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In the wake of a global financial crisis that forced cruise lines to cut fares, halt orders of new ships, and withdraw some vessels from foreign markets, the industry is poised for a return to growth in 2010.

At least, that’s what industry executives predicted this week at the 2010 Cruise Shipping Conference in Miami.

The cruise industry’s future was the main topic during the event’s opening session which kicked off with presentations from conference moderator Chris Hayman and Cruise Line International Association (CLIA) Chairman Richard Sasso.  

Hayman told a packed room of more than 1,000 people that the cruise industry is on its way to recovery in 2010 with strong growth in passenger bookings, particularly from Europe. “North America continues to be the dominant source of cruise passengers but the rest of the world is growing fast,” he said.

As proof, Hayman pointed to the record number of European passengers carried by cruise lines in 2009, which increased by 12% over the prior year compared to about 7% for the industry overall. That European growth was led by Germany and the United Kingdom who contributed 1.5 million and 1 million passengers respectively in 2009.

In addition, Hayman said the cruise industry is embarking on a trend towards more international deployment of ships after pulling back to North America and the Caribbean over the last two years in the face of the global financial crisis. This wider deployment will attract more international passengers and provide North Americans with a broader choice of attractive itineraries.

Richard Sasso, who is also President and CEO of MSC Cruises (USA), spoke about the steady evolution of cruising and the industry’s ability to navigate through several rough economic periods including during 2009. He said the industry’s resiliency was largely due to its innovative approach in building ships, designing onboard features and offering itineraries that meet the desires and expectations of its customers.

What was once a small business consisting of a few converted ocean liners is now a $100 billion global industry with more than 200 purpose-built cruise ships, Mr. Sasso said. During the past 30 years, he added, the industry has evolved from ocean liners to ocean playgrounds with amenities like balconies instead of port holes, 15,000 sq. ft. spas instead of 300 sq. ft. gyms, and rock climbing walls, ice skating rinks and surfing pools instead of shuffleboard.

“We’ve come a long way baby,” he quipped.

In terms of the industry’s future success, Sasso pointed to a number of key areas including the ability to keeping adding innovative new ships, provide value for money, deploy ships to a wider range of destinations and source passengers globally. And he predicted continued steady growth for the industry with passenger totals increasing to 14.3 million in 2010 versus 13.4 in 2009.

“So, where do we go?” asked Mr. Sasso. “If you look back and project forward, extraordinary things are about to happen.”

It’s only the first day of the Seatrade Cruise Shipping Conference in Miami and there’s already a central theme developing: cruising is going global in a big way.

What used to be a travel industry focused primarily on North Americans – and a small percentage of them at that — is apparently looking to expand into new markets and new destinations faster than you can say “up the gangplank.” And the results are going to be more ships, carrying a wider diversity of passengers, visiting a broader variety of ports in future than we have ever seen in the past.

The reason for this sea change of philosophy is quite simple. The rest of the world has always had a much lower rate of penetration in terms of the percentage of the population that has cruised versus North America. But the combination of declining cruise fares and increasing per capita incomes around the world is creating a compelling proposition for cruise lines to expand into new markets.

In addition, a growing number of government agencies around the world are beginning to realize the full economic impact of having cruise ships decant thousands of passengers into their major tourist destinations for a day or more. As a result, they are building new port facilities, launching aggressive marketing campaigns, and competing to get more cruise ship visits.

In fact, at both the morning and afternoon panel discussions at this annual gathering of cruise mavens, the main topics were sourcing new cruise passengers and developing new cruise markets for ships. And a number of international agencies made compelling presentations on why their markets were best primed for an expanded cruise ship presence, including Australia, Europe, Hong Kong and Africa.

As a result, the world’s major cruise lines have begun to base ships in new markets like Dubai, add more exotic ports to their itineraries like Vietnam and Taiwan, expand the range of itineraries in far-flung places like Australia and Hong Kong, and expand the cruising season in regions like Europe where several lines now operate year-long in the Mediterranean.  In particular, Med cruises in the winter appeal to a number of northern Europeans.

In addition, a number of major cruise lines are now going after passengers from non-North American markets such as Brazil, Chile, Eastern Europe, Mexico, Africa and Asia. In fact, Royal Caribbean’s Spanish subsidiary Pullman Tours recently announced it will be home porting a ship in Acapulco in compliance with Mexican cabotage laws. The move is seen as a joint effort by RCI and the Mexican authorities to further develop the cruising market in Mexico.

That’s not to say that Americans and Canadians are no longer a priority market. North America, which sourced some 13 million passengers in 2009, is still the world’s most lucrative cruise market. And we’ve barely scratched the surface in terms of its potential.

