Ten Predictions For 2012 and Beyond
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1 Ten Predictions For 2012 and Beyond January 2nd, 2012 by Kevin Griffin Those involved in the cruise industry over the past few decades have been lucky to work in one of the most dynamic industries on Earth. Not that other industries are not dynamic but this one is one of the most interesting. Since the dawn of the modern cruising era just over forty years ago, ships have grown in size from 19,000 tons to 250,000 tons and capacities from about 1,000 passengers to over 6,000. Growth has been constant, especially in the past decade, where markets such as the UK, Germany, Italy, Spain, Brazil, Australia and now China are all substantially adding to the overall numbers taking a cruise every year. With the dawn of a new year we have a look at some of the things that will affect cruising in not only the year to come but beyond. Here are our top ten predictions. 1. Ships Will Spend More Time In Port This has already begun to occur among the upmarket lines, especially those such as Azamara Club Cruises, Crystal and Silversea. On her 2014 World Cruise, departing Los Angeles January 18, the Crystal Serenity will visit 32 ports in 19 countries and include 17 overnight port stays, giving the opportunity for more detailed exploration, instead of rushing on to the next port. Silversea s 2013 World Cruise will be a 115-day cruise from Los Angeles to Fort Lauderdale on board Silver Whisper, departing January 5. This cruise will visit 52 ports in 28 countries, visiting New Zealand and Australia, and include nine overnight stays in Tahiti, Fremantle, Hong Kong, Ho Chi Minh City, Bangkok, Singapore, Cochin, Cape Town and Walvis Bay, but unlike Crystal, will include no two- or three-night stays. Azamara Club Cruises, like Crystal, also offers overnight stays on its routine cruises at popular ports such as Venice, usually a turnaround port, and St Petersburg, a port of call. Due to more time spent in port, and slow steaming between ports, less fuel will be consumed, and fast multi-country cruises will become less common. In the end, fewer ports will be covered, but in more detail. 2. Ships Will Spend More Time At Sea
2 Among the more mass market lines there is however a commercial imperative to keep the tills rolling on board so that shops, bars and casinos add to the lines coffers as on board spend approaches and exceeds 40% of fare revenue. This formula therefore relies more on cutting the number of ports on a typical 7-night Caribbean or Mediterranean cruise, for example, by dropping a port, down from say five to four or four to three, and using the time by steaming more slowly between those that are left. This will of course mean more days at seas, and, the lines hope, more on board revenue. Although Carnival Corp & PLC includes within its portfolio many different types of cruise operation, how important fuel costs are is reflected in its reporting on the fourth quarter and full year 2011, which recorded a 32% increase in fuel bills. The company thus implemented a fuel derivatives program in the last quarter of 2011 that has resulted in $1 million in net unrealised gains to its fuel portfolio in the quarter. Early days yet but we will see more of this and other attempts to control fuel cost increases and whether they result in more days in port or more days at sea. 3. The Trend to Multiple Embarkation Ports Will Continue European lines such as Costa and MSC already offer 7-night cruises where inventories are split among Genoa (Savona in Costa s case) in Italy, Marseilles in France and Barcelona in Spain. In 2011, Norwegian Cruise Line also introduced dual embarkation ports, including Civitavecchia as well as Barcelona, on its Norwegian Epic 7-night Med cruises, thus making this ship available to the Italian market as well. Royal Caribbean International intends to enter the French market this year in a similar manner with its Liberté of the Seas, as she has been dubbed by come in recognition of a oncefamous Transatlantic liner, embarking passengers at Marseilles or Toulon as well as Barcelona. Equally, this has now spread to northern Europe with a number of ships allowing embarkations in both the UK and Amsterdam on some itineraries. Pullmantur Cruises now use multiple embarkation ports on certain Caribbean itineraries, allowing boarding of the Horizon for example at La Guaira, Cartagena or Aruba. This can eventually be expected to spread to some of the Florida-based lines as well as it allows a line to expand its passenger numbers without having to rely on a single port of embarkation. Indeed, Carnival has already operated a number of San Juan cruises that also embark passengers in Barbados and Aruba. 4. Greece May Leave the Euro But Its Cruise Industry Will Grow In all likelihood, Greece will exit the Euro within two years and become the test that allows the EU to retain countries like Italy and Spain in its fold. Free of the Euro, however, Greek port costs, which were something MSC Cruises complained about last year, could well become competitive from what they are now. And free of the cabotage restrictions that have previously held back the development of cruising in Greece the whole tourism industry may well have the chance to grow again. Indeed, in June, Royal Caribbean Cruises came forward and offered to assist Greece with its port and cruising infrastructure, as did Carnival Corp & PLC. With the lifting of cabotage
3 restrictions it was predicted two years ago that the cruise industry could create 14,000 new jobs and account for 4% of the Greek gross domestic product. Certainly, the largest operator under the Greek flag, Louis Cruises, although having closed its western Mediterranean operation this winter, has a new chief executive and will be having a long, hard look at the future of Greek cruising, especially as Greece is second only to Italy in the tourism business, attracting about four million to Italy s five million annual tourists. 