Cruise execs optimistic about 2002 as industry rebounds

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Posted 8:43AM on Wednesday, March 13, 2002

MIAMI BEACH, Fla. - Cruise lines are rebounding after suffering a slew of cancellations and lower bookings following the Sept. 11 attacks and the economic slowdown. Speaking at the industry's annual Seatrade Cruise Shipping Convention Tuesday, several executives said they're optimistic about the industry's future. "The recovery has been much faster than most or perhaps all of us expected." said Colin Veitch, president and chief executive officer of Norwegian Cruise Line. "I think it says something about the strength of the industry." Fallout from the attacks last year sunk two cruise lines -- American Classic Voyages and Renaissance Cruises -- and left the rest struggling to fill cabins as people afraid to travel or in the midst of financial trouble canceled or postponed their vacation plans. Cruise lines moved ships from the Mediterranean and Europe to North America and drove down prices, eventually increasing booking levels after a few weeks, particularly for near-term cruises. The lower prices, however, hurt revenue yields. Bob Dickinson, president of Carnival Cruise Lines, said cruise lines had to lower prices because, unlike hotels or other land-based tourist destinations, they have a limited amount of time to book passengers before the ship leaves port. "Is it really the strength of the industry or the fact that we had the collective marketing chutzpah ... to take pricing down to $199 for one seven-day cruise that in general would be $399," Dickinson said. "We need the sustained activity to make up for the bookings that we should have had in September and October." Peter Ratcliffe, chief executive officer of P&O Princess Cruises, said the impact of the Sept. 11 attacks seems to have been restricted to the last three months of 2001. "We'll probably have our ships full for 2002," he said. Mark S. Conroy, chairman of Cruise Lines International Association and president and chief executive officer of Radisson Seven Seas Cruises, said the industry projects it will draw about 500,000 more customers than last year, or a total of 7.5 million. And 3.5 million of those will be first-time cruise ship travelers, Conroy said. The industry also expects to add 19,704 berths in 2002 as some 15 ships come on line. It lost 7,400 berths when American Classic and Renaissance shut down, Conroy said. Meanwhile, speculation over the pending outcome of a takeover struggle between No. 1 Carnival Corp. and No. 2 Royal Caribbean International over No. 3 P&O Princess PLC nearly upstaged discussion on the impact of the terrorist attacks on cruise ship travel. U.S. and European regulators are reviewing a $5.4 billion takeover bid by Carnival for Princess and a $3.7 billion offer from Royal Caribbean. Ratcliffe, Howard S. Frank, vice chairman of Carnival Corp., and Jack Williams, president and chief operating officer of Royal Caribbean and Celebrity Cruises, were seated together on the panel, and moderator Christopher Hayman tried with mixed success to push their buttons. Williams sidestepped a question on whether consolidation was good for the cruise industry by saying it was more important to consider whether it is good for the customer. "That will be the relevant question, and that will be answered in the months ahead," Williams said. "We'll watch it unfold from there. We remain in the deal today." Ratcliffe reiterated that a merger between Princess and Royal Caribbean would suit Princess best. "This will be positive for the global cruise market." Frank drew laughs when he turned to Ratcliffe and said: "I'm still waiting for Peter to return my call." "We also saw the benefits of a merger with P&O. We never in our own thinking ever wanted to do any kind of a hostile takeover," Frank said.