Cruise deals rock the boat

The cruise ship season in Sydney is in full swing and it's booming, with ships forced to anchor in the middle of Sydney Harbour due to a lack of dock space.

But despite the onboard party atmosphere and the postcard image of luxury liner passengers waving to ferry commuters from ship rails, the world's cruise industry is sailing through rough financial seas as the global downturn bites into tourism.

Cruise operators are desperately trying to attract passengers for 2009, slashing prices, offering last-minute deals, two-for-one pricing, shorter cruises, family packages in which children sail free, and home-port cruises that avoid the cost of an airfare to reach an exotic departure port.

Norwegian Cruise Line last month announced "BookSafe," which will give passengers a full cash reimbursement if they cancel their cruise because of job loss. U.S. cruise retailers CruiseOne and Cruises Inc. have introduced "CruiseAssurance" to cover passengers in the event of them being laid off.

"What's changed is that cruise lines have offered ferociously discounted fares," Carolyn Spencer-Brown, editor-in-chief of the British website Cruise Critic, said in an interview.

"2009 is looking like the biggest buyer's market ever, with the absolute cheapest fares seen in a long, long time," she said.

So far, bookings for 2009 are holding, but Cruise Critic warns some cruise operators may gain 90-per-cent occupancy rates this year, but still lose money due to cheaper pricing and conservative spending by passengers.

"There's been no significant downturn for big-ship cruise lines. They're dropping prices as low as necessary to fill ships and then are hoping that passengers, in the holiday spirit, will feel moved to spend on onboard extras," Spencer-Brown said.

Royal Caribbean Cruises Ltd., the world's second-largest cruise operator, has already reported a profit collapse in the fourth quarter of 2008 and expects 2009 revenue to be weak as it offers discounts to lure passengers.

In January, Royal Caribbean reported fourth-quarter profit of $1.5 million, compared with $70.8 million in the same quarter the year before.

The Miami-based company stopped paying its dividend last November as it looked to save cash, following a similar move by its main rival, Carnival Corp. & Plc.

Carnival Corp., the world's largest cruise-ship operator, managed to beat expectations in posting a 3.6-per-cent rise in net income in the fourth quarter of 2008, based on higher room rates, cost cutting and offsetting fuel costs.

The company said its net income in the quarter was $371 million, compared with $358 million a year earlier. But the fourth-quarter profit included $31 million on the sale of the Queen Elizabeth 2 and a rapid decline in fuel costs.

Carnival says 2009 is going to be a tough year. It will report its first-quarter results this month.

The cruise industry has seen unprecedented growth in recent decades thanks to soaring popularity in North America and Europe, the two main markets, and emerging cruise ship markets in Asia and Latin America.

Since 1980 the average annualized growth of North America has been 7.4 per cent and annual passenger volume has risen 79 per cent in the past eight years. An estimated 13.2 million people took a North American cruise in 2008.

The Cruise Lines International Association, North America's largest cruise-industry body, estimates 2009 will see only a five-per-cent rise in passengers, to about 13.35 million.

"The cruise industry is optimistic that it will weather the current economic conditions and continue to grow," said Robert Sharak, the association's executive vice-president for marketing and distribution.

"Overall bookings are holding. The primary trend that cruise lines are seeing is a late booking pattern. Consumers are waiting until the last minute to decide to travel," Sharak said.

Cheaper prices and incentives have seen some cruise operators post record bookings so far in 2009, he said.

Carnival recorded the highest weekly bookings in its history in the first week of March.


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