1989 is expected to be another growth year for the cruise industry. Seven new ships are bringing more than 5,000 new berths to market, while at least three ships are being reintroduced under new colors. And, according to industry sources, close to three and-a-half million Americans are expected to cruise during the year.
But 1989 will also give the industry some breathing room, with less new capacity coming on line compared to 1988 when more than 7,000 new berths were introduced. Thus, following the consolidation that has taken place in the previous months, industry executives said that this may be a year of product concentration and stepped up marketing activities. It may also be the year m which the cruise industry will break through to the American public with massive network television advertising.
At year's end there will be 124 ships offering more than 85,000 berths operating from North American ports or being marketed primarily in North America, compared to 117 ships and nearly 80,000 berths at the beginning of the year.
Thus, the capacity growth rate for 1989 is estimated at slightly more than six percent. Similar growth projections prepared by CIN and based on confirmed orders are estimated at 11.5 percent for 1990 and 11.5 percent for 1991.
(Projections based on confirmed orders and announced intentions to build would increase the annual growth rate to 13 percent in 1990; 23.5 percent in 1991; and 11 percent in 1992.)
Supply and Demand
The 1989 cruise fleet offers a supply of some 31 million passenger days, while the demand by about 3.5 million cruise passengers, based on an average cruise length of 5.5 days, is estimated at some 19 million passenger days, resulting in an industrywide oversupply of about 30 percent.
While the supply-and-demand scenarios are hotly debated by the cruise lines and their organizations there is in ustrywide consensus that the supply of berths will be exceeding demand for some time to come. Yet the successful cruise lines report to be operating at or near maximum capacity.
The following new ships are scheduled to enter service in 1989:
Star /Ship Atlantic 1600, pax.,
Premier Cruise Line, rebuilt/Atlantic, January.
Crown Del Mar, 486 pax., Crown Cruise Line, rebuilt, new to U.S., January.
Ocean Spirit, 300 pax., Ocean Quest, rebuilt, new to U.S., February.
Seabreeze, 1,000 pax., Dolphin Cruise Line, rebuilt/Royale, February.
Star Princess, 1,400 pax., Princess Cruises, newbuildin March.
Star Ship Majestic 700 pax., Premier Cruise Line, rebuilt/Sun Princess, May.
Yacht I, 100 pax., Fearnley & Eger, newbuilding, September.
Yacht II, 100 pax., Fearnley & Eger, newbuilding, September.
Fantasy, 2,050 pax., Carnival Cruise Lines, newbuilding December.
Seabourn Spirit, 212 pax., Seabourn Cruise Line, newbuilding, December.
The cruise picture will also be changing in 1989 with the emergence of four dominant lines, Carnival, Princess, Royal Admiral and Kloster Cruise.
With four major operators, it is expected that prize levels will stabilize, and that the four will be able to mount massive advertising campaigns attracting more passengers not only to their own fleets but to all the lines.
While this development bodes good news for the industry, the consolidation is also expected to discourage newcomers from entering the market.
Yet, the "big four" have not settled into their newfound positions of dominance and may not for some time be able to demonstrate their success. This is partially because it is not yet known whether the lines can fill their expande capacity and because they to some extent are also competing against each other.
There is also one more cruise line that should be part of the group and that is Cunard Line, which is finding itself left in the wake of the development. It is expected, however, that Cunard will make another acquisition in 1989, mainly to maintain its position of leadership in the upscale market.
Carnival, moreover, has announced plans to expand further into the upscale market through its "Project Tiffany" as well as into the downscale market.
Earlier this month, Aloha Pacific filed for Chapter 11 reorganization, following last fall's bankruptcy of Exploration Cruise Lines and American Cruise Lines. Last year, Home Lines also sold both of its ships and effectively retired from the cruise business.
While industry executives do not expect any further consolidation in 1989, smaller lines are likely to feel increased competitive pressures from the "big four" and may opt for joint marketing and sales operations in order to carry the cost of remaining competitive. Some industry insiders also expect a shakeout in the upscale segment, where several of the operators are said to be suffering from low load factors.
But in spite of the consolidation in the mass market, 1989 will see further innovative growth by entrepreneurs entering niche markets.
