Worldwide Cruise Ship Activity

ISBN: 92-844-0610-2

Published by the World Tourism Organization Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

All right reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system without permission from the World Tourism Organization.

The designations employed and the presentation of material in this publication do not imply the expression of any opinions whatsover on the part of the Secretariat of the World Tourism Organization concerning the legal status of any country, territory, city or area of its authorities or concerning the delimitation of its frontiers or boundaries.

Printed by the World Tourism Organization Madrid, Spain ACKNOWLEDGEMENTS

This report was drawn up by an outside consultant, Dr. Manuel Butler, Naval Engineer, currently Director of the Spanish Tourism Bureau in London, under the supervision of the WTO’s Market Intelligence and Promotion Section, which also contributed. A number of professionals working in the tourism and ocean cruise sectors have also contributed to the report, in particular the Director General of ANAVE, the Spanish Shipowners Association, Dr. Manuel Carlier de Lavalle, Naval Engineer. This report would not have been possible without consent to use their statistical information graciously provided by the consulting firm GP Wild (International) Ltd., the Cruise Line International Association (CLIA), and the Passenger Shipping Association (PSA).

The Secretariat of the World Tourism Organization would like to express its thanks to all those who have helped prepare this report for their valuable cooperation. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

3 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM TABLE OF CONTENTS

EXECUTIVE SUMMARY...... 9

CONTENTS...... 17

1 INTRODUCTION ...... 19

1.1.- The cruise as a tourist resort ...... 21 1.2.- Reference terms ...... 24

2 A STUDY OF THE DEMAND: CRUISE PASSENGE ...... 27

2.1.- Quantitative aspects ...... 27 2.1.1.- Geographical origin of US cruise passengers ...... 33 2.1.2.- Duration of trip ...... 34 2.2.- Qualitative aspects: socio-demographic profile of cruise passengers ...... 37 2.2.1.- United States and Canada ...... 38 2.2.2.- Europe ...... 43 2.2.3.- Asia-Pacific ...... 44 2.3.- Specific examples of niche markets ...... 45 2.3.1.- Cruises for American families ...... 45 2.3.2.- The European Union's senior citizen market ...... 46 2.3.3.- The Conferences and Incentives Segment ...... 47 2.3.4.- Theme cruises ...... 48 2.3.5.- Adventure cruises ...... 49 2.4.- Analysis of the supply and demand relationship ...... 49

3 A STUDY OF THE SUPPLY: BUSINESS STRUCTURE ...... 55

3.1.- Main Cruise Line Associations ...... 55 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM 3.1.1.- United States of America and Canada: CLIA, ICCL and FCCA ...... 55 3.1.2.- Europe: PSA, Croisimer and VFF ...... 57 3.1.3.- Asia ...... 58 3.2.- Cruise classification ...... 59 3.3.- Main Groups ...... 61 3.3.1.- Carnival Corporation ...... 64 3.3.2.- P&O Princess Group ...... 72 3.3.3.- Royal Caribbean Cruises Ltd. Group (RCC) ...... 76 3.3.4.- Star Cruises Group ...... 80 3.4.- Other cruise lines ...... 83 3.4.1.- Cruise lines in the US and Canadian source markets ...... 83 3.4.2.- Cruise lines operating in the European source market ...... 89 3.4.3.- Cruise lines operating in the Asian source market ...... 101 3.5.- Commercial middlemen in the cruise business ...... 104 3.5.1.- Cruise trip distribution channels ...... 104

5 3.5.2.- Other agents: independent ship mangers, shipping agents and ship brokers ...... 113 3.6.- Main conventions and special trade fairs ...... 115 3.6.1.- Seatrade Convention ...... 115 3.6.2.- Other Convention ...... 116 3.6.3.- Activities aimed at travel agencies ...... 116

4 THE PRODUCT: CRUISE PACKAGES ...... 119

4.1.- Creating the itinerary ...... 119 4.2.- Cruise package cost ...... 124 4.2.1.- Revenue generated on-board ...... 130 4.3.- Main regions of operation and destination ...... 131 4.3.1.- The Caribbean ...... 140 4.3.2.- Alaska ...... 145 4.3.3.- Atlantic Europe and the Baltic Sea ...... 147 4.3.4.- The Mediterranean ...... 150 4.3.5.- Asia-Pacific ...... 155 4.3.6.- Emerging regions ...... 158

5 THE INTERACTION BETWEEN THE CRUISE AND ITS ENVIRONMENT . . . . .161

5.1.- Financial implications of cruises on their destination ...... 161 5.1.1.- Definition of main services provided ...... 161 5.1.2.- Analysis of spending by ship managers, cruise passengers and crew .163 5.2.- Effects on marine life: sustainability ...... 165 5.3.- Safety aspects for cruise passengers ...... 168

6 MEDIUM-TERM TRENDS ...... 171 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM 6.1.- Growth in European demand at higher levels than in the US ...... 171 6.1.1.- Evidence ...... 171 6.1.2.- Characteristics in the growth of European demand ...... 173 6.1.3.- Main consequences ...... 173 6.2.- Entry into service of greater tonnage vessels ...... 174 6.2.1.- Evidence ...... 174 6.2.2.- Characteristics of the process of bringing larger tonnage ships into operation ...... 177 6.2.3.- Main consequences ...... 177 6.3.- Cruise line horizontal business consolidation...... 178 6.3.1.- Evolution ...... 179 6.3.2.- Characteristics of business centralization ...... 183 6.3.3.- Main consequences ...... 183

6 7 ANNEX I. SHIPPING TERMINOLOGY ...... 185

7.1.- Relative size of tourist cruise fleets ...... 185 7.1.1.- Sea cruises: scheduled or tramp traffic? ...... 186 7.1.2.- Financial agents ...... 187 7.1.3.- Tourist cruiser registration ...... 189 7.2.- Definitions and symbols used ...... 191 7.2.1.- Explanation of symbols and abbreviations used ...... 194 7.3.- Addresses and websites of interest ...... 196 7.3.1.- Associations ...... 196 7.3.2.- Main shipping companies: websites ...... 197 7.3.3.- Other websites of interest ...... 198

8 ANNEX II. NUMERIC STUDIES ...... 199

8.1.- Spending patterns in the Côte d'Azur (France) and in the Caribbean . . . .199 8.1.1.- Spending category grouped by type ...... 199 8.1.2.- Spending attributable to port services (SPORT) ...... 199 8.1.3.- On-land passenger spending (SON-LAND) ...... 210 8.1.4.- Other spending patterns in destinations on the French Côte d'Azur .203 8.2.- Forecast of cruise demand in the European Union and in the United States ...... 206

9 BIBLIOGRAPHY ...... 213 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

7 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM EXECUTIVE SUMMARY

The Secretariat of the World Tourism Organization maintains a series of studies on different segments of the tourism market. The present report examines cruise tourism activity.

The concept

The scope of this report is limited to ocean or sea cruises and does not cover river or coastal cruises. Modern cruise tourism is different from traditional transatlantic voyages on ocean liners in both concept and business type. Whereas the latter was con- ceived mainly as transport, in cruise tourism the key element is the ship as accommodation. This is why cruise ships are often described as floating hotels or resorts. This is evident in the fact that the normal layout of modern hotels, with a gigantic atrium around which the various different accommodation floors are set out, is faithfully imitated in this type of ship, with crew members being given job titles like “hotel manager”. Resort-style services are also offered such as: swimming pools, interactive TV, stores, library, golf courses, art galleries, business centres, cinemas, spas, etc. The main difference and advantage over a conventional hotel is its mobility, which provides greater flexibility in the geographic distribution of accommodation capacity.

All of the above means that cruises not only share characteristics that are typical of destinations, but they are also, in some respects, destinations in themselves. One extreme example of this can be found in the famous Florida-based “cruises to nowhere”. It is therefore reasonable to consider cruises as competitors to certain types of land-based holidays, especially those in resorts.

Growth and diversification of demand

In the early 1970s, the first modern cruises began to operate in the Caribbean with North American clientele. In the 1990s, the cruise phenomenon reached the United Kingdom and the rest of Europe, and subsequently, the Asia-Pacific region. This means that there is currently a process of globalization of the North American cruise expe- Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM rience. This is why cruises are still considered to be an tourism market that has yet to reach maturity, meaning that increases in supply are followed by parallel increases in demand.

In 2000, cruise demand reached almost 10 million trips, with North America accounting for almost 2/3 of world demand. Although North America is a relatively more developed or mature market, it still has substantial potential demand, which the CLIA has estimated at some 43.5 million people over the next five years. The European market is a distant second with almost 2 million trips, with the rest of world accounting for a very small share. This gives an indication of the enormous potential for growth and expansion, ensuring a promising future for cruises.

Passengers by region 1989 1991 1993 1995 1997 1999 2000 N. America 3.29 4.00 4.48 4.40 5.05 5.89 6.88 Europe 0.53 0.70 0.88 0.97 1.36 1.79 1.95 Rest of the world 0.20 0.22 0.25 0.30 0.46 0.85 0.78 TOTAL 4.02 4.92 5.61 5.67 6.87 8.53 9.61

Source: CLIA for the US and Canada, PSA for Europe and GP Wild (International) Ltd for the Rest of the world.

An analysis of the demand characteristics shows a high number of first-timers, that is, tourists who are taking a cruise for the first time. Also, cruise passengers come from all segments of the population, especially in the more developed markets (United States and Canada). Contrary to what one may expect, a cruise is not a type of holiday that is exclusive to seniors or to wealthier demographic segments. This is borne out by the average age of cruise passengers, which is 46, and their average household income (approximately 50,000 dollars in the case of American cruisers). This is achieved by offering shorter itineraries, which are therefore less costly and highly compati- ble with the tastes and demands of all segments of the population.

Cruises as tourism supply

Table B shows the accommodation capacity provided by the cruise sector. It can be observed that the cruise industry represents just 0.6% o the world’s accommodation capacity. At first blush it would seem that the importance of the cruise business is minimal. However, there are other figures that must be taken into account in order to form a clearer picture of its importance:

• the high level of business confidence in the industry is reflected in operators’ order books (worth over 14 billion dollars),

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM • high present and future growth rates (8% per year),

• tourist consumption generated at destinations,

• the possibility of opening up new destinations for land-based tourism due to the intense desire created by cruises to return to the destination, and

• high added value of cruises.

These aspects give an idea of the effects of this new form of holiday. Therefore, its importance lies not so much in the size of the cruise business per se, but rather in the activity’s effects. It is also interesting to study the cruise industry from the perspective of hotel operation because of the advanced technologies used and the complex systems needed to manage on-board hotel and complementary services, as the floating hotel facility is usually in an isolated setting.

10 Table B. Acommodation capacity measured in thousands of berths

Region 1980 1990 1998 Europe 8,542 9,824 11,869 America 6,436 8,616 10,329 East Asia and the Pacific 763 4,798 6,974 Africa 269 665 855 Middle East 141 319 442 South Asia 126 222 343 TOTAL 16,277 24,444 30,812 Cruises (*) 45 93 177

Source: WTO; (*) CLIA for the United States and Canada, PSA for Europe, GP Wild for the rest of the world.

Table C shows a summary of the world’s most important cruise lines. Supply, as shown in Table D, is characterized by the existence of a situation that is close to being an oligopoly, with the four largest groups (Carnival, Royal Caribbean, P&O Princess and Star Cruises) accounting for 72% of the world supply of berths. The so-called “Big Four” could be reduced to just three, due to the possible acquisition of P&O Princess by one of the top two groups. All four groups use multibrand strategies to cover all the segments of the market and own very modern fleets (average age 9.9 years). The figures of the leading group, Carnival Co. give an idea of the economic magnitude of these companies. With a market capitalization of over 15 billion dollars (2001), Carnival is one of the world’s largest tourism companies. It has a fleet of 46 ships with a total of more than 60,000 berths, and annual revenues of 3.78 billion dollars.

Table C. Main cruise lines that offer passenger sea cruises (January 2002)

4 Main groups United States of Europe Asia Carnival Royal Caribbean P&O Princess Star Cruises America and Corporation Cruises (RCC) Group Canada Carnival Cruise Royal Caribbean P&O Star Cruises Clipper Cruises Louis Cruises Indian Ocean Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Lines (CCL) International (RCI) Royal Olympic Cruises Cruises (ROC) Holland America Celebrity Cruises Swan Hellenic Norwegian Cruise Crystal Cruises Festival Cruises NYK Cruises Line (HAL) Line (NCL) Windstar P&O (Australia) Orient Lines Disney Cruises Saga Cruises Mitsui OSK Costa Crociere Princess Cruises Radisson Seven Airtours Sun Japan Cruise Seas Cruises Line Cunard Aida Cruises ResidenSea Thomson Cruises Hyundai Seabourn Cruise Line Silversea Cruises Fred Olsen Star Clippers Page and Moy Hapag Lloyd Peter Deilmann Club Mediterranée Nouvelles Frontieres Mediterranean Shipping Cruises (MSC) Valtur Spanish Cruise Line Pullmantur Cruises Vistamar Canarias

Source: Own study. 11 “Minor cruise lines” in Table D includes those that are highly specialized in niche markets, and which capture mainly North American clientele. These companies own modern ships and demonstrate that profitability is possible through specialization. The supply represented by the European and Asia-Pacific cruise lines is in line with the size of the demand in these two regions, which is starting to take off.

Table D. Distribution of ocean-going fleets at January 2002

Group/ Total Fleet Order Book Cruise Line NS GT GT/ Berths Ave. NS GT GT/ Berths Berth Age Berth Minor cruise lines 18 508,944 52.3 9,728 7.5 3 203,000 66.7 3,044 Big Four 106 6,152,670 38.1 161,411 9.9 31 3,006,656 41.7 72,046 Europe 49 926,188 26.8 34,512 27.6 3 178,600 37.6 4,746 Asia- Pacific 10 252,133 35.0 7,206 17.9 0 0 - 0 Total 183 7,839,935 36.8 212,857 14.8 37 3,388,256 42.4 79,836

Source: Own study using data from PSA and Lloyd’s Cruise Int.

The cruise industry is in the midst of a profound fleet renovation process, with ever-larger vessels coming into service. The largest of the new ships have a capacity of up to 3,500 passengers and offer more on-board services, thus expanding on the concept of cruise ships as floating resorts. This makes it possible to generate more on-board revenue. On-board revenue is also being enhanced by a move away from “all-inclusive” packages and the increasing adoption of “add-on” formulas where certain services are not included in the price of the cruise and must be paid for separately. Another trend is greater specialization of cruise ships, as exemplified by Disney’s themed cruises. One highly notable characteristic of the cruise industry is the highly efficient management of resources making it possible to achieve high occupancy rates – much higher than those achieved by the holiday hotel industry or charter airlines. At the same time, in Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM order to minimize risk cruise lines diversify their destinations, thus favouring the geographical expansion of tourism and this type of activity.

Destinations offered

One important aspect for tourism destinations in the analysis of cruise line operations by region. Climate, which is tied to the seasons, is a determining factor just as it is for land destinations. This gives rise to substantial relocation of fleets from one region to another. The Caribbean, not surprisingly, is the busiest cruise region, especially during the winter months in the northern hemisphere. The following chart shows that the second most important area is the Mediterranean, especially from March to September. Atlantic Europe and Alaska also experience a surge during this period, although to a lesser degree. The significant share of the Asia-Pacific region is notable, indicating that the foundations are being laid down for strong development in the region.

12 0.a. Capacities offered worldwide by season in 2002

April-September October-March

Source: GP Wild (International) Limited.

The product and its distribution

The tourism product commercialized is the cruise package, which consists of all the different land destinations on the itinerary, as well as the ship itself. The role of ports of call in the creation of the package is crucial, with the determining factors being their policy of investments in specific facilities as well as their pricing policies. It is here that two hitherto separate economic sectors -- port services and tourism – come together and pool their economic resources. From the point of view of port services, the role of cruises within the context of modern port-city policies is essential.

The distribution of packages is carried out through the usual channels used for other types of holidays, that is, travel agencies. For travel agencies, the sale of cruise packages is one of the biggest revenue generators, due to the commissions applied to Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM them. However, as with other tourism products, there is a trend towards eliminating middlemen through the sale of packages using new information and communication technologies (Internet, interactive TV, CRS and call centres). The shipping aspect of the cruise business means that traditional sea transport agents are involved in the distribution channels. The main shipping agents, who have a long history within the cargo shipping business, have gone on to set up their own cruise divisions. They also have a dual role in the sale of the trip, in the guise of a GSA, and in organizing hotel accommodation and on-land activities just as a travel agency would.

The effects generated by cruises

As mentioned at the start of this executive summary, cruises generate substantial effects, which amplify the importance of this type of holidays. The most immediate effect is the expenditure generated at destinations. Few in-depth studies have been carried out on this subject and so the available information is limited. The present report discusses studies for France and the Caribbean, which estimate the economic

13 impact of cruises at 87 million euros a year and 410 million dollars per semester, respectively. Furthermore, the methodological foundations are laid down for future studies, given the current lack of documentation. There is a clear need for this type of studies, as they make it possible not only to quantify the impact of the business on destinations, but also the distribution of this impact between the port community and the destination city itself.

Aside from economic effects, cruise activity also has significant environmental effects, which are gaining prominence due to the rise in maritime traffic. Efforts are geared mainly towards preventing undesirable impacts on the natural environment, such measures include: the definition of maritime regions of special interest, limitations on the dumping of waste into the sea or requirements for the installation of less-polluting propulsion systems, especially in the case of Alaska.

With the advent of very large cruise ships that can carry more than 5,000 people including passengers and crew, maritime safety and security issues have attracted a great deal of interest, especially in cases of fire or sea rescue. Due to the events of 11 September 2001, protection against acts of terrorism and piracy at sea has become a major concern for the competent international authorities. This issue has affected cruise operations, port facilities and the configuration of cruises. This report discusses both safety and security as issues that will shape the future of the business.

Short- and medium-term trends

In order to form a picture of the future scenario that is emerging, the following trends are identified and discussed:

• The slowdown in the growth of US demand.

• Strong growth of European demand, especially in the German, French and Spanish markets. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM • Changes in the demographic structure of demand: younger audience, with lower purchasing power, from all segments of the population. As repeat cruisers become more demanding, there will be greater demand for specialized products.

•Cruise package prices will fall due to economies of scale, technological advances and shorter duration of cruises.

• The commissioning of ships of ever-increasing size -- tonnage, in nautical parlance – that are more technologically advanced, safer, more complex and with more on- board facilities will make it possible to generate larger on-board revenues. The modernization of fleets for technical and economic efficiency reasons will continue at the current pace.

• The horizontal concentration of the industry will accelerate since the investment required to build a standard modern cruise ship easily exceeds 300 million dollars.

14 In this scenario, only small, highly specialized cruise lines can survive alongside the large groups.

If we consider that demand will grow in parallel with supply, given that the market has not yet reached maturity, it is possible to project future cruise demand in the main generating markets. Table E shows the results of this projection. Among the most notable aspects of this projection are the extremely high growth rates expected for Europe, over 20% in the case of France, Germany and Spain, with world demand expected to easily surpass 13 million cruise passengers in 2005. This gives an indication of the dynamic nature and growth potential of the cruise business, as mentioned earlier. This substantial rise in demand will be accompanied by an expansion in the regions where cruises operate, with greater activity in established destinations and the strong entry of emerging destinations such as South America, Africa, India and Oceania.

Table E. Demand for ocean-going cruises measured in thousands of cruise passengers

Country 1995 1996 1997 1998 1999 2000 95-00 2005d 01-05d Aannual %annual United Kingdoma 340 416 522 631 740 747 17.05% 1,155 11.51% Germanyc 217 235 283 306 327 380 11.86% 825 21.38% Italya 151 174 200 230 250 273 12.57% 522 17.57% Francea 100 112 126 154 224 266 21.61% 622 25.62% Spaina 24 34 41 52 82 87 29.38% 265 32.14% Othersa 134 141 185 187 167 200 8.34% - - European Uniona 966 1,112 1,357 1,560 1,790 1,953 15.12% - - United Statesb 4,378 4,656 4,864 5,243 5,894 6,880 9.46% 8,008 3.87%

Source: (a) PSA, (b) CLIA, (c) DRV, (d) own study.

In short, as we have already pointed out, the importance of this modern tourism product lies in the effects it generates and its prospects for future growth. Both aspects Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM are analysed in depth in the present report.

15 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM CONTENTS

The object of this report is to examine the activity of sea cruises. River cruises and coastal cruises that form such an important part of the US and German markets have not been taken into consideration. Special attention has been paid to the US and Canadian markets with regard to sea cruises, for the following reasons: as a source market it represents two thirds of the world market share, the renaissance of cruise holidays began in the area, and US capital almost exclusively dominates the sea trade's business structure.

