600 euros.
199
6.
Boat ser vice for anchored cruise ships; in the case of the por t of
Villefranche (France) this varies between 1,200 and 2,000 euros.
-
Shipping agents remuneration (SSHIPA) is based on an average of three
to five people for two to three days var ying between 1,100 and 3,000
euros/por t call.
-
Fuel supply, carried out in the por ts of Le Havre and Marseille,
because of the quality of its oil products and established in long-term
contracts signed by ship managers. This amounts on average to
38,000 euros/por t call in Marseille, to which must be added the
supply of fresh water, which is normal practice in nearly all French
por ts, for a total cost of between 1,500 and 3,000 euros/por t call
(based on an average price of 2.1 euros/m3).
The total cost of port services per port call varies between 9,000 euros for a small
cruiser in a secondary port (400 berths) and 27,500 euros for a large cruiser in a
base port (1,500 berths). The average cost of a port call in French Mediterranean
ports is estimated at 15,200 euros.
Spending in port (SPORT): The combination of port spending on the Côte d'Azur
varies from between 11,450 and 15,600 euros/port call, which is distributed three
ways between the Port Authority, professional port services (pilotage, ship on tow,
mooring) and shipping agents. This represents around 32 euros per passenger. In
accordance with the work cited in the bibliography (48) the following similarities
can be found:
SPORT = Nrberths x SPORT = TPA + SPIPROF + SSHIPA
sPA = SPIPROF = SSHIPA
(5)
b) In the Caribbean:
The previously mentioned figures are much less than those supplied by FCCA for
the Caribbean. This is due to the higher numbers of cruise passengers (approximately double) carried by the cruisers that operate in the region. In 1994, companies spent about 18 million dollars on food and drinks and other hotel services. An
example worth noting is that, in 1999, two HAL ships spent 6.3 million dollars on
food and drink alone.
In the spending of both cases, technical matters as described below have not been
taken into account. They include:
200
Ship maintenance and repairs, the costs of which vary greatly and are therefore
difficult to calculate as such.
-
Major interventions. On the Côte d'Azur, the combined cost for technical services
carried out in the port of Genoa by eight ships from the cruise line Costa is estimated at 15 million euros, in other words 1.8 million euros/ship year.
8.1.3. On-land passenger spending (SON-LAND)
a) On the Côte d'Azur:
-
On-land shopping. Cunard customers, a high proportion of whom are British, spend
16 euros per passenger in the city, in other words three times higher than a British
Airtours passenger, who is generally younger and has a lower spending power. The
Russians are a case apart: their average spending is estimated at a minimum of
43 euros per passenger. The average spending of the Japanese is calculated at 32
euros per passenger. As for US customers, the average amount of spending varies
between 30 and 46 euros per passenger.
Looking at tonnage and the type of ship, spending figures generated in a port of
call in the French part of the Mediterranean on a 1,500 berth 4 star ship is similar to that of spending of a 5 to 5+ star ship with 300 berths. In both cases the
average value is 30,500 euros per port call.
-
Accommodation costs vary between 31 euros per passenger for Nice (European
customer) and 72 euros per passenger for Cannes (US customer).
-
On-land restaurants. This mostly impacts on base ports as opposed to secondary
ports. Average spending ranges from 20 euros/meal on a one-day excursion to
120 euros for an evening in a castle. It is believed that meals in secondary ports
just before departure (or on return) cost between 23 to 30 euros per cruise passenger in Marseille, rising to between 35 and 58 euros per cruise passenger in
ports along the Côte d'Azur.
-
Sightseeing trips and excursions. Spending on these sorts of trips is dependent on
the destination. For example, in Cannes, the cost of an average excursion can be
as high as 62 euros per passenger, in other words, almost double that of
Villefranche and four times that of Nice.
Sales in general vary between 23 and 30 euros for a half day and 45 to 75 euros
with a meal for a whole day. Excursions are more popular with European passengers than US passengers, with participation levels varying between 55 and 65%.
Guided city tours are being given in ever-greater numbers by specialist taxi drivers,
and prices are based on 46 euros per hour per passenger.
-
Other spending in the city: museum visits, visits to monuments, etc. drinks and
food in outdoor cafés etc. represent totals of between 12 and 28 euros per passenger.
