AP Features, March 15th, 2007
Cruise lines must target new customers by including specific groups such as minorities, children and Generation X in marketing efforts as they try to cater to the broadest base of travelers, industry executives said Tuesday.
Executives of six cruise lines discussed topics important to the industry in front of a standing-room only collection of representatives from ports, shipyards, suppliers, travel agents and cruise lines at the annual Seatrade Cruise Shipping Convention.
Richard Fain, chairman and CEO of Royal Caribbean Cruises, said meeting the changing demographics of a cruise industry that's getting younger and more diverse is one of its main challenges.
"You've seen large shifts in our industry ... to an industry which is more and more focused on being able to satisfy not only the American public or whatever public we're talking about in general terms, but also demographically targeting specific groups," Fain said.
Citing an industry statistic that shows only about 17 percent of Americans have taken a cruise vacation, Fain said directly marketing to groups such as blacks, Hispanics, the physically disabled and multi-generation travelers _ also known as families with children _ would add to cruise vacation demand.
"Children were (once) seen as entities that distracted from the enjoyment of the bulk of our guests... Today we devote whole sections of the ships to meet their needs," he said.
Stein Kruse, president and CEO of Holland America Line, pointed to the increasing influence and affluence of 78 million baby boomers who are approaching retirement and will have more time and money to spend on vacations.
"I think we've got to strap ourselves in and look at what's coming ahead of us," Kruse said. "The wave of the baby boomer and what that means for our industry is just absolutely fascinating."
But Bob Dickinson, president and CEO of Carnival Cruise Lines, stressed the need to appeal to younger travelers. Statistics show that Generation X, from the late 20s in age to the early 40s, is the group that reports it is most interested in taking a cruise vacation, said Daniel Hanrahan, chairman of the Cruise Lines International Association's marketing committee.
"If you can get people when they're younger, it's an annuity," Dickinson said. "The purchase cycle of somebody could be 50, 60 or 70 years versus a boomer who on average, the purchase cycle is perhaps 20 years, 25 years."
About 12.1 million passengers took cruises to about 500 ports in 2006, and CLIA estimates that number will increase by 500,000 this year. The CLIA cruise lines need the demand because they have invested in 30 new ships at a cost of $15.2 billion for delivery through 2010, adding 74,000 berths and new amenities such as surfing pools and bowling alleys in the process, said Hanrahan.
"My bet is that we haven't seen the last of the ships being ordered," said Hanrahan, who also is president of Celebrity Cruises.
The executives agreed on the importance for ports to improve their infrastructure to deal with bigger ships and more passengers. They also stressed building on the success of the European market, which saw significant growth and solid net revenue yields last year amid a strong euro and high demand. Royal Caribbean announced last week its largest ever deployment in Europe with seven ships visiting in 2008.
"Now you're going to see this movement to the Old World. Columbus came here in 1492 and now we're all going back, looking for the gold that's there," said Rick Sasso, president and CEO of MSC Cruises (USA).
But in the Caribbean, the story is different. There has been a general softness in Caribbean demand in the last year, and that was negatively affecting net revenue yields. Yields are a key profitability gauge that measure net income earned from passengers per day from cruise tickets and onboard sales.
Colin Veitch, president and CEO of Norwegian Cruise Line, said the troubles in the Caribbean can't be blamed on fundamental problems with the industry, such as market saturation or consumer boredom. Rather, it's a cyclical problem based on problems in the U.S. economy, specifically the housing market and lending issues, that have cut into consumer travel spending.
"It's a temporary softness and we'll come out of it again," Veitch said.
