Cruise Shipping Miami: Executive Panel Explores China and Cuba

March 19, 2015 By: Susan Young

More than 11,000 cruise industry, shipyard, trade, operations and product development executives are in Miami Beach this week for Cruise Shipping Miami. The conference continues today and Friday.

Agents can read about the Cruise Lines International Association (CLIA) update, given by Adam Goldstein, CLIA Global, here.

In addition, Richard Quest, international correspondent for CNN, also moderated a “State of the Industry” panel featuring the world's top four cruise company leaders. Participating were Pierfrancesco Vago, MSC Cruises; Arnold Donald, CEO, Carnival Corporation; Frank Del Rio, president and CEO, Norwegian Cruise Line Holdings; and Richard Fain, chairman and CEO, Royal Caribbean Cruises Ltd.

Executive Panel Discussion

China, Cuba and the pursuit of new cruisers were the hot topics. Many attendees described the discussion as more freewheeling, to-the-point and spirited than in past years.

“We’re about to grips with this industry,” Quest told the audience. “And if you think this is your regular CEO panel, you’re wrong. Nothing is off limits.” He asked the leaders, “Is it time to do battle? Welcome to my playground.”

In talking about growth in the global marketplace, Europe is a huge market with 700 million people, said Vago, who also said MSC Cruises has posted double-digit growth over the last few years. But he also said there are only 6.4 million cruise passengers who sail annually from Europe, and certainly much more is needed to tap into Europe's huge marketplace.

“It’s still a United States-driven industry, but we’re global now,” said Del Rio, adding that it’s no longer any one segment of the global cruise market that will drive growth. The industry must be firing on all cylinders everywhere.

Still, he acknowledged: “The U.S. is strong, we know about the economic recovery here. We’re seeing more disposable income, oil prices are going down…unemployment is down to normal levels.” And, for his brands, Europe is also strong.

Fain said the global market is growing but “really breaking out and getting a whole new level of customer to come in is something we haven’t really found the formula for, and I think that’s a big challenge for us.”

Capacity growth is limited by shipyard capacity for building but demand growth is another story, from Fain’s perspective: “We need to find a way to break out of this paradigm and get a whole new level of customer.”

“Value is so much better than any other competitive vacation,” said Fain, citing higher level of satisfaction and the pricing that's lower than other vacation choices for similar features. If the industry is successful at getting more cruisers, that can help pricing.

Donald said his Carnival Corp. grew 25 to 30 percent year-over-year in demand and it expects another 25 percent growth in demand this year. But a lot of that didn’t come from adding a lot of new ships, he noted, but rather the company’s investment in enhanced product offerings and ensuring passengers get on the “right experience” with the right brand for their type of vacation style.

“That’s all we have to do – figure out what they want and give it to them and then they’ll buy it,” said Donald. That builds demand growth and can increase ticket prices.

Del Rio says one of the knocks on the industry as a whole is that it hasn’t achieved the ROI (return on investment) analysts expect, while Fain said “we’ve been in an inflationary period for some time; we’re getting the same prices as we did in 2008. How do we communicate how much cruising offers?”

Vago stressed: “Cruising is the best value for money there is.”

Cuba Potential

Looking at the potential in Cuba, Del Rio, whose brands include Oceania Cruises, Regent Seven Seas Cruises and Norwegian Cruise Line, was perhaps the most eager, although Arnold and Fain also said they wanted to include Cuba when the U.S. government lifts the embargo on trade restrictions.

A proud Cuban American, Del Rio told Travel Agent a year or two ago that he had itineraries already made up and in an office cabinet, just waiting for the loosening of government restrictions on U.S. trade.

Once the embargo is lifted, “yes, we’re ready,” said Del Rio, snapping his fingers and noting “just like that.” He says that the wonderful thing about the cruise industry is that it brings along its own infrastructure.

“So yes, we’re ready and I would bet all of us in this town are ready at a drop of the hat.” He said many lines already go to places across the globe that are less developed than Cuba, and points out that Cuba is only 220 miles from Miami.

Quest asked the same question of the panel and said, “Are you ready?”

“I’m not sure any of us are ready,” Fain said, hesitated a bit, then adding: “Cuba is such an amazing opportunity.” Yes, he said, his lines will be there but companies still have a lot to learn about every country they enter. Cultural and infrastructure elements come into play, but, he acknowledged, “part of the beauty of the cruise industry is that it does adapt.”

Arnold agreed with Del Rio on many of the points and also said his group will be headed to Cuba too, but that “wherever we go we have a responsibility not only to assure that guests are safe and have a great time, but that it’s a great experience for the destination as well.”

Vago got a laugh from the audience when he said “I’m European. We’re already there,” as MSC as a foreign company is not subject to the U.S. embargo.

China Expectations

Arnold noted that Carnival Corp. was the first in China as a sourcing market and is now the biggest player there. While he said size matters, what’s more important is the opportunity to develop the perception of cruising from “a blank sheet of paper.”

“We have an ability to define an industry,” Fain stressed, as his firm is also heavily in the market. That said, local Chinese guests, in many, cases, have no clue what cruising is about, both officials said.

While it’s good they don’t have the challenging misconceptions about the industry (“I'll get sick, I won't have anything to do, I don't like to do this and that”) as people in the U.S. or Europe do, the executive said the opposite challenge is that they have absolutely no conception whatsoever of the experience. For example, recently, a group from Mongolia cruised with a Carnival Corp. brand but had never seen a swimming pool, said Donald.

Vago said from MSC’s perspective, it does not now have enough ships to enter the Chinese sourcing market. In addition, the company is looking elsewhere for growth — specifically North America. The company announced plans for its new MSC Seaside at Cruise Shipping Miami; the ship will sail year-round from Miami.

Del Rio says the other lines have paved the way, but he has the same issues as MSC – he’s not had enough vessels to dedicate a ship there. Internally, though, Del Rio said the company is now evaluating the potential for the Chinese market, their resources and so on. They'll make a decision over the next month or so whether to go or not.

Look for more stories from Cruise Shipping Miami in the next few days.