Preview 2012: Cruise

By Donna Tunney

Emerging from a challenging year that left cruise executives with furrowed brows, the cruise lines have already taken steps to shore up and protect their 2012 business.

Still, they can only take action based on what's obvious at the moment.

They know, for example, that they don't want to be forced to undertake costly redeployments of ships away from areas where geopolitical unrest spooks potential passengers, as it did in the Eastern Mediterranean and North Africa regions during the Arab Spring in 2011.

For next year, some of the major lines have reduced their capacity in that part of the world in favor of areas such as the Western Med, the Baltics and other cruising grounds in Northern Europe.

Royal Caribbean Cruises Ltd., for example, cut its brands' deployments in the Eastern Med by 17%.

And cruise executives know that the stubbornly slow, at times spotty, economic recovery will draw down at least some portion of the traveling public's discretionary spending. Agents already have seen some lines' early responses to that in the form of widespread and deep early-booking discounts for 2012 among the upmarket and luxury segments.

For most, this is a new strategy to build a more solid foundation of advance bookings, coupled with the hope that they won't have to discount again close to departure dates.

The deals include incentives such as 50% or higher discounts on published fares, free airfare, thousands in bonus savings per cabin and hefty onboard spending credits.

Ross Spalding, president of Princeton, N.J.-based Crown Cruise Vacations and its luxury unit, Crown Cruise Collection, recently observed: "It's tight out there. People are being very careful with their money, and if the deal isn't good enough, they'll look elsewhere." Moreover, he noted, the deals are not just for early 2012 or the summer season but well into next fall, too.

Azamara Club Cruises, for example, is trying to entice prospective passengers with 50% off published rates, air credits and prebooked shore excursions.

A 'recalibration of thinking'

Azamara President Larry Pimentel has said that troubling economic data, coupled with lower home sales and the decline in home values, led to a new consumer sentiment: a "recalibration of thinking."

The uncertainty in global markets, the ongoing sovereign debt crisis in Europe and the potential for more civil unrest in certain destinations have led even the most senior cruise executives to avoid making strong predictions about business expectations for 2012.

Carnival Corp., in its Q4 report to analysts last week, said it had very little inventory left to sell on cruises departing in Q1 2012 but "significant" inventory in later quarters. Chairman Micky Arison predicted the industry would see a strong Wave season based on booking patterns of the last six weeks.

Richard Fain, chairman and CEO of Royal Caribbean Cruises Ltd., parent of Royal Caribbean International, Celebrity Cruises and Azamara, said late this year that the volatility in the global markets is causing "angst for us and everybody else."

In their Q3 conference call with analysts this fall, Fain and other RCCL executives flatly refused to provide any specific booking or yield predictions for 2012.

Overall, though, for the major lines at least, revenues have increased and yields have held steady or improved slightly, all signs that the cruise vacation market can hold its own even in a tough economy.

Other bright spots are also easing cruise executives' concerns somewhat, among them the 2012 Alaska cruise season. Coming off of a very successful 2011 season, Arison recently declared, "We don't see any reason why it wouldn't be as good in 2012."

Retailer Bill Wodarski agreed. The owner of Above & Beyond Travel in Austin, Texas, recently said he's been selling a lot of Alaska cruises for summer 2012. But while it's one of his most-requested destinations, he also said he's spending much more time comparison shopping for budget-conscious clients.

And several agents agreed that many clients are holding out for a bargain on advance registrations. Edith Salter of Tampa-based Bowen Travel Service said, "My clients continue to be very concerned about the economy. They're not spending as much, not getting the oceanview cabin. But they're still going."

Renovations and newbuilds

Other encouraging signs for 2012 can be seen in the ambitious renovation projects that both Royal Caribbean International and Carnival Cruise Lines are undertaking.

Royal Caribbean embarked on the Royal Advantage, a $300 million project to bring Oasis-class innovations to more of the line's fleet.

The revitalization plan, which began with upgrades to the Radiance of the Seas last spring and the Splendour of the Seas in November, will extend to the Rhapsody of the Seas next March, the Grandeur of the Seas in May and the Serenade of the Seas in November.

The revamps will continue in 2013 and 2014, when revitalizations will take place aboard seven more of the line's vessels.

Carnival in 2012 will continue to expand its Fun Ship 2.0 project, a $500 million program to enhance 16 ships. Intended to "transform the Carnival vacation experience" through partnerships and new branded spaces, the line partnered with several big names for onboard branding.

New features will include Guy's Burger Joint (a restaurant created by Food Network star Guy Fieri), RedFrog Rum Bar, BlueIguana Tequila Bar, BlueIguana Cantina, Alchemy Bar and EA Sports Bar. Also, comedian George Lopez will oversee the line's comedy presentations.

The enhancements have been added to the Carnival Liberty and in 2012 will make their debut on the Carnival Conquest. They also will appear on the newbuild Carnival Breeze when it enters service in June and on other ships during the next three years.

Newbuilds typically generate a lot of consumer buzz about the cruise industry, and 2012 will be no exception.

In addition to the 3,600-passenger Carnival Breeze, agents will be able to sell several other new vessels next year.

Disney Cruise Line will debut the 4,000-passenger Disney Fantasy; Oceania Cruises will launch the 1,250-passenger Riviera; Costa Cruises will christen its 3,800-passenger Fascinosa; Celebrity Cruises will introduce the 3,000-passenger Celebrity Reflection; and MSC Cruises will welcome the 4,363-passenger Divina.