201
The study cited in the bibliography (48) also states:
-
US passengers spend around 114 euros per passenger, which is almost double that
of the Europeans. In the case of base ports the difference is even greater: 234
euros per US cruise passenger as opposed to 83 euros per European cruise passenger. This is due to the fact that: a) 50% of US passengers arrive at least one
day before the ship actually sets sail, as opposed to Europeans, 80% of whom arrive on the same day as departure; b) 67% of US cruise passengers choose a 4 star
hotel as opposed to 33% of Europeans; c) US cruise passengers spend twice as
much time and money on gastronomy than their European counterparts.
-
Cruise passengers who get off the boat, some 90% of the total, spend between 94
and 157 euros, depending on whether it is a base or secondary port.
It can therefore be concluded that on-land spending depends on the category of cruise,
the type of port call, and the nationality of the cruise passenger. Spending patterns can
be divided into two (sightseeing trips and shopping) in secondary ports, and into three
(the above two categories plus accommodation and restaurants) in the base port. The
average value of sON-LAND is estimated at around 120 euros per passenger.
202
PCALL: GON-LAND = Nrberths x gON-LAND = SSIGHTSEEING + SSHOPPING
sSIGHTSEEING= sSHOPPING
PBASE:
(6)
SON-LAND = SSIGHTSEEING + SSHOPPING + STOURIST
sSIGHTSEEING = sSHOPPING = sTOURIST
(7)
b) In the Caribbean: According to table 8.III, total unitary cost is lower, with figures
for 1998 of 124 dollars compared to 145 dollars for the Côte d'Azur. Nevertheless,
it can be seen that spending distribution is far from being uniform, as shopping
offers are a very important variable. St. Thomas, which has one of the world's most
profitable shopping centres, has a total unitary spending figure (sTOTAL) that is
double the average and five times that of the lowest. Figures supplied by ports in
Puerto Rico (see table 8.IV) establish two facts: on the one hand the rapid surge
in growth, especially in the eighties, and on the other the totally different set of
figures, in which, for example, in 1997, FCCA gives a figure of 158 dollars/cruise
passenger compared to 76 dollars/cruise passenger. This illustrates the difficulty
in comparing figures from different sources, given the lack of analogous statistical
criteria.
8.1.4. Other spending patterns in destinations on the French Côte d'Azur
Below is information on spending patterns on the French Côte d'Azur that is complemented by data in table 8.V.
-
On-land crew spending (SCREW). It is estimated that a third of the crew takes
advantage of a port call to disembark. This equates to 15% of passengers, taking
into account that the crew/cruise passenger ratio is between 2 and 2.5 to 1.
There are many different influencing factors: the duration and type of port call
(docked or anchored), the nationality of the cruise passengers and the cruise ship
category. Spending per crew member is about 15 euros for 3 star cruises ("Ocean
Majesty" and "Saphire"). In the case of 4 to 5 star ships or ships with a high proportion of Europeans, such as on Costa's cruises or the "Queen Elizabeth 2", spending per crew member is double and is even higher for 5+ star cruises.
Regardless of crew member nationality and the cruise ship class, the breakdown
of crew spending is about 5 euros per individual on-land (drinks and meals), to
which a similar sum must also be added in spending on taxis, and five times this
amount in all manner of other shopping (telephone cards for Philippine crew members, souvenirs and other small items for European crew members). The average
figure works out at 30 euros/crewmember, which is equal to a total of 3,000 to
7,500 euros/port call, depending on cruise capacity.
-
Supplies (SSUPPLIES), above all fresh provisions, vary a great deal depending on
type and quantity. Estimates based on minimum supplies (buying water), require a
detailed study by port and by cruise. In the case of frequent port calls at base
ports, the degree of uncertainty is less, as they give rise to regular supplies of products. Nevertheless, some of these products are acquired from abroad and therefore do not have an effect locally.
Table 8.I. Cruise passenger spending in secondary ports (two thirds of the total)
on the Côte d'Azur
Spending *
Average (euros)
Per cruise passenger
Secondary port
Nice Villefranche
Media
Cannes
Customer
USA**
EU**
Russia
114
57
135
62
55
24
52
104
119
- Sightseeing trips
18
36
- Shopping
93
Breakdown:
24
31
31
28
21
127
- Restaurants
6
15
12
11
7
7
- Others
6
19
11
31
6
(*): updated figures to 2001. (**) USA: United States of America. EU: European Union.
