"Norwegian Cruise Line (NCL) has long-term intentions to be in the year-round seven-day Hawaii market - which we believe has tremendous potential," said NCL President Colin Veitch. That commitment begins on Dec. 16, 2001, when the 76,800-ton, 2,000-passsenger Superstar Leo (to be renamed shortly) begins service for NCL after its transfer from Star Cruises - a move which will significantly change the competitive landscape for American Classic Voyages' (AMCV) startup United States Lines.

With the Leo's redeployment, the 76,800-ton, 2,000-passenger Superstar Virgo will be shifted to Hong Kong and Star's next newbuild, the 91,000-ton, 2,300-passenger Superstar Libra, will take over for the Virgo in Singapore. Concurrently, the 76,000-ton, 2,032-passenger Norway - no longer considered competitive in the North American market - will sail its final cruise for NCL in September 2001, before entering a three-week drydock and then continuing on to service in Asia under the Star Cruises banner. The Norway's previously announced summer 2001 two- and five-night deployment has been scrapped.

Regarding the change in plans for the Norway, Veitch explained, "By the time we would have built momentum (for the new short-cruise program), we would have had to close it down." Thus, the ship's seven-night service will be maintained, and NCL's Freestyle Cruising concept will not be implemented aboard, allowing the ship to be marketed to Norway aficionados as "farewell cruises."

The departure of the Norway has been timed to coincide with the arrival of the 80,000-ton, 2,000- passenger Norwegian Sun.

Altogether, the various shifts within the Star Group in the second half of 2001 will increase the NCL brand's berth total from 10,498 to 12,466, a rise of 19 percent, and will cut the NCL fleet's average age in half, from 14 years to 6.6 years.

Historic Growth in Hawaii

The announcement by NCL further accelerates the growth curve in Hawaii already anticipated thanks to United States Lines and other companies.

According to estimates by Cruise Industry News, Hawaii will see a capacity increase of 81 percent next year, from 103,792 passengers in 2000 to 187,576 passengers in 2001. The increase is primarily attributable to the arrival of United States Lines' first vessel, the 33,930-ton, 1,212-passenger Patriot (ex­ Nieuw Amsterdam), as well as the first-ever Hawaii voyages by Celebrity Cruises, which will sail both the Infinity and Mercury, and other newcomers such as Carnival Cruise Lines' 84,000-ton, 2,100-passenger Carnival Spirit and Royal Caribbean International's 85,000-ton, 2,000-passenger Radiance of the Seas.

In 2002, capacity is estimated to increase 53 percent, to 287,576 passengers, as the result of the new year-round itinerary by the Superstar Leo, while in 2003 the market is forecast to increase a further 35 percent with the anticipated arrival of U.S. Lines' first 72,000-ton, 1,960-passenger newbuild. The company's second newbuild is due to arrive the following year.


AMCV has two brands in the Hawaiian market, U.S. Lines and American Hawaii Cruises. Prior to the NCL decision, Cruise Industry News estimated AMCV brands would have held a 73.6 percent capacity share in 2003, and would thus be in a strong position to control pricing during the inaugural year of its first newbuild. After NCL's move, however, AMCV can expect to control only 53.9 percent of capacity by 2003, and only 37.6 percent of the market the year before, in 2002, when NCL will actually exceed AMCV in Hawaiian capacity.

Examining the overall market growth rate, the NCL move means the Hawaii market must absorb a 275 percent capacity increase between 2000-2003 (+285,704 passengers) versus the 175 percent rise (+181,704 passengers) which had been predicted prior to the NCL announcement.

According to Rod McLeod, president of AMCV, "If you look at the 100,000 or so total berths being added (by NCL), yes, it changes the numbers, but you have to consider that there are seven million people a year and growing who visit Hawaii." This is the proper perspective, he explained, from which to view the NCL addition. "If Hawaii is as strong a cruise destination as we believe it to be, it will accommodate both of us," said McLeod.

But can that current Hawaii cruise per diem averaging around $200 - be maintained during the next three years as the market nearly quadruples in size and welcomes a second major player into the seven-night sector? According to Veitch, "We expect to be competitively priced. The $200 per dierns look very nice, and if the market bears a high price, it is not our intention to destroy that situation. But can we expect to make as much (in a competitive environment) as when there was only one ship in the market? History suggests that is probably not the case."

NCL rates for the Leo's first winter season start at $1,499 including port charges for inside cabins, and $1,799 for outside cabins, generally in line with AMCV's Hawaii rates.

Asked whether NCL's arrival will actually help AMCV, by injecting new marketing dollars into the promotion of Hawaii as a cruise destination, McLeod said, "We've all prayed at that altar at one time or another. It depends on how NCL markets itself. We have to wait and see how this product comes forward."

NCL and AMCV will be taking significantly different approaches in terms of product delivery. "With two companies developing the market, I do think it's important for each line to stand for something different, so there is a choice of experience,"

AMCV will feature an all-Hawaiian itinerary, with calls at the four main islands - Oahu, Hawaii, Maui and Kauai. NCL's seven-night product also features calls in each of these islands, but to comply with the Passenger Vessel Services Act, the vessel must make a high-speed run down to Fanning Island and back, necessitating two days at sea.

While featuring three days' less time in Hawaiian ports than AMCV, the NCL ship will be able to operate its casinos during the period when it leaves Hawaiian waters.

Like AMCV, NCL will target North American passengers almost exclusively. Veitch said that U.S. West Coast residents in particular would be targeted, and that the product would not utilize Star's Asian network of wholesalers to fill out the vessel, save for a limited number of Australian sources.

Veitch said that there will not be significant alterations to the Leo before it is placed in service for the North American market, maintaining, "The Leo and the Virgo and all the ships to be built after them have been designed by Star from the onset to be interchanged between Asian and Wes tern markets."

NCL is currently considering whether to keep the Superstar Leo's existing "Balcony Class" concept in place for American passengers, wherein specialty restaurants charge landside prices for meals, but Balcony Class passengers are given a food credit to cover those costs. "It's an idea we're toying with, and this would be the perfect place to try it out," said Veitch.

While the choice of vessel had not been decided until recently, the new management of NCL had intended to enter the seven-night Hawaiian market from the beginning, according to Veitch.

Since 1998, NCL has operated 10- and 11-night cruises on the same itinerary, using a slower ship (this year, the Norwegian Wind, and in 2001, the Norwegian Sky) which takes four days for the trip to Fanning Island, not two. Veitch said the longer itinerary would be continued even after the arrival of the Superstar Leo.

Summing up his thoughts on the new market landscape in Hawaii, AMCV's McLeod concluded, "We're accustomed to competition. We'll see how this works out and do what we need to do."