Cruise lines face vaccination and sustainability battles but “people are splurging again”
ATTENDING my first Cruiseworld conference in Miami, organised by TravelWeekly, I am struck by three things.
One, the cruise industry in the US is massive, and Asia is but a drop in the ocean, to put it in perspective. And while some distribution might have shifted online, it is largely an offline industry powered by travel advisors – more than 800 of whom showed up in force to find out how they can be part of the great cruise comeback, a term used by Frank Del Rio, CEO of Norwegian Cruise Line.
Two, this is an industry of fighters – the conference opened with a speaker declaring, “We did not wait for the light at the end of the tunnel, we went to light up the b…. ourselves”.
And three, this is an industry that’s not only preparing for the great comeback but also for the future because long after Covid, it faces more systemic challenges such as climate change and generational shifts in consumer behaviour, which will impact distribution and aspirations.
That the industry is back is without doubt. There was lots of talk about strong bookings from 2022 onwards with Regent Seven Seas round-the-world 2024 cruise selling out in two and half hours. Said Del Rio, “We see demand for second half of 2022 at record prices.”
And it is fighting back. Norwegian Cruise Line is in a legal battle with the state of Florida (a big market for cruising) which has banned businesses from denying entry to unvaccinated customers. Declaring his belief that “all vaccinated cruises are for the protection and safety of our employees and guests”, Del Rio said, “If we have to continue the legal fight, we will. This is not a slogan. This is what we do.
“It is beyond my comprehension how the leadership in this country has failed to protect us and if they won’t do it, we will,” he told the audience of travel advisors at Cruiseworld.
The fact is, he said, bookings are higher for the second half of 2022 and 2023 than they were pre-pandemic and “it is proof that all-vaccinated is a competitive advantage”.
“In this environment, the vast majority of our target market wants to be with vaccinated people.”
And Alaska is top of the charts as far as cruise companies are concerned. Of its 28 ships, seven are based in Alaska – “great yields, great satisfaction scores, every newbie should go to Alaska, then they are cruisers for life”, said Del Rio.
The challenge the cruise industry faces as it returns is what is facing every sector in the US – the lack of staff. The hospitality industry is said to be the net loser in The Great Resignation and during my stays in four hotels in New York, Miami and Fort Lauderdale, the lack of services and staff was evident, with almost every request met with the explanation, “Covid”, whether true or not.
Del Rio does not believe that cruises are in the same boat as hotels and casinos though when it comes to labour shortage, although he admits that it has crewing issues in Hawaii, with the rule that 75% of crew have to be American, and “so we are fighting for the same labour market”.
“To start a ship from scratch is hard, it takes time to put Humpty Dumpty back again.”
Itineraries, followed by balcony cabins, strongest driver of yields
The good news is, onboard revenues are higher than ever. “Pre-pandemic, everyone said they want to buy experiences, not stuff. But they are buying stuff again, jewellery is a big item onboard. People are also eating better, our specialty restaurants are doing well.
“People are splurging again.”
The splurging also extends to people buying premium inventory. “I wished every stateroom had a balcony. Balcony cabins are the second biggest driver of yields, followed by itineraries. People want outdoor perimeters.”
Del Rio is adamant that the “great cruise comeback” should not be undermined by price cutting. “We are doing this for the longterm. It’s a slippery slope to drop prices – those who dropped prices in 2008 have not returned to the same levels. We will do what we can to fill, without discounting.”
Del Rio acknowledges there was a surge in direct bookings during the pandemic. “Many agents left the industry, but those that are still around, are selling more for us. And my bet is once they see the buzz, those who left will come back too. They will answer the bell when the bell needs to be answered.”
Addressing the climate change challenge, Del Rio said, “The cruise industry is being challenged by ports – from Venice to Dubrovnik. We have to balance between sea days and ports of call, between star ports and boutique destinations. Itineraries are the strongest driver of yields and longer more exotic cruises are in demand.”
Taking up the climate change challenge is Arnold Donald, CEO of Carnival Cruise Line, wearing his hat as chairman of World Travel & Tourism Council (WTTC). Putting things into perspective, he said the cruise industry has a total of 300 ships, compared to the 3,500 in the maritime industry. “But we have to do our part, this is our priority as a company with nine brands. We peaked in 2011 in emissions and we are lower today, even in the higher category.”
Carnival announced 2030 sustainability goals in June this year, which includes achieving a 40% reduction in carbon rate per available lower berth day by 2030, relative to a 2008 baseline and achieving net carbon neutral operations by 2050.
“When it comes to protecting the ocean, of course, we will. It is in our own self interest to do so,” said Donald.
Currently, recovery is the priority. “While it’s coming back, bumps and potholes will come up,” he warned.
He cited France and Saudi Arabia as two countries that are investing a lot in tourism – the former to rebuild its number one position and the latter to build up a new destination.
On requiring vaccinations for travel, Donald said that “protocols were all over the place”. He said it was important for governments to “harmonise” protocols and recognise individuals, and not by countries. “We are moving in the right direction but we have to stay flexible and watch the protocols.”