As one of the conference speakers from Royal Caribbean pointed out, nearly as many Americans visit Branson, Missouri every year as those who take cruises. So there is still lots of growth potential left for the North American market. However, there is even greater potential outside of North America because the percentage of the population in those markets who have taken a cruise has traditionally been much lower.

While the Miami Cruise Shipping conference is barely one day old, there’s no mistaking what the cruise industry officials here are trying to tell us:  the world of cruising is about to get more international, take us to many new destinations, and introduce us to a lot of exciting cultures.

So far, I like what I’m hearing.

(Commodore Dave is reporting from the Seatrade Cruise Shipping Conference in Miami.)

Much has been written about Royal Caribbean International’s decision to continue port calls at its private beach resort in Labadee, Haiti following the island’s devastating earthquake on January 12. In particular, some organizations have questioned the morality of passengers sipping margaritas on the beach in a private compound that suffered no damage while thousands of Haitians are suffering a mere 100 km away at the quake’s epi-centre in the country’s capital of Port-au-Prince.

There’s no question that the dramatically different images of pampered cruise ship passengers enjoying carefree fun on the beach versus hungry and homeless people wandering the devastated streets of Port-au-Prince are difficult to reconcile. In fact, on first glance, they can be downright offensive.  But there’s more to this story – a lot more — than what these images and some media reports may have let on.

So let’s put the issue of these Haitian port calls in perspective.

After much internal debate and discussion with officials from Haiti, executives at RCI decided to continue port calls in Labadee rather than diverting its ships elsewhere. They did so because they believed it was the most effective way they could help the country deal with this terrible tragedy now and in the future.

That decision was based on two primary factors: the amount of money pumped into the local economy every time a ship visits Labadee, and the potential for ships to bring food and other needed supplies ashore to help in the country’s relief efforts. For example, 40 pallets of rice, beans, powdered mile, water, and canned foods were delivered when the first RCI ship called on Labadee following the earthquake, and more has followed in subsequent visits. In addition, RCI is donating every cent of its revenue from the visits to humanitarian relief in Haiti, and more than 300 Haitians in the area derive part or all of their income from cruise ship visits.

So the facts show that RCI’s decision to continue calling at Labadee was the right one from both a humanitarian and economic perspective. But what about the public relations damage caused by those contrasting photos and stories, and the outrage felt by people who question the morality of vacationing so close to a disaster zone?

It may have helped RCI’s image if they had waited a few weeks after the earthquake before allowing their ships to call at Labadee. For one, it would have shown the cruise line was really struggling over its decision, that is was sensitive to the public’s perception of the situation in Haiti, and that it wanted to respond in a respectful fashion. And at the very least, it would have given them an opportunity to more fully flesh out their relief plan, determine the size of an appropriate corporate donation, and get out in front of what they should have known would be a public relations challenge.

As for the morality issue of pampered passengers having fun when so many people are suffering, it’s a legitimate concern that demonstrates our sense of humanity. As caring people, we don’t think it is right for “rich” holiday makers to be drinking margaritas on the beach while “poor” people are sleeping in tents just a few miles away.

However, while this is a noble sentiment, it’s also somewhat hypocritical. After all, would we still care if the happy holiday makers were celebrating on a beach in nearby Cuba or the Dominican Republic? And would this outcome be better for the people of Haiti, some of whom rely on tourism for their family income or are benefitting from RCI’s relief efforts?

The reality is that while we may have found the images of cruise ship passengers frolicking on the beach in Labadee somewhat troubling, I don’t believe we can fault the motives or actions of RCI. They’ve done their best to help in Haiti, despite a rather unfair public relations hit to their image. If we need someone to blame, perhaps we should be looking at those media outlets and special interest groups who were only too happy to profit from a misleading photo or headline.   

Now that we’re a few days into the New Year, I thought it was time to gaze into my crystal ball and predict some of the trends we’ll see in cruising during 2010:

Pricing: Cruise fares will continue to face downward pressure as consumer demand remains soft (particularly in the U.S.) and new ships come online. Look for another year of good cruise deals, particularly in the Caribbean, Mexico, Europe, and New England/Canada. However, this may be the final year for these kinds of rock-bottom prices if the recovery continues, employment expands, and stock markets continue to show strength.

Refurbishing old ships: After decades of growth, the number of American cruise passengers actually shrank in 2008 and 2009. As a result, almost all new ship building has come to a halt except for ships ordered before the recession began. Going forward, we are likely to see cruise lines investing in refurbishing their existing fleets rather than adding new tonnage – at least until passenger growth returns to more normal levels. While there are a number of new ships being delivered over the next 18 months, there won’t be much after that for several years.  So if you enjoy maiden voyages, now’s the time to sign up for one.

