State of the Industry: 2004

The industry expects record bookings and a moderate to good improvement in yields in 2004, according to Mark Conroy, president and CEO of Radisson Seven Seas Cruises and chairman of the (CLIA), who was speaking at the recent cruise conference in Miami.

Conroy forecasted 10.6 million passengers, including 5.3 million first-time cruisers, on CLIA member lines in 2005, up from 9.5 million in 2004.

But Conroy expressed some caution. He said that "people want to go somewhere their money will go a long way and where nobody wants to kill them."

He added that the American economy still suffers from joblessness despite the economic upturn.

Carnival Corporation Vice Chairman and COO Howard Frank said that demand was strong for all of its brands on both sides of the Atlantic and noted (two weeks ago) that bookings were running 50 percent ahead of this time last year.

Richard Fain, Chairman of Royal Caribbean Cruises, said that the "Wave Season so far has proven to be quite strong."

At Norwegian Cruise Line, President and CEO Colin Veitch said that the brand was experiencing positive demand and pricing development.

At Carnival Cruise Lines, President and CEO Bob Dickinson said: "We are selling cruises for 40 percent of what they are worth. We discount because not enough people understand or appreciate the value of a cruise."

He also said that repeat cruisers filled up the ships, keeping more first-timers from cruising, and pointed out that only 16 percent of the American population has ever taken a cruise. "We need to penetrate the market much better," he added.

Also taking part in the status of the industry debate was Albert Peter, CEO of Silversea Cruises. He said people should go to Paris and see what they have to pay for a hotel room and then compare that to a cruise. He also said that Silversea expects yields to be up five percent in 2004 over 2003 and that the line is now starting to pull back on some of its discounts.


Reflecting on the troubles of Festival Cruises and Royal Olympic Cruises (ROC), Frank said they were due to what has happened over the past two years. In tough times, more thinly capitalized businesses run into trouble, he explained, adding that lenders get concerned.

Frank also said he was a little surprised that this has happened (the problems of Festival and ROC) because Carnival's European brands were generating reasonably good profits and cash flow.

And, despite the troubles of these two companies, Frank thought the future in Europe looks very good for the cruise business.

Dickinson added that Europe as a market is 20 years behind the U.S., and that he has seen 71 brands go out of existence in North America since 1966.


Frank noted that Carnival Corp. is introducing seven new ships in 2004, two in 2005 and three in 2006, and that the company absorbed a 17 percent capacity increase in 2003 and will see another 17 percent added in 2004.

With the building pace slowing down for 2005 and 2006, Frank sees an opportunity for the industry to improve margins and returns. Meanwhile, the industry can also take a more focused approach for what it builds ships for, he said.

"We think Europe is an excellent opportunity for growth - at our German brand and in the U.K. as well," Frank said.

With a strong euro it is difficult to grow U.S. capacity, according to Frank. But Carnival will build for the U.S. market when the price is right, he added. That would be based on an exchange rate "around parity or slightly higher." Japan is also seen as a possibility for more new ships, following the successful delivery of the Diamond Princess.

Veitch said that NCL's recent contracts with Meyer Werft was in dollars for the first ship and in euros for the second with payback over 12 years and that he believed the euro rate will change allowing NCL to average the cost over 12 years.

"We look at the cost in dollars per berth not so much at the exchange rate," Veitch said. "The exchange rate is only one variable," he added. "We expect to be ordering more ships for NCL. Today, 36 percent of our capacity is new ships; by the end of 2006, 74 percent will be new ships; and our goal is to have all new ships by 2010.

"The older NCL capacity will be moved to Asia to help open China," Veitch noted.

Added Fain: "The overall cost (of newbuildings) is more important than the exchange rate."

Southern Caribbean

The key to adding more capacity in the Southern Caribbean is airlift, according to Dickinson, who said that once that is solved, there are other issues such as "island governments' willingness to grasp the economic value of the industry."

Veitch said that Europe may become more important as a source market for Southern Caribbean cruises as Americans become more accustomed to driving to their ports of embarkation.

Small Ship Consolidation?

While he eventually expects consolidation among small ship operators, Albert said that segment of the industry has not matured enough yet.

Added Comoy: "Consolidation can make sense financially, but we (small ship lines) are all owned by individual owners who have different visions."

Frank did not think that regulators will allow Carnival to buy any more brands, but thought that Fain was an excellent candidate as a buyer.


Frank said that Carnival was in the early stages of discussions with companies in Asia, but that it was too early to say whether Carnival will launch a new brand or use an existing brand to enter the Asian market.

Cruising in Asia is difficult, according to Veitch, who said he would welcome Carnival in Asia (so they would have some problems too).



Cruise Industry News Email Alerts


Email Newsletter

Get the latest breaking cruise news. Sign up.

Cruise Ship Orderbook

115 Ships | 237,130 Berths | $65 Billion | View

New 2020 Luxury Report

Cruise Industry News Luxury Report


Full Insight

All Operators

Data Sets


140 Page PDF