Big Three: Tactical Moves

The major cruise lines are continuing to reposition ships, entering and expanding new market segments as they expand their fleets.

In the latest developments, Royal Caribbean Cruise Line is making its first entry into Europe as well as the three- and four-day domestic market, while stretching the range of its minimum rates. Carnival Cruise Lines is repositioning a ship to three- and four-day cruises out of Cape Canaveral. Kloster Cruise has said it is considering a one- to five-ship newbuilding program to get underway this fall.

RCCL to Europe

RCCL will reposition the 724-passenger Sun Viking in 1990 from San Juan, Puerto Rico, to Europe for a seven-month summer season, sailing 12-day cruises in the Western Mediterranean and Northern Europe. Rates and itineraries have not yet been finalized.

A spokesperson said that RCCL's European cruises will primarily be marketed in the United States and that they are expected to attract first-timers as well as repeaters.

Traditionally, RCCL has operated from Miami, until 1985 when it brought the Nordic Prince to New York for summer season Bermuda cruises; and in 1988, when it positioned the Song of Norway in San Juan.

Upscale 3/4 Day Market

RCCL will also enter the three- and four-day market for the first time in May of 1990, positioning the new 45,000-ton, 1,610-passenger Future Seas in Miami. The ship, which was originally intended for Admiral Cruises, has instead been transferred by the two lines' joint owners to RCCL.

"We are moving to Europe and into the three- and four-day market here to offer our customers more choice," said Richard Fain, Chairman of the line. "Our move into the three- and four-day market evolves from RCCL moving from longer to shorter cruises to meet the changing pattern of the domestic travel market," he said, underlining that the Future Seas will offer quality and style similar to the other RCCL vessels.

Revised Pricing

In 1990, RCCL will also introduce lower minimum rate categories for all its ships. 

"We are restructuring our prices for 1990," said Fain, "and while our overall prices will probably be higher than in 1989, four percent of our cabins will be offered at a lower price point. In the past we have not had as many cheap cabins as our competition," he added.

The new minimum rate categories resulted from market complaints that the line's cruises were overpriced, according to a spokesperson for RCCL, who also said that the new price categories were intended to broaden the market and attract more first-time cruisers. RCCL will also be offering early booking discounts and a new guaranteed single occupancy rate.

Instant Booking Confirmation - CruiseFax

RCCL has also announced that it is spending more than $1 million offering its top producing 1,200 agents free fax machines or, if an agent has a fax, alternatively $1,000 in co-op advertising. According to Fain, the advantage of a fax machine is that it gives the travel agent instant written confirmation of a booking and all the booking details. The confirmation will also include a version for the client.

The service, which is trademarked CruiseFax, can also be used to transmit information to travel agents.

CruiseFax cannot easily be duplicated by other cruise lines, Fain noted, because the system involves special technology and software.

Carnival to Cape Canaveral Carnival

Cruise Lines will reposition the 1,160-passenger Carnivale to Port Canaveral in February of 1990 for three- and four-day cruises to the Bahamas. The ship presently sails three- and four-day cruises from Miami until January 1990 when the line's new 2,050-passenger Fantasy takes over.

Carnival will package three- and four-day cruises with land stays in Central Florida that can be combined into six- and seven-day vacations.

According to Robert Dickinson, Senior Vice President of Sales and Marketing, Carnival intends to broaden the market base in Port Canaveral by targeting honeymooners, young marrieds, middle-aged couples and seniors - in addition to the families now attracted by Premier Cruise Lines.

The Carnivale will sail three-days every Thursday to Freeport and four-days every Sunday to Freeport and Nassau. Sources said that Port Canaveral is building a new $6.5 million, 15,000 square feet terminal (no. 5) for Carnival.

Kloster Looks at Newbuildings

As reported exclusively in the last issue of CIN, Kloster Cruise is contemplating a newbuilding program of one to five 1,200-passenger ships, which, if added to the present Norwegian Cruise Line fleet, would also necessitate additional ship movements.

To Europe

Europe as a cruising region for American passengers is experiencing somewhat of a renaissance. This year, Princess Cruises has tripled its presence in Europe; Royal Cruise Line is back; and Cunard Line will be repositioning the Cunard Princess for year-round operations out of Malaga, Spain.

Also marketing European cruises for U.S. passengers are Costa, Cunard/NAC and Cunard Sea Goddess, Epirotiki, Ocean Cruise Lines, Royal Viking Line, Seabourn Cruise Line, Sun Line Cruises and Windstar Sail Cruises. In addition are the smaller operators, including Special Expeditions and Lindblad Travel. Moreover, Chandris has expressed plans to broaden its involvement carrying more American passengers in European waters.

More than 11,000 European summer cruise berths are marketed in the United States this year, with more than 12,000 projected for 1990.

Industry insiders interviewed by CIN said that Europe produces higher per diems than Alaska or the Caribbean in the summer, and that operating in Europe will gain RCCL further recognition as a world-class cruise line.

Doug McDougall, an Associate at Temple Barker & Sloane, a Massachusetts-based management consulting firm, said that RCCL has been pursuing a strategy of diversification to lessen its dependence on the Caribbean which is increasingly driven by price. He also said that by moving into Europe and into the three- and four-day domestic market, RCCL can expect to attract more repeaters and more first-timers.

McDougall said that the Sun Viking will let the company establish a beachhead in Europe, and noted that in the first few years the majority of RCCL passengers will probably be American, but that over time this is likely to change. Operating in Europe and attracting both European and American passengers will also help insulate RCCL against market risks, according to McDougall, who said that RCCL's moves were "investments in the future."

