Thursday, November 20, 2008
How is the Recession Affecting Cruises?
The economy is really starting to effect the travel industry. Cruise lines are no exception. Facing a large growth in passenger capacity due to expanding fleets among the major cruise lines, the seemingly deep global recession that is approaching is starting to affect the cruise line's bottom line. The main solution: stay closer to home.
When fuel was the problem, the answer was simple: add a fuel surcharge. But with the price of oil literally one third of its peak this summer, the surcharge looks and feels greedy. Most major cruise lines have at least partially ended that practice. However, operations are getting more expensive over time and revenues aren't exactly increasing. Pricing hasn't increased generally for cruising over the last 15 to 20 years, but the ships have become larger and more expensive. The cruise industry appears to be on its way to have a razor thin profit margin. Billion dollar ships won't pay for themselves with $500 cruise fares. And in a competitive marketplace, postponing improvements and innovations won't work either. In some cases, cruise lines have been experimenting with extra a la carte features, like Royal Caribbean's premium steak experiment in the main dining rooms. But by and large, we're seeing an expansion of port usage in the US, and a reduction of European, South American and Asian itineraries.
For proof, just look at Baltimore. In 2008, fewer than 30 cruises departed from this Northeastern port, serving Royal Caribbean and Norwegian Cruise Lines. In 2009, Baltimore sees much more service, jumping to nearly 80 cruises. The Northeast has been a great market for Cruise Lines in the early part of this decade. Norwegian and Royal Caribbean maintain year round service from New York City, where voyagers are willing to pay a premium for service that doesn't require a flight to Florida, California or even further afield. Often times, cruise lines were able to charge more for sailings leaving from the Northeast than the cost for a cruise for Miami plus airfare - especially in the summertime.
Carnival took the hint in a big way this year. The Fun Ship line cut its nascent European schedule in half, and redeploys the Liberty to Miami this summer, instead of the Mediterranean and moves the Pride to Baltimore for regular service this summer. Royal Caribbean is moving out of the South American market in 2009, cancelling a lot of Radiance sailings for the fall and winter of next year and leaving the ship to concentrate on Mexican sailings off the West Coast.
Sailing to exotic ports can have its draw, but for the big cruise lines, whose bread and butter have been the Caribbean and sailings leaving from the US, its a big expense and given NCL's problems in selling South American sailings, there isn't a lot of money to spread around there. Norwegian Sun South American sailings were selling for under $25 a day per person for 19 and 20 night voyages. That's cheaper than many European hostels. If that's what it takes to fill the ships on the most exotic itineraries, it's no wonder that cruise lines are staying closer to home to ride out the recession.
When fuel was the problem, the answer was simple: add a fuel surcharge. But with the price of oil literally one third of its peak this summer, the surcharge looks and feels greedy. Most major cruise lines have at least partially ended that practice. However, operations are getting more expensive over time and revenues aren't exactly increasing. Pricing hasn't increased generally for cruising over the last 15 to 20 years, but the ships have become larger and more expensive. The cruise industry appears to be on its way to have a razor thin profit margin. Billion dollar ships won't pay for themselves with $500 cruise fares. And in a competitive marketplace, postponing improvements and innovations won't work either. In some cases, cruise lines have been experimenting with extra a la carte features, like Royal Caribbean's premium steak experiment in the main dining rooms. But by and large, we're seeing an expansion of port usage in the US, and a reduction of European, South American and Asian itineraries.
For proof, just look at Baltimore. In 2008, fewer than 30 cruises departed from this Northeastern port, serving Royal Caribbean and Norwegian Cruise Lines. In 2009, Baltimore sees much more service, jumping to nearly 80 cruises. The Northeast has been a great market for Cruise Lines in the early part of this decade. Norwegian and Royal Caribbean maintain year round service from New York City, where voyagers are willing to pay a premium for service that doesn't require a flight to Florida, California or even further afield. Often times, cruise lines were able to charge more for sailings leaving from the Northeast than the cost for a cruise for Miami plus airfare - especially in the summertime.
Carnival took the hint in a big way this year. The Fun Ship line cut its nascent European schedule in half, and redeploys the Liberty to Miami this summer, instead of the Mediterranean and moves the Pride to Baltimore for regular service this summer. Royal Caribbean is moving out of the South American market in 2009, cancelling a lot of Radiance sailings for the fall and winter of next year and leaving the ship to concentrate on Mexican sailings off the West Coast.
