The U.S. Cruise Market

According to the January 1994 edition of The Cruise Industry: An Overview — a biannual report released by the Cruise Line International Association (CLIA), the cruise industry grew at the impressive average annual rate of 10 percent from 1980 - 1993, and from average annual passengers of 1.4 million to an estimated 4.5 million. The cruise industry, in other words, is experiencing a period of extended prosperity that seems to bode well for not only ship owner/operators, but for ship builders, repairers and suppliers as well.

"I think on an overall basis the industry is extremely healthy," said Jim Godsman, president of CLIA — and he expects the trend to continue into the near- and long-term future. "Demand opportunity is incredible," he said, noting that taking a cruise is a dream of 60 percent of people 25 and older with an income of $20,000 a year or more.

Some other facts about the industry's potential, according to the report: • In the next five years, CLIA's best estimate indicates a potential $50 billion opportunity in the cruise industry, • An estimated 40 million people have taken deep-water cruises of two or more days since 1970 — with 70 percent of that number generated in the past ten years, and • Almost 40 percent of those 40 million cruised in the past five years, and of those, the average number of cruises per person has been 2.4 — amounting to an average of one cruise every two years.

A major factor cited in the report as favoring further cruise industry growth is the high degree of satisfaction with cruises as a vacation option — with 92 percent of frequent cruisers and 94 percent of first-time cruisers sampled rating the cruise experience to be as good or better than other vacations, and more specific samples revealing that a majority of cruisers feel that cruising is a better vacation option with regard to relaxation, being pampered, sampling several geographical locations, value, activities, comfort, fun, entertainment, accommodations, and more. According to CLIA's figures, not only are there more first-time cruisers, but there is tremendous repeat business — and an untapped wellspring of new business that is slowly but surely being reached.

So the growth of the cruise industry is a foregone conclusion in the opinion of many. Obviously, more people taking cruises means increasing demand for new ships.

Ship Orders According to Mr. Godsman, the immense Majesty Cruise Line's Royal Majesty. 98 demand for cruises is what's fueling the recent spate of newbuilding orders. The information in the CLIA report published in January 1994 indicates 23 new ships were contracted or planned to join the North American cruise ship fleet between the report's publication and 1998. Several major new orders have been placed since the report's publication — including one for the largest cruise ship in the world, a 100,000-gt vessel, for Princess Cruises, closely following the order for the previous title-holder, a 95,000-gt vessel for Carnival Cruise Line being built at Fincantieri.

Also, CLIA reported that average capacity based on number of lower berths rose 8.1 percent annually from 1980 to 1993, and projected capacity increases of between 4.6 percent (contractual additions) and 5.3 percent (contractual and planned additions) for the next five years, based on information available at the time.

Ship additions in the coming years include four for Royal Caribbean Cruise Line; three for Celebrity Cruises; three for Silversea Cruises; four for Carnival, and two for the Carnival subsidiary Holland America Line; and at least three for Princess Cruises. Princess will reportedly option a second 100,000-gt ship, for a possible total of four newbuilds in the next few years. Carnival's newbuilding program, including that of its Holland America subsidiary, has swelled to $3 billion. Princess' parent company P&O Cruises says the Princess newbuilds will make it the second largest cruise line in the world. Celebrity will build its Century series of cruise vessels in partnership with Overseas Shipping Group (OSG) at Meyer Werft in Germany.

Also, Disney recently entered the cruise business when former Crystal Cruises President Arthur Rodney agreed to oversee Disney's upcoming cruise venture, preliminary plans for which call for one 2,400-passenger vessel to launch in 1998, and a second ship soon after. The report also indicated notable activity by Delta Queen Steamboat Co., which ordered a vessel for 1995 delivery, and which more recently acquired American Hawaii Cruises — reportedly the only major U.S.-flag cruise line — and plans to upgrade American Hawaii's two vessels at U.S. yards (Newport News Shipbuilding has been selected for contract management on the first vessel, SSIndependence. For the full story, see p. 7 of this issue).

Trends According to Mr. Godsman, the recent orders for large cruise ships don't necessarily indicate any kind of marketing or other trend toward bigger ships. "The largest ships tend to get a lot of ink, but the average number of berths is about Holland America's Westerdam and Rotterdam.

t Dolphin Cruise Line's Ocean Breeze. 1,350," he said.

To put that figure in perspective, Carnival's newbuilds Fascination and Imagination have 2,021 berths each and Holland America'sRyndam has 1,266, whereas Crystal Cruises 'Crystal Symphony has 960 and Diamond Cruise's projected Radisson Ruby will have 378. So if the industry is showing any kind of trend toward greater size, it seems to be only among two or three lines, and not very pervasive there.

However, Mr. Godsman acknowledged, "The larger ships are destinations in themselves." The two- to five-day cruises was the fastestgrowing cruise category, having experienced 373 percent growth since 1980. "The shorter cruise market directly appeals to younger people, many of whom take mini-vacations," Mr. Godsman said — and many of them take several of those mini-vacations a year. "Many of them are also first-time cruisers," Mr. Godsman noted, indicating opportunity for repeat business.

Proposed legislation to create a U.S. cruise industry by barteringU.S. port-to-U.S. port rights to foreign cruise lines in exchange for newbuilding contracts placed in U.S. yards may constitute the seeds of cruise ships being built in the U.S. — a "trend" that could prove extremely profitable for U.S. shipbuilders.

The greatest trend in the cruise industry may be is steady growth. "We don't see any upside limitation in terms of growth," Mr. Godsman said. "We expect eight million passengers by the turn of the century." CLIA is a cruise industry organization representing 95 percent of all North American-marketed berths.

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