Fuel surcharges: When crude oil dipped below US$46 per barrel a year ago, most cruise lines dropped their fuel surcharges which at the time ranged between $8 to $15 per person, per day. However, most lines reserved the right to re-introduce fuel surcharges if oil prices hit $70. Since then, crude has gone up 76% and recently closed at $79.62 per barrel. If oil prices continue to rise, and some analysts predict it will, we can expect to see fuel surcharges again this year. Or at the very least, we may see some itineraries shortened to save fuel.
A la carte charges: In order to compensate for lower cruise fares, most cruise lines (except the ultra-luxury lines) have introduced extra fees or raised existing ones for almost everything including fitness classes, specialty restaurants, spa treatments, alcohol, special coffees, some types of room service, shore excursions, onboard tours and some ship activities. In fact, most cruise lines have revenue budgets for their main money-making departments (e.g. food & beverage and shore excursions) that they depend upon to help make the cruise profitable. As long as cruise fares remain soft, we can expect this trend to continue.

More port-intensive itineraries: We’ve seen a growing number of cruise lines (particularly the smaller, luxury lines) promoting longer stays in ports and extended land excursions. In fact, Azamara Cruises recently relaunched its entire brand around a more port-intensive experience, and Oceania has been offering longer port stays for some time. We can expect this trend to continue in 2010, especially for smaller ships that don’t count as much on shipboard revenue from casinos and shops that usually can’t operate when the ship is in port.

Loosening of dress codes: A number of cruise lines, including luxury lines like Regent, have introduced new dress codes that make formal wear optional. In addition, some cruise lines have reduced or eliminated formal dress evenings during cruises to tropical climates like French Polynesia. With airlines restricting baggage and a growing number of people eschewing formal wear, we can expect this trend towards looser dress codes to continue.

New & more exotic ports of call: A number of luxury and niche cruise lines have been adding new ports of call to their itineraries in far-flung places that have rarely been visited by cruise ship before. These lines are hoping to benefit from a growing number people who want to visit unusual and off-the-beaten track destinations. In fact, Crystal, Regent, Seabourn and Silversea have all added a number of new and unusual ports to their itineraries this year.

Fewer Alaska cruise options: Many cruise lines have cut back on the number of ships and sailings they will offer in Alaska during 2010. These reductions have been driven by a new cruise ship head tax introduced in Alaska, and by falling demand in the US for Alaska cruises. These cut backs could lead to higher pricing for Alaska cruises if demand returns to more reasonable levels.

Home porting: We saw an increase in the number of ships with home ports in the United States last year that people can drive to and that sail to closer-to-home destinations like the Caribbean, Mexico, Alaska, Bermuda, the Pacific Coast, and New England/Canada. This trend had been driven by economic factors, but this year concerns about terrorism and/or airport security hassles could make it even more pronounced.

More choice in nautical noshing: The trend towards giving passengers greater flexibility in their dining options that began several years ago with NCL will continue across the industry in 2010 as more ships move to “anytime dining” formats, expand their range of menu items, and add additional dining venues. In fact, almost all mainstream cruise lines will be offering some form of “anytime dining” option by the end of 2010.

That’s it for my forecast in 2010. If more than 75% turns out to be accurate, I may include picks for the stock market and horse races next year.

Last Saturday’s attack by pirates on a cruise ship sailing off the coast of Somalia made headlines around the world.

The unsuccessful assault on the 1,500-passenger MSC Melody was newsworthy for a number of reasons. First, it happened some two weeks after the American Captain of a container ship was dramatically rescued from pirates in the same region by the U.S. Navy.  And second, it involved an armed response by a cruise ship.

In several previous assaults on cruise ships in the region, the liners simply outran the pirates. This time, however, Israeli security personnel on the ship returned fire from the pirates. And in a bizarre Captain Jack Sparrow-like moment, some passengers joined the fracas by tossing tables and chairs overboard at their assailants who were trying to climb up ropes to board the ship. Apparently, the pirates fled before passengers could re-arm themselves with folded napkins and carved fruit.

But kidding aside, the publicity surrounding the assault and the growing ability of the pirates to attack ships further offshore, have raised questions about the safety of cruising and whether the Melody’s response was an appropriate way to handle the situation. So let’s look at the facts.

