The way to be a winner in this era of cruise-berth oversupply is through aggressive marketing and niche positioning, according to industry analysts.
" 'Who gets demand?' is the burning question," according to Jay Lewis, president of the Miami-based Market Scope, a marketing research firm that specializes in the travel and tourism industry and concentrates on the cruise industry.
Temple, Barker & Sloane Inc., a Cambridge, MA-based management consulting firm that conducts research in the travel/leisure industry, has forecasted a berth supply that will continue to outpace demand for cruising over the next eight years. The firm predicts a growth in supply of CLIA fleet ships from 17.6 million passenger-days in 1986 to 26.7 million in 1995; and a growth in the number of North American cruisers from 15.3 million passenger-days in 1986 to 21.3 million in 1995. (These figures account for nearly 13,000 berths added because of new shipbuilding over the next three years.)
When asked to comment on the berth-oversupply situation, a spokesperson for Cruise Lines International Association said "the gap will be closing in the future," citing a growth in ship berths at 9 percent a year and a growth in passenger numbers at 10 to 15 percent. She said member lines have already reached their projections of three million passengers for 1987, a rate that exceeded by nine percent the 2.7 million that cruised in 1986.
"They've got more beds than bodies," according to Garth Peterson, publisher of "Garth's Profile of Ships." The saturation point has already been reached, he says, and cites as evidence the facts that the lines are "cutthroat on prices," the extension of the low period through the month of January, and relaxed group override policies. Not only are lines not calling back blocked space from agents, many offer "open allotment" where if agents don't sell the entire space blocked, they are still awarded the group override. Peterson also operates a travel agency which books a large number of cruises for clients.
Lewis said that an acceleration of discounting in its most negative extreme would lead to a depression in the cruise industry, perhaps even more so when coupled with the slackening U.S. economy.
Discounting not the Answer
Discounting may be a fact of life, but Mark Deck, a principal with Temple, Barker & Sloane, believes that cruise lines must market more aggressively in order to survive the oversupply situation and to profit.
He said that lines are spending considerably more for marketing and that strategies have become smarter and more direct. He cites the use of direct-mail and telemarketing tactics.
Rich Skinner, Public Relations Director for Holland America Lines, noted that all the "big players" have stepped up their marketing efforts, with sales-force expansions, television advertising campaigns and agency education programs. Holland America, according to Skinner, has become "a lot more aggressive" in selling its Alaska programs at travel shows, and works actively with agents at sales seminars to develop group business, while developing its own identity in the process.
Indeed, "there will be winners and losers" in this oversupplied market, according to Deck, and the players who make the most of their market niche will meet with the most success.
He recalled that when the market flattened out about five years ago, industry occupancy as a whole dropped, yet occupancy was up for Carnival and Norwegian Caribbean Line, largely because they had defined their "sense of place" - Carnival with its very different kind of fun experience and NCL's Norway as the "destination unto itself."
Deck said that to be successful, "you've got to have some kind of a hook," one hook being the big ship. Two of the new ships included in Temple, Barker & Sloane's study are Royal Caribbean Cruise Line' Sovereign of the Seas with capacity for 2,500 passengers, and Carnival's Fantasy that will carry over 2,600 passengers.
Lewis said the tendency to build larger and larger ships is practical for the major lines, which already have established their markets and distribution systems. He added: "It takes 10 small ships to equal one big one," alluding to the greater profits per sailing on large ships.
He said that new lines in the marketplace will tend to build smaller ships.
The weakening of the U.S. dollar abroad may boost supply. If consumers don't cut back on discretionary spending, U.S. dollars that may have gone toward European land travel may be directed toward cruising in 1988, according to Lewis.
Lewis estimated the growth in the number of cruise passengers to be 13 to 15 percent this year, and he said the momentum will be carried through the first half of 1988 (since people have already booked their sailings). It is more difficult to gauge how well cruises will fare in the second half of the year, since consumer reaction to the weakening economy probably won't be felt until after the holiday spending season. (According to a report in The New York Times on Monday, Nov. 30, strong sales were posted over the three-day post-Thanksgiving weekend, which is viewed by economic analysts as a key indicator of what lies ahead.)
Lewis said he doesn't see the dollar firming up in the near future, and predicts that next summer the dollar will be at the same level or lower than it is now.
Ages and Destinations
Lewis also noted the average age of the cruiser is younger, largely because of the popularity of shorter cruises, party cruises and theme cruises that are targeted toward a younger market. Lewis cited Carnival and Premier as having a hand in bringing the cruiser's average age down.
"The age is definitely dropping," said a CLIA spokesperson. According to research done by the organization, the average age of cruisers is now between 25 and 39, with half of past cruisers under age 45 and one-third under age 35. The spokeswoman said one of the reasons for the lower average age of cruisers is due to more ship capacity on three- and four-night cruises primarily from Miami, Fort Lauderdale and Port Everglades to the Bahamas and the Caribbean, which now account for almost 30 percent of all passengers on CLIA member ships.
First timers tend to sail the Caribbean, according to CLIA, and island cruises are growing in popularity. Last year, 20 CLIA ships featured Caribbean itineraries, and most of the new ships being introduced in 1988 will be sailing in the Caribbean year-round or seasonal.
According to CLIA, the most popular cruising grounds in addition to the Caribbean are Alaska, the Mediterranean, Mexico, the Orient, South America, and Transcanal.