Page 21: of Maritime Reporter Magazine (October 1988)

'Consolidation And Expansion'

Will Be Theme

Of Seatrade's Cruise Shipping '89

By Christopher Hayman* *Editor's Note: Mr. Hayman is the publisher of Seatrade Week, which is published weekly by Seatrade

North America Inc.

The 500 registered delegates at

Seatrade's Cruise Shipping Confer- ence and Exhibition, held in Miami in February of this year, were asked to give their opinions on how they expected the cruise industry to de- velop over the next 12-month peri- od. The opinion sample, which was taken by Market Scope, asked a series of questions about passenger volumes and demand, profitability and the prospects for mergers and consolidation in the industry. To the question "Do you expect there to be more mergers between cruise lines?" The survey respondees, more than 30 percent of whom were cruise line executives, gave an over- whelming "yes" answer.

Despite this near unanimity, few observers would have expected this prediction to have been fulfilled as quickly as turned out to be the case.

In the month of August, two major deals were announced which will make a significant realignment of the industry. In a $210-million deal,

Princess Cruises, the Los Angeles- based subsidiary of the Los Angeles

P & O Group, acquired Sitmar

Cruises, its four-ship fleet and three large newbuildings now under con- struction in France and Italy. Top cruise industry analysts such as

Country NatWest's Dan White, who forecasts further consolidation, believes that price makes this a good deal for Princess. The newbuildings, the 1,470-berth Fair Majesty due for delivery next year from Chantiers de l'Atlantique, and two 1,600-berth ships building for delivery in 1990 and 1991 from Fincantiere in

Trieste, were contracted at favor- able prices and exchange rates.

Princess, which plans to hold on to as many Sitmar employees as possi- ble, says that the Sitmar deal does not affect plans to build a Royal

Princess II which is now in discus- sion with several yards.

The second major consolidation move in August emerged in stages, starting with the news that Gotaas-

Larsen had sold its cruise interests, consisting of a 30.72 percent stake in

Royal Caribbean Cruise Lines and a 51 percent stake in Admiral Cruises for $260 million to Carnival Cruise

Lines. Before the industry had had a chance to digest this information, it became known that Carnival had also mopped up the 30 percent hold- ing of I.M. Skaugen in RCCL and the 7 percent of Admiral owned by

Johnson Line and EFFOA. This leaves one of the original partners in

RCCL, Norwegian owner Anders

Wilhelmsen, out on its own. At press time there was some indication that the company was seeking to form a consortium to buy out the Carnival interest, but it remains to be seen how this situation will ultimately be resolved,

Whatever the outcome, there is no doubting the strength of Carni- val, or the determination of the company to move beyond the "con- temporary" concept. President

Mickey Arison has made it clear that the RCCL and Admiral deals do not preempt the company's plans for its "Tiffany" project, which will take it into the luxury end of the market and could involve the con- struction of three 45,000-grt new- buildings in Sweden.

This move towards further ex- pansion of capacity is not confined to Princess and Carnival by any means. Holland America, which al- ready expanded its fleet once this year through acquisition of existing capacity, is widely expected to con- firm orders for newbuildings in the near future. Kloster Cruise takes delivery of two newbuildings this year, the Seaward for NCL and the

Royal Viking Sun for RVL in De- cember. Other notable additions to the fleet this year include the Spirit for Windstar. Royal Cruise Line ex- panded its fleet earlier in the year with the Crown Odyssey, American

Star Lines added the Betsy Ross, and Clipper Cruise took delivery of the Yorktown Clipper. The delivery attracting the most attention this year was the Sovereign of the Seas for RCCL.

With an estimated 11 more ships to come in 1990 and 1991, is this rate of increase in capacity exces- sive? Certainly not, if demand keeps increasing at its present rate. Kirk

Lanterman, president of Holland

America and the current chairman of Cruise Lines International Asso- ciation, was in no doubt about this when speaking at the Seatrade con- ference this year. "While capacity will grow by an average of 7.2 per- cent per year, passenger growth is exceeding 10 percent per year." he said. "If anything, the cruise indus- try today is scrambling to stay ahead of the game. Our biggest problem in the 1990s may be an

UNDERsupply of quality and cost- efficient capacity," he told dele- gates.

