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State of the Cruise Industry: Top Executives Bullish on Future Despite Constraints

From left: Arnold Donald, Richard Fain, Pierfrancesco Vago

Arnold Donald, president and CEO of Carnival Corporation, described 2020 as a trying but inspiring time on Tuesday morning at the traditional "State of the Industry" panel in Miami Beach.

Donald called 2020 transformative, and now has his sights set on the recovery.

“We know where the road is headed and the road is headed toward a very bright future … but the road does have potholes and detours in it. It has been choppy and complicated,” said Donald, noting the Carnival brand had 11 ships back in service at 70 percent occupancy.

Across the corporation, the cruise brands in service for Carnival Corporation are averaging 68 percent occupancy, he noted.

“The net promoter scores are higher than ever, the bookings are strong and the (health) protocols are working,” Donald said.

Despite that, there are challenges with some destinations yet to open and changing protocols globally, Donald continued.

“We have never competed on the basis of safety or security or health,” said Richard Fain, chairman of Royal Caribbean Group. “We had a history of working together toward a common goal.”

Fain noted that with the strong health protocols in place across the cruise business, now other industries are looking at the cruise industry as a benchmark.

Fain was asked about new players coming into the industry, such as Virgin Voyages. Fain said new players attract attention, pointing to Disney Cruise Line’s entry in 1998 with the Disney Magic.

“(Disney) added 2 percent to the supply and 10 percent to the demand,” Fain said, adding that it's important that the industry gets out the message that it's an amazing vacation.

Fain elaborated that the real competition for the cruise industry was land-based competition and possibly even flat screen TVs.

Donald pointed out that the industry is capacity constrained, and that a new player could not come in overnight and build 100 ships.

Pierfrancesco Vago, executive chairman of MSC, described the last 19 months as “quite a ride,” having starting with one ship in Asia being blamed for the global pandemic to the safe restart of the cruise industry.

“We set a precedent,” said Vago.

MSC’s bubble cruising concept was rolled out on the MSC Grandiosa in August 2020.

“It is still very complex. You are talking about cross border (travel),” Vago continued. “The complexities on how to bring these protocols and offer a (safe) holiday to our customers is incredible”

Vago noted that to enter the cruise business a new player would need master both shipbuilding and hospitality.

“The fact (Virgin) is building three ships without testing them on the market will be a complexity,” Vago said.

Long-term, Vago said, customers want to cruise, and that new-to-cruise guests were booking,

“In spring 2022 bookings are coming back and in 2023 they are even better,” Vago said.

Kelly Craighead, president and CEO of CLIA, pointed out the CDC’s Conditional Sail Order that expires at the end of October was put in place before the COVID-19 vaccine rollout.

“We have been really encouraged every time we have the opportunity for industry to speak with governments; we take steps forward,” she said.

Fain added that with each week, more ships are sailing more cruises, and there is additional data available showing how safe cruising is and how robust the protocols are that the industry has developed in conjunction with public health authorities globally.

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