Source: Nice Chamber of Commerce.
203
Table 8.II. Cruise passenger spending in base ports (one third of the total) on the Côte d'Azur
Spending *
Average (euros)
Per cruise passenger
Breakdown:
- Accommodation
- Restaurants
- Shopping
- Others
Nice
135
Base port
Villefranche Cannes
0
187
31
36
35
27
-
69
48
55
24
Average
158
Customer
**USA
EU**
83
83
-
72
60
72
35
25
28
18
11
(*): updated figures to 2001. **USA: United States. EU: European Union.
Source: Nice Chamber of Commerce.
Table 8.III. Cruise ship spending in the Caribbean (in dollars)
Port
Aruba
Bahamas
Barbados
Curaçao
Grand Cayman
Key West
Montego Bay, Jamaica
Ocho Rios, Jamaica
San Juan
Saint Lucia
St. Kitts
St. Thomas
Average
Passengers (1997)
65
83
61
63
n/a
41
57
101
158
n/a
47
225
124
Crew (1997)
n/a
91
58
n/a
77
n/a
98
98
120
57
57
47
63
Source: Florida Caribbean Cruise Association (FCCA).
Table 8.IV. Cruise passenger spending in Puerto Rico (1960-1998)
Year
1960
1970
1980
1985
1990
1991
1992
1994
1995
1996
1997
1998
Cruise
numbers
105
301
700
906
911
943
850
793
740
751
674
701
(*): includes crew member spending.
Source: Puerto Rico Ports Authority.
204
Passengers (1996)
n/a
60
73
80
40
n/a
85
85
64
46
29
241
90
Cruise
passengers
45,337
136,604
505,124
866,090
890,348
1,63,370
1,014,490
968,112
955,105
1,045,104
1,105,957
1,365,622
Spending*
(Million of dollars)
1.5
5.9
20.3
50.3
54.4
56.9
65.1
66.7
65.6
75.4
84.2
102.5
Spending
(Dollars/cruise passenger)
33
43
40
58
61
53
64
69
69
72
76
75
205
7.960
3.950
500
55
27.500
80
15
1.200
36.600
69
4.580
790
155
225
33.750
30
40
1.200
39.530
247
Cannes
Nice
Base
Secondar y
“Star Clipper”
“Ocean
Majesty”
5+
3
22
13
160
530
50% USA*
80% UK
50% EU*
63
200
31
6.200
85.450
46
63.400
400 (P BASE)
700 (P SEC)
78
15.850
7.900
Marseille
Base
“Costa
Romantica”
4
24
1.350
50% France
50% EU*
52
70
15
1.050
29.750
46
18.400
-
400
10.300
6.350
3
25
570
90% UK
Ajaccio
Secondar y
“Saphire”
196
25
46
1.150
21.600
46
4.600
Source: Nice Chamber of Commerce. "Cruise passenger profile and spending".
-
100
15.850
7.900
5+
5
110
100% USA*
Bordeaux
Secondar y
Renaissance
(^) figures updated to 2001 and not including supplies. (*) USA: United States EU: European Union, excluding France.
A. Por t costs
SUBTOTAL (A)
actually in por t
B. Passenger spending
On-land cruise passengers
P BASE
Spending (euros/cruise passenger)
P SEC
Spending (euros/cruise passenger)
SUBTOTAL (B)
C. Crew Spending
On-land (one third)
C. Spending (euros/crew member)
SUBTOTAL ( C )
TOTAL (A+B+C)
Average euros
Per passenger
Categor y (star)
Yearly frequency
Capacity (ber ths)
Nationality
Por t
Type
Ship/Company
Table 8.V. Economic return in euros^ by por t call on the Côte d'Azur
88
300
24
7.200
131.950
93
93.000
-
1.000
31.750
17.400
62
250
31
7.750
80.850
62.000
62
1.000
11.100
5.500
Le Havre
Point à Pitre
Secondar y
Base
“Queen
“Costa
Elizabeth 2”
Classica”
5
4
2
25
1.500
1.300
50% USA
50% France
50% UK
50% EU*
8.2. Forecast of cruise demand in the European Union and in the
United States55
As stated in section 6.1, the two basic principles that are used to calculate mediumterm European demand are as follows:
-
The tourist cruise is just another category within leisure trips as a whole.
