Big business for big boats: cruise lines are steering in different directions toward the same goal
Cruise lines are steering in different directions toward the same goal–a huge unplumbed customer base.
Big firms versus small upstart businessess. One-stop shopping versus personalized service. Small players carving out unique identities. All of these are signs of another market shifting from mass to niche. In this case, the market is luxury cruises.
The largest lines of ocean liners–Carnival Cruise Lines, Princess Cruises, and Royal Caribbean Cruise Lines–operate 27 of the 113 ships run by member companies of the Cruise Lines International Association (CLIA). These three companies also have larger-than-average ships, accounting for four in ten passenger berths, and they are vying for an even greater share. The big three are known for shorter cruises from Florida ports, while smaller competitors like Holland America and Windstar sail for more distant and exotic locations with fewer passengers.
Fewer than 7 percent of Americans have ever taken a cruise, but the big players are betting on a breakthrough. They are introducing a new wave of megaships that range in size from 70,000 to more than 100,000 tons and hold as many as 4,000 passengers. These floating resorts offer every convenience under the ocean-reflected sun: pools, casinos, restaurants, health clubs, shows, and more. Smaller cash-strapped competitors don’t have the $300 million or so it takes to build a megaship. Some of their ships are 30 years old and don’t offer what Americans have come to expect in amenities.
The megaships have already claimed their first victim. Regency Holdings of Cayman, which operated Regency Cruises, recently filed for Chapter 11 bankruptcy protection. The reason? “Regency expanded too much,” says Ron Bitting, vice president of sales and marketing for Leaders in Travel and The Cruise Center in Great Neck, New York. “Companies either have one or two ships, or they have eight or nine.” Regency tried to make the jump from small to big, and the move did it in.
Other small cruise lines are taking an alternate route, by focusing on exotic locations like Alaska, South America, and Asia. Their smaller ships also offer more personalized service. “We think that as the new ships come on line, there will be plenty of first-time passengers who are interested in a more luxurious cruise,” says Jack Anderson, vice president of marketing and sales for Holland America in Seattle, Washington. He says that the cruise line will launch new ships, but will stay in the 1,500-passenger range. “We’re going smaller and more upscale,” says Anderson. “It will further differentiate us from the others, and that will help travel agents better qualify travelers. So we don’t fear megaships in that respect.”
Industry analysts are divided on the future of the cruise market. Average annual passenger growth between 1980 and 1994 as tracked by the CLIA was a robust 9 percent. On the other hand, this growth is subject to fluctuations, especially in the weather. The number of cruise passengers declined 6 percent in the first half of 1995. A severe hurricane season like last year’s doesn’t help, grounding potential customers before they even board the boat.
For cruise lines, a key to attracting first-time passengers is to change their attitudes about cruises. “When ports are lost to hurricane damage, people say, `Why spend $600 to go nowhere?”‘ Bitting says. “The marketers’ challenge is to make the ships themselves the destination.”
The Cruise Lines International Association provides industry statistics. For more information about CLIA, contact Barbara Weiner at Diana Orban Associates; telephone (201) 605-2121.
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