Over the past 10 years, there have been just a handful of attempted assaults by pirates on cruise ships like the Oceania and Seabourn Spirit. None have been successful, and all have occurred off the coast of Somalia near the Gulf of Aden. Since this region is not a popular cruising area, the risk of pirate attacks on cruise ships remains extremely low. In other words, stay away from the waters off the east coast of Africa and the only pirates you’ll see will be at Blackjack tables in the ship’s casino.

In addition, modern cruise ships are now equipped with state-of-art security features that include advanced radar, water cannons, loudspeakers that can emit eardrum shattering sounds, armed security personnel and engines that can generate reasonably high speeds. Furthermore, cruise ships are much harder to board from the open water because their first open deck is so much higher than on a container ship. So when it comes to safety, cruise ships are still one of the safest forms of travel in the world.

Of course, even the best safety measures in the world can’t overcome bad decisions like letting passengers get involved in fighting off a pirate attack. In my view, what happened on the MSC Melody was not only dumb, it was dangerous and could have resulted in passengers getting wounded or killed.  

The ship and its security personnel were more than capable of dealing with the pirates, and the Captain should have ensured that all passengers were confined to a safe area of the vessel for the duration of the assault. The fact that even some passengers aboard the Melody were involved in fending off pirates warrants a full review by the cruise line of its policies and this itinerary.

In any event, until NATO or one of the world’s major powers decide to forcefully bring piracy to an end off the coast of Somalia, cruise ships should simply avoid the region. But if ships insist on sailing in these pirate-infested waters, they should take stronger measures including the use of armed escort vessels. Doing less could leave passengers at risk, and cause some people to believe that the problem is much bigger than it actually is.

The cruise industry took swift action this week in response to U.S. and Canadian governments advising against non-essential travel to Mexico due to the outbreak of the swine flu.  

Starting this week, most major cruise lines cancelled calls at Mexican ports for at least the next two weeks, and some (led by Carnival) offered passengers the option of sailing to alternate ports of call on their cruise or a full credit towards a future cruise. In addition, the major lines calling at Mexican ports – which include Carnival, Celebrity, Princess, Holland America, NCL, and Royal Caribbean – promised to keep passengers updated about the situation and to avoid the area until they felt it was safe for passengers to go ashore.

In my view, the cruise industry has put the safety of passengers first by taking quick and decisive action. And they’ve done this despite already having some of the best health practices in the travel world such as hand-sanitizer dispensers throughout their ships, in-house doctors, and quarantine procedures for seriously ill passengers.

In contrast, there are still major airlines offering flights to and from Mexico City, although some like Air Canada have cancelled flights to vacation destinations in Mexico. And screening procedures on planes and in airports for people returning from Mexico are currently weak or non-existent. I know where I’d feel safer.

But while the cruise industry is putting the interests of travelers first, it hasn’t come without a cost. According to a recent report from UBS Securities, the two cruise lines with the most exposure to Mexico – Carnival and Royal Caribbean – could have as much as 17% of their ship deployments impacted by the swine flu issue. In financial terms, the investment bank estimates that a prolonged Mexican outbreak of swine flu could result in a 1% decline in full-year yields for both cruise lines.

Despite the hit to their bottom lines, most of the major cruise lines are doing the right thing from both a public relations and customer service perspective. And their promise to keep an eye on future developments and update their policies accordingly can only be seen as a source of comfort for anyone already booked on or contemplating a cruise to ports in both the east and west coasts of Mexico.

Ironically, just like after 9/11 and SARS, the swine flu issue could be a boon to travelers who don’t panic and keep an eye on developments. If history repeats itself, there could soon be a raft of fantastic deals on cruises to the Mexican Riviera even when the health advisory is lifted and things return to normal in Mexico. So savvy travelers would be well advised to keep an eye on these itineraries as the health situation changes.

But at the end of the day, my guess is that the cruise industry overall and the Mexican cruise itineraries in particular will be stronger in future as a result of the consumer-friendly policies implemented this week by most major cruise lines. While they may be taking some short-term pain, theyare adding to their long-term bank of trust and goodwill that can only drive more cruise sales in future.

There are lots of other industries out there that could learn from this example.

When it comes to cruising, I guess the Beatles were right – there really are eight days a week.  At least, that’s the impression some cruise lines are giving when they exaggerate the length of a vacation at sea.

What I’m referring to is the practice of including the check-in and check-out dates as full days in calculating the length of a cruise. For example, if you sail on a one-week cruise from one Saturday to the next, is that a seven or eight-day cruise? 

While a one-week cruise provides seven nights of accommodation, your holiday actually spans eight days. That’s because you check in during the afternoon of Day 1, and depart on the morning of Day 8. But while technically correct, is it fair to promote a one-week voyage as an eight-day cruise?