Along with this expansion of ca- pacity and optimism about demand, there are some entrepreneurs who believe that the time is right for the mega-cruise vessel. For some years,

Knut Kloster has been the princi- pal advocate of this type of vessel in his attempt to find finance for the

Phoenix project. This year he was joined by the Indian-born tanker magnate Ravi Tikkoo. His con- cept of the "Ultimate Dream" may not be as big as the Phoenix in terms of capacity but there are some simi- larities in the concept. It remains to be seen whether the viability of the mega-ship idea will be tested in practice.

The issues of consolidation and the expansion of demand, the role of the mega-vessel, etc., will be on the agenda for the next Seatrade Cruise

Shipping Conference and Exhibi- tion, which is scheduled to take place at the Miami Intercontinental from February 28 to March 4, 1989.

A panel of experts, including Pricess president Tim Harris, Holland

America's Kirk Lanterman, Car- nival's Bob Dickinson and Royal

Cruise Line chairman Pericles

Panagopoulos for the cruise lines, and major travel agents like Bob

Seckman, managing director of travel agency services of the Ameri- can Automobile Association, will give their views on these issues and the future direction of the cruise industry.

Even though the forecasts suggest an optimistic picture so far as de- mand is concerned, if the ships are to continue sailing full, then more imagination needs to be put into the range of onboard facilities available for cruise passengers and in the iti- neraries and destinations on offer.

There is no doubt that lines both big and small are spending much more time on identifying new and attrac- tive ports of call, both in the tradi- tional cruise areas and further afield. Thus, while there is still a great deal of opportunity for the well-established products such as the Caribbean from Miami, Mexico,

Alaska and the Mediterranean, new areas such as the Pacific and the Far

East are attracting considerable at- tention. Regency Cruises chairman

William Schanz and Exploration

Cruise Lines president Bob Giers- dorf are two of the speakers looking at this subject in the conference.

The 1989 Seatrade cruise confer- ence will be expanded by an extra day to include two seminar sessions running in parallel for the benefit of delegates. One of these, comprising cruise line operations executives and technical experts, will look at cruise ship technology and vessel operations. The other, including travel agents, marketing experts and tour operators, will look at the distribution systems for the cruise product. Other new conference top- ics will include U.S.-flag cruise oper- ations by James Kurtz and John

Broughan of Aloa Pacific, the con- cept of cargo-carrying cruise vessels by James De Chant from Ivaran

Lines, the pioneers of this new con- cept, and the views of a major Euro- pean ferry operator,Thomas Le- pisto, president of Sally Lines, Fin- land, on what the cruise and ferry operators should be learning from one another. Keynote luncheon speakers will be Miami port director

Carmen Lunetta and Adm. Joel

Sipes of the U.S. Coast Guard.

Each year, the Seatrade confer- ence is accompanied by an exhibi- tion of products and services, desti- nations and onboard facilities, avail- able to the cruise industry. Al- though the space has been doubled for 1989, the show is already 80 per- cent sold out.

The tremendous growth in the cruise industry over the past five years shows no sign of having been affected by the stock market col- lapse of last October. Most experts agree that the industry has moved into a maturing phase that will mean more consolidation of lines, more sophistication in marketing and product definition, and, per- haps, an influx of participation from nontraditional areas such as the air- lines and the hotel industry. Above all, this increasing sophistication creates a tremendous challenge to the shipbuilders, designers and nav- al architects, marine engineers and other technical suppliers, to in- crease comfort and convenience for passengers while maintaining opera- tional efficiency. That challenge is being met. The latest generation of cruise vessels represents one of the most exciting areas of marine tech- nical development today.

For further information, contact:

Sharon Day, the Seatrade Organi- zation, Fairfax House, Causton

Road, Colchester COl 1RJ, United

Kingdom; telephone: (0206) 45121; telex: 98517 DISOP G; telefax: (0206) 45190; or Mike Kazakoflf,

Seatrade North America Inc., Suite 1805, 40 Rector Street, New York,

N.Y. 10006; telephone: (212) 393- 1000; telex: 233629 SEA UR; and telefax: (212) 608-5874.

Wartsila Marine Industries of Finland, one of the world's leadingbuilders of cruise ships, was just one of the exhibitors atSeatrade's Cruise Shipping '88. 23 Maritime Reporter/Engineering News