-
The tourist cruise as a product is undergoing a period of growth, whereby, as
supply is created, so there is a corresponding and parallel demand.
The first principle allows a relationship to be established among the main national
demands, especially those already defined in section 2.1 (North American, British,
German, Italian, French and Spanish). The second principle allows world demand to be
calculated. Demand in the main European markets in the medium-term can be deduced
by using a combination of the two principles.
When an economic development indicator is established for cruise demand in national
markets, what normally happens is that the relationship between the number of cruise
trips sold per year and the total population of that specific market in one year "y" for a
market "j" are the variables taken into consideration. This is the relationship selected
by Ken Trippe (see section 2.1).
A more appropriate indicator would be the relationship between cruise trips sold in a
year "y" and the total demand for leisure trips in the middle and high segments for that
same year "y" in a given market "j". This would then apply the first principle described.
The problem arises when calculating the proposed divisor, as it is a figure that differs
from national market to national market. In other words the standard variable is not
constant. If we call this divisor removed foreign trip demand (D’), the calculation can
then be made as follows:
D’= DTOTAL – C x DCD
(8)
Short distance international trip demand (DSD) and the reductive coefficient (C) take
two correcting effects into account when comparing the US with national European
markets:
-
The geographical size of the source market country: the bigger the source market
country, the smaller the percentage of trips abroad.
-
The cost of trips abroad: the cruise is competing in the middle to upper segment
of international trips.
55 For a fuller analysis please see Manuel Butler's 2002 Doctoral Thesis from the Polytechnic
University of Madrid (Universidad Politécnica de Madrid) in Spain, entitled " Economic analysis
and oppor tunities for Spain in the tourist cruise market."
206
In the cases of Germany and the UK, short distance trips abroad (Tsd) are intraEuropean and of these about half are low cost, comprising the mass-tourism sun and
beach package, which is why the reductive coefficient is C = a half.
In the cases of France, Italy and Spain, low-cost short distance packages are less popular, with the sun and beach package almost non-existent, which is why it is reasonable
to establish a figure of C = a third.
In the case of the US, as it is so large, no other types of trip should be deducted, and
therefore C = 0.
The new indicator that will replace Ken Trippe's indicator will be named "quota of touy
rist cruise demand in a market "i" in one year "y" (Qi ). Given that the US market is the
most developed of all, the relationship QUSAY will serve as a reference value and if it
is taken as a potential value, this will allow the grade of development to be calculated
(giy), as defined in chapter 2. The grade of development is therefore seen as the relationship between cruise trip quotas and the corresponding figure for the US, and the
closer it gets to this figure, the greater the slow-down in growth.
Previous hypotheses, with no appreciable deviations:
A. The competition of river cruises in Germany has zero effect.
B. No incidence of business activities on local demand.
C. Identifying North American demand with US demand.
D. Regular distribution of demand for the 2001 to 2005 period.
E. The variations in exchange rates and/or bank interest rates for the euro and the
pound with regard to the dollar do not have an appreciable effect on cruise trip
demand.
F. The variations in GDP of western economies do not substantially affect cruise trip
consumption.
On the basis of these hypotheses, and in accordance with the tables below (8.XII to
8.XX), a true calculation can be made to establish development grades and forecasts
for the 2001-2005 period, (with supporting data in graph 8.a).
207
Table 8.VI. Source market: United Kingdom. Demand for foreign trips
by destination in thousands of cruise passengers
Destination/year
1995
Africa
928
Americas
4,334
Southern Asia
585
Eastern Asia
2.300
Europe (Deuro
34,919
Middle East
618
Total (Dtotal)
43,684
Removed foreign trip (D’total) 20,405
Cruises
340
QUK
1.67
1996
915
4,934
595
2,448
33,991
654
43,536
20,875
416
1.99
1997
1,057
5,639
627
2,538
36,886
669
47,417
22,826
522
2.29
1998
1,074
5,964
663
2,751
41,632
641
52,726
24,971
631
2.53
1999
264
5,786
551
2,698
38,654
628
48,581
22,812
740
3.24
2000*
n/a
n/a
n/a
n/a
38,159
n/a
42,501
23,422
747
3.19
1998
2,104
2,607
182
1.070
17,326
340
23,628
17,853
154
0.86
1999
1,366
2,648
175
1,037
21,383
434
27,043
19,915
224
1.12
2000*
n/a
n/a
n/a
n/a
21,763
n/a
26,298
19,044
266
1.40
1998
352
895
43
141
12,192
62
13,685
9,621
52
0.54
1999
289
960
43
152
11,239
122
12,805
9,059
82
0.91
2000*
n/a
n/a
n/a
n/a
n/a
n/a
9,401
9,401
87
0.93
Source: Own study based on data from the WTO and PSA. (*) Provisional data.