The concept of the modern tourist cruise is defined in chapter 1, and is very different from the traditional transatlantic ocean cruise. There is also a brief note on methodology.

Chapters 2 and 3 analyze in greater detail the current demand for tourist cruises within a global context and from a socio-economic viewpoint, followed by a similar examination of supply and cruise line business structure.

Chapter 4 is a study of the tourist product itself, including the main itineraries, which are of major importance given the direct impact on ports and destinations and in cruise line operations.

Chapter 5 is devoted to the interaction between the cruise and its surroundings, analy- sing financial aspects, the sustainability of the marine environment and passenger security. Spending patterns at the destination and the price or fare of cruise trips are also considered in the first section of the chapter.

Chapter 6 forecasts medium term macro-trends. For the purposes of this report medium term is considered as a period of 4 years, as the sector is developing rapidly, which is reflected in the cumulative annual growth rates. The analysis of this four year period is considered a reasonable time period, given that it is very difficult to realistically forecast events over a longer period of time and that necessary business decision times have been taken into account within the specified time frame (building a new ship Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM takes between a year and a half and two years).

The understanding of the current situation and the medium term macro-trends of cruises clarifies and identifies the worldwide opportunities in relation to this new maritime trade. It is hoped that these findings will help to give potentially useful information to the National Tourism Associations (NTA) and the managers within the various relevant sectors to adopt suitable strategic decisions to successfully handle their incorporation into this major and renewed tourism activity.

Chapter 7 deals with and defines terms from the shipping world such as tonnage, cabotage, moulded breadth, moulded depth, length, displacement, etc. The symbols and acronyms used throughout the report are also listed in this section.

Chapter 8 details two examples of important figures within the cruise tourism sector, which are the spending carried out at the destination and the possible future demand of these types of trip.

During the last decade, the cruise industry has been the tourism sub-sector that has experienced the most rapid growth of all. While the world demand for international trips during the period 1990-2000 grew at an annual cumulative rate of 4.3%, the cruise market grew at 7.9%, as can be seen in table 1.II.

Three basic facts typify a tourist cruise:

• It is another category within leisure travel as a whole, which is in direct competition with on-land holiday resorts.

• It is a product that is growing, and as it increases its supply so it generates an equal and corresponding demand. Up until the present its non-cyclical character makes it a very attractive economic proposition.

•It is immersed in a process of worldwide promotion based on the experience gained from the US market. This is the very market that designed the modern concept of the tourist cruise, from the points of view of both supply and demand.

In table 1.I the capacity of sea cruises, measured in berths, is 0.6% of the whole of available hotel space worldwide, while table 1.II shows that it represents 1.4% of international arrivals. The importance of these observations lies in the economic weight and potential for growth of sea cruises rather than in their relative weight in the Tourism Sector.

Business confidence in this subsector is reflected in the order book1, which has not undergone any major shrinkage, in spite of the worldwide economic downturn. On 31st January 2001 the order book was at its highest figure (18.5 billion dollars2, 53 new ships and 98,162 additional berths), with a slight reduction in quantities on 1st November of the same year (14.8 billion dollars, 41 new ships, and 79,658 additional berths). In spite of the drop, the figures are a clear indication of business commitment Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM towards the sub-sector.

The relevance of these findings for tourist destinations lies in the following:

1) tourist consumption generated in secondary ports3 (shopping, guided tours, sightseeing) and especially in base ports4 (mainly overnight stays in hotels).

2) sea cruises are also a means of transport, capable of provoking an intense desire to return to the same destination (according to CLIA market research, almost 50%

1Order book: ships awaiting delivery and under construction at the shipyards. For a fuller description of shipping terminology see section 7.2. 2 In this report the figures and references to dollars are understood to be US dollars unless otherwise stated. 3 Secondary port: from which the passenger disembarks, to subsequently embark and continue the cruise. 4 Base port: also known as the head or main port, it is used for embarking and disembarking at the beginning and at the end of the cruise. 19 Worldwide Cruise Ship Activity © 2003 World Tourism Organization of cruise passengers are convinced that they will return to the same geographical region for some other type of holiday).

3) the relationship established with the Port Authorities, for financial reasons (the revenue generated by the cruise ships during their stays in the port) and because it is an essential element for connecting the port to the city.

Table 1.I. Accommodation capacity measured in thousands of berths

Source: WTO; (*) CLIA.

Table 1.II. International arrivals in millions

Region 1980 1990 2000 2001** Europe 212.0 282.7 403.2 400.5 America 64.3 92.8 128.3 119.3 East Asia and the Pacific 31.1 54.6 110.6 114.9 Africa 9.7 15.0 27.6 28.5 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Middle East 7.5 9.0 21.2 19.4 South Asia 2.5 3.2 6.4 6.0 TOTAL 327.1 457.2 697.5 688.5 Cruises (*) n/a 4.5 9.6 n/a

Source: WTO; (*) CLIA; (**) Preliminary WTO estimation. Data January 2001.

20 Table 1.III. International and cruise tourism (in millions of trips)

Geographical region Expected International arrivals annual growth (%) 2000 2010 Africa 5.6 27 47 America 3.9 130 190 East Asia and the Pacific 7.7 93 195 Europe 3.0 393 527 Middle East 7.0 18 36 South Asia 6.7 6 11 Cruises 5.8 8.8 13.05 (US, Canada and Europe)*

Source: WTO. (*) GP Wild (international) Ltd forecast for 2007.

1.1 The cruise as a tourist resort

The business strategy that inspires a project for ships of this kind is clearly reflected in the feedback from Bob Dickinson, Carnival Cruises' executive president, who states: "The main key to Carnival's success was to position itself in the holiday market and not in the cruise market. This way, if Las Vegas attracts 28 million tourists and Orlando attracts some 40 million, then Carnival only attracts 1.5 million, with a holiday market share of 0.5%. The main competitors are the land resorts and not the other cruise line companies." This is why they are considered as and called floating resorts.

There are two key elements in this assertion: Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM • The first is the concept of the ship as a floating hotel and not as a mere means of transport. This formula has been extremely successful in the Caribbean, although it cannot be simply transferred to other regions or settings in which the destination plays a major role. Nevertheless it has helped to completely modernize facilities on board cruise liners.

• The second is having adapted a formula to the cruise that has been so successful in the US city of Las Vegas, where the main element is the casino. The interior decoration of the ships is also similar to the city’s hotels. This is why some ships are referred to as having been "Las Vegasized".

The Disney experience is also worthy of note. They are considering that if the two formulas that work in the US holiday market are Las Vegas and Orlando, and if only the first city has been transformed into the cruise format, then

21 why not try the formula with the second. This has given rise to theme cruises.

The notion of "Cool Cruising" is a concept for the future, and its objective is to attract the younger section of the population. This concept requires a large platform and consequently long journeys. It would incorporate a large number of leisure facilities of an electronic nature and of a more outdoor and active nature. To a certain extent these possibilities are being explored in the VLCVs5, especially in Royal Caribbean International's (RCI) Eagle-class, which offers ice-skating, mini golf, climbing areas, spas, etc. during its trips around the Caribbean.

The key to the success of the modern tourist cruise lies in its capacity to adapt itself to market trends, and move away from the excessive rigidity imposed by social norms on classic transatlantic cruises. This basically entails: informal dinners, food service available 24 hours a day, vegetarian meals, diet meals, non-smoking areas, beauty salons, a variety of on-board shops, etc.

The size of the cruise ship depends on commercial and economic factors. Given that the price of construction of a VLCV varies between 300 and 500 million dollars, the management and commercialization of the VLCV represent a major challenge, with a high level of risk involved due to the major investment in only one ship. The new ships must be flexible and capable of operating in different settings, or else they should be designed for a specific and lucrative destination. Cruise ships are designed and constructed to operate in specific areas, which implies a certain rigidity in the relationship between ship and area of operation. It has been the norm over the last few years to consider the limit for the first condition as having a tonnage of 70,000- 80,000 GT6 (a transcanal ship), while for the second condition the lower level Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM is set at 100,000 GT. Shipbuilding on this scale, however, can only be undertaken by the four main cruise line groups. The current order book shows that the figure of 140,000 GT for the Eagle-class ship will only be surpassed by the "Queen Mary 2" in the period 2002-2004. The "Phoenix / American World City" project has set a ceiling of 250,000 GT that will be difficult to surpass, with discussions that have been on-going for over 10 years, although as yet no concrete decision has been made, mainly because of financial problems.

The tourist cruise has two facets: one as a ship and the other as a floating hotel. With regard to the distribution of space, 75% is considered as a hotel, while the remaining 25% is a ship.

The modern cruise liner, therefore, is also a floating hotel. The normal layout of modern hotels, with a gigantic atrium around which the various different

5 VLCV: Very Large Cruise Vessel. For the definition please see section 7.2. 6 22 GT: Gross Tonnage. accommodation floors are set out, is faithfully imitated in this type of ship. The services associated with a hotel are also incorporated on-board: jacuzzi, sauna, gym, massage rooms, jogging track, casino, library, cinema, interactive TV in the cabins, children's activities, disco, meeting rooms, restaurants, bars, duty free shops and swimming pools. The most innovative element on the most modern cruise ships is that all the cabins are connected to the Internet. Particularly worthy of note is the P&O Princess Grand Class, with its own Broadway style theatre with 748 seats, and a medical centre connected via satellite to specialists in Houston.

As well as the rise in the amount of facilities, there is also a greater deal of comfort during the cruise, which is mirrored in the increased size of the cabins. They have increased in size over the last five years from 12 m2 to 18 m2. The market trend calls for a larger amount of cabins with windows and/or balconies, which are also more profitable, hence the adoption of the previously mentioned atrium layout. The service is essentially measured in relation to passengers/crew that varies between 2 and 3 to 1, depending on the cruise category. In order to guarantee the quality of the service, as part of the modern philosophy that states a "happy crew means happy guests", special facilities for the exclusive use of the crew have been installed, and include: a TV in each cabin, different types of restaurants, discos and swimming pools. The general layout has been closely studied in order to reduce distances and thereby give the best possible service.

The importance of the human factor is clear, which is why it is essential that the passengers and the crew must be well looked after. One of the main problems is seasickness, which is caused by the boat's pitching and rolling7, as 8 9 well as other influencing factors such as Ltot , B , whereabouts on the ship, age and sex of the person, as well as the activity being performed immediately beforehand. According to recent research, vertical acceleration is the Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM primary cause. Normally the cabins that are located in the bow are the most expensive, as there tends to be less noise and fewer vibrations, as they are further away from the engine room. Nevertheless, the movement of the ship and the likelihood of getting seasick are increased in this area. Computer- controlled stabilizers are a usual feature installed in order to help reduce rolling movements on the ship.

Other major elements to be taken into consideration given the vast amount of people on-board, which can be over 5,000 passengers on a VLCV, are environmental problems, including waste treatment, safety (fire, flooding, stability) and hygiene (meals, swimming pools, etc.) systems, which are discussed in sections 5.2. and 5.3.

7 Pitching: ship rocking from bow to stern, dipping and climbing alternately. Rolling: the ship's movement from port to starboard or vice versa. 8 Ltot: overall length. 9 B: moulded breadth. 23 The operation of sailing in different areas may require a greater number of trips, and this is when the sailing speed figures heavily in the equation. This may entail greater cruise speeds, going from 18-23 knots10 to 20-26 knots. To increase the speed by 5 knots from a speed of 20 knots requires at least a doubling of the ship's power. This has given rise to new propulsion systems, new propulsion plants and new designs for the underside of the hull.

1.2 Reference terms

In accordance with the United Nations/World Tourism Organization Recommendations on Tourism Statistics:

A) Tourism is defined as "the activities of persons travelling to and staying in places outside their usual environment for not more than one conse- cutive year for leisure, business and other purposes."

B) Visitors are defined as all types of travellers related to tourism. International visitor is the term applied to "any person travelling to a country different from that of his/her usual residence, outside his/her usual environment, for less than twelve months, and whose main purpose of trip is other than the exercise of an activity remunerated from within the place visited". International visitors may be tourists ("visitors who stay for at least one night in public or private accommodation in the country visited") and sightseers or day-visitors.

C) Cruise passengers are also included within the definition of day-visitor, as they are "persons who arrive at a country on board a cruise ship and who return each night to spend the night on the ship, even though it may stay in the port for several days". Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Throughout this report it shall be considered that:

D) Tourist cruises are only sea cruises, and include neither coastal cruises, ferry crossings nor river cruises.

E) The occupancy levels are an indicator of productivity. The occupancy levels may be greater than 100, as the official accommodation capacity does not take extra berths or third berths in double cabins into consideration.

F) The occupancy summaries are based on two people sharing a cabin.

G) Supply is based on the capacity of the transport, that can be measured either by gross tonnage (GT) (shipping concept) or else by the number of

10 Knot: unit of speed, equal to one nautical mile per hour (1,852 Km/h). 24 berths or berths x day (tourist concept). Although demand is normally considered in terms of transport measurements (ton-mile), this report is based on overnight stays, which once again benefits the concept of accommodation over that of transport.

. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

25 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM 2 A STUDY OF THE DEMAND: CRUISE PASSENGERS

2.1. Quantitative aspects

In 2000 the worldwide demand reached 9.61 million passengers (see table 2.I). Graph 2.a details the sector's evolution in the 1989-2000 period, indicating a clear increase in the growth of these holidays, with demand growing by 50% in a seven year period between 1989 and 1996. A similar increase was then repeated in just 4 years (1996- 2000).

Table 2.I. Worldwide cruise demand (in millions)

Passengers by region 1989 1991 1993 1995 1997 1999 2000 N. América11 3.29 4.00 4.48 4.40 5.05 5.89 6.88 Europe 0.53 0.70 0.88 0.97 1.36 1.79 1.95 Rest of the world 0.20 0.22 0.25 0.30 0.46 0.85 0.78 Total 4.02 4.92 5.61 5.67 6.87 8.53 9.61

Source: CLIA for the US and Canada, PSA for Europe and GP Wild (International) Ltd for the Rest of the world.

2.a. World demand for cruises 1989-2000 (millions of passengers) Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Source: CLIA, PSA, GP Wild (Internacional) Ltd.

This trend is expected to be maintained in the future, and it is estimated that the demand from North America and Europe will comfortably surpass the 13 million passenger mark towards the end of the first decade of the twenty first century. One of the keys in the evolution of the demand for cruises is that it grows when the supply increases. The report on the relationship between both variables can be seen in section 2.4.

It must not, however, be forgotten that the market share of cruise holidays is relatively small within the worldwide market of international holidays, standing at about 1.4%, as

11 North America: the cruise demand from residents in Mexico is not significant, while the corresponding demand from the residents of Canada rose to 300,000 in 2000. The influence of the US in the world and in North America is very strong. 27 Worldwide Cruise Ship Activity © 2003 World Tourism Organization cited in section 1 of this report. In section 8.2 the author includes a written forecast on demand for 2005. The past and future booms in growth are tangible evidence of the great economic strength that lies in these kinds of holiday.

The demand of the three major regions is studied in greater detail in the following para- graphs.

United States and Canada. Graph 2.b details annual demand, with a clear and continued growth trend with the exception of the two-year period of 1994-95. The unusual behaviour of demand during these two years was due to commercial stagnation of the supply put on the market by the cruise line companies.

2.b. Cruise demand in the US and Canada (thousands of passengers)

Thousands Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Source: CLIA.

In spite of the pessimistic forecasts made by the majority of analysts who signalled a slowing down of the market after the boom of the previous years, the 6 million trips mark was clearly surpassed in 2000, reaching a record annual growth of 7%. A major cause of this boom was the availability of a large number of berths, together with the successful marketing and selling efforts of the cruise lines.

The potential demand over the next 5 years in a study carried out by CLIA12 can be seen in graph 2. c. The potential figure cited in the graph is 43.55 million people, which gives an idea of the growth possibilities of cruises in the medium term.

12 CLIA: Cruise Lines International Association. See section 3.1. 28 2.c. Potential demand for the next 5 years in the US and Canada (Target customers are defined as being over 25 with a family income of >20,000 dollars/year)

% Target audience

68,810,000 people 43,552,000 people

Interested Potential

Source: CLIA 2000.

The European market has a major lack of available data in addition to a considerable statistical problem, with no one sole institution to compile and regulate information, and consequently no standard criteria that can be used for these purposes. The most reliable source of information is the British PSA13, for demand generated in the UK as well as for the main European source markets. The consultancy firm GP Wild (International) Ltd is an excellent source of information for the smaller markets (see bibliography 56). The data supplied by both sources differs slightly with regard to the UK, and can be seen in the comparison between tables 2.II and 2.III.

European demand in the world market reached a total share of 20% in the year 2000, totalling almost 2 million passengers. All analysts agree that the European market has Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM the highest potential rates for growth in the short term, easily surpassing the US and Canada. It is headed by the UK, largely thanks to its seafaring tradition, its business connections with the US and the clear commitment of the large tour operators to the business.

13 PSA: Passenger Shipping Association. See section 3.1.. 29 Table 2.II. European demand for cruises (measured in number of trips)

Country 1995 1996 1997 1998 1999 2000 United Kingdom 340,000 413,400 518,400 630,600 739,500 739,100 Germany 217,000 235,300 283,500 306,200 327,000 379,500 Italy 151,000 174,000 200,000 230,000 250,000 273,400 France 100,000 150,200 164,500 154,000 224,000 266,000 Spain and Portugal 24,000 33,800 40,800 52,500 81,700 87,400 Benelux 45,000 50,200 56,500 68,600 71,000 75,000 Scandinavia 34,000 34,000 41,000 51,000 55,000 59,400 Russia14 50,000 50,000 75,000 50,000 15,700 11,000 Cyprus15 5,000 7,500 12,500 17,500 25,000 55,000 Total Europe 5,000 1,148,400 1,392,200 1,560,400 1,788,900 1,945,800

Source: GP Wild (International) Ltd.

2.d. Demand in the European market Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Source: CLIA.

The most recent developments within the European source markets can be seen in table 2.II and in graph 2.d from GP Wild (International) Ltd. data. As has already been stated, it is clear from the figures that the main European source market is the United Kingdom with 739,000 sea cruise trips in 2000 (+0.9%) and 65,000 river cruises. Note that the first figure, although similar in magnitude, differs from that given by PSA in table 2.III. The said association expects that the one million barrier for trips will be surpassed by 2003. It is followed in order by: Germany, Italy, France and Spain. The fact that German demand is half of the British demand, when the demand for international

14 Includes Eastern Europe. 15 Cruise passengers departing from Cyprus, without taking nationality into account. 30 trips as a whole is the exact opposite, suggests that there is great potential for growth in the German market. The importance of these figures is taken into account in section 8.2 for the calculation of future demand. The following are considered as secondary markets as far as demand is concerned: Scandinavia, the Netherlands, Belgium and Switzerland.

As far as recent developments in demand are concerned, the previously mentioned UK boom stands out, along with Spain, although they depart from completely different bases, along with the curious slow growth of German demand. The lower level of German development within the sector can be explained by the language barrier and local legislation, which is more regulated than the British, making it a market that is much harder for foreign competition to penetrate. Added to this fact is the dominant stranglehold that the German tour operators have on the holiday market.

The demand in the British source market is detailed in table 2.III, differentiating between the number of passengers that depart from ports in the UK and passengers who fly in order to arrive at their cruise departure port. It can be seen that the growth of the latter is spectacular and is the main cause for the major increase in demand for cruise holidays. In round figures, the demand in 1986 was just over 50% while in 2000 it reached 75%. The cumulative annual boom of 17% stands out in the table, compared to the North American demand, which stands at 7% for the same period of time.

Table 2.III. British demand (measured in thousands of trips)

Year From British Cruise and Others Total Ports Aeroplane 1986 40,9 46,5 4,1 91,5 1988 50,3 81,5 20,3 152,1 1990 47,2 125,5 13,8 186,5

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM 1992 66,9 142,6 19,2 228,7 1994 80,7 165,5 37,2 283,4 1996 117,9 283,8 14,4 416,1 1998 166,2 482,8 14,2 663,2 1999 143,9 588,7 13,6 746,2 2000 177,2 560,8 16,5 754,4

Source: PSA.

Asia. It has been calculated that the regional demand for 2000 reached 500,000 passengers, with Japan, Taiwan (Chinese province) and the Republic of Korea at the fore. The real potential of this market is based on selling Asian products to Asian customers.

The main source market is Japan, whose development is reflected in table 2.IV. The sluggish growth was due to the fact that only local cruise lines were operating in the market up until 1999, and they were obliged to have their ships registered in Japan.