Three- and Four-day Market Exploding

McDougall also said that entering the three- and four-day market is part of RCCL's strategy to expand, reaching more first time cruisers. The three- and four-day Florida-to-the-Bahamas market has been relatively dormant if profitable, and until recently only included older vessels. But with Carnival's recent announcement that its new 2,050-passenger Fantasy will enter the short-cruise market, this has all changed.

According to industry executives interviewed by CIN, there is a tremendous potential in the short cruise market, which is also evolving in accordance with the national trend towards shorter, but more frequent vacations.

The repositioning of the Carnivale to Port Canaveral gives Carnival three ships in 1990 in the three- and four-day market to the Bahamas.

The three vessels are expected to carry almost 400,000 passengers in 1990 about half of the 800,000 passengers the line is projecting for that year.

RCCL's three/four day capacity will be about 166,400 and Norwegian Cruise Line's 76,960. In addition comes Admiral's Emerald Seas, 99,840, and Dolphin's Dolphin IV's, 60,944, adding up to a total annual capacity of some 804,144 passengers in the South Florida three- and four-day market.

The entries into the short cruise market are attempts to penetrate the market deeper than before according to John Leeper, President of Leeper, Cambridge & Campbell, a Virginia-based consulting firm. It is a way of reaching more people who might lack the time or the money to take longer cruises. Generally, these are young executives and young people.

Leeper also said that by operating shorter cruises the cruise lines keep their vessels full, asking the same daily rate as on seven-day cruises, but generating many more passengers, thus contributing to the tremendous growth of the industry.

Dr. Stanley Buchin, Senior Vice President of Temple, Barker & Sloane, commented that it is easier to make money in the short cruise market. He also said that the three- and four-day cruises have strong growth potential especially if the cruises were tied into land programs, citing Premier's Disney program as an example.

Buchin noted that the three-day cruises are ideally suited to the average vacationing gambler who typically spends three days in Las Vegas, losing on the average $300 per trip.

Leeper also said that the short cruises tend to inflate the industry's growth rate and when the cruise lines project 3.4 million cruise passengers in 1989, they are not distinguishing between seven-day and three/four-day passengers.

Leeper added that segmentation was crucial to the industry. "You cannot sell the same cruise to the same passenger the next year," he said. "So in order to keep the passengers coming back, the cruise lines must continuously offer new products." He pointed out that it is only by maintaining high occupancy levels that the cruise lines can keep costs down and be profitable.

Increased Competition

As the industry is growing, operators are also squeezing more capacity into the same markets and market niches.

In Cape Canaveral it is expected that Carnival will become a formidable opponent to Premier Cruises. Already, insiders expect Carnival to be putting a second ship into Canaveral by mid-1990, even contemplating seven-day cruises, while Premier is said to be adding a fourth vessel within the same time period.

Premier and Carnival may do very well next to one another, however, according to insiders who pointed out the potentially huge central Florida pool of tourists. 

Premier caters to families and sails to different ports in the Bahamas than does Carnival which is more entertainment oriented and sails to Nassau and Freeport.

Skeptics, on the other hand compared Port Canaveral to San Diego, which had proven to be too far from the main market (Los Angeles), according to Leeper.

While the three- and four-day market is heating up, it may also only be a question of time before Carnival and NCL follow RCCL to Europe. Insiders said there is strong market potential at the mid and lower end of the price scale.


RCCL has suddenly transformed its image overnight from being a conservative operator, in spite of its daring newbuildings, to being extremely competitive.

Its declared competitiveness may be reflecting significant changes in the cruise market, although broad price categories and early booking discounts are now industry norms. While RCCL's entry into the short cruise market may have surprised some, it meshes with evolutionary travel trends in the United States. And it is not very different from Royal Viking Line's experimenting with seven-day luxury cruises from New York to Bermuda.

Jay Lewis, President of Market Scope, a Miami-based marketing research firm, pointed out that 20 years ago, seven days was considered a short cruise.

Several of those interviewed pointed out that the tactical moves by Carnival, NCL, and RCCL indicated that the traditional seven-day cruise market is not able to absorb the new tonnage at the rate at which it is being introduced.

Cruise executives interviewed said there was a pent-up demand as no new tonnage has been introduced into the South Florida three- and four-day market for some time. So far the Bahamas is the immediate benefactor of this development with nearly all of the 800,000 three- and four-day passengers from Southern Florida.

Contrasting Signals?

Cruise line executives said they are going to tap into the market potential, without revealing much about the profit potential or passenger demographics. Other experts said it is a combination of factors that are feeding this development, including the lines' need to mantain load factors and profit levels.

Buchin said that he expected more new ships in the short-cruise market in the near future as the lines discover the potential of this market and partially in response to the general national travel trend towards shorter, but more frequent, vacations and more weekend travel.

While Buchin did not expect any reduction in the seven-day market capacity, he expected more rapid growth in short cruises, and that new ships would make these cruises much more attractive to a broader segment of the cruise market.

The development of the cruise industry with new ships and demands by repeat passengers for new itineraries and new ports have helped open up the Caribbean, but a trend towards shorter cruises, may slow down the volume of this growth or affect it by constraining ships closer to their baseports. At the same time, this could generate a need for new Caribbean ports with airlift.

Long-term, the potential market concentration could again be offset by the aging of the American population with more senior citizens having the time to take seven-day and longer cruises.

Dynamic Growth

The dramatic actions by RCCL should also be seen as reflecting the dynamic growth of the North American-based cruise industry, which is building ships based on new design concepts and developing the cruise product to meet consumer demand, while adapting to the evolutionary changes in the U.S. travel market.

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