5. Cuba Will Return to the World of Cruising It has been half a century now since the last cruise ship carrying Americans called at Havana. Too long say many. But slowly the United States has been loosening its ties so that there are now flights available from eleven US airports to Havana. These now include Chicago s O Hare and airports in Baltimore, Dallas/Fort Worth, New Orleans, Pittsburgh, Tampa, Atlanta and San Juan. Until 2011, flights had only been allowed from Los Angeles, Miami and New York. As this traffic, which for the moment is restricted to Cuban expats visiting family, the basic infrastructure will soon be in place to feed some passengers to cruise ships sailing from Havana. At the moment, this is more likely to happen first from Canada, which has a plan to bring the Louis Cristal into service in 2013, but the US is bound to open up the gates again at some point. Although Havana is only about the same distance from Miami as Paris is from London, it is more likely however that Florida-based ships will be among the first to come sailing past Morro Castle into Havana once again, just as they had in the past. When that does happen, however, it will be bad news for Nassau, which will have its work cut out for it to maintain the same cruise visitor base that it has now. 6. Liquefied Natural Gas Will Fuel New Cruise Ships The imposition of more Emission Control Areas, especially in North America, will see fuel costs rising substantially by 2015 as cruise ships (along with all other ships) are forced to burn lighter fuels, known as distillates, within 200 miles of the coast. Liquid Natural Gas-propelled ships however leave virtually no emissions at all and Viking Line has already signed a contract with STX Finland for delivery of a 57,000-ton cruise ferry to carry 2,800 passengers on the Stockholm-Turku overnight route in early Now under construction at its Turku yard, engines, screws and steering gear for the new gas-electric propulsion system will be supplied by Wärtsilä. Presently known as Newbuilding 1376, a contest is now under way to choose a name for the new groundbreaking ship, for which an option has been agreed for a second unit. Just as the design of the Silja Symphony and Silja Serenade, with their interior promenades, ultimately resulted in the Oasis and Allure of the Seas, it is a very good bet that this new Viking Line ship will be a precursor to several cruise ships as well. After all, it was the influence of the Viking Line ships of a generation ago that produced Carnival Cruise Line s now-standard starboard-side promenade between the lounges. The same Turku yard will also build the new 97,000-ton cruise ship for TUI Cruises for delivery in 2014.
4 7. There Will Be Less Flying to Ships Since the events of 2001, after which Americans developed a dislike of flying, new cruise ports have been opened up all over North America. The same has happened in the UK, where the number of cruise-only guests has been rising just as the number of fly/cruisers has been diminishing. And in Italy, new cruise terminals are being opened, the next being Trieste, while in France Toulon is coming to the fore as an alternative to Marseilles. People, particularly tourists and families, are tired of flying, airport congestion and all the invasion of personal privacy that is endemic to today s high security regime when it comes to flying somewhere. Much better to drive, train or coach to the port and board your ship without having to submit to ever-diminishing luggage allowances of the budget carriers. This trend is likely to spread. 8. New Emission Control Areas Will Stunt Growth The imposition of the North American ECA in 2012 will see growth in cruising to areas such as Alaska and Canada/New England drop as these areas are totally within 200 miles of the coast. Due to the high increase in fuel costs, two things will happen. First, cruise lines will develop new technology such as scrubbers that will allow them to control emissions when burning heavier fuels, while more ports will make an effort to offer shore power to visiting cruise ships. In the other direction, the increasing costs will see these areas suffer from less growth than they otherwise might have had as ships seek out areas such as Mexico where they can still burn heavy fuel. Mexico is not a party to the North American Emission Control Area and there are many attractive destinations outside the 200-mile emissions limit zone that might be less expensive to serve if the crowds want to go there. Early estimates put the extra cost of cruising within the North American ECA at about $50 per head, or the same as the Alaska head tax that dampened that market s business for a couple of years before being reduced. 9. There Will Be More Shore Power A study some time ago concluded that ships at sea (and in port) produce more of the sulphur oxides (SOx) that cause acid rain than all vehicles on the world s roads, as well as nearly as much of the nitrous oxides (NOx) emissions that produce smog and particulates. One way of cutting this is supplying shore power (alternative marine power) for a cruise ship s auxiliaries, or cold ironing as it s called colloquially, while in port. This started in Juneau in 2001 with Princess Cruises, with the concept assuming that the source of the shore power itself does not produce emissions, for example hydro-electric or nuclear power, rather than coal-fired power stations. Cold ironing can cut SOx emissions in port by 99.9% and NOx emissions by 99.6%, as well as reducing CO2 emissions by half. From Juneau, shore power spread to Seattle, Los Angeles and Vancouver, among other ports on the west coast, and in 2012, Brooklyn Cruise Terminal, where Cunard Line and Princess Cruises dock in New York, will also invest $15 million into providing shore power. Three
5 ships, Queen Mary 2, Caribbean Princess and Emerald Princess, are equipped for shore power. Each ship must be retrofitted in order to take advantage of this option, at a cost that runs to a few hundred thousand dollars and more per unit. Brooklyn is the first east coast port to adapt this technology but look for more to follow. Europe will be next. 10. More Comfortably-Sized Ships Will Be Built Last month s order by Viking Ocean Cruises for two 49,000-ton 888-guest ships, with an option for a third, is sure to be followed by more. Next in line could well be Regent Seven Seas, which is ready for a new ship, or indeed Crystal Cruises, while in Europe Hapag-Lloyd Cruises is already building its Europa 2, which will cater to international markets, and rumours continue to attach to Saga and Fred Olsen Cruises in the UK. The old story about all-inclusive ships being expensive is slowly falling by the wayside as on board revenues on the main market lines can easily run to 40% or 50% above the fare. Recently, UK agent Cruises & Voyages circulated its own customers with a breakdown for a typical 10-night Regent Seven Seas Mediterranean cruise at 2,862 per person in comparison with a non-all-inclusive line and came up with a rather interesting result. Since Regent Seven Seas now include shore excursions and flights, the main market line comes to 89% more than the base fare, although this is reduced to 65% when compared on a like-to-like fly/cruise basis:
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