31 This involved high running costs, as the crew had to be Japanese. The increase noted in the year 2000 is due to the fact that the cruise line Star Cruises entered the market, attracting a younger sector of the population with shorter cruises. Unfortunately the economic slow-down, along with the events of 11th September 2001, have driven this cruise line to reduce its operations during 2001-2002, which will probably entail a reduction in demand over the next few years.

Table 2.IV. Japanese demand for cruises

Year International cruise trips Internal Total In Japanese In non-Japanese Subtotal cruise ships ships trips 1987 29,800 9,000 38,800 84,900 123,700 1992 46,400 30,400 76,800 120,300 197,100 1997 33,300 49,000 82,300 103,300 185,500 1998 26,700 46,100 72,800 102,900 175,700 1999 22,700 48,000 70,800 98,500 168,900 2000 21,100 109,400 130,500 95,400 225,900

Source: Japanese Ministry of Transportation.

Potential demand. Ken Trippe, in his paper entitled Globalization of the Cruise Industry, (see bibliography 54), analyzes the world demand and the potential for growth by region. In the paper he establishes the conversion factor as an indicator of development within a given market; he defines this factor as the quotient between the demand for cruises and the population of a market. The main source markets and respective conversion factors are detailed in table 2.V.

Table 2.V. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Market Conversion factor Population Demand United Kingdom 0,013 60,000,000 754,000 United States 0,023 280,000,000 6,580,000 European Union16 0,004 300,000,000 1,133,000 East Asia and the Pacific 0,001 430,000,000 430,000 Japan 0,002 120,000,000 226,000 Total 0,008 1,190,000,000 9,123,000

Source: Ken Trippe, with author's updated data for the year 2000.

It can be seen from the above table that US and Canadian demand represents over two thirds of the world total. This is due to the fact that the cruise renaissance took place in the US, starting with destinations to the Caribbean. This is the reason why whatever happens in this market has a huge worldwide impact. As the market is a lot older the conversion factor is more than five times that of the European Union and more than 11 times that of Japan. This is an indication of the development potential that lies within 32 the aforementioned source markets. This is particularly true of Europe, which has developed strongly since 1995, while the economic situation in Japan and the general Asian economic crisis is merely postponing a similar boom.

Although the conversion factor is a clear indicator of potential demand and on an initial level gives very useful information, it is nevertheless possible to introduce another more precise indicator that measures the level of development. It is defined as the coefficient between the real demand (Vrti) and the corresponding potential demand (Vpti) for a specific source market "i" at a given moment "t".

rt pt git = (V i) / (V i) (1)

The closer the figure is to the value of 1 the more developed the source market will be, taking all values between 0 and 1. The only calculation that has been made so far has been for potential demand in the United States. The result published by CLIA in their report which is cited in the bibliography (12), is as follows:

gUS;2000 = 0,158

which suggests that only 15.8% of the potential demand is being tapped. The possibility for increased cruise demand is thus clear to see, taking into account that this source market is the most developed.

2.1.1. Geographical origin of US cruise passengers

As reflected in table 2.VI, the three main source markets in the US are:

- New York (the largest consumer in the whole country). Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM - South Atlantic (it must not be forgotten that Florida is home to the three main cruise ports: Miami being the world's most important, and Port Everglades and Port Canaveral serving as a base for the Caribbean and the Bahamas).

- Pacific (with the cities of San Francisco and Los Angeles and base ports for cruise destinations in the Pacific).

The effect of the base port on local demand is strong, a fact that has been noticed by the industry, which has attempted to stimulate demand in non-traditional base ports. The most representative case is that of the cruise line Norwegian Cruise Line (NCL) with its resounding success obtained in Houston. The events of 11th September have strengthened this tendency, with the use of flights in the fly & cruise package being reduced, in conjunction with the opening of new cruise base ports. It should be noted that approximately 75% of US demand comes from states that border the coast.

33 Table 2.VI.

Origin 1990 Share 1999 Share Difference (%) (%) (%) New England 5.78 5.84 0.06 Mid-Atlantic 16.21 16.35 0.14 Northeast Central 14.03 11.24 -2.79 Northwest Central 4.50 4.57 0.07 South Atlantic 24.16 30.67 6.51 Southeast Central 2.86 3.00 0.14 Southwest Central 5.42 7.26 1.84 Mountains 3.86 4.70 0.84 Pacific 23.18 16.37 -6.81 TOTAL 100,00 100,00 0,0

Source: CLIA Passenger Carryings Reports 2000.

The breakdown of the regions by states is as follows:

a) New England: Connecticut, Maine, Massachusetts, New Hampshire, Vermont and Rhode Island.

b) Mid-Atlantic: New Jersey, New York and Pennsylvania.

c) Northeast Central: Illinois, Indiana, Michigan, Ohio and Wisconsin.

d) Northwest Central: Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota.

e) South Atlantic: Delaware, District of Columbia, Florida, Georgia, Maryland, North Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM and South Carolina, Virginia and West Virginia.

f) Southeast Central: Alabama, Kentucky, Mississippi and Tennessee.

g) Southwest Central: Arkansas, Louisiana, Oklahoma and Texas.

h) Mountains: Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming.

i) Pacific: Alaska, California, Oregon, Washington and Hawaii.

2.1.2. Duration of trip

Depending on the original source market, the average duration of a cruise is closely linked to consumer's available free time and the ever increasing tendency to split holi-

34 days, with variations between different source markets: in the US and Europe it varies between 6 and 9 days, while in Japan it is only 3 to 6 days.

In the US, the average duration of a trip from 1988 onwards became shorter, with the point of inflection reached in 1991 and an increase in the following years, as seen in graph 2.e. The decrease in length for the period 1988-1991 was due to the increase in demand for cruises to the Bahamas, which are typified by their short duration: 3-4 days. New ships that entered service from 1991 were located in the Caribbean, with an average itinerary of 7 days, and in Europe (9.5 days). The decrease in the average cruise duration in 1999 and 2000 is merely anecdotal, given the importance of the short itineraries of the cruises to the Bahamas, which last between 2 and 5 days. The long- term trend is for longer average duration, until it reaches saturation point in the US and Canadian-Mediterranean markets. The average cruise duration in the year 2000 was 6.5 days.

2.e. Average cruise duration in the US and Canada

Days

Source: CLIA. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

In the distribution of cruise times, see graph 2.f, it can be seen that the most popular cruise durations are 2 to 5 days and 6 to 8 days, and combined they have increased their share in the last 16 years from 84% to 89%. The majority of the 2 to 5 day itineraries obviously takes place in the Caribbean, although this duration is also offered in other regions. The 12 day cruise in Europe is the most popular for many companies, as they coincide with the 2 week holiday of the average US family, taking into account that 2 days are lost during the flight time to and from the cruise destination. In order to reach a wider public there is a general tendency to promote short duration cruises. For example, after September 11th, Holland America Line (HAL) chose 15 base ports in the US for 2001-2002, including Port Canaveral, San Diego and Fort Lauderdale, offering 360 itineraries and promoting the 2-4 day cruises, reaching 40% of US homes within a half-day car-trip radius. Carnival and Royal Caribbean International (RCI) have also adopted similar strategies.

35 2.f. Distribution of cruises by duration in days in the US market

1980 2000

Source: CLIA.

Similar information regarding Europe's two main source markets, the UK and Germany, can be seen in graphs 2.g and 2.h. It can be seen from the graphs that short duration cruises are very popular, helping greatly to increase and capture the younger end of the market. The season also has an influence on the duration of the cruise. As can be seen from graph 2.g, the British take more longer cruise holidays (14% are over 15 days in length) between the months of October and March than in the months between April and September (only 7%). This is due to the type of customers and the specific product on offer. In general, retired people tend to travel during the October - March period. They have a high purchasing power and no employment commitments to hamper their free time, which is why the senior citizens segment should be studied in greater detail.

2.g. Distribution of cruises by duration in days in the british market (2000) Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

April-September October-March

Source: PSA.

36 2.h. Distribution of ocean going cruises by duration in days in the german market

1987 1998

Source: DRV. Alf Pollak.

Table 2.VII. Distribution of cruises by duration for the year 2000

France United States United Kingdom Nights % Days % Days % < 7 26 1-5 37 < 5 18 7506-8 51 5-7 36 8-12 19 9-17 11 8-14 37 > 12 5 > 18 1 15-21 7 > 22 2 Average 7,2 nights Average 6,5 days Average 9,3 days

Source: Croisimer, CLIA and PSA.

According to a report by PATA, (see bibliography 33), the most popular cruises in Asia Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM are weekend cruises and 4-day cruises. This is a result of available free time, which is normally 14 days a year and which tends to be divided up. Cruise duration in Japan is slightly higher for two reasons: round-the-world cruises offered by the cruise line NYK, along with local legislation which forces cabotage cruise liners to be registered in Japan. There are consequent cost implications, as the crew has to be Japanese, and the revenue generated from gambling is less, given the stricter on-board regulations. As there are no port calls in Japanese ports, itineraries offered tend to be longer.

2.2. Qualitative aspects: socio-demographic profile of cruise passengers

"The value that is given to the "ostentatious" quality of a product, linked to the notion of "spending power", is rife in the holiday world, affecting those people who believe themselves to be superior. A great many people are linked to what has recently been described as the "status-oriented" classification in the Vals consumer scale. These peo-

37 ple travel in order to be able to tell others that "they were in such and such a place" and "they did what few people can do" as opposed to travelling for the intrinsic value of the holiday itself. It is more commonly known as the Veblen effect." (See Bibliography 24).

In more recent economic studies on Tourism, cruise holidays have been considered a part of this category, which is especially true of the European and Asian markets, which have not yet developed fully. In the case of the British and US source markets it is more difficult to see it in this way, as the demand curve in relation to price does not behave exactly according to the patterns set out by Veblen.

2.2.1. United States and Canada

The general public that takes cruise holidays represents a wide spectrum of the population, and it is not possible to state that a clearly defined public exists. It can safely be said that it does attract almost all demographic groups(see tables 2.VIII and 2.IX). Trends have remained stable since 1992, including a percentage reduction at the older end of the market (over 60 years old) with consequent reduced use of the terms "unemployed/retired" along with a smaller percentage participation of university graduates. CLIA has identified six segments within the market (graph 2.i), details of which can be found in the bibliography (12) and which are as follows:

a) "Restless Baby Boomers". They are eager for new experiences and new ways of travelling. This segment is the most recent addition to the market. They represent 33% of total cruise holidays and 59% are first-timers.

b) "Baby Boomer enthusiasts". This is a segment of people who have already been convinced, and who are attracted to cruise holidays and the variety of activities that this entails. The cruise itself represents a break from the daily routine, and Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM they tend to travel with their family. They represent 20% of total cruise holidays and 46% are first-timers.

c) "Lovers of luxury". They are prepared to spend money on very high quality goods, which the majority of specialized cruise lines offer. They represent 14% of total cruise holidays and 30% are first-timers.

d) "Demanding buyers". They are in search of the best price-quality ratio. They are the most faithful customers with regard to cruise holidays. They appreciate special promotional offers and discounts. They represent 16% of total cruise holidays and 20% are first-timers.

e) "Explorers". They are well informed and have a vast holidaying experience. They are very interested in the destinations and regions through which the cruise will pass. They represent 11% of total cruise holidays and 20% are first-timers.

38 f) "Boat enthusiasts". This is the oldest segment. They have already taken several cruises and enjoy the on-board stay, finding it pleasant and very comfortable. They represent 6% of total cruise holidays and 13% are first-timers.

2.j. Companion types on cruise holidays within the last five years (in the US and Canada)

Source: CLIA 2000.

Closer analysis reveals that the cruise passenger tends to travel in company, normally with their husband/wife, (graph 2.j) and that the amount of families with small children is still very low, in spite of agents' best efforts to attract this group.

2.k. Type of holiday taken by US and canadian cruise passengers in the last five years Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Source: CLIA 2000. 39 The great potential of the segment can be seen in graph 2.k, in spite of the degree of development already reached in the US. Stays in holiday complexes or resorts, which are its nearest competitor, reach 34%, while cruise holidays are at 15% (although they are on the rise, from 11% in 1990).

Table 2.VIII Demographic profile of cruise passengers in the Caribbean

Country of residence United States 82.3 Canada 8.5 United Kingdom 5.5 Others 3.7

Age 25 years or under 17.6 26 to 35 years 13.1 36 to 45 years 18.7 46 to 55 years 21.2 56 to 65 years 16.7 66 years or over 12.8

Annual income Less than 25 6.7 (thousands of US$) 25-40 16.0 40-60 17.3 60-75 13.9 75-100 22.6 Over 100 23.4

Education GCSEs 15.6 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM A-Levels 23.7 University Degree 37.9 Postgraduate 20.6 Technical College 2.3

Marital status Single 17.2 Married 76.3 Widow(er) 3.2 Divorced 3.3

Employment status Employed 70.8 Unemployed 3.5 Retired 25.7

Source: FCCA. 2000.

40 On-land Activities. Graph 2.l details the on-land activities that take place during the cruise. These activities include panoramic visits, shopping, visits to tourist sites, sightseeing, trips to museums, monuments, and churches and going to the beach. A significant point is that almost 50% of first-time cruise passengers and over 60% of repeat passengers go to restaurants at the destination, in spite of the fact that the package always includes meals on-board and that gastronomy is one of the reasons why the cruise is chosen in the first place.

2.l. Participation in on-land activities of US and canadian cruise passengers

Source: CLIA 2000.

Other factors when choosing a cruise are as follows:

a) the price-quality ratio, Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

b) the itinerary,

c) the good service of the crew.

Average age. At the beginning of the seventies, it was 65 years old. At present the average age is between 43 and 45. This radical change has arisen thanks to the offer of shorter duration cruises (3 or 4 days) that are more suitable for the younger segment of the population, with regard to both available leisure time and disposable income. The great advantage of attracting a younger customer base as opposed to senior citizens lies in the fact that their consumer window is prolonged, and they also tend to be very satisfied with the holiday, ensuring a greater possibility of repeated trips over a period of time in comparison to the older segment of the market.

41 Table 2.IX. Demographic profile of cruise passengers in the US and Canada

1992 2000 Sex (%) Men 45 51 Women 55 49

Age (%) 25-39 years 44 43 40-59 years 35 44 60 years or over 21 13 Average age (years) 44.3 43.0

Children in the Family Unit (%) Yes 43 51 Holiday with children 65 52

Number of Family Members 1-2 47 48 3-4 41 38 5 or more 12 13 Average 2.9 2.9

Annual income 20-39 45 30 (thousands of US$) 40-59 34 31 Over 60 21 39 Average 47.7 60.4

Education (%) GCSEs 25 24 A-Levels 75 76

Marital Status (%) Single 30 31 Married 70 69 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Employment Status (%) Employed 74 76 Unemployed/retired 26 24

Source: CLIA. August 2000.

Level of first-timers. In the mature destinations holiday market a high level of repetition must be maintained. In the sub-sector of the cruise holiday, however, the booms in occupancy levels mean that new customers must be attracted. An important variable to be taken into account is the share of first-time cruise passengers, or first-timers, to this type of holiday. The four main cruise lines, known as the Big Four, are the ones that are creating the demand. Consequently, the level of first-timers for Carnival is 58%, and for RCI 50%, and this is in spite of the considerable increase in fleet capacities for both cruise lines. The average level for CLIA is 48% and, given the enormous influence of the "Big Four", it can be said that the average CLIA share without them is 30%. It is worth making a special mention of Disney, who have set a first-timer quota target of 70%.

42 This is why business initiatives are geared towards capturing new customers. It is also the reason why Carnival have created the "Carnival’s Vacation Guarantee" programme, allowing customers who are not satisfied with the cruise the opportunity to disembark at the first port of call and have their money refunded for the remaining days of the cruise. Operating from non-traditional ports in order to stimulate local demand is another initiative. On this subject, it is worth noting the experience of NCL, who, in 1997, in an attempt to offer a better service than other companies, included Houston amongst its operating ports and thereby increased its first-time customers to 65% of its total.

2.2.2. Europe

The same trends are repeated in all the major source markets: the lowering of the average age of the cruise passenger (although this is still way behind the US market) and the high level of first-timers, are both characteristics of a market in its initial growth phase. Nevertheless, not all European countries are growing at the same rate, which is why it is necessary to briefly analyze the three main markets.

The market in France is beginning to grow considerably, with a trend towards a wider and younger client base. According to Croisimer data, the potential demand is 5 million holidays, and the typical profile of the average French 7-10 day cruise passenger is "a couple with no children, between 40 and 60 years old", representing 40% of the customer base. In spite of this, the family with children segment is beginning to grow substantially, thanks to price-related promotional offers. The over-sixties represent 60% of the total demand and they corner the long (over three weeks), and especially luxury, cruise trip market.

Table 2.X. Demographic profile of British cruise passengers

% Sex Men 46.3

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Women 53.7

Age 12 years or under 2.1 13 to 17 years 1.6 18 to 25 years 2.1 26 to 34 years 5.5 35 to 44 years 11.4 45 to 54 years 22.6 55 to 64 years 24.9 65 to 74 years 20.9 75 years or over 8.9 Average age (years) 53.9

Groups 1 person 7 2 people 77 3-4 people 12 5-6 people 3 7 or more people 1

Source: PSA. 2000.

43 In table 2.XI segments are studied by cruise passenger age in Germany and the UK. The average age of the UK market is lower because of the younger section of the population that is attracted to short Mediterranean cruises. The level of first-timers in the UK has recently decreased from 62% (1994) to 37% (2000) because of the boom in the demand of cruise holidays during the cited period. It is therefore possible to say to a certain extent that the market "is taking a breather". Nevertheless, the level of first- timers is higher in the fly & cruise holidays, which is the largest growing category. The average age has notably decreased in Germany over the last two years, which indicates a major development within this market.

Table 2.XI.

GERMANY UNITED KINGDOM Age Groups 1996 2000* Age Groups 1992 2000 (years) (%) (%) (years) (%) (%) < 25 4 4 20 – 40 15 10 25 – 34 5 5 35 – 44 9 11 40 – 60 46 52 45 – 54 18 23 55- 64 25 25 > 60 39 38 > 65 40 30 Average age 56 50,9 Average age 59,1 53,9

(*) Breakdown of ages from 1997. Sources: Own study with data from Alf Pollak and PSA.

2.2.3 Asia-Pacific

This is very different from the European market, especially with regard to demographic profile and demand. Behaviour and tastes are also very different. Cruise lines tend to use add-ons for Asian customers, who pay extra for on-board activities, as opposed to Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM the all-inclusive package preferred by Western customers. It must not however, be forgotten, that the younger section of the population imitate the American lifestyle, which is a sure guarantee for the success of cruise holidays.

Table 2.XII. Asian demand in 1998

Ages Distribution < 25 years 20% 25 to 39 years 40% > 40 years 40%

Source: PATA.

Japanese cruise passengers of 70 to 80 years of age are very important, and they are fully at ease with their own language and customs. Star Cruises, on the other hand, is attracting young people between the ages of 20 and 30, and it is only a matter of time before they reach the baby boomers. 44 2.3. Specific examples of niche markets

2.3.1. Cruises for American families

One of the ways to win over the youngest end of the market is to attract families, in the hope that the children will remember the cruise holiday as a wonderful experience.

In the US, this segment includes the very important baby-boomer generation that represents over 40% of homes, of which 60% have children. Given that the majority of families look for moderately priced holidays, it also ensures that they tend to purchase all- inclusive package holidays. As they are considered one of the main target groups, the cruise line sector is very well placed to satisfy family wishes by offering moderately priced packages along with interesting complementary activities.

Carnival is considered to be the cruise line that carries the most children within the business and the number one family cruise line. It is estimated that in 1999 over 250,000 children took part in its programmes. It began its children's programme some 25 years ago and currently offers Camp Carnival programmes that have been classified for different age groups, from toddlers up to 15 year olds.

The other two main groups, RCI and P&O Princess, focus their attentions on children, and offer packages for 5 to 17 year olds which include a great variety of on-board activities. Star Cruises, which is the fourth in the group, also pays special attention to families with children, given the large base of the population pyramids in the majority of Asian countries. The majority of companies have recognized the importance of families and have separate children's swimming pools, play areas, children's programmes, discos and meeting places for teenagers, video rooms, etc. It must not be forgotten that cruise ships are a completely safe environment for families with teenagers as they are an enclosed environment. Other companies have included the "Single Parent Plan" for

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM single-parent families.

The efforts to attract families have to be interpreted within the context of a general desire to attract young groups onto cruises. It is an attractive proposition to lure the younger sections of the population, as it is believed that over time they will be high- income earners. Hence they offer discounts for air travel, such as 50% discounts for the under 12s and free flights for children under 2 years of age.

