The Wave Season for 2004 seems to be bringing about a surge of optimism among travel agents. Cruise Industry News questioned a series of travel agency presidents and CEOs in various parts of the US, and found that most admit things are looking better than they have in some time, attributing the slowdown in 2003 to catastrophic world events, ignorance concerning illnesses such as SARS, and an overall economic downward spiral as the primary culprits. But now, with the mainstream popularity of the Queen Mary 2, more close-to-home ports being built, and an invigorated economy, travel agents seem convinced that the Wave Season for 2004 will be far from a wipeout.

RCC also needs to focus on its Celebrity Cruises brand and increase pricing for this premium brand.

According to Kantor, RCC puts out a very good product and can give CC a run for the money.

Long term, the cruise industry will be able to hold its own, if not peak, over land-based vacation
alternatives, according to Reid.

He also said that Carnival's merger with P&O Princess Cruises was gong well, and that cost savings and revenue enhancement opportunities were being realized. "Long term, Carnival will have very strong cash flow," he noted.

Reid added that RCC was more leveraged, generating a lower return on capital. "They have paid more for their ships and are not getting higher prices," he said. "Celebrity has been a disappointment for the past couple of years. We are now seeing some improvement. It is an issue of getting prices up," he said. But RCC should have a big spike of free cash flow in 2005 with no new ship arrivals, according to Reid.

With only one new ship entering service in 04, RCC has less to worry about than CC, according to
Murphy, who said it gives RCC time and energy to focus on improving operations and to close the gap to CC.

Murphy said that CC clearly has a superior operating performance, and the acquisition of P&O Princess Cruises opened up huge strategic opportunities. "On the books it looks like CC paid a premium price for the acquisition, but the acquisition is justifiable if it raises operating efficiencies, and Carnival has a trackrecord of doing that," she added.

"In the long run, the key is to position yourself with the strongest market share and draw the largest
market at the best prices and the lowest cost," she said. 

Murphy expects it may take two to three years before CC will receive the full benefit of the acquisition.

Meanwhile she also believes the gap in capacity and earnings will widen even more between the two companies in the future.

"RCC will have to work harder to improve brand awareness, pricing, and operating efficiencies, but at the same time, it will be even harder for RCC to get closer to CC," Murphy said. "In terms of operating income per passenger day, RCC has consistently lagged 30 percent behind CC," she added. 

"RCC also needs to drive pricing up for Celebrity," Murphy continued, adding that Celebrity is now priced lower than the Voyager-class.

Kantor said that as things get better for the two cruise companies, there could be another building bubble towards the end of the decade. "Growthd epends on newbuildings. But new ships may cannibalize older ships in the marketplace," she added.