In the very upscale market, Seabourn Cruise Line has launched its first ship and is working to make its mark on the industry. A second ship is due at the end of the year.
Both Fearnley & Eger and Navtol Windsor have promised to launch the first of their new upscale, yachtlike vessels during the summer. Dutch-held Master Cruise is expected to contract its two ships.
Featuring diving cruises, in New Orleans Ocean Quest will be introducing a refurbished vessel sailing weekly to Mexico.
With literally it own cruise port, in Palm Beach, Crown Cruise Line introduced the Crown Del Mar in January and is awaiting delivery of the Crown Monarch early next year.
Sailing between the East Coast and South America, Ivaran Lines is contemplating adding two more luxury cruise freighters to its fleet.
In addition, there are numerous projects on the drawing boards and in the feasibility stages in the United States, Western Europe and Japan, just waiting for the numbers to add up. These projects range from trans-Atlantic to trans-Pacific service, to day cruisers from Atlantic City, to super-deluxe, ultra-expensive 30-knot yacht cruisers and catamaran designs aimed at the meetings market.
There are several risk factors that sets the cruise industry apart from landbased hotels and resorts, including the industry's sensitivity to fuel prices and air transportation as well as consumer trends, world events and weather conditions.
Cruise lines have traditionally argued that if problems arise in one region they can easily move their ships which is an impossible option for hotels and resorts. Experience has shown, however, that while cruise ships can be moved, this option may not be a viable business alternative. While cruise ships may desert secondary sailing regions, it would become increasingly difficult to move ships from major areas of operation.
The cruise industry also has its traditional hurdles to overcome. Recent research has confirmed that the majority of Americans still perceive cruises to be more expensive than comparable vacation alternatives. Many Americans also view cruises as being for "older people" and that cruises are confining; and they are afraid of getting seasick.
Cruise passengers on the other hand are becoming more discriminating, especially towards ports of call, and particularly in terms of their perception of local attitudes as well as shopping opportunities, beaches and sightseeing excursions. This is spurring the cruise lines to develop more onboard activities and literally making ships into self-contained resorts. Last year, there were more reports of passengers staying aboard ships in ports they had no desire to visit.
More than ever, however, 1989 will present opportunities for new homeports and new ports-of call to attract cruise business.
With the steady increase in the cruise ship fleet and with more discriminating repeat passengers looking for new cruise experiences and demanding quality, the cruise lines are forced to explore new ports and new sailing regions.
Different research projects proclaim that anywhere from 30 to 80 million Americans are potential cruise passengers, concluding that there is a vast untapped potential market when only 10 million have cruised so far.
This may be so, according to some observers, who also point out that the same argument is used by others, including the Mexican tourism authorities, which recently said that there are 30 million Americans who have indicated an interest in visiting Mexico - and can afford to do so.
While the many aspects of the cruise industry are debated within and outside the industry, 1989 is expected by many to be the year in which the cruise industry will be entering a new era in its evolution.
This new stage of maturity is primarily said to be reached in the wake of Carnival Cruise Line's successful public offering and subsequent earnings record; the sizeable investments and innovative newbuilding programs by several cruise lines; the general industry expansion; and the consolidation that has created mega companies and at the same time encouraged innovative niche operators.
From being a somewhat fledgling but growth-oriented industry throughout the seventies and mid-eighties, the now $7 billion-a-year cruise industry is beginning to earn the recognition and acceptance also of the American financial communities.
What else is in store for 1989?
The most significant and exciting happening may be the contracting of the 5,000-pax. Phoenix which insiders expect to become reality by mid-year.
Also highly noteworthy is the planned catamaran-design ship to be built by Wartsila for Diamond Cruises to be marketed in the United States by the radisson Hotel Corp.
Further along on the horizon is the expected increasing presence of Japanese owners and operators on the North American cruise scene.
As observers, CIN expects 1989 to be another exciting and prosperous year for the cruise industry, and we expect to see more innovative and intensified marketing efforts. As these developments take place, the cruise industry will also generate more awareness and acceptance in the larger-scale American marketplace and thus contribute towards its own successful future.