Sailing to exotic ports can have its draw, but for the big cruise lines, whose bread and butter have been the Caribbean and sailings leaving from the US, its a big expense and given NCL's problems in selling South American sailings, there isn't a lot of money to spread around there. Norwegian Sun South American sailings were selling for under $25 a day per person for 19 and 20 night voyages. That's cheaper than many European hostels. If that's what it takes to fill the ships on the most exotic itineraries, it's no wonder that cruise lines are staying closer to home to ride out the recession.
Labels: carnival, cruises, economics, ncl, royal caribbean, travel
Thursday, February 28, 2008
NCL ship says Good Bye Hawaii, Hello Europe!
Just as NCL has started cutting back its cruise service in one market, Norwegian is expanding its profile in another lucrative market, the Mediterranean. The Norwegian Jade (one of the former Hawaii based Pride ships) will not be sailing back to the Caribbean this winter as originally planned.
Instead, they will keep the ship in the Mediterranean throughout the winter, offering longer 12 night sailing options that will explore the Eastern Mediterranean, including Turkey and Egypt. Given the cool weather that hits the Western Med in the winter time, this is the cheap way to be the only major cruise line in the US to offer year round European cruising.
The ship which was designed for warm weather cruising in the Pacific will not be refitted to make the ship more user friendly for European winters. This limits what NCL can offer in the winter time as without a dome for the main pool area, the outdoor space would likely become mostly unusable throughout the bulk of a Western Mediterranean cruise in December and January. With an average high temperature around 50 in Istanbul in January, but warmer around Egypt, it still could be a very chilly winter for the pleasure cruiser, but probably a better situation than a sailing concentrated in Italy and France where high temperatures would rarely crack the 50 degree mark.
Depending on how the Jade is marketed, this could be a very smart move for a struggling cruise line. They would have a growing Mediterranean market basically to itself for a large chunk of the year, if these cruises are marketed to American cruisers. If NCL chooses to market to a European audience, they could find themselves in a bit more trouble, as there are plenty of cruises for Europeans in the Mediterranean year round and the NCL product is likely to be very different than the European standard which could be very problematic. Although this isn't a slam dunk for anyone, much less NCL which has consistently eluded success in the Hawaii market where it holds a virtual monopoly on the market, NCL does stand a very good chance in grabbing and holding market share in the European market.
Instead, they will keep the ship in the Mediterranean throughout the winter, offering longer 12 night sailing options that will explore the Eastern Mediterranean, including Turkey and Egypt. Given the cool weather that hits the Western Med in the winter time, this is the cheap way to be the only major cruise line in the US to offer year round European cruising.
The ship which was designed for warm weather cruising in the Pacific will not be refitted to make the ship more user friendly for European winters. This limits what NCL can offer in the winter time as without a dome for the main pool area, the outdoor space would likely become mostly unusable throughout the bulk of a Western Mediterranean cruise in December and January. With an average high temperature around 50 in Istanbul in January, but warmer around Egypt, it still could be a very chilly winter for the pleasure cruiser, but probably a better situation than a sailing concentrated in Italy and France where high temperatures would rarely crack the 50 degree mark.
Depending on how the Jade is marketed, this could be a very smart move for a struggling cruise line. They would have a growing Mediterranean market basically to itself for a large chunk of the year, if these cruises are marketed to American cruisers. If NCL chooses to market to a European audience, they could find themselves in a bit more trouble, as there are plenty of cruises for Europeans in the Mediterranean year round and the NCL product is likely to be very different than the European standard which could be very problematic. Although this isn't a slam dunk for anyone, much less NCL which has consistently eluded success in the Hawaii market where it holds a virtual monopoly on the market, NCL does stand a very good chance in grabbing and holding market share in the European market.
Labels: cruises, europe, mediterranean, ncl, travel
Saturday, February 16, 2008
Norwegian Saying Aloha to Hawaii?