Table 8.VII. Source market: France. Demand for foreign trips
Destination/year
1995
Africa
1,769
Americas
2,251
Southern Asia
162
Eastern Asia
1,038
Europe (Deuro)
14,723
Middle East
299
Total (Dtotal)
20,242
Cruises
100
QF
0.65
1996
2,038
2,466
165
1,037
15,333
425
21,465
16,354
112
0.68
1997
2,286
2,519
169
1,077
16,340
453
22,844
17,397
126
0.72
Table 8.VIII. Source market: Spain. Demand for foreign trips
Destination/year
1995
Africa
273
Americas
761
Southern Asia
40
Eastern Asia
130
Europe (Deuro)
11,504
Middle East
52
Total (Dtotal)
12,759
Cruises
24
QS
0.27
1996
282
900
44
135
10,557
51
11,968
8,449
34
0.40
1997
318
907
44
133
11,239
77
12,718
8,972
41
0.46
208
Table 8.IX. Source market: Italy. Demand for foreign trips
Destination/year
1995
Africa
536
Americas
1,087
Southern Asia
144
Eastern Asia
511
Europe (Deuro)
13,348
Middle East
352
Total (Dtotal)
15,979
Cruises
151
QI
1.31
1996
589
1,286
136
504
13,843
462
16,821
12,207
174
1997
686
1,373
144
517
14,835
509
18,065
13,120
200
1998
658
1,419
176
512
15,363
460
18,588
13,467
230
1999
214
1,366
183
472
14,190
760
17,185
12,455
250
2000*
n/a
n/a
n/a
n/a
n/a
n/a
11,451
11,451
273
1.43
1.52
1.71
2.01
2.38
1998
1,746
3,502
299
1,549
71,391
445
78,932
31,338
306
0.98
1999
328
3,540
293
1,468
113,260
731
119,620
44,113
327
0.74
2000*
n/a
n/a
n/a
n/a
22,965
n/a
27,159
15,617
380
2.42
1999
167
40,424
317
5,367
13,145
383
59,804
5,894
9.86
2000*
n/a
n/a
n/a
n/a
n/a
n/a
41,775
6,880
16.47
Table 8.X. Source market: Germany. Demand in foreign trips
by destination by thousands of cruise passengers
Destination/year
1995
Africa
1,490
Americas
3,016
Southern Asia
298
Eastern Asia
1,629
Europe (Deuro)
67,171
Middle East
518
Total (Dtotal)
74,123
Cruises
217
QG
0.74
1996
1,612
3,546
271
1,675
70,741
643
78,488
31,327
235
0.75
1997
1,751
3,471
287
1,658
71,407
621
79,196
31,591
283
0.90
Source: Own study based on data from the WTO and DRV. (*) Provisional data.
Table 8.XI. Source market: United States. Demand in foreign trips
by destination by thousands of cruise passengers
Destination/year
Africa
Americas
Southern Asia
Eastern Asia
Europe
Middle East
Total (Dtotal= D’total)
Cruises
QUSA
1995
378
44,637
301
4,664
15,536
409
65,925
4,378
6.64
1996
398
46,050
321
4,883
16,391
417
68,460
4,656
6.80
1997
470
44,924
345
5,078
17,871
430
69,117
4,864
7.04
1998
460
43,249
357
5,256
19,486
449
69,258
5,243
7.57
Source: Own study based on data from the WTO and CLIA. (*) Provisional data.
209
Table 8.XII. Demand quota for cruise trips in the main markets
1995
1996
1997
1998
1999
2000
QUK
QI
1.67
1.99
2.29
2.53
3.24
3.19
1.31
1.43
1.52
1.71
2.01
2.38
QS
QG
0.27
0.40
0.46
0.54
0.91
0.93
0.74
0.75
0.90
0.98
0.74
2.42
QF
QUSA
0.65
0.68
0.72
0.86
1.12
1.40
6.64
6.80
7.04
7.57
9.86
16.47
Source: Own study.