The majority of companies include these special offers for families with children during the peak season, due to the school holidays. As a result of the seasonality of purchases, cruise lines are not excessively dependent on this type of consumer. In spite of the fact that, since entering the market in 1998 Disney has geared itself towards the family market (each of its ships can accommodate 1,750 adults and up to 1,000 children), targets set for cruise passengers travelling without children are 44%.

45 The Berlitz guide (55) states that the following cruise lines are geared towards this segment: Aida Cruises, Carnival Cruise Line, Celebrity Cruises, Cunard, Disney, Norwegian Cruise Line, P&O Cruises, RCI, Star Cruises and Thomson Cruises.

2.3.2. The European Union's senior citizen market

This is the largest growing niche, which is why other economic sectors pay special attention to it, especially in the short-term consumer goods sector. Senior citizens have considerable purchasing power, although questions must asked about how long this situation is likely to last, with an ever-shrinking base within the population pyramid and an increasingly ageing population.

In the report cited in the bibliography (49) it is calculated that this segment undertook 95 million international trips in 1996, while this figure was 60 million in the EU, exceeding the 1993 demand by 22%. Table 2.XIII measures the senior citizen population divided into their respective European Union (EU) countries. In table 2.XIV international trips are measured according to senior citizen age groups. The table clearly reflects the ever-growing importance of this section of the population when it comes to purchasing holidays.

Table 2.XIII. Population over 55 within the European Union Data measured in thousands for 1996

Country Total 55-59 60-64 65-69 70-74 75-79 80-84 >85 >55 Population Germany 84,068 6,072 4,866 4,066 3,381 2,384 1,573 1,504 23,846 Austria 8,054 507 353 366 343 239 151 142 2,101 Belgium 10,204 519 532 527 460 310 195 182 2,725 Denmark 5,269 294 247 221 203 168 116 100 1,349 Spain 39,224 1,840 2,118 2,004 1,691 1,204 779 621 10,257 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM France 58,470 2,716 2,817 2,768 2,435 1,691 2,251 14,678 Finland 5,109 282 240 235 199 140 92 66 1,254 Greece 10,583 595 660 603 438 295 224 173 2,988 Netherlands 15,653 800 699 640 552 421 279 212 3,603 Ireland 3,556 153 135 121 109 85 55 37 695 Italy 57,534 3,548 3,248 3,074 2,693 1,751 1,223 1,022 16,559 Portugal 9,868 519 522 492 418 294 174 116 2,535 United Kingdom 58,610 2,984 2,763 2,611 2,353 1,887 1,266 1,108 14,972 Sweden 8,946 488 407 393 381 341 233 193 2,436 TOTAL 375,148 21,313 19,603 18,117 15,652 11,206 8,607 2,927 99,998

Source: Travel & Tourism Analyst.

The natural customer base for cruises has always been the older sections of the population, which is why many operators attempt to broaden the market by focusing on young families with children, as has previously been seen. Companies, however, have noticed that they must make the most of senior citizen purchasing power, as they have

46 a great affinity with their product. On the one hand they offer a holiday that combines the comfort of a good hotel with a vast range of activities, and on the other hand on- board entertainment, as well as the culture on offer at the ports of call throughout the cruise. In fact, the British tour operator Saga has gone one step further, by not allowing anybody under 50 years of age on board its ships. Like Saga, Swan Hellenic also advertizes itself as a child-free cruise line.

Table 2.XIV. International trips of the over 55s in the EU in 1996

Segment Population Holiday Trips Per capita (thousands) (millions) holiday trips 55-59 21,340 17.0 0.8 60-64 19,628 13.7 0.7 65-69 18,141 10.9 0.6 70-74 13,318 6.7 0.5 >75 23,434 11.7 0.5 Total 95,861 60.0 0.6

Source: Travel & Tourism Analyst.

Table 2.XV shows the modes of transport used by this segment of the European population, with the highlight being that cruise/ferry, with 10%, is used more often than the train (7%). Cruises with no flights involved, as offered by the cruise lines Fred&Olsen and P&O, are more geared towards senior citizens.

Transport used by senior citizens in the EU in 1996

Mode of transport Market Share (%) Aeroplane: 31 - scheduled flight 17 - charter flight 14 Car 27 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Coach 24 Train 7 Cruise/Ferry 10 Others 1 TOTAL 100

Source: Travel & Tourism Analyst.

2.3.3. The Conferences and Incentives Segment

The major and continual increase of cruise offers means that is necessary to search for new customers, which is why the cruise is a suitable product for this segment. The reasons are as follows:

47 a) being a novelty,

b) its all-inclusive nature,

c) reservations can be made up to 18 months before departure, and entire ships can be chartered,

d) it has the added advantage of housing all delegates within a closed space, which greatly facilitates the arrangement of functions.

In spite of the fact that cruises tend to convey an image of pure luxury, they can be more competitive in the benefits/costs ratio than other more traditional on-land holidays. Given the increase in ship sizes and consequent increase in accommodation capacity, one of the disadvantages is that the set of incentives may be diminished among the vast quantity of passengers on board. This disadvantage can be resolved by organizing specific cocktail parties and receptions for the group as well as placing special distinctive notices on the cabin door of each of the group members.

The majority of long-journey ships are well equipped for this. A noteworthy example is reflected in the facilities that have been installed by Sony in the new "Celebrity" ship belonging to the cruise line of the same name. It has a hall that can accommodate 242 people and can be used as a cinema or as a conference hall. It is also equipped with the most up-to-date audio-visual systems: simultaneous translation booths for different languages, the capacity for multimedia presentations, computer-generated graphics, video conferences via ship-to-earth satellite, conference calls, etc.

With regard to capacities, most large ships have large 700 to 800 capacity assembly rooms. RCI's "Voyageur of the Seas" has the largest hall that has been built to date, with a 1,350 capacity, slightly surpassing the "Paradise" (1,300 seats) and easily surpassing the "Vision" which caters for 1,171 people. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Cunard estimates that 15% of its business is from Incentives and Conferences. Other more conservative companies speak of 5% in Europe and a somewhat higher percentage in the US. Groups tend to be made up of 50 passengers for itineraries of 4/7 nights, or else an entire ship is chartered for 3 nights. RCI forecasts that it will establish a 19% market share in the US within the next 3 years, 7% in the UK and 5% in continental Europe. Cruises organized by large companies are widely approved of in Japan with a formula that is known as the study-tour. The cruises are shorter in duration and are geared towards training and allowing staff to get to know each other.

2.3.4. Theme cruises

As the market grows it becomes more specialized, with a need to offer frequent passengers new products, which can be achieved by introducing new itineraries-destina-

48 tions or by adding specialized products. An example of this specialization is Carnival's very own "Paradise" ship, which is exclusively dedicated to non-smokers. Nearly all the cruise lines offer theme cruises in ever greater measures. HAL, for example, offers a cruise in the Caribbean with the screening of films from the forties, while other cruises are dedicated to the Bavarian Oktoberfest or even to wine tasting. Disney cruises are fully integrated in the theme cruise.

They are also very common in Northern Europe, and include: the "Viking Theme" that calls at the ports of Aalborg and Aarhus in Denmark, and the ports of Visby and Stockholm in Sweden; the "Amber" itinerary or the "Golden Baltic Sea" itinerary that calls in at the ports of Bornholm (Denmark), Gdynia (Poland) and Kaliningrad (Russia); the Hanseatic cruise that calls at the ports of the famous Hanseatic trading league: Lübeck, Hamburg and Rostock.

2.3.5. Adventure cruises

They can be divided into three sub-divisions:

a) Expedition/exploration. This entails using "zodiacs" to reach areas which are difficult to access. The most popular itineraries are the poles. The demand is modest but not insignificant: for example, Antarctica attracts 63,000 Americans and Canadians every year. The companies that normally operate this niche market do not belong to the big groups, with the exception of Orient Lines (Star Cruises/NCL) and Hapag-Lloyd (with its ships the "Bremen" and the "Hanseatic"). The following specialized cruise lines stand out: The World Cruise Company and Abercrombie&Kent with their ship the "Explorer". Clipper, Marine Expeditions and Quark Expeditions are notable because they offer itineraries through the Arctic, Greenland and Antarctica, and use Russian icebreakers. Altogether it is estimated that the offer comprises 63 ships and 5,500 berths. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

b) Partial or complete sailing ships that offer all manner of comforts, such as the Windstar, along with cruises that encourage passenger participation with the crew, such as the Windjammer. The world offer comprises 19 boats, with a total of 2,300 berths.

c) Other specialized ships. Itineraries on these ships have a strong educational element, similar to the German cultural visits or "Studienreisen", with a slight adventure element included (soft adventure). Swan Hellenic and Orient Lines are the cruise lines that specialize in this niche market.

2.4. Analysis of the supply and demand relationship

The demand and the supply are studied respectively in section 2.1 and in chapter 3 of this report. The study into the relationship between both variables provides a series of 49 economic keys on the performance of this market, which are essential for a greater understanding of the subject. Perhaps the most important element is that the tourist cruise is a product that has not yet entered its maturity phase, not even in the more prosperous US source market, which will be discussed a little later.

It is well known that all economic theories attempt to establish the ideal conditions required for each market in order to prove the equation:

Supply = Demand (2)

The above equation is a demonstration of a dynamic equilibrium. The production capacity is ever changing, and has no constant variable as far as the supply of cruise berths is concerned. The variable is instead discreet, with the capacity for accommodation in each cruise representing a step or leap in the supply. First of all, the relationship between supply and demand must be fully considered, as the general balance that corresponds to several similar goods that satisfy an identical need must also be taken into account. In this case there is a multitude of causal connections that are difficult to defi- ne and incorporate into one single pattern. Nevertheless it is possible to highlight the following:

- An increase in demand for cruises can be compensated for by the fall in demand of other substitute holidays, above all resort holidays. On this point, according to data from the CLIA 2000 report, the demand for resort holidays amongst cruise passengers themselves is far greater (35%) than for cruise holidays (14%) in the 1993-2000 period (see graph 2.k).

- The supply of all goods tends to increase when new advances in technology take place that are of sufficient and significant force. The construction of the VLCVs is a case in point, having allowed economies of scale to be applied to the lower-middle segment of the market. A dense network of flight connections has also impro- Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM ved accessibility to a greater number of towns and cities. This fact has assisted the expansion of fly + cruise packages and shorter duration cruise holidays, both of which are in great demand.

- The increase in the disposable income of families, coupled with cruise prices, have a considerable influence on the supply-demand dynamic and on the corresponding elasticity rates. The effect of supply on the latter can be clearly seen in graph 2.n.

A strict initial analysis between supply and demand reveals average occupancy levels, which are detailed in table 2.XVI for the period 1989-2000. It can be seen that very high occupancy levels of between 90% and 100% are achieved, figures which are very similar to charter flight levels and higher than holiday hotel levels. The fact that in some cases the figures exceed 100% can be explained by the fact that extra berths in the cabins are not taken into account, while the ship's real occupancy levels are taken into account by the actual demand. The turnover values of passengers by berth also indicate an intensive use of the ship facilities. 50 Table 2. XVI.

Sample 1989 1991 1993 1995 1997 1999 2000 Passenger per day (millions) 27.74 32.96 36.47 38.72 47.23 58.64 66.96 Berth supply (thousands) 81.00 100.65 114.11 132.53 160.10 194.28 212.62 Berth per day supply (millions) 28.34 31.98 36.25 42.10 50.86 60.86 66.60 Passengers per berth 49.60 48.90 49.17 43.05 42.54 n.d. n.d. Occupancy 97.88 103.09 100.59 92.01 92.85 96.35 100.53 Source: GP Wild (International) Limited.

It is well known that a product is not considered mature when increases in supply are followed by parallel increases in demand, without there being a fall in prices. Trippe's conversion factors, defined in section 2.1 and set out in table 2.V, support the fact that development within European markets, especially on the continent (0.004), and in the Japanese market (0.002) are substantially less than in the US (0.023).

Focusing attentions on the US market, on which a great deal of detailed research has been done, it has been established that the potential yet unattended demand is very high. Estimates from CLIA's report from the year 2000 place the figure for this at 43.6 million people over the next 5 years, when the real volume of trips/year is 6.9 million (see graph 2.c), resulting in a degree of development of gUSA ; 2000 = 0.158. This means that only 15.8% of potential demand is being served. The other indicator defined in section 2.1 is the level of first-timers, set around the 50% mark (see section 2.2.1), in a market in which the supply is growing at an annual cumulative rate of 12%.

GP Wild (International) Limited's figures (see bibliography 56) and table 2.XVII and following tables, set out the full data for past world supply and demand along with forecasts for the future. A study of the data reveals the following: Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM a) From the period 1992-2000, the increase in the net supply (∆supply = +93%, or +8.55% cumulatively per year) has been less than the demand (∆demand = +97%, or +8.87% cumulatively per year), which is why the average occupancy levels have improved slightly from 98.18% to 100.53%. The large cruise lines are the major protagonists offering additional capacity and have maintained their occupancy levels stable, although RCI figures are slightly better than those of Star Cruises and P&O Princess (see table 2.XVIII), with Carnival figures the worst of all. This situation is different from that of two years ago, which indicates that the excess tonnage of the smaller cruise lines has either been removed (bankruptcies of Premier and Commodore Cruises), or has been absorbed by more efficient management of assets.

b) Graph 2.m shows that over the same period major variations in supply are followed by parallel movements in demand. This is a clear indication of the success of the marketing efforts that have been made by the sub-sector.

51 2.m. Variation in world supply and demand of cruises 1992-2007 (by percentage)

Source: GP Wild (International) Ltd.

c) For the period 2001-2007 a slightly lower increase is forecast in supply (+38.2%) than in demand (+39.6%), which will inevitably ensure that the current business structure is maintained.

d) The increase in nominal terms of 19,6% for the 1992-2000 period for average revenue per cruise passenger and an almost identical level in real terms (-5%), clearly indicate that the tourist cruise has not yet reached its maturity phase.

e) Nevertheless, the forecast for 2001-2007 suggests that the revenue per cruise passenger will remain constant with the dollar figure set in 2001.

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Table 2.XVII. Evolution of supply and demand 1992-2000

1992 1993 1994 1995 1996 1997 1998 1999 2000 Demand (mill. nights) 33.92 35.82 36.77 38.47 42.22 47.07 53.75 58.64 66.96 Total supply (thousands of berths) 108.76 114.11 122.20 132.53 147.54 160.10 177.04 194.28 212.62 Net supply (thousands of berths)1 98.72 103.58 110.92 120.30 133.92 145.32 166.42 173.88 190.29 Supply (thousands of berths x days) 34.55 36.25 38.82 42.10 46.87 50.86 58.25 60.86 66.60 Occupancy (%) 98.18 98.79 94.71 91.37 90.06 92.54 92.28 96.35 100.53

1 Considering that the inactive tonnage up to 1997 is 9.23%, 6% in 1998 and 10.5% in 1999. Source: GP Wild (International) Limited.

52 Table 2.XVIII. Occupancy levels of the main cruise lines

1996 1997 1998 1999 2000 Carnival 107.6 108.3 106.3 104.3 105.4 RCI 101.3 104.2 105.2 104.7 104.4 P&O Princess n.d. 98.8 99.0 100.0 99.3 Star Cruises n.d. n.d. 88,1 100.9 90.6

Source: GP Wild (International) Limited.

Table 2.XIX. Supply and demand forecast 2001-2007

2001 2002 2003 2004 2005 2006 2007 Demand (berths) 184,329 195,339 207,851 220,646 234,006 246,399 257,320 Net supply (berths) 198,110 223,025 246,725 264,458 258,957 271,549 273,688 Occupancy (%) 93.04 87.59 84.24 83.43 90.37 90.74 94.02

Source: GP Wild (International) Limited.

Table 2.XX. Estimated revenue per cruise passenger 1992-2000

1992 1993 1994 1995 1996 1997 1998 1999 2000 Total cruise passengers (mill.) 5.14 5.51 5.57 5.74 6.30 7.03 7.79 8.62 9.70 Average revenue / cruise passenger (US$)1 1,121 1,197 1,199 1,167 1,135 1,160 1,368 1,478 1,341 Total Revenue (mill.US$) 5,760 6,660 6,720 6,750 7,160 8,180 10,690 12,920 13,010

1 Revenue generated by the shipping companies but which is not related to the cruise line business has not been included. Source: GP Wild (International) Limited. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Table 2.XXI. Revenue per cruise passenger forecast 2001-2007

2001 2002 2003 2004 2005 2006 2007 Total cruise passengers (mill.) 9.35 9.91 10.54 11.19 11.87 12.50 13.05 Average revenue / cruise passenger (US$)1 1,340.7 1,340.7 1,340.7 1,340.7 1,340.7 1,340.7 1,340.7 Total Revenue (mill.US$) 12,540 13,290 14,130 15,000 15,910 16,760 17,500

1 Prices calculated with data from the year 2000. Source: GP Wild (International) Limited.

Two years ago it was possible to say that the cruise market had excess supply, whereas currently it seems that a balance has been reached between supply and demand, without having generated a price reduction. This fact is reflected in the maintenance of revenue generated per cruise passenger (see graph 2.n), due to the tourist cruise going through its phase of expansion, and, given the existing potential and unattended demand, it is possible that it may remain like this for the medium term (2007).

53 2.n. Evolution of supply and world revenue per cruise passenger 1992-2000

Source: Own, with data by GP Wild (Internacional) Ltd

In spite of the balance that currently exists, a situation may arise that disturbs the balance between supply and demand, such as the situation in the world economy in 2001 that was temporarily aggravated by the events of September 11th. This may cause problematic situations for short periods of time. There are three reasons why the room for manoeuvre of the big companies is greater:

a) They have experienced a boom outside their traditional source market of the US. The main focus for this lies in the UK and Scandinavian markets, and allows the big companies to spread the risks.

b) Their growth, which has been based on multiple mergers between companies. lea- ves only the smaller companies at a disadvantage. Given their larger size they have a better financial position, which may be because they find funding at better rates, Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM or thanks to their own large volume of resources generated (cash flow).

c) Should they be faced with a drop in demand, the size of their fleets enables them to realistically postpone the commissioning of new orders by one to two years. It must not be forgotten that they control 85% of the order book for 2001-2006.

54 3 A STUDY OF THE SUPPLY: BUSINESS STRUCTURE

3.1. Main Cruise Line Associations

Existing associations do not, under any circumstances, set common pricing and transportation policies, which is why these associations are not Conferences. Nevertheless, they all have very similar objectives:

a) to promote cruise holidays collectively, through advertising programmes, market research, publications, etc.

b) to train the selling agent: travel agents, with corresponding training certificates.

c) sometimes they join forces to lobby governments and international organizations. ICCL and FCCA are a case in point.

3.1.1. United States of America and Canada: CLIA, ICCL and FCCA

3.1.1.1. Cruise Lines International Association (CLIA)

It was founded on 7th July 1975. Cruise Lines International Association (CLIA) is an organization devoted to marketing and training, whose main objective is "to provide a forum where companies engaged in the marketing of passenger cruises in the United States and Canada can meet and discuss matters of common interest and develop and agree on policies aimed at promoting the concept of cruise holidays."

The 23 largest cruise line companies -representing 95.1% of the total market share and 81.2% of the ships- are members of the CLIA, as well as 19,000 travel agencies (66% of the total within the United States). See table 3.I CLIA's headquarters are in New York. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM The directors of all the member companies make up the Managing Committee, which is headed by an elected Chairman who serves a two-year term and is assisted by a Vice Chairman. A seven-member Executive Committee (including the Association President) provides the link between CLIA staff and Managing Committee meetings. A Marketing Committee also works closely with CLIA staff in developing CLIA's programmes.

Its main activity is focused on the following: travel agent training seminars and corresponding certification (ACC = Accredited Cruise Counsellor and MCC = Master Cruise Counsellor), public relations campaigns, a major advertising campaign, as well as the publication of several different periodicals, the most notable of which are: "The Cruise Industry. An Overview." and the "CLIA Cruise manual", geared towards travel agents.