In my opinion it’s not only unfair, it’s misleading.

After all, passengers can’t board their ship until well after noon on the first day of their cruise, and then they must get off the vessel before 10:00 am on the last day. So while a one-week cruise may span eight days, passengers are actually getting just seven full days of vacation time or less on the ship. The so-called “eighth” day is spent getting to and from the pier. The same principle applies to any length of voyage, whether it’s one or 101 nights – getting to and from the ship is not part of the cruise vacation.

If cruise lines could actually provide passengers with an eight-day voyage each week, there would have to 35 days in a month, and something like 420 days in a calendar year. Unless the cruise lines are using a different type of calendar than the rest of us, eight-day weeks are just not possible.

So why do some cruise lines insist on exaggerating the length of voyages in their brochures and web sites? And what should you do about it?

I suspect one reason for this deception is that it’s an easy way to make some cruises look like an even better deal than they already are. For example, Costa recently promoted a series of week-long cruises in the Med starting at only $549 or what they hailed as costing just over $68 per day. But that per diem is misleading because it’s based on an eight- day week instead of seven.

Another reason some cruise lines exaggerate the length of a cruise is that it makes direct comparisons with competitors more confusing and time-consuming. For example, if I want to compare that 15-day South American cruise with a comparably priced14-day voyage, I may have to look at both itineraries and actually count the number of nights they offer to ensure I’m comparing apples to apples. Busy people might just assume the 15-day voyage is the better value when they could both be the same length –14 nights.

As a result, the best way to determine the length of a cruise is to look at the number of nights it offers rather than days. It’s the same principle used in the hotel industry – they calculate the length of your stay based on nights, not days.

Of course, this task would be a lot easier if the cruise industry adopted a common standard and made it mandatory for members to list the length of voyages using the same criteria. Until that happens, however, the difference between some cruises will continue to be night and day.

Smart cruise lines reward passengers who book early by giving them a price protection guarantee. The way the protection works is that if cruise fares subsequently go down after passengers have booked their cruise, the lower price is passed along to those who booked at the higher rate.

It’s a smart way of encouraging people to make their cruise bookings early, which works well for both passengers and the cruise line. By booking early, passengers get the best choice of cabin categories and sailing dates, and the cruise line gets advance deposit money in the bank, and more time to plan the yield management of each sailing. And a bond of trust and loyalty is created and cultivated between passenger and cruise line.

In good times, price protection is a much easier benefit to provide because most ships sell a lot of cabins well in advance of departure and last-minute discounting isn’t as necessary. But when times get tough, cruise berths become more difficult to sell and there’s a greater need for wide-ranging price reductions as sailing dates get closer. In fact, this is exactly what’s been happening according to a recent report on the cruise industry from UBS Securities.

Giving up revenue by reducing cruise fares for passengers already booked at higher rates is an expensive policy, especially when prices drop by significant amounts. Let me give you a personal example. Last November I booked my family of 4 on an 11-day Mediterranean cruise this summer aboard the Celebrity Solstice. Since booking, we’ve received two price reductions totaling $580 per person, and 4 cabin category upgrades.  

But this kind of price protection is not necessarily automatic. In some cases, it’s up to passenger to keep any eye on cruise fares and advise the cruise line or their travel agent that fares on their cruise have been reduced and that they want a reduction. This is much easier to negotiate before final payment has been made as the passenger can simply cancel his/her cruise, get a 100% refund, and then book the same cruise at the lower rate. However, after final payment is made and cancellation penalties kick in, the passenger is at the mercy of the cruise line and its policies.

That’s why it’s important to understand what a cruise line’s price protection policy is before booking a voyage 90 days or more in advance of departure (the typical period at which final payment is due and cancellation fees begin kicking in).  A number of cruise lines, particularly the ultra-deluxe brands like Crystal, Silversea, Regent and Seabourn, provide the highest level of price protection for their clients.

While some of the premium and economy brands are holding the line, others have instituted policies that greatly restrict the level of price protection available to their passengers. For example, Carnival offers price protection as part of a program that only applies to a limited number of sailings, and I’ve heard from some people who have been adversely impacted by it.

At the end of the day, it’s important to realize that you have full price protection on most cruises until you make final payment and their cancellation policies kick in. But if you want a greater level of protection for that final 90 day period when many discounts are offered, you have two choices.

The first is to always book your voyage with a cruise line that offers full price protection right up until the day of embarkation. If the cruise line values your patronage and wants your continued loyalty, they should give it gladly. The second choice is to wait until the last minute, take your chances, and grab the best available deal. Smart cruise lines will do their best to ensure you make the first choice.  

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