Table 8.XIII. Degree of development (gi) of main markets
1995
1996
1997
1998
1999
2000
gUK
0.25
0.29
0.33
0.33
0.33
0.19
2001-2004
0.30
gI
gS
0.20
0.21
0.22
0.23
0.20
0.15
0.18
0.04
0.06
0.07
0.07
0.09
0.06
0.08
gG
gF
0.11
0.11
0.13
0.13
0.08
0.15
0.14
0.10
0.10
0.10
0.11
0.11
0.08
0.11
Source: Own study.
Applying the second defined principle, which takes into account that increase in
demand is conditional upon actual supply, and taking the following hypotheses into
account:
A. Occupation levels remain constant.
B. The increase in berth numbers is equal to the increase of itineraries sold.
C. The total berths that will enter service in the future are defined in the Order Book,
and will be placed in the European and US source markets, with the exception of
Star Cruises.
D. The number of berths that will be removed will be equivalent to the number of
berths on ships which have been in service for more than 40 years.
E. There will be no further contracts or cancellations in the Order Book.
F. Only the cruise lines described in chapter 3 will be studied.
G. The prices as examined in section 2.4, per day and per person, will remain constant, given that the market is undergoing a phase of growth.
210
Table 8.XIV. Cruise Fleets
Company
Capacity (berths)
1.01.2002
The Big Four Groups*
152,909
66,046
9,728
3,044
Smaller North American groups
European
Order Book
34,512
4,746
TOTAL
197,149
73,836
World
225,000
n/a
(*) Only NCL and Orient Lines ships included.
Source: Own study based on data from Seatrade.
TFUSA+EU = TF4groups – TFStarCruises + TFSmaller cruise lines USA + TFNSmaller cruise lines Europe =
152.909 + 9.728 + 34.512 = 197.149 camas
Table 8.XV. Estimated ships decommissioned between 2001 – 2005
Name of cruise
Capacity
Year of
ship
(berths)
Construction
"Princesa Victoria"
566
1936
"Valtur Prima"
520
1948
"Monterrey"
592
1952
"Stella Solaris"
658
1953
" Topaz"
978
1956
"Princesa Amorosa"
284
1957
"Ausonia"
701
1957
"Albatros"
940
1957
"Emerald"
1,172
1958
"Norway"
2,130
1961
"Apollo"
1,256
1961
Total D
9,797
Source: Own study.
TF2005 = TF2001 – D + OB
Table 8.XVI. Variation in berth supply for the US and European Union
2000
Proposed Forecast
197,149
OB
D
73,836
9,797
2005
261,188
W x 100
32.48
Source: Own study.
211
taking into account the following:
AUSA = increase in US demand for the 2001-2005 period.
A = increase in world demand for tourist cruises in the same period.
Taking into account that the medium-term growth is inversely proportional to the real
quota for cruise demand in a given market, in other words that the market will grow
more quickly the less developed it actually is, and that in the medium-term the potential value is equal to that of the US, it can be given that:
Ai = AUSA / Gij
Which is why:
AUSA DUSA + AUK DUK + AD VD + AIDI + AE DE + AF DF =
= (DUSA + DUK + DG + DI + DE + DF) A = 8,633 x 0.3248 = 2,869
6,880 AUSA + 747/0.30 AUSA + 380/0.14 AUSA +273/0.18 AUSA +87/0.08 AUSA +
+266/0.11 AUSA = 2.869
AUSA = 0.1639094
Table 8.XVII. Demand for ocean-going cruises measured in thousands of cruise passengers
Country
1995 1996 1997
2000
1995-
2005d 2001-5d
2000
(%annual)
Aannual
United Kingdoma
Germanyc
217
235
283
306
327
380
11,86%
825 21,38%
Italya
151
174
200
230
250
273
12,57%
522 17,57%
Francea
Spaina
100
112
126
154
224
266
21,61%
622 25,62%
24
34
41
52
82
87
29,38%
265 32,14%
Otrosa
134
141
185
187
167
200
8,34%
-
-
European Uniona
United Statesb
966 1.112 1.357 1.560 1.790
1.953
15,12%
-
-
4.378 4.656 4.864 5.243 5.894
6.880
9,46%
8.008
3,87%
340
416
522
212
1998 1999
631
740
747
17,05%
1.155 11,51%
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