CLIA Member Capacity NS * CLIA Non-Member Capacity NS * Companies (berths) Companies (berths) American Hawaii Cruises 867 1 American Canadian 244 3 Carnival Cruise Line 26,885 14 American West Steamboat 163 1 Celebrity Cruises 8,218 5 Classical Cruises 140 1 Commodore Cruise Line 1,177 2 Clipper Cruise Line 240 2 Costa Crociere 7,047 6 Club Med 386 1 Crystal Cruises 1,884 2 Delta Queen Steam Boat 1,024 3 Cunard Line 3,131 5 Europamerica River 792 5 Disney Cruise Line 3,508 2 Renaissance 3,692 9 First European 3,622 4 Star Clipper 572 3 Holland America Line 11,742 9 Mediterranean Shipping C. 3,449 4 Norwegian Coastal Voyages 4,263 11 Norwegian Cruise Line 12,306 8 Orient Lines 845 1 Premier Cruises 5,022 5 Princess Cruises 14,670 9 Radisson 7 Seas 1,524 5 Regal Cruises 873 1 Royal Caribbean International 24,714 12 Royal Olimpic Cruises 3,277 6 Seabourn Cruises 612 3 Silversea Cruises 592 2 Windstar Cruises 756 4 TOTAL 140,984 121 TOTAL 7,253 28

(*) NS: number of ships. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Source: CLIA August 2000.

3.1.1.2. International Council of Cruise Lines (ICCL)

It acts as a lobby group in Washington, D.C. and represents the main 18 US companies (Carnival Cruises, Celebrity, Commodore, Costa, Crystal, Cunard, Disney, Dolphin, Holland American, Majesty, Norwegian, Princess, Regal, Renaissance, Royal Caribbean, Royal Olympic, Seabourn and Windstar). In 1997/98 it launched its Associate Membership Programme, in order to extend its market reach, encompassing the 500 main travel industry suppliers (airlines, hotels, car hire companies, tour operators). Its newsletter "Even Keel" is published every three months.

It comprises an array of different committees split into: technical, legal, public relations and legislative activities. They deal with issues of security, public health, insurance, medical facilities, environmental awareness, consumer/passenger protection and promoting changes in the law.

56 One of its most important roles is representing the industry's best interests before key US and international organizations with the power to establish new international maritime laws that may affect its members. They include the IMO (International Maritime Organization) that sets the recognized safety standards known as SOLAS (Safety of Life at Sea) and the basic regulations for training crews, STCW (Standards of Training Certification and Watchkeeping) and the ISM Code (International Safety Management). The US Coast Guard is responsible for monitoring compliance with these standards in the US.

It also has close links with other organizations such as the CDC (Centre for Disease Control and Prevention), which regulates the health and safety conditions in all ships that enter US ports, as well as with US Customs Services, US Immigration and Naturalization Service, Federal Maritime Commission, Department of Agriculture and the US Congress.

3.1.1.3. Florida-Caribbean Cruise Association (FCCA)

Founded in 1972, its main objective is to promote good working relations between the US cruise industry and the port authorities and governments of the Caribbean islands. Since 1992 it has commissioned the Cruise Line Impact Study, which analyzes the economic effect of the sub-sector of cruise ship tourism on the countries of the area. It is made up of the following member lines: Cape Canaveral Cruise Line, HAL, Carnival, NCL, Celebrity, Premier Cruises, Costa, Princess, Cunard, Regal Cruises, Disney and RCI.

3.1.2 Europe: PSA, Croisimer and VFF

3.1.2.1. Passenger Shipping Association (PSA) Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM A British Association whose members include the 35 cruise lines and 19 ferry companies that operate in this market. It was established in 1958 under the name of Ocean Travel Development (OTD), the very year when aeroplanes overtook ships in volume of transatlantic passenger traffic. Its objectives are to promote sea travel among the general public, to boost sales within the sector and to fight against all manner of restrictions, above all tax restrictions. It acts as a lobby group before the British Government and the European Union, and works closely with ABTA (Association of British Travel Agents) as well as with other tourist associations. Since 1987 it has helped in the training of travel agents via its subsidiary PSARA (Passenger Shipping Association Retail Agents Scheme).

Cruise companies have their own representation in the UK, which is known as GSA (General Sales Agent). Ferry companies serve routes from or within the UK. It is run by the Management Council which has representatives from 7 cruise companies and 5 ferry companies. Annual meetings are normally held in July. The PSA is split into two

57 sections: ferries and cruise ships. It publishes an annual report on the state of the market entitled "Annual Cruise Market Digest".

3.1.2.2. Croisimer

A French Association, established in 1970 in Paris by American Express, CIT, Havas, Transcar and Wagon Lits, with the initial aim of providing information to its members, (e.g. travel agents), on sea trade. It currently comprises seven cruise and ferry companies, making up 95% of the market share.

Its main activities are organizing conferences, promoting the sale of cruises and publishing the brochure entitled "Bien vendre le maritime". It also helps in the university training of professionals, having helped establish the Maritime Marketing Institute in the Sorbonne.

3.1.2.3. Verband der Faehrschiffahrt und Faehrtouristik e.V. (VFF)

VFF was founded 4 years after the disappearance of Seepassage-Komitee Deutschland (SPKD) in 1991. Its headquarters are in Hamburg, its role is identical to its predecessor, and it has 31 ordinary members and 12 non-ordinary members. Its objectives are to promote the image and sales of cruise trips among travel agents and tour operators, unify booking systems and train travel agents.

3.1.3. Asia

3.1.3.1. International Cruise Council Australasia

The association is made up of 15 companies and is dedicated to promoting the cruise experience all over the world. The 15 company members are: Captain Cook Cruises, Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Carnival Cruises, Celebrity Cruises, Crystal Cruises, Cunard, MSC Cruises, Norwegian Cruise Line, Orient Lines, P & O Cruises, Radisson Seven Seas Cruises, Royal Caribbean International, Royal Olympic Cruises, Seabourn, Silversea Cruises, and Star Cruises.

In 2001 it had 670 travel agent members, thanks to the CLIA agent-training programme. This programme is called the Cruise Counsellor Certification Programme and awards two different qualifications: the Accredited Cruise Consultant (ACC) and the Master Cruise Consultant (MCC).

3.1.3.2. Japan Oceangoing Passenger Ship Association

It was founded in May 1990. The cruise ship companies are regular members, while other suppliers including banks, insurance companies, airlines, travel agents, shipyards and local governments are classified as associate members. It has a total of 9 regular members and 40 associate members, of which 11 are local authorities. In November

58 2001 the regular members were as follows: Camellia Line Co., Kampu Ferry, Kyushu Railway, Japan Cruise Line, Mitsui O.S.K. Lines, Mitsui O.S.K. Passenger Line, NYK Cruise and Orient Ferry.

Its main objectives are: to improve security on cruise lines, to protect the people on the ships, to carry out market research and establish marketing guidelines. In order to do so it has developed the following lines of work: measures to ensure the safe operation of passenger liners and measures to protect users, in the areas of transportation and insurance.

3.2. Cruise classification

It is a difficult task to classify cruises by category. Nevertheless the best and most widely accepted is the Berlitz Guide's classification. See bibliography reference (55).

The aforementioned guide classifies cruises in 10 different categories: from 5 stars plus to 1 star. It carries out 400 inspections in 20 specific areas with each being scored out of 100 points, giving a maximum score of 2,000 points. The 5 major areas taken into account are:

- the ship (weighting 25%),

- the accommodation (15%),

- the cuisine-gastronomy (15%),

- the service (20%),

- the programme, i.e. the itinerary plus on-board activities (25%). Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

This is also the same classification system that is used by Lloyd’s. The corresponding categorization is Super Deluxe for Lloyd’s which is equivalent to 5 stars plus for Berlitz, Deluxe plus (4 stars plus and five stars on the Berlitz scale), Deluxe (4 stars), and Standard and Economy (the equivalent of 3 stars plus or less). It is quite interesting to compare these categories with the corresponding tariffs as set out in point 4.2.

According to its "life style" classification, Berlitz classifies cruise lines in three groups:

- Standard: lower band in price scale.

- Premium: middle band with better restaurants, services and facilities than the previous group.

- Luxury: upper band with the best on-board facilities, excellent service and restaurants and undoubtedly the best cruise experience of all. 59 The cruise lines under examination here are classified, according to the aforementioned bibliography reference 55, as follows:

- Standard: Aida Cruises, Disney Cruises, Festival, Hapag-lloyd, Louis Cruises, Mediterranean Shipping Cruises, P&O, Pullmantur Cruises, RCI, Spanish Cruise Line, Star Clippers, Thomson, Airtours, Carnival Cruises, Costa, First Choice, Norwegian Cruise Line, P&O (Australia), Princess Cruises, Royal Olympic Cruises and Star Cruises.

- Premium: Club Mediterranée, Fred Olsen, Holland America, NYK, Orient Lines, Saga, Swan Hellenic, Windstar, Celebrity, P&O and Radisson Seven Seas.

- Luxury: Crystal Cruises, Hapag-Lloyd, Radisson Seven Seas, Seabourn, Cunard, Sea Cloud and Silversea Cruises.

The main cruise lines are listed in table 3.I a.

Table 3.Ia. Main cruise lines that offer passenger sea cruises (January 2002)

4 Main Groups United States of Europe Asia Carnival Royal Caribbean P&O Princess Star Cruises America and Corporation Cruises (RCC) Group Canada Carnival Cruise Royal Caribbean P&O Star Cruises Clipper Cruises Louis Cruises Indian Ocean Lines (CCL) International (RCI) Royal Olympic Cruises Cruises (ROC)

Holland America Celebrity Cruises Swan Hellenic Norwegian Cruise Crystal Cruises Festival Cruises NYK Cruises Line (HAL) Line (NCL)

Windstar P&O (Australia) Orient Lines Disney Cruises Saga Cruises Mitsui OSK

Costa Crociere Princess Cruises Radisson Seven Airtours Sun Japan Cruise Seas Cruises Line

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Cunard Aida Cruises ResidenSea Thomson Cruises Hyundai

Seabourn Cruise Silversea Cruises Fred Olsen Line Star Clippers Page and Moy Hapag Lloyd Peter Deilmann Club Mediterranée Nouvelles Frontières Mediterranean Shipping Cruises (MSC) Valtur Spanish Cruise Line Pullmantur Cruises Vistamar Canarias Source: Own study.

60 3.3. Main Groups

In the cruise ship tourism subsector there are very rapid moves in horizontal concentration in line with the accelerated process of globalization, as seen in table 3.II. Europe is the only region in which the four main groups do not control over 50% of the market share. As can be seen in chart 3.a, they hold 78% of the world supply of berths. These groups are: Carnival Corporation, Royal Caribbean Cruises (RCC), P&O Princess and Star Cruises. These multibrand companies are known as The Big Four.

3.a. World market share of the main cruise line groups

Source: Lloyd’s Shipping Economist 2001.

Table 3.II. Market share (%) of offer in destination regions

Group Caribbean Alaska Europe Far East Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM 2000 1999 2000 1999 2000 1999 2000 1999 Carnival 37,8 38,5 31,2 31,0 23,6 19,1 0,4 4,5 RCC 25,7 24,0 23,7 25,0 4,1 3,8 0,2 0,5 P&O Princess 5,9 5,5 29,0 32,0 9,1 5,8 3,5 3,5 Star Cruises 7,5 7,0 12,9 9,0 4,3 3,1 74,4 66,0 Total 76,9 75,0 96,8 97,0 41,1 31,8 78,5 74,5

Source: Christiania Bank og Kreditkasse ASA.

The process of consolidation is an indicator of the degree of maturity which is being reached17. To give an example of the ever-changing situation that currently dominates the industry, one need only look back at the last four years, in which there have been many major changes:

17 For the companies it is a more economical way of expanding than mere organic growth. Compare the figures that are detailed in every takeover or merger, with the price of each new vessel, which varies between 200 and 500 million dollars. 61 A) RCC purchases Celebrity Cruise for 1.3 billion dollars, in spite of Carnival's takeover bid.

B) Carnival Co. buys 50% of Costa Crociere for 452 billion lira.

C) Carnival Co. takes over Cunard, for the price of 500 million dollars.

D) Star Cruises purchases NCL for 600 million dollars, exceeding Carnival's initial bid.

E) P&O Princess purchases 51% of Aida Cruises in Germany.

F) The start of merger talks between P&O Princess and RCC towards the end of 2001 were cut short by the 5.4 billion dollars offer made by Carnival Co. in February 2002.

In 1998, the all-powerful Walt Disney entered the cruise line market, acting as a catalyst by improving the image of cruise holidays and increasing the number of customers, especially in the family segment.

The Big Four operate on occupancy levels around or above the 100% mark, which is not mirrored in any other sector within the holiday market. It is this statistic that has driven the shipping companies into a policy of intense growth. In order for the market to grow there needs to be more ships, which is why the level of new boats being built has soared. As has already been cited in section 2.4, all passenger capacity levels stated within this study are based on the occupancy of a double cabin, when it is a known fact that they are often used by families with children. This explains why Carnival or RCI, for example, can publish passenger numbers on their ships at over 100%. All the groups operate in the US holiday market.

Fleet data for the Big Four is set out in table 3.III, and allows the reader to make com- Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM parisons between them. The market leadership of the Carnival group is clear for all to see. RCC stands out as having the market's most modern fleet, and efforts made by Princess (P&O Princess) are also evident in the doubling of its capacity in the space of three years. Chart 3.b details capacities for 2002 and how things are expected to look in 2004. Chart 3.c shows projected sales for 2001.

62 3.b. Main cruise company groups: capacities

Source: Own study.

Table 3.III. Position of main groups (January 2002)

Group/ Total Fleet Order book Cruise Line NS18 GT18 GT/ berths Average NB GT GT/ berths Berth Age Berth CCL 16 1,175,806 35.5 33,126 6.62 5 502,000 38.2 13,146 HAL 10 556,257 41.7 13,346 6.90 5 420,000 45.5 9,240 Windstar 4 30,666 40.6 756 14.00 0 0 0 0 Costa 8 389,300 38.0 10,245 15.62 3 295,700 38.9 7,594 Cunard 8 171,081 41.5 4,124 17.50 1 150,000 57.3 2,620 Carnival 46 2,323,110 37.7 61,597 10.78 14 1,367,700 42.0 32,600 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM P&O 6 295,144 39.6 7,448 13.33 1 110,000 42.3 2,600 Aida Cruises 2 57,191 34.3 1,666 10.50 2 82,400 32.4 2,540 Princess 10 730,727 39.9 18,306 8.50 5 511,000 43.7 11,700 P&O Princess 18 1,083,062 39.5 27,420 10.33 8 703,400 41.8 16,840 RCI 15 1,248,866 37.8 33,066 6.20 5 529,556 42.0 12,606 Celebrity 8 592,378 42.0 14,118 4.50 1 91,000 47.9 1,900 RCC 23 1,841,244 39.0 47,184 5.61 6 620,556 42.8 14,506 NCL 8 540,743 36.5 14,806 10.25 1 91,000 43.3 2,100 Orient L. 2 56,322 29.6 1,902 24.5 0 0 0 0 Star Cruises 9 308,189 36.2 8,502 11.67 2 224,000 37.3 6,000 Star Cr. Group 19 905,254 35.9 25,210 8.50 3 315,000 38.9 8,100 TOTAL 106 6,152,670 38.1 161,411 9.88 31 3,006,656 41.7 72,046

Source: Own study using data from PSA and Lloyd’s Cruise Int.

18 NS: number of ships. GT: Gross Tonnage. 63 3.c. Main cruise company groups: projected sales 2001

Source: Christiana Bank og Kreditkasse ASA.

These four main groups are described below in alphabetical order.

3.3.1. Carnival Corporation

It is the undisputed leader in both the US and the world market, although if the merger between RCC and P&O Princess goes ahead it will no longer be the biggest company. Figures are based on a market capitalization in 2001 of 15,583 billion dollars. Micky Arison owns 22% of the share capital, and holds 38% of the votes, thanks to Arison Holdings Ltd., and the Arison family also owns an additional 25% of the share capital. It has 33,000 employees. Its dynamic expansion policy is reflected in the fact that, of 85,512 berths that will be put on the market between 2002-2005, 38% will belong to Carnival. In 2000 it carried 2,669 million passengers, and generated 3.78 billion dollars worth of business, with 99% of the revenue coming from cruise activities (84% in the Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM US) and 1% from tour operating activities.

One of the keys to its rapid growth is its heavy investment in marketing and advertising, with the latter rising to 181 million dollars in 2000, mainly in the US and Canadian markets. It has a major building programme and its order book will total 6,195 billion dollars in 2002. It is the parent company of Carnival Cruise Lines (see point 3.3.1.1), Holland America Line/Windstar Cruises (see point 3.3.1.2), Costa Crociere (see point 3.3.1.3) and Cunard Line/Seabourn (see point 3.3.1.4). Its global expansion strategy is based on the following:

a) Northern Europe and Canada: With the purchase of Cunard and its association with the Canadian company Sunquest. During 1996-2001 it had 26% of the share capital of the British tour operator Airtours.

64 b) Latin America. It launched the Fiesta Marina brand in 1993, which did not have the expected success and was consequently wound down the next year. It is currently using Costa Crociere to concentrate its efforts within this market.

c) Southern Europe: the purchase of Costa Crociere in 1997 (Carnival 50%-Airtours 50%) was successfully completed in July 2000.

d) Asia-Pacific: it signed a joint venture (50-50) with the South Korean company Hyundai Merchant Marine to begin business from 1998, as Carnival Cruises Asia, which was subsequently cancelled. The failed joint offer with Star Cruises for NCL was with a view to operation in this area. All of this is a clear indication of its interest within this market.

It has acted aggressively in its previous takeover bids within the sector, though not always successfully, as in the case of NCL, Celebrity Cruises and Aida Cruises, and the most current case regarding P&O Princess.

Since 1998 it has had a marketing association for its 6 cruise companies called The World’s Leading Cruise Lines.

In the words of Bob Dickinson (Carnival's CEO) the successful combination of so many different brands is as follows: "It is based on the theory of elasticity of price/demand. All the brands can be envisaged within a triangle with Cunard-Seabourn at the top, as it is a super deluxe product (850-1,000 dollars/day) with relatively small package sales of 30,000. Carnival is located at the base of the triangle, and offers a popular and large selling product with over 1.5 million package sales. As HAL has a slightly higher daily price (330 dollars) it lies halfway up the triangle, with lower package sales figures of 350,000. Costa is a mass-tourism product for the European market, while Windstar is a very

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM specialized luxury product".

Carnival Group Organization Chart

CARNIVAL CORPORATION Cruise Operators Tour Operators Carnival Cruise Lines Holland America Line Holland America Westours Windstar Cruises Costa Crociere Cunard Seabourn Cruise Line 65 3.3.1.1. Carnival Cruise Lines

The business began in 1972 and is based in Miami. A clear example of its success can be seen in the occupancy figures over the last few years that stand at over 100% (104.3% in 1999, 105.5% in 2000 and 107% in 2001), and it transports over one million passengers per year. The undoubted success of the company lies in the Fun Ship concept that helps create a relaxed and informal atmosphere, along with a wide variety of activities and entertainment, to attract people of all ages and social class. The concept revolves around the ship as a holiday destination in itself, competing with resorts on land. This is why Carnival can offer all-inclusive package holidays in the broadest sense of the word.

It had a fleet of 16 Fun Ships at the beginning of 2002, (see data in the attached table) with a capacity of 33,126 berths. The relationship between GT/berth varies between 40 and 31. It is one of the youngest fleets (the average age of its ships is 6.6 years) and one of the market's most uniform (it has only 4 different types of ship, with capacities of 1,500, 2,000 and 2,600 berths), which both simplifies management and makes it extremely competitive. The Fantasy-class ship (70,367 GT, 2,040 berths) is the most numerous cruiser ever built. Carnival is the company owner, ship owner and cruise line all rolled into one and only registers its vessels under flags of convenience (Liberia and Panama). The crew are international and the officers are exclusively Italian. It is the first company to enter the VLCV segment for ships weighing over 100,000 GT: its Destiny-class ship (101,353 GT, 2,642 berths) sails throughout the year in the Caribbean. It is also the first and only company that has a ship solely reserved for non-smokers: the "Paradise".

In 2001 it launched the new Carnival Spirit class (85,900 GT, 2,124 berths), which represented a true landmark by taking industrial car manufacturing techniques, with a shared platform for different models, and applying them to cruise liners. Carnival Spirit, the Costa Atlantica and HAL's Zuiderdam class all have the same basic hull, the same Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM machine room layout and the same engineering areas. They are Panamax19 class, with 80% of the cabins looking out onto the exterior and 70% having balconies20. The waste treatment systems ensures that waste products are not tipped into the sea. As a result it has received the environmental "Green Star" RINA rating.

19 Panamax: name given to those vessels that can pass through the Panama Canal, with a beam length of no greater than 32.25 m being the principal restriction. 20 It is diesel-electric powered, as it was built to sail in the waters of Alaska, which is why it has a no smoke option. When sailing in other parts of the world it is propelled by other methods. It also has the revolutionary propulsion system called Azipod, that gives greater manoeuvrability and a shorter emergency stopping time, thereby improving the ship's safety.

66 Table 3.IV. Carnival Fleet (January 2002)

Ship GT Berths Year of Classification Construction Holiday 46,052 1,452 1985 3+ Jubilee 47,262 1,486 1986 3+ Celebration 47,262 1,486 1987 3+ Fantasy 70,367 2,040 1990 3+ Ecstasy 70,367 2,040 1991 3+ Sensation 70,367 2,040 1993 3+ Fascination 70,367 2,040 1994 3+ Imagination 70,367 2,040 1995 3+ Carnival Destiny 101,353 2,642 1996 4 Inspiration 70,367 2,040 1996 3+ Elation 70,367 2,040 1998 3+ Paradise 70,390 2,040 1998 3+ Carnival Triumph 101,509 2,758 1999 4 Carnival Victory 101,509 2,758 2000 4 Carnival Spirit 85,900 2,124 2001 4 Carnival Pride 82,000 2,100 2001 Pend. Current Fleet Total 1,175,806 33,126 Carnival Conquest 110,000 2,974 2002 Carnival Legend 86,000 2,100 2002 Carnival Glory 110,000 2,974 2003 Carnival Miracle 86,000 2,124 2004 Carnival Valor 110,000 2,974 2004 Order Book 502,000 13,146 Future Fleet 1,677,806 46,272

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

In 1996 it introduced a revolutionary clause called the "Vacation Guarantee", aimed mainly at first-time cruise passengers, which stated that if a client was not satisfied with the cruise experience he or she could disembark at the first port of call and have Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM the full amount of the cruise refunded by the cruise line. In the source markets of the US and Canada it has very close ties with the travel agencies who distribute the product. In Europe it markets its Caribbean cruises with stays in Orlando or in the surroun- ding islands through a GSA (General Sales Agent), which is different from those promoting Costa Crociere cruises and may even be competing against them. In the French market it shares a GSA with Costa. It gives the local GSA free reign to fix prices, although the basic price is the same in all markets, given that the GDS21 and the Internet would invalidate any other option. It also has two major commercial offices in London and Frankfurt am Main.

The international share of the market works out at 13%, which is double that of 7 years ago. In Europe it focuses mainly on the Spanish, German and Italian markets, while in the Americas it focuses equally on the US and Canada and Latin America, as the languages spoken on the boats are English, Spanish and Italian.

21 Global Distribution System: computer distribution system for all elements of the tourist package, including: flights, hotel, care hire, etc. 67 It began by operating 7-day Caribbean cruises up until 1984. In 1996, it was already offering 3 to 16 day cruises in the Bahamas, the Caribbean, Western Mexico (7 days), the Panama Canal, Alaska and Hawaii (11-12 days). It currently operates 3-4 day cruises in the Bahamas, 7 day cruises in the Caribbean and it began cruises in Alaska in 1996. In its drive to conquer the West Coast of the US it has set aside the "Elation" that operates from the port of Los Angeles. It does not operate in the Mediterranean, which is reserved for HAL and Costa Crociere, although the management does not rule out Carnival Cruise Line ships sailing in the area.

3.3.1.2. Holland America Line (HAL)/Windstar

Table 3.V. Holland America Fleet (January 2002)

Ship GT Berths Year of Classification Construction Maasdam 55,451 1,266 1993 4 Noordam 33,930 1,214 1984 3+ Rotterdam 59,652 1,316 1997 4 Ryndam 55,451 1,266 1994 4 Statendam 55,451 1,266 1992 4 Veendam 55,450 1,264 1996 4 Volendam 63,000 1,440 1999 4 Westerdam 53,872 1,494 1986 3+ Zaandam 63,000 1,440 2000 4 Amsterdam 61,000 1,380 2000 4 Current Fleet Total 556,257 13,346 Zuiderdam 84,000 1,848 2002 Oosterdam 84,000 1,848 2003 [HAL 3] 84,000 1,848 2004 [HAL 4] 84,000 1,848 2004 [HAL 5] 84,000 1,848 2005 Order Book 420,000 9,240 Future Fleet 976,257 22,586 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

This cruise line has a great tradition, having been founded in 1873. It was taken over by the Carnival Corporation in 1989. It forms part of the Holland America Line-Westours group, and is the largest tour operator in Alaska and the Yukon. As well as owning the cruise line it also owns Westmark Hotels & Inns (14 hotels), Gray Line of Alaska (150 luxury coaches) and Gray Line of Seattle (the biggest tour operator in the Pacific Northwest with 150 coaches and 13 train wagons). It is based in the luxury segment of the market, with Princess being its main competitor. The World Ocean & Cruise Line Society regularly votes it the Best Cruise Value of the year.

It has been undergoing a major modernization programme since the year 2000, expanding its fleet size and lowering the average age of its vessels to 6.9 years from 11.9 in 1999. Its current capacity is 13,346 berths. It also has a highly uniform fleet, with two basic types of ship with capacity for between 1,200 and 1,500 passengers, to which

68 five new class ships (Zuiderdam) will be added between 2002 and 2005. The GT/berth ratio is high, at around 45, with the exception of its two older boats. All of its ships are registered in the Netherlands, with the exception of the "Veendam" which is registered in the Bahamas. The crew tends to be Indonesian and Philippine, while the officers are Dutch.

It holds a dominant market position in the Alaskan market that it shares with Princess. The cruises combine sailing with excursions to the Yukon, Alaska and even East Russia. Other destinations apart from those previously mentioned are: South America, the Panama Canal, the Mediterranean, the Baltic Sea, the Caribbean, Bermuda, Hawaii, the South Pacific, South East Asia and round the world cruises.

Windstar Cruises, a subsidiary of HAL, is a pioneer in luxury sailing ship cruises. Its advertising slogan is "180 degrees from ordinary". It has 30,000 customers per year and caters for young honeymoon couples to retired people over 70 years old. Its fleet has an average age of 14 years, with a total capacity of 756 berths that works out as a GT/berth ratio of 41. It has three four-mast sailing ships: the "Wind Star", the "Wind Song" and the "Wind Spirit". All of them are 5,307 GT and have 74 double cabins; a more recent addition is the "Wind Surf" (ex "Club Med I") with five masts, 312 berths and 14,745 GT, which has been operating in the French market since May 1998. It offers special holidays, as well as an array of different itineraries that vary from 6 to 14 days, and which explore the many exotic ports of the Mediterranean, the Caribbean and French Polynesia. The most notable new destinations for 2002 are: the Far East, Australia, New Zealand and South East Asia. Travel Holiday magazine awarded it the title of Best of the Best for Small Ship Cruises Experiences in 1998.

3.3.1.3. Costa Crociere

It is one of the oldest companies, founded in 1924 in Genoa (Italy) as Costa Crociere, which merged with the cruise line division of the French group Accor (Croisières Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Paquet) in 1993. It held business talks with RCC in 1996 without success, and was subsequently purchased by Carnival Corp. and Airtours (50%-50%), with the former acquiring the other 50% in July 2000 for a figure of 510 million dollars. It is the market leader in Europe with a share of 25%, as well as in Latin America. All of its ships are based in Europe over the summer. Despite the international character of its client base, it stands out with its own Italian style, reflected in the interior decoration of the ships as well as in the on-board activities: the famous "Roman Bacchanalian" party, Italian classes, Italian cooking classes, Italian wine tasting, etc.

It is renowned for its wide experience of dealing with a multinational clientele and several different languages at the same time. In some cases the crew can speak up to five languages fluently and know the diverse customs of each of the different countries. The national breakdown of its clientele in 1998 was as follows: 42% Italian, 22% French, 14% US and Canadian, 7% German, 6% South American, 4% Spanish and 3% British. In order to avoid any linguistic obstacles the on-board entertainment programme always

69 has universally recognized themes such as magic, singers and dances. Multinational theme nights are organized and include: Siberian Circus, Arabian Nights, etc. The utmost care is taken to avoid linguistic obstacles, so that guests tend to be seated in linguistic blocks in the restaurants, receive the menu in their native language, and have waiters who speak their language assigned to their tables.

The average age of the ships is quite old (15.6 years) and its berth capacity is 10,245, having been streamlined after Carnival took control of the business. Nevertheless there are a great many types of ship, and its GT/berth ratio stands at around 32-41. The first VLCV geared towards the European market and Mediterranean cruises is due to enter service in 2003. It is registered in Liberia. After the injection of US capital, the building of terminals in Cuba had to be suspended because of the Helms-Burton law.

Costa's international fleet offers 7-day cruises in the following areas: the Caribbean, the Mediterranean, the Baltic Sea and South America. The main source markets are France, Italy and Spain, where it began to operate in 1993 with resounding success (see point 3.4.2) and it also has a major slice of the German market.

Table 3.VI. Costa Crociere Fleet (January 2002)

Ship GT Berths Year of Classification Construction Costa Riviera 30,361 958 1963 3 Costa Allegra 28,430 800 1969 3 Costa Tropicale 36,674 1,022 1981 3 Costa Marina 25,558 763 1990 3 Costa Classica 52,926 1,306 1991 3+ Costa Romantica 53,700 1,356 1993 3+ Costa Victoria 75,951 1,928 1996 4 Costa Atlantica 85,700 2,112 2000 4 Current Fleet Total 389,300 10,245 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM [Costa Atlantica2] 85,700 2,154 2003 [Costa UL1] 105,000 2,720 2003 [Costa UL2] 105,000 2,720 2004 Order Book 295,700 7,594 Future Fleet 685,000 17,839

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

3.3.1.4. Cunard Line/Seabourn

This is a company with a great tradition, founded in 1840 by Samuel Cunard. It has grown thanks to a series of mergers and takeovers. It belongs to the Norwegian industrial group called Kvaerner PLC, and was purchased in 1998 by a group of investors headed by the Carnival Corporation. Operating under the name of Cunard Line Ltd., it has incorporated the Cunard and Seabourn fleets and is aimed at the deluxe end of the market. The first is based around the US and Canadian markets while the second fleet

70 is more European in outlook. The last big ship to be built was the Queen Elizabeth 2 in 1969. In the last 20 years it has merged with Norwegian American Cruises (1983) and Sea Goddess Cruises (1986). The average age of the fleet stands at 15.5 years (in 1999). It invested over 70 million dollars in 1999 in modernizing its three oldest ships.

The Cunard fleet is made up of only two ships. The Queen Elizabeth 2 is the company's flagship and is the only one that regularly crosses the Atlantic. Cruises can be combined with Concorde, with the outward journey being made by boat and the return by plane or vice versa, which makes this a unique and highly prized package. It also has an annual three-month round-the-world cruise, and sails in the Caribbean, Bermuda, Canada and Europe.

It also has a major project in the pipeline to construct another genuine transatlantic ship similar to the Queen Elizabeth 2. The order has gone to Chantiers de l’Atlantique and has been named Queen Mary 2. The ship's main details are as follows: 150,000 GT, cost 780 million, approximate speed 27 knots, capacity for 2,600 passengers and projected entry into the market set at 2003. It will be the world's largest and most expensive cruiser. The fact that it will be a true transatlantic vessel makes it very different from what people are used to nowadays, and is an attempt to return to the old tradition of the Queen Elizabeth 2 and the France.

It is one of the largest cruise lines in the north of Europe, and had a selection of 10,000 berths to choose from in the region in 1997, and a total market share of 9.5%. At present its fleet visits over 300 ports around the world.

Table 3.VII. Cunard Line Ltd. Fleet (Cunard + Seabourn) (January 2002)

Ship GT Berths Year of Classification Construction

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Queen Elizabeth 2 70,327 1,778 1969 5/3+ Caronia 24,492 716 1973 4+ Seabourn Goddess I 4,253 118 1984 5 Seabourn Goddess II 4,253 118 1985 5 Seabourn Sun 37,845 758 1988 5 Seabourn Pride 9,975 212 1988 5 Seabourn Spirit 9,975 212 1989 5 Seabourn Legend 9,961 212 1992 5 Current Fleet Total 171,081 4,124 Queen Mary 2 150,000 2,620 2003 Order Book 150,000 2,620 Future Fleet 321,081 6,744

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

Seabourn Cruise Line is 100% owned by the Carnival Corporation. The Norwegian busi- nessmen Atle Brynestad founded the company in 1987. Its fleet and the Seabourn

71 brand are marketed under the Cunard umbrella, after it was purchased by the Carnival Co. Since the company began it has been aimed at the super luxury end of the market (5 star), with special emphasis being placed on a personal and exclusive treatment of the client. The typical client tends to be in a couple and 35 years of age or over.

It travels all around the world as well as sailing through the Americas, Alaska, the Caribbean, the Mediterranean, the South Pacific, the Amazon, Australia, the Indian Ocean, the Baltic Sea and South East Asia. The "Seabourn Goddess I" and "Seabourn Goddess II", originally owned by Cunard, are the ultimate in superyacht cruises, and are ideal for sailing into ports (for example along the Amazon river) that are inaccessible to the larger cruisers.

3.3.2. P&O Princess Group

It belongs to the cruise line P&O (Peninsular & Oriental), that was originally British owned and funded. The group also has other shipping enterprises, mainly involving ferries (the largest ferry operator in Northwest Europe, with a total of 50 ships serving 19 different routes) and container ships. It began merger talks with the RCC group towards the end of 2001, but Carnival Co's counter-offer may jeopardize the deal. It attracted 8.7 million passenger days, 5.9 million from the US and Canada and 2.8 million from Europe and Australia. Its market capitalization in 2001 rose to 3.6 billion dollars. It only entered the US cruise market in 1974 with the takeover of Princess. At the beginning of 2002, the cruise division had a total capacity of 28,096 berths and the average age of its fleet was 11.9 years.

Below is a breakdown of the main P&O group cruise lines and owners, before the break- away of the P&O Princess cruise division. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Peninsular and Oriental Steam Navigation Co.

Cruise Lines Ferries Container Ships P&O Princess

P&O Cruise P&O Stena Line (60%) Assoc. Bulk Carriers (50%) Swan Hellenic

P&O Cruises P&O European Ferries P&O Nedlloyd (50%) (Australia)

Princess Cruises P&O North Sea Ferries

Aida Cruises (51%) P&O Scottish Ferries

72 Its plans for expansion are very ambitious, reflected in an order book that means the delivery of 8 ships for the 2002-2004 period, at a total cost of 2.85 billion dollars. This is a clear indication of the company’s commitment to expansion in both economic and capacity terms (see table 3.III). Two facts stand out from the company's 1998 annual report (see bibliography 38):

• The three main businesses in which the group will concentrate its future efforts will be exclusively sea trade based: cruises, ferries and port, although, as its Chairman Lord Sterling points out: "with an ever greater focus on the cruise market". This strategic decision for the group can be understood by looking at table 3.VIII with its breakdown by activities, with cruises being the most profitable of all. This fact led to the break-up of the group and the floating of the cruise division of the company on the stock market in October 2000, under the name of P&O Princess.

• The new UK company tax legislation for cruise line companies based on gross tonnage (tonnage tax), which is awaiting approval, means that the company will be able to register at least 50 of its large vessels from its fleet in the UK, ensuring a 50% increase in the number of its UK registered ships. This would allow the company to double the number of British officers that it trains.

It transports around 700,000 passengers a year (about a third that of its two nearest rivals). It has a large British customer base, who take 14 day cruises, as opposed to the 3-4 and 7 day cruises preferred by US and Canadian customers, who make up the core customers of RCC and Carnival Co. This is why the number of berths per day is approximately only half of the other two groups. P&O Princess total sales rose in the year 2000 to 2,605 billion dollars and the average occupancy level on its ships increased to 99.7%. It is made up of four brands: P&O and Swan Hellenic (see section 3.3.2.1), Aida Cruises (see section 3.3.2.2), set up in 1999 and committed to the German market, and Princess (see section 3.3.2.3). Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Table 3.VIII.

Activity NS % Amount of Business (*) % Net Profit (*) % Cruises 16 9.2 1141.1 19.3 216.1 37.4 Ferries 50 28.7 472.2 8.0 81.0 14.0 Container ships(#) 58 33.3 44.9 0.8 8.2 1.4 Bulk carriers 25 14.4 - - - 0 Other cargo ships 25 14.4 - - - 0 Real Estate - - 2727.7 46.1 193.6 33.4 Ports and logistics - - 1525.8 25.8 80.0 13.8 TOTAL 174 100.0 5911.7 100.0 578.9 100.0

(*) In million pounds sterling. (#) The data on the amount of business and net profit refer to container ships, bulk carriers and other cargo ships combined. Source: P&O Annual Report 1998.

73 3.3.2.1. P&O Cruises

It is the leader in the British source market in the cruise sub-segment. It has entered a phase dedicated to the modernization of its fleet, by introducing the "Arcadia" (Ex- "Star Princess"), which replaced the "Canberra" in 1997 and by commissioning the "Aurora" (76,000 GT and 1,870 berths), which entered service in the year 2000. The highlight is the 2004 launch of the second VLCV designed for the Mediterranean and European demand. The normal sailing areas are: the Arabian Gulf, Australia, the Mediterranean, the Indian Ocean and the Baltic Sea.

Table 3.IX. P&O Fleet (January 2002)

Ship GT Berths Year of Classification Construction Victoria 27,670 728 1966 3+ Pacific Sky 46,314 1,184 1984 3+ Arcadia 63,524 1,448 1989 3+ Minerva(*) 12,331 392 1992 4 Oriana 69,153 1,822 1995 4 Aurora 76,152 1,874 2000 4 Current Fleet Total 295,144 7,448 [Grand Class 6] 110,000 2,600 2004 Order Book 110,000 2,600 Future Fleet 405,144 10,048

(*) It is assigned to Swan Hellenic. Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

Its business divisions are: P&O Cruises (based in the UK and aimed at European customers), P&O Cruises (Australia) (based in Australia), and Swan Hellenic (specializing in cultural trips). In the UK market it has built the first ship specifically designed for

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM British customers, the "Oriana". The fleet itself is not uniform, neither in size, nor in the countries where the ships are registered (Liberia, UK and the Bahamas), nor in its GT/berth ratio (ranging from 27 to 42).

3.3.2.2. Aida Cruises

Deutsche Seetouristik GmbH, with its headquarters in Rostock (Germany) and its subsidiary Deutsche Seereederei Touristik GmbH, owns a cruise division and various holiday resorts. It is the German market leader and the most active German cruise line, having taken over the specialized cruise tour operator Seetours in 1998. With the concept of the ship "Aida" it attempted to revolutionize the German market, but after poor financial results, it had to look for outside funding. With the aim of developing the market, in September 1999 it formed a new cruise line with P&O Princess called Aida Cruises, with the British company holding 51% of the company share capital. This ensu- red an injection of capital that enabled the company to continue with its proposed plans as well as offering a modern product in the 3-4 star category.

74 Table 3.X. Aida Cruises fleet (January 2002)

Ship GT Berths Year of Classification Construction Arkona 18,591 480 1985 4 AIDAcara 38,600 1,186 1996 4 Current Fleet Total 57,191 1,666 Aidavita 41,200 1,270 2002 [Aida 3] 41,200 1,270 2003 Order Book 82,400 2,540 Future Fleet 139,591 4,206

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

It currently has two ships (2002): the "AIDAcara" and the "Arkona", both with German officers, the first registered in the Bahamas and the second in Germany. In 2002 it underwent a major change with the launch of the A’ROSA brand, aimed at the German- speaking market of first-timers and over forties. It will have an ocean-going cruise ship called the "A’ROSA BLU" (the reconverted "Crown Princess") and two river cruise ships. The "Arkona" is being retired from service this year. Two twin vessels on the order book will be incorporated into the AIDA brand, aimed at the under forties. It is hoped that this will help to substantially increase the number of packages (72,000) sold in 2000, with a customer base which is 95% German and the remaining 5% Austrian and Swiss. The ships sail all round the world, calling at and using Palma de Majorca as their base port when operating in the Mediterranean.

3.3.2.3. Princess Cruises

It was founded in 1965 and is based in Los Angeles. Stanley McDonald was the foun- ding father who started the business to satisfy the demand for cruises from California to the West Coast of Mexico. After 2 years he chartered a new ship for the developing Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM market of the Gulf of Alaska. He popularized the cruise in the TV series The Love Boat (1977), which is why he used the slogan "It’s more than a cruise, it’s the Love Boat" in his advertisements. In 1974 and after the takeover by the British company P&O, it began its expansion, and ten years later it was operating four boats. In 1988 it took over Sitmar Cruises and added three more ships to its fleet. In 1997 it reached the half a million trips mark, and hopes to double that figure by the year 2002.

Its fleet is very uniform, having standardized its ships as of 1995. It registers its ships in the UK and Liberia, and the ship's officers are Italian and British. It has one of the sector’s largest order books, with a figure of 11,700 berths.

75 Table 3.XI. Princess fleet (January 2002)

Ship GT Berths Year of Classification Construction Pacific Princess 20,636 646 1971 3+ Royal Princess 44,348 1,200 1984 4 Crown Princess 69,845 1,590 1990 4 Regal Princess 69,845 1,590 1991 4 Sun Princess 77,000 2,022 1995 4 Dawn Princess 77,441 2,022 1997 4 Grand Princess 108,806 2,592 1998 4 Sea Princess 77,000 2,022 1998 4 Ocean Princess 77,000 2,022 2000 4 Golden Princess 108,806 2,600 2001 4 Current Fleet Total 730,727 18,306 Coral Princess 88,000 1,950 2002 Diamond Princess 113,000 2,600 2002 Star Princess 109,000 2,600 2002 Island Princess 88,000 1,950 2003 Sapphire Princess 113,000 2,600 2004 Order Book 511,000 11,700 Future Fleet 1,241,727 30,006

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

The "Grand Princess" has broken yet another record in cruise ship tonnage, with the third and fourth vessels of the series still under construction for 2002 and 2004. It has formally unveiled its Grand-class cruising concept that includes a full range of facilities and entertainment.

Princess has a wide range of itineraries and offers cruises in the Caribbean, Bermuda, Alaska, the Panama Canal, Mexico, the South Pacific, Hawaii, the Mediterranean, the Baltic Sea, Asia/the East, the Indian Ocean, South America/ the Amazon and

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Canada/New England. It shares the market leadership with HAL for cruises in the Gulf of Alaska, where improvements are being made to its on-land facilities.

3.3.3. Royal Caribbean Cruises Ltd. Group (RCC)

It is the second largest group in the world, and the company is registered in Liberia. The shareholding is divided as follows: Wilhelmsen (41%), Pritzker (Hyatt Hotels) (41%), small shareholders (16%) and its president Richard Fain (2%). It operates two brands: Royal Caribbean International (RCI) and Celebrity Cruises and has a 20% stake in the British tour operator First Choice in a marketing and selling partnership for Europe. Its market capitalization in 2001 was 3.1 billion dollars. In 2000 it registered a total of 13,014 million passenger days, just over 2 million passengers, at a value of 2,866 billion dollars. Its occupancy levels are similar to those of Carnival Co. (104.7% in 1999 and 104.4% in 2000). Unlike Carnival Co, it based its expansion in organic growth, but when faced with the aggressive strategies of its rivals, it took over Admiral

76 Cruises (1988) and Celebrity Cruises (1999). On 20th November it announced its merger with P&O Princess, taking a 49.3% share of the newly formed group. Nevertheless, as has already been stated, the counter offer from Carnival Co. has momentarily halted the proposed merger (February 2002).

It focuses strongly on the US and Canadian markets, in spite of its efforts to keep up with the trend for globalization. The fact that the company was renamed in 1997 and became Royal Caribbean International, even though the corporation keeps its Royal Caribbean Cruises Ltd. name, is a clear indication of the company's globalization wishes.

3.3.3.1. Royal Caribbean International (RCI)

Based in Miami and founded in 1969. A total of 85% of its customers come from the US and Canada and 10% come from the UK. Nevertheless, its objectives for 2004 have been set at capturing 24% of the European source market, which explains the strong involvement of both RCI and Celebrity on the European continent.

At the beginning of 2002, the average age of its fleet was 6.2 years, with a capacity of 33,066 berths that will rise to 45,672 in 2004. The average size of its ships is 1,680 berths, which is similar to Carnival's size and suggests that both have similar strategies. Nevertheless, its more recent constructions indicate a strategy aimed at faster ships that are capable of covering wider areas, which is a slight departure from the cruise-destination concept and more akin to a mix of cruise-destination and cruise- means of transport. However, with its "Voyageur of the Seas" class (five vessels) of 137,000 GT, post-Panamax22, operating in the Caribbean and incorporating a great deal of complementary facilities, it is reorienting itself towards the notion of Carnival's cruise-destination. Its advertising slogan is in keeping with these ships: "We’re not just a cruise, we’re a vacation". The commitment in the Caribbean is therefore clear and completely independent of on-land tourist destinations. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

With the launch of the 6 vessels in the "Vision" class (70,000 GT), it has increased its capacity by 94% in only three years. The occupancy levels have also increased at a parallel rate. The Vision-class has 11 decks, which can be used during the voyage by 1,950 passengers, which can be increased to 2,446, with a 760-man crew. Of the 976 cabins, only 399 are interior. The largest hall can accommodate 1,171 people, making it ideal for medium to large conferences and meetings. It has a casino, a fitness centre, a spa, a shopping centre, a library, 2 swimming pools, 6 jacuzzis, a beauty salon, video-games, facilities for children, etc.

22 Post-Panamax: refers to a ship with a maximum breadth measurement of over the permitted 32.25 m allowed for passage through the Panama Canal.

77 Table 3.XII. Royal Caribbean International Fleet (January 2002)

Ship GT Berths Year of Classification Construction Viking Serenade 40,132 1,514 1982 3+ Sovereign of the Seas 73,192 2,276 1987 3+ Nordic Empress 48,563 1,600 1990 3+ Monarch of the Seas 73,941 2,354 1991 3+ Majesty of the Seas 73,941 2,356 1992 3+ Legend of the Seas 69,130 1,804 1995 4 Grandeur of the Seas 74,140 1,950 1996 4 Splendour of the Seas 69,130 1,804 1996 4 Enchantment of the Seas 74,137 1,954 1997 4 Rhapsody of the Seas 78,491 2,000 1997 4 Vision of the Seas 78,491 2,000 1998 4 Voyager of the Seas 137,278 3,114 1999 4 Explorer of the Seas 136,000 3,100 2000 4 Radiance of the Seas 85,000 2,126 2001 4 Adventure of the Seas 137,300 3,114 2001 Pend. Current Fleet Total 1,248,866 33,066 Brilliance of the Seas 85,000 2,126 2002 [Voyager 4] 137,278 3,114 2002 [Voyager 5] 137,278 3,114 2003 [Vantage 3] 85,000 2,126 2003 [Vantage 4] 85,000 2,126 2004 Order Book 529,556 12,606 Future Fleet 1,778,422 45,672

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

The new Radiance-class23 was introduced only 18 months after the Voyageur. In reality it is a hybrid of the two classes. Its importance lies in that it has brought about a substantial change in tourist cruise management: work titles are more similar to those given to people who work in resorts. For example, now there is no such thing as a hotel Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM manager or a cruise director, instead they are known as general manager with a wider remit, covering all aspects of customer services. Of the crew, 60% are new additions, as opposed to the normal 20% on new RCI ships. The aim is to implement the new personnel structure more successfully. It includes a whole host of new developments, including a modern spa, swimming pools with 5-metre high waterfalls and modern cof- fee shops with personal computers, books and pastries. Another highlight is the inclusion of two paying restaurants, adding to the element of the add-on formula, and 71% of cabins with balconies.

The Viking Serenade ship will be incorporated in April 2002 into Island Cruises, a joint venture between RCC and the British tour operator First Choice.

23 It has been designed to sail all over the world, while the Voyageur only operates in the Caribbean, which is why half of the outside areas of this superstructure are glazed. It has Azipod propulsion and a powerful transverse propeller in the bow. Gas turbines help reduce gas exhaust emissions by 95% along with a significant reduction in oil waste compared to the diesel engine. It uses the same propulsion mechanism as a B-747, which is why there are fewer vibrations.

78 Its main focus lies in the on-board activities, offering tried and tested standard programmes throughout its fleet, including: Art Auctions, Passenger Talent Show, Masquerade Parade, Country & Western Jamboree, etc.

The majority of its business is based in the Caribbean, but the increase in its fleet has allowed it to expand into the European and Alaskan markets, with its 70,000 GT ships. It operates the 7-day and 4-3 day segment in the Caribbean and the 12-day segment in the Mediterranean, with excellent results. The company's ships make port calls in more than 130 destinations spread over four continents. Its itineraries include the Caribbean (East and West), the Bahamas, Bermuda, Lower Mexico, The Mexican Riviera, the Panama Canal, Alaska, the Pacific Coast, the Mediterranean, Europe, the British Isles, Norway, Scandinavia, Russia and the East. The base ports are: Miami, San Juan, Los Angeles, along with the major ports in the East, and New York, Acapulco, Barcelona, Venice and Harwich, depending on the season.

3.3.3.2. Celebrity Cruises

Its headquarters are also in Miami (Florida). Profits in 1996 reached only 100,000 dollars, which provoked its sale to RCC. It has always been an innovative company, introducing the fly & cruise concept, and pioneering the short cruise. Under the gui- dance of the world-renowned chef Michel Roux, it has also shown a special interest in haute cuisine, and has received many awards for it. With the incorporation of the "Century", it has introduced more advanced information systems and leisure facilities, thanks to its relationship with Sony Corporation of America. This system is being installed throughout the entire fleet.

It has a very uniform fleet, with three basic ship types: a GT/berth ratio of 42, registered in Liberia, with an international crew and Greek officers.

Table 3.XIII. Celebrity Fleet (January 2002) Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Ship GT Berths Year of Classification Construction Horizon 46,811 1,354 1990 4+ Zenith 47,255 1,376 1992 4+ Century 70,606 1,784 1995 4+ Galaxy 77,713 1,896 1996 4+ Mercury 77,713 1,870 1997 4+ Millennium 91,000 2,038 2000 5 Infinity 90,280 1,900 2001 5 Summit 91,000 1,900 2001 Pend. Current Fleet Total 592,378 14,118 [Millennium 4] 91,000 1,900 2002 Order Book 91,000 1,900 Future Fleet 683,378 16,018 9

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

79 It operates the 7 to 10 day itineraries. In autumn and winter its ships currently set sail from San Juan de Puerto Rico towards the inner Caribbean.

During the spring and summer seasons (in the Northern hemisphere) cruises to the Bermuda Islands set sail from New York and from other East coast US cities. It entered the Alaskan and Pacific coast markets in 1996. It has committed itself heavily to expansion outside the Caribbean, with a considerable rise in its capacities. It has been present in the European market since 1998, introducing its Horizon ship (1,354 berths) from May to October and increasing the number port calls from 55 to 110.

3.3.4. Star Cruises Group

Headquartered in Hong Kong (China), although the capital belongs to the Malayan company Genting International Group. The Lim Goh Tong family has a 45% share in Genting International Group. It operates the cruise line Star Cruises (see section 3.3.4.1) in the Asia-Pacific region and Norwegian Cruise Line (see section 3.3.4.2), which it took over in April 2000. In the year 2000 the group had consolidated sales of 1,493 billion dollars and 6.75 million passenger days, incurring a net loss of 29.6 million dollars, which reflected the cost of taking over NCL, and is the group with the greatest financial leve- rage. Sales for the first nine months of 2001 were 1,042 billion dollars (+6.2%). The occupancy levels for 2000 were 96.7%.

The majority of analysts believe that it is the largest growing company in the current decade. Its order book has risen to 1.28 billion dollars, which will enable it to exceed 34,000 berths by 2004.

3.3.4.1. Star Cruises Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM The company began operating in 1993 with the purchase and subsequent refurbishment of two modern European ferries that operated in the Baltic Sea. It dominates the supply and demand of the Asia/Pacific region, attracting 88% of overnight stays. It sold over 500,000 trips in 1998. It is aimed at the short length itinerary segment, in accordance with the available leisure time of Asian customers: 2-3 days from Singapore and Hong Kong (China). In March 2001 it began business in the Japanese market, offering mini-cruises of 2 to 3 nights, aimed at a mass-market. The majority of its customers are Asian and Australian with the remainder from Europe (British and German), the US and Canada.

80 Table 3.XIV. Star Cruises Fleet (January 2002)

Ship GT Berths Year of Classification Construction Norwegian Star I 28,018 766 1973 3+ SuperStar Aries 37,012 678 1981 3+ Megastar Aries 2,928 82 1989 n/a Megastar Taurus 2,928 82 1989 n/a Star Pisces 40,012 1,196 1990 3 SuperStar Taurus 25,036 974 1992 3+ Superstar Gemini 19,089 804 1993 3+ SuperStar Leo 76,583 1,960 1998 4 Superstar Virgo 76,583 1,960 1999 4 Current Fleet Total 308,189 8,502 SuperStar Sagittarius II 112,000 3,000 2003 SuperStar Capricorn II 112,000 3,000 2004 Order Book 224,000 6,000 Future Fleet 532,189 14,502

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

The casino and gambling in general, originating with this company, form an integral part of the overall package on offer. It plans to have 12 ships, one for each sign of the zodiac. It is the only cruise line that has an on-land navigation simulation centre for its officers.

Given its undoubted prominence in the region, it plays a major role because of its heavy investment in cruise terminals in the ports of Port Klang (Kuala Lumpur), Langkawi (Malaysia) and Phuket (Thailand). The regions in which it sails are: the Arabian Gulf, Australia and Southeast Asia. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM At the beginning of 2002, the average age of its fleet was 11.7 years. The fleet is classified into three categories: Star for short cruises (1-3 days) for the Asian market, Superstar for a more sophisticated public and repeat passengers, lasting 7 days, and Megastar which is for smaller groups, aimed at the company Conferences and Incentives segment.

3.3.4.2. Norwegian Cruise Line (NCL)/ Orient Lines

Founded by Arison and Kloster in 1966 as Norwegian Caribbean Lines (NCL), it revolu- tionized the cruise industry with the introduction of the "single class" concept sailing for the Caribbean in an informal yet luxurious setting.

81 Table 3.XV. NCL Fleet (January 2002)

Ship Observations GT Berths Year of Classification Construction Norway 76,049 2,130 1961 3+ Marco Polo Orient Lines 22,080 850 1965 4 Crown Odissey Orient Lines 34,242 1,052 1988 4 Norwegian Sea 42,276 1,518 1988 3+ Norwegian Dream 50,760 1,726 1992 3+ Norwegian Majesty 40,876 1,460 1992 3+ Norwegian Wind 50,764 1,726 1993 3+ Norwegian Sky 80,000 2,002 1999 4 Norwegian Star 2 91,000 2,244 2000 Pend. Norwegian Sun 78,200 2,000 2001 Pend. Current Fleet Total 566,247 16,708 [NCL 2] 91,000 2,100 2002 Order Book 91,000 2,100 Future Fleet 657,247 18,808

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

It has been experiencing financial difficulties since 1993, which prevented it from competing in the shipbuilding race along with the other main companies in the sector such as RCI, Princess and Carnival Cruises. The injection of Norwegian capital along with the 20% participation of the Norwegian industrial giant Kvaerner plc in the company enabled it to temporarily recommence its expansion policy with the building of new ships and its entry into niche markets (the acquisition of Orient Lines for 30 million dollars). Nevertheless, the failure of the joint ventures with Australian Cruise Project, and consequent creation of Norwegian Capricorn Line for operating in Australia, and with Trasmediterránea and Barceló in Spain, coupled with the high cost of lengthening

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM the Norwegian Dream and the Norwegian Wind, and the fall of occupancy levels, meant that their financial situation did not improve. This instigated the takeover (for 600 million dollars in 2000) by Star Cruises, after a failed attempt to establish a joint venture between Star Cruises and Carnival Co., with a corresponding 60%-40% share.

The occupancy levels were 99.5% in 2000. At the beginning of 2002 the fleet had an average age of 10 years. Its flagship the "Norway" (ex-"France") is the longest ship currently in service, which will be surpassed by the Queen Mary 2 in 2003. It has renamed all of its vessels with the exception of the Norway, placing the company name Norwegian in front of all the ship names.

Its ships sail in the Caribbean, Bermuda, Alaska, New England/Canada, the Bahamas, Mexico, Hawaii and the Mediterranean. After increasing its presence in Northern Europe, where it believes there is a great potential for growth, its poor financial performance has led it once again to concentrate on the Caribbean. It provides a product suitable for an active, cheerful, sport loving and carefree public.

82 Orient Lines has its headquarters in London and a regional office in Fort Lauderdale (Florida), having been taken over by NCL in 1998, although it remains an independent brand. It specializes in "destination cruises", which is based around allowing the passenger to get to know the destination fully, whilst at the same time enjoying the comforts of a traditional cruise. It has 33,000 customers per year (80% from the US and Canada and 20% British and Australian), mainly within the demographic segment of the over 55s, although the 35-55 segment has grown recently. Its financial results are very good (17.8 million dollars in profits on a sales volume of 65 million).

Itineraries are packaged as "cruise and tour" and include hotel stays, sightseeing in the ports of call, detailed information on the port and on-board entertainment with a local flavour. Groups form 40% of its customers, and include school groups or friends of museum associations.

Its fleet is made up of two ships: the "Marco Polo" and the recently incorporated "Crown Odyssee". The first ship offers 7 to 25 day cruises in five continents, with port calls in the Mediterranean, the Indian Ocean, the East, the South Pacific and Antarctica. Bought from the former Soviet Union, it was completely refurbished in 1993 and is reinforced for sailing through ice, having originally been built for sailing in the Russian Baltic. In 1996 the company introduced a series of new routes around the Greek islands and Turkey. Cruises of 7 days or more include conferences, with guest speakers, who discuss the culture, history and religion of the places visited. The company is also keen on the Conferences and Incentives segment.

3.4. Other cruise lines

3.4.1. Cruise lines in the US and Canadian source markets

This section details the cruise lines which are independent of the major cruise lines Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM described in section 3.3, and who operate mainly in the US and Canadian source markets, although their itineraries include destinations all over the world. They are characterized by the following features:

a) a) Their need to invest heavily in order to maintain their independence, faced with the accelerated growth and consolidation imposed by the Big Four. Seabourn, Windstar and Sea Goddess (Cunard) are companies that could have been included in this category, but having been taken over by Carnival Corporation, they are instead described in section 3.3. The clear exceptions of independently financed companies are Disney Cruises, which forms part of the powerful leisure group of the same name, and Crystal Cruises, owned by the Japanese cruise line NYK.

b) The precarious financial situation of the independents is reflected in the bankruptcy of the following cruise lines in 2000 and 2001: Renaissance, Commodore Cruises and Premier Cruises, for different reasons in each case.

83 c) Most of the independents are aimed at the luxury end of the market (4+/5 star), where the profitability threshold is reached with capacities of around 100 to 300 berths. This segment, as with the major cruise lines, follows the general trend to increase cruise liner tonnage, in order to add to the berth capacity of the shipand thereby increase the GT/berth ratio. A general characteristic of the luxury segment is that the majority of berths are made up of suites, and all the cabins look out onto the sea.

d) The destination and itinerary of the cruises are of much greater importance than for the bigger cruise lines. This, together with the lower draught of their ships, allows them greater flexibility.

e) They concentrate their efforts on very specific products: Disney competes in the interesting niche market that combines theme parks with cruises based around Orlando (Florida), Star Clippers concentrates on sailing boats, Radisson Seven Seas focuses its attentions on incentives and adventure-expeditions, Crystal Cruises on single themed cruises and ResidenSea on time-sharing.

f) Combined they represent around 5% of the world supply of berths. Forecasts indicate that they will maintain this share in 2004.

Table 3.XVI. Distribution of ocean going fleets (January 2002)

Group/ Total Fleet Order book Cruise Line NS GT GT/ berths Average NB GT GT/ berths Berth Age Berth Clipper Cruises 2 9,582 40 242 18.5 0 0 - 0 Crystal 2 100,404 51 1,966 8.5 1 68,000 63 1,080 Disney 2 166,646 48 3,500 2.5 0 0 - 0 Radisson 7 Seas 5 130,747 63 2,088 8.4 1 45,000 61 732 ResidenSea 0 0 - 0 - 1 90,000 73 1,232 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Silversea Cruises 4 89,854 66 1,368 3.5 0 0 - 0 Star Clippers 3 11,711 21 564 6.7 0 0 - 0 TOTAL 18 508,944 9,728 7.5 3 203,000 3,044

Source: Own study using data from PSA and Lloyd’s Cruise Int.

3.4.1.1. Clipper Cruise Line

The company's headquarters are in St. Louis, Missouri (United States) and its customers are North American. It has belonged to the Swiss tour operator Kuoni since 1998, and is a cruise line that specializes in expedition cruises. The fleet is not uniform, neither in category nor in age, as can be seen from the table below. The first ship comes from the former Soviet Union, with a strengthened hull for sailing through icy waters and the second ship is designed to operate in the Japanese market. It sails in the following regions: Alaska, Antarctica, round the world, Canada/New England, the Caribbean, the fiords of Chile, the Mediterranean and South America.