More cruise news is rearing its ugly head this week, this time around from Norwegian Cruise Line with cuts to capacity to its Hawaiian market where it enjoys a near monopoly, and hints they could be pulling out altogether. They're subsidiary, NCL America, was at one point featuring sailings from Hawaii with four ships. Three of which were flagged from the United States, a requirement to be able to sail the ships on a purely Hawaii itinerary.
Last year, NCL retired the Norwegian Wind from the fleet. This year, the Pride of America was repositioned as the Norwegian Jade. Now, this week, NCL America further reduced capacity in Hawaii by announcing that it would be transferring the Pride of Aloha to its parent company, Star Cruises, and targeting the ship to serve the Asian Market. It's a sad story, really.
It makes me wish that they would just send the ship to New York City instead and then NCL could send back the horrific Norwegian Spirit which came over from Asia in 2001 and has never actually been refurbished.
But there is some good news in the offing, the remaining Pride of Hawai'i will stay in its seven day cross state operation for the foreseeable future, having had its itineraries announced through 2010. So NCL America is here to stay for the foreseeable streamlined future. Or is it?
Maybe not so much, according to the Honolulu Star Bulletin. NCL America is heavily backing proposed legislation which would create rules that essentially force other cruise lines to leave the Hawaiian market altogether (like Carnival, Princess, Holland America and others.) The proposed rule would force a ship to stay in a foreign port for 48 hours before being able to port in Hawaii. This would turn the 15 night options that other cruise lines currently offer on a semi-regular basis into 17 night cruises, something that isn't too likely to happen. NCL America seems to think that this is a requirement for their profitability.
The bottom line? NCL America is losing money and is losing out on the Hawaii market to its competitors despite having a huge advantage of not having to cross half the pacific ocean to reach its first port in Hawaii. Because of current Jones Act regulations, NCL America is the only cruise line able to offer purely Hawaiian itineraries and has a virtual lock on the 7 night Hawaiian cruise market. Yet, due to poor staffing, inattentive service, and frankly overpricing the market, the cruise line has struggled for years. Changing cabotage rules to benefit NCL America will not straighten out these core failures.
Reducing capacity by 75% should allow its one remaining Hawaii cruiser to become profitable. But its success could be foiled by the line's relatively poor product reputation. Will NCL America stay in place for the next two years? Probably, but don't be too shocked if in six months, the Pride of Hawai'i says Aloha for the last time.
Last year, NCL retired the Norwegian Wind from the fleet. This year, the Pride of America was repositioned as the Norwegian Jade. Now, this week, NCL America further reduced capacity in Hawaii by announcing that it would be transferring the Pride of Aloha to its parent company, Star Cruises, and targeting the ship to serve the Asian Market. It's a sad story, really.
It makes me wish that they would just send the ship to New York City instead and then NCL could send back the horrific Norwegian Spirit which came over from Asia in 2001 and has never actually been refurbished.
But there is some good news in the offing, the remaining Pride of Hawai'i will stay in its seven day cross state operation for the foreseeable future, having had its itineraries announced through 2010. So NCL America is here to stay for the foreseeable streamlined future. Or is it?
Maybe not so much, according to the Honolulu Star Bulletin. NCL America is heavily backing proposed legislation which would create rules that essentially force other cruise lines to leave the Hawaiian market altogether (like Carnival, Princess, Holland America and others.) The proposed rule would force a ship to stay in a foreign port for 48 hours before being able to port in Hawaii. This would turn the 15 night options that other cruise lines currently offer on a semi-regular basis into 17 night cruises, something that isn't too likely to happen. NCL America seems to think that this is a requirement for their profitability.
The bottom line? NCL America is losing money and is losing out on the Hawaii market to its competitors despite having a huge advantage of not having to cross half the pacific ocean to reach its first port in Hawaii. Because of current Jones Act regulations, NCL America is the only cruise line able to offer purely Hawaiian itineraries and has a virtual lock on the 7 night Hawaiian cruise market. Yet, due to poor staffing, inattentive service, and frankly overpricing the market, the cruise line has struggled for years. Changing cabotage rules to benefit NCL America will not straighten out these core failures.
Reducing capacity by 75% should allow its one remaining Hawaii cruiser to become profitable. But its success could be foiled by the line's relatively poor product reputation. Will NCL America stay in place for the next two years? Probably, but don't be too shocked if in six months, the Pride of Hawai'i says Aloha for the last time.