84 Table 3.XVII. Clipper Cruise Line Fleet (January 2002)

Ship GT Berths Year of Classification Construction Clipper Adventurer 4,364 122 1976 3 Clipper Odyssey 5,218 120 1989 4+ Total Fleet 9,582 242 Order Book 0 0 Future Fleet 9,582 242

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

3.4.1.2. Crystal Cruises

Its headquarters are in Los Angeles, and it belongs to the Japanese cruise line NYK Yusen KK, the majority of whose business is geared towards merchant shipping. Its customers are mainly North American senior citizens (89%), with the rest made up of British (3%), Australian (1.8%), Mexican (1.5%) and Japanese customers (0.4%). It has annual sales of 50,000 packages. It has two ships in its fleet, registered in the Bahamas, with Norwegian and Japanese officers. It has a very high GT/berth ratio of 51, which corresponds to the market sector in which it operates.

Both cruisers have gained high ratings in the best publications within the subsector. Over the last three years, Fielding’s Guide to Worldwide Cruises has awarded the company prizes for its excellent quality. The company's product is notable as it specializes in theme cruises: the "Big Band Show", the food and wine festival, in which master chefs and wine experts are invited to share their knowledge during the show, Computer University@Sea, Best of Broadway, Par Excellence Golf, etc.

Table 3.XVIII. Crystal Cruises Fleet (January 2002)

Ship GT Berths Year of Classification Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Construction Crystal Harmony 49,400 1,006 1990 5 Crystal Symphony 51,004 960 1995 5 Current Fleet Total 100,404 1,966 [Crystal 3] 68,000 1,080 2003 Order Book 68,000 1,080 Future Fleet 168,404 3,046

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

In the 2002 season, its nautical days range from 7 to 16 nights through Alaska, Africa, Australia, the Indian Ocean, the East, the Mediterranean, Canada/New England, the Panama Canal, the Caribbean, the Bahamas and Bermuda. It also offers a round-the- world cruise that lasts 96 days.

85 3.4.1.3. Disney Cruises

It is owned by the famous Walt Disney group, and began operating in 1998 with its ship "Disney Magic". Its main asset is its own Disney brand, with abundant use of the parent company’s logo: three black circles representing Mickey Mouse's head. This is without doubt the guarantee of its success, proof of which can be seen in the fact that in February 1997, over a year in advance of the trip, all the tickets for the maiden voyage of the "Disney Magic" were sold.

They hope to extend their market reach, which is currently based on 70% first-timers. Its target public are families (55-60%), senior citizens and newly-weds. There is almost an entire deck reserved exclusively for children, with over 200 programmed activities. The honeymoon niche market is very important to the company, as its parks are the number one honeymoon destination in the US.

Table 3.XIX. Disney Cruises Fleet (January 2002)

Ship GT Berths Year of Classification Construction Disney Magic 83,338 1,750 1998 4+ Disney Wonder 83,308 1,750 1999 4+ Total Fleet 166,646 3,500 Order Book 0 0 Future Fleet 166,646 3,500

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

They offer their cruises as an extension to visits to their theme parks. They calculate that they need half a million customers to fill their ships, which is only a fraction of the amount of visitors that the parks receive. The package offered lasts 7 days and combines the Walt Disney Resort for 3 or 4 days with another 3 or 4 days on the "Disney

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Magic". The tourist is given a shopping credit card that forms part of the whole package and which is valid in both Disneyworld and on board the ship. Disney has also built its own terminal in Port Canaveral, which has been decorated in Art-deco style.

Both ships are the largest existing ships that can travel through the Panama Canal. They are registered in the Bahamas, and the officers are European. Safety has been calculated down to the last detail and it is the only company that has a mooring quay on its own private Caribbean island ("Castaway Cay") for its ships, which is why it does not need to use transfer launches. Given the proximity to its theme park in Annaheim (California), on the outskirts of Los Angeles, it is possible that a third vessel may be built in the near future to exploit the US West Coast.

86 3.4.1.4. Radisson Seven Seas Cruises

Created by the merger between Radisson Diamond Cruises (Helsinki, Finland) and Seven Seas Cruise Line, and forms part of the US group Carlson Hospitality Worldwide. Having signed a management agreement with V Ships from Monaco, it rapidly increased its capacities in order to remain competitive. It is aimed at the new super-deluxe segment. Its customer base is 90% over-50s from the US, although it has begun to com- mit part of its business to other source markets in countries with high per capita incomes, such as the UK, Germany and Australia. The level of first-timers is low, only 15 to 20%. In 1998, 20,000 cruises were sold, and the company hopes to reach a figure of 50,000 for 2002.

As well as the ships that appear in table 3.XX, it also operates the "Bremen" and the "Hanseatic", both of which belong to the German company Hapag-Lloyd and are aimed at the adventure segment. The latter is possibly the best passenger ship for sailing through icy waters, with cruises to the Arctic and the Antarctic and other unusual regions such as the Spitsbergen Archipelago, Greenland and Iceland.

Table 3.XX. Radisson Seven Seas Fleet (January 2002)

Ship GT Berths Year of Classification Construction Song of Flower 8,282 202 1974 4+ Radisson Diamond 20,295 354 1992 4+ Paul Gauguin 19,170 320 1997 4+ Seven Seas Navigator 33,000 504 1999 4+ Seven Seas Mariner 50,000 708 2001 5 Current Fleet Total 130,747 2,088 Seven Seas Voyager 45,000 732 2003 Order Book 45,000 732 Future Fleet 175,747 2,820 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

The "Radisson Diamond", initially designed for the conferences and incentives segment, has a catamaran hull that reduces the ship's rolling. It also has a much larger deck than normal ships, but the cost of construction was so high that it is unlikely to be repeated. Its large draught measurement (7.92 m) and low cruise speed (13-14 knots) mean that it does not have much flexibility in itineraries, and its customers are destination orientated. The ship sails through the Panama Canal from December to April, with port calls in Costa Rica and other Caribbean countries. During the summer it cruises through the Mediterranean and the Baltic Sea. Cruises set sail from Barcelona, Rome, Athens, Istanbul, Dover, Stockholm, Copenhagen and Lisbon.

The ships' registration is closely linked to the itineraries. For example the French registered "Paul Gauguin" operates in French Polynesia and the Italian registered "Seven Seas Navigator" cruises through the Mediterranean.

87 3.4.1.5. ResidenSea

This is a unique case, as its marketing is similar to the real estate market. It uses a variety of formulas, from the sale of cabins to individuals, with prices ranging from 2 to 6.8 million dollars, to time-share deals through the "Tailored Time Fares" programme, sold in blocks of 30 to 300 days. A total of 88 suites can also be hired. It is estimated that the average level of occupancy will be 300 passengers, and after many delays it will enter into service in March 2002. The ship has all manner of complementary services such as swimming pools, a video library, a library, a golf course with real grass, an art gallery, a business centre, a cinema, a casino, a spa, etc.

Its ports of call on its maiden voyage will be Hamburg, London, Lisbon, Port Everglades, New Orleans and Houston. A trip around the world has also been planned.

Table 3.XXI. ResidenSea Fleet (January 2002)

Ship GT Berths Year of Classification Construction Total Fleet 0 0 The World of ResidenSea 40,000 616 2002 Pend. [ResidenSea 2] 50,000 616 2003 Pend. Order Book 90,000 1,232 Future Fleet 90,000 1,232

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

3.4.1.6. Silversea Cruises

V Ships recently sold its share in the company, and it is now owned exclusively by the Italian Lefebvre family. Cruises are characterized by the fact that all passengers travel in suites, 75% of which have their own balcony, a basic requirement for the super-deluxe segment. The business generated 117 million dollars in 1998. 70% of its customers Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM are from the US.

After its expansion it now boasts one of the most modern fleets on the market. Itineraries have been devised to include destinations all over the world, the most notable of which are the exotic cruises that travel through the East, India and the Red Sea, the Caribbean, South America, including the Amazon, and sightseeing trips along the East Coast of the United States, Canada and New England. Both ships also sail through the Mediterranean, the Baltic Sea, the East coast of Africa and the Canary Islands.

It is characterized by a full commitment to the all-inclusive package, with prices including: return flights in tourist class, luxury hotel at the point of embarkation prior to departure, all drinks (including wines and spirits consumed on board, which is unusual for cruises), transfers, port taxes, tips and an event called the "Silversea Experience".

88 Table 3.XXII. Silversea Cruises Fleet (January 2002)

Ship GT Berths Year of Classification Construction Silver Cloud 16,927 296 1994 5 Silver Wind 16,927 296 1995 5 Silver Shadow 28,000 388 2000 5 Silver Whisper 28,000 388 2001 Pend. Current Fleet Total 89,854 1,368 Order Book 0 0 Future Fleet 89,854 1,368

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

3.4.1.7. Star Clippers

It is owned by the Swedish businessman Mikael Krafft, and is headquartered in Coral Gables (Florida, US), with ships registered in Luxembourg. It operates within a real niche market: sailing boats, attracting over 70% of its passengers from outside the US.

Table 3.XXIII. Star Clippers Fleet (January 2002)

Ship GT Berths Year of Classification Construction Star Flyer 3,325 168 1991 3+ Star Clipper 3,325 168 1992 3+ Royal Clipper 5,061 228 2000 4 Total Fleet 11,711 564 Order Book 0 0 Future Fleet 11,711 564

Source: Own study using data from Berlitz, PSA and Lloyd’s Cruise Int.

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Its fleet is made up of two twin four-mast sailing boats that are quite modern (1991- 92): the "Star Flyer" and the "Star Clipper" (both 3,325 GT), as well as a third vessel: the "Royal Clipper" (5,061 GT), which entered service in 2000. They offer itineraries through the South Caribbean, the Far East, the Indian Ocean, the Mediterranean (Las Palmas, Malaga and the Balearic Islands) and the North Atlantic.

3.4.2. Cruise lines operating in the European source market

As has been stated in previous sections, the cruise sub-sector is undergoing a period of strong growth that has triggered a process of globalization in both supply and demand. Europe also forms part of this dynamic. Culture, history and economy (similar purchasing power) are just some of the many reasons, together with language in the UK and Ireland, why Europe forms natural extension of the US consumer market, with some slight differences. The process may be described simply as follows:

89 excess supply from the large North American cruise lines → increase in European demand → increase in European supply.

In real terms the first and third phases are just beginning to superimpose themselves within the process.

The first phase will remain this way as long as the Big Four continue to expand their fleets. The "destination-Europe" market is currently becoming very important (see sections 4.3 and 2.1) for US companies. An example of this is the "Grand Princess" that began its maiden season in European waters with resounding success. It returned after 1999 with equal success, and was the only VLCV outside the Caribbean. NCL has also located the "Norway" there. RCC has followed suit with the Celebrity, in the hope that it will double its share of European tourists by 2004 (the share is currently 12%) along with its own share in First Choice (tour operator). Carnival is also present in the market thanks to Costa.

It is interesting to note the breakdown by source market of customers on ships in European waters. European participation is increasing considerably, a fact that is being noted by the North American companies, given the greater flexibility of transporting passengers from other European destinations than transporting them from the US. A clear example is that of Costa. When operating in Europe its North American customer base is 10%, but when it cruises in the Caribbean this figure rises to 85%.

While the US market is dominated by a small number of large companies creating a virtual oligopoly, the European market is extremely fragmented, with many companies often operating only within their own national borders, some with very old fleets which they are in the process of renewing, and much lower tonnage levels than the US competition.

Nevertheless, over the last few years it has become an extremely active market, Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM especially with the addition of the big British tour operators to the market, from the 1997-98 season onwards. Traditional operators such as P&O, Cunard, Hapag Lloyd, Royal Olympic Cruises and Costa still hold a major share of the market, but are nonetheless a long way behind the comfortable position of their North American counterparts within their own US source market. Competition is fierce, with new operators entering the market, the main one being Festival, along with the expansion of already established fleets and the arrival of the big US groups.

The reaction of the traditional companies to this new outlook has been swift:

• The merger of Royal Olympic Cruises (ROC) and Louis Cruises has created a large group which has brought together the biggest Greek companies. They can now consider themselves as one of the big world players.

90 • P&O have concentrated their efforts exclusively on their shipping business, with cruise activities being taken on by the new P&O Princess company. They are awaiting entry into the German market with Aida Cruises.

• All the major European companies are undergoing a period of expansion. P&O Cruises, Festival, ROC and Costa are all renovating their fleets. Hapag Lloyd have incorporated a fourth ship into their fleet and Fred Olsen has taken over a third ship from the defunct Premier Cruises.

The arrival of the pan- European Festival is of major importance, establishing itself as the first true European cruise line. The joint venture with Trasmediterránea in Spain forms part of this process, as well as its ambitious plan to renovate and expand its fleet.

As has already been stated, one of the main features of European cruise lines is that they rarely venture outside their national borders, which is why a study into the European market needs to be based on the five main markets. There are, of course pan- European companies such as Louis/ROC and Festival Cruises, both funded by Greek capital, which will be examined separately. Another feature that distinguishes it from the US market is that normally the ship owner and the cruise line are not the same. As explained in section 7.1.3, the cruise line is responsible for commercial exploitation of the ship, although it may not be the actual owner of the ship.

The fleet of ocean-going ships studied represents 10% of the world fleet. See table below. In graph 3.d, the major European cruise lines have been classified by their capacities (number of berths).

3.d. Smaller european companies. Number of berths to 2002 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

91 Table 3.XXIV. Distribution of ocean-going fleets (January 2002)

Group/ Total Fleet Order book Cruise Line NS GT GT/ berths Average NS GT GT/ berths Berth Age Berth Louis C. + ROC 18 270,955 23 11,969 34.5 0 0 - 0 Festival Cruises 4 138,259 33 4,252 15.3 1 58,600 37 1,566 Saga 1 24,474 41 592 36.0 0 0 - 0 Airtours Sun C. 4 100,396 23 4,358 30.2 0 0 - 0 Thomson Cruises 2 51,851 27 1,955 44.0 0 0 - 0 Fred Olsen 3 58,790 30 1,968 24.3 0 0 - 0 Page and Moy 1 10,417 20 523 35.0 0 0 - 0 Hapag Lloyd 4 58,470 50 1,176 6.7 0 0 - 0 Peter Deilmann 3 32,320 32 1,015 10.3 0 0 - 0 Club Mediterranée 1 14,745 38 392 9.0 0 0 - 0 N. Frontieres 1 15,402 14 1,100 26.0 0 0 - 0 MSC 3 72,782 29 2,512 30.7 2 120,000 38 3,180 Valtur 1 15,000 29 520 53.0 0 0 - 0 Spanish Cruise L. 1 16,107 21 761 33.0 0 0 - 0 Pullmantur 1 38,722 34 1,124 35.0 0 0 - 0 Vistamar Canarias 1 7,498 25 295 12.0 0 0 - 0 TOTAL 49 926,188 34,512 27.6 3 178,600 4,746

Source: Own study based on data from PSA and Lloyd’s Cruise Int.

3.4.2.1. Louis Cruise Lines / Royal Olympic Cruises (ROC)

It is owned by the main family-based Greek-Cypriot hotel and tourism holding company. It took over the majority shareholding in ROC in 1999. The takeover pushed the companies’ combined berth capacity to 11,969, thereby creating a group that may be a big player in the cruise line industry in the future, but which at present is still an amalga- mation of several small companies. It still maintains its Greek essence, reflected in the fact that almost all of its ships are either Greek or Cypriot registered. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

The group is in reality the result of a concerted effort by the main Greek cruise lines (Epirotiki -the oldest with over 150 years of history-, Royal Olympic Cruises and Sun Line), who dominated the market in the seventies, to pool together their resources. Unfortunately, due to the lack of investment in new vessels they were soon surpassed by the North Americans and the Norwegians. Notable features of the company are the age of its fleet (ROC with an average of 28.2 years and Louis with an average age of 40.7 years), along with the size of its vessels and the fact that they bare boat charter24 whole ships to British tour operators, who then run the whole operation. Together, these two cruise lines have a 35% share of the Mediterranean market and they dominate the Eastern sector.

Louis ships operate short 2 and 3 day cruises from Cyprus. ROC currently focuses its operations on the Greek Islands, with over 100 3-4 day cruises in the Aegean Sea each

24 Bare boat charter: the ship is surrendered by the owner to the leaseholder for a set period of time. The leaseholder then fits out and commissions the ship, thereby becoming the ship owner and taking on the shipping and commercial management of the ship. 92 summer. It also offers cruises in the Red Sea in winter, with ports of call in Egypt, Israel and Jordan. The area in which the company specializes (Eastern Mediterranean with its own political instability), along with the fleet structure, ensure poor financial results. Its occupancy levels were 75% in 1999 and 84% in 2000.

Table 3. XXV. Louis Cruises/Royal Olympic Cruises Fleet (January 2002)

Brand Ship GT Berths Year of Construction Classification Princesa Victoria 14.583 566 1936 2 Princesa Amorosa 5.026 284 1957 2+ Ausonia (*) 12.609 701 1957 2+ Louis Emerald (^) 26.431 1,172 1958 3 Cruise Princesa Cypria 9.984 548 1968 1+ Lines Princesa Marissa 10.487 628 1966 2 Sapphire 12.263 650 1967 3 Calypso 11.162 486 1967 2+ Serenade 14.173 507 1967 2 Current Fleet Total 116,718 5,542 Order Book 0 0 Future Fleet 116,718 5,542 Stella Solaris 17.382 658 1953 3 Apollo 28.574 1.256 1961 n.d. Royal Odysseus 12.000 452 1962 2+ Olimpic Stella Oceanis 3.963 318 1965 2+ Cruises World Renaissance 11.724 479 1966 2+ Triton 14.110 754 1971 2+ Olympia Countess 17.593 840 1976 3 Olympia Voyager 24.391 840 2000 4 Olympia Explorer 24.500 830 2001 4 Current Fleet Total 154,237 6,427 Order Book 0 0 Future Fleet 154,237 6,427 Current Fleet Total 270,955 11,969

Observations: (*) Bare boat charter to First Choice. (^) Bare boat charter to Thomson Travel Group.

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Source: Own study based on data from Berlitz, PSA and Lloyd’s Cruise Int.

3.4.2.2. Festival Cruises

Greek owned (Poulides and Sarantitis families). The total volume of sales was 165,000 passengers in 2000, but it expects to reach a figure of 300,000 passengers within two years. Sales in 2000 were 200 million euros (+39%). It can be described as the only pan-European company, as its customers come from all the major European source markets (95%), divided up as follows: France (22%), Italy (18%), Spain (15%), Germany (20%), United Kingdom (5%). The ship's decoration and the cuisine is 100% European, and only euros are accepted for payment on-board. In 2001 it set up Spanish Cruise Line, a joint venture with Trasmediterránea and the tour operator, Iberojet, for its Spanish side of the business.

It basically offers Mediterranean cruises combined with cheap flights(less than 100 dollars), although it prefers not to use the fly & cruise package, with the majority of its

93 customers embarking in the ports of Marseille, Barcelona, Genoa, Naples, Venice and Kiel, which are well connected with major towns and cities by road and rail.

Its fleet (see table 3.XXVI) is made up of 4 ships. Normally, they sail in the Mediterranean, the Black Sea and the Caribbean. They are registered under flags of convenience (Bahamas and Panama), with the exception of the "Mistral", which is registered in France for tax reasons. The "European Vision" accommodated European leaders during the G-8 summit in 2001.

Table 3.XXVI. Festival Cruises Fleet (January 2002)

Ship GT Berths Year of Classification Construction The Azur 14,717 698 1971 2+ Flamenco 17,042 792 1972 3 Mistral 47,900 1,196 1999 4 European Vision 58,600 1,566 2001 Pend. Current Fleet Total 138,259 4,252 European Dream 58,600 1,566 2002 Order Book 58,600 1,566 Future Fleet 196,859 5,818

Source: Own study based on data from Berlitz, PSA and Lloyd’s Cruise Int.

3.4.2.3. The British market

The market is very dynamic and fluid, as previously seen in section 2.1 of this report. Demand has increased over the last five years at a cumulative yearly rate of over 15%. The reason for this rise can be found in the actual increase in ship capacities, mainly thanks to the commercial policies of the main tour operators in keeping prices low, thereby completely revolutionizing the market. The market catalysts were the arrival in 1995 of Airtours PLC (MyTravel Group as of November 2001) along with the entry into Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM service of P&O's cruise ship the "Oriana", which was the first ship assigned to operate specifically within the British market.

Typical features of the market are:

- The long-established dominance of P&O (see section 3.3.2) currently operating under the name of P&O Cruises.

- The recent arrival of the main tour operator cruise line subsidiaries: Airtours, Saga, Thomson and First Choice. Their vertical integration (travel agency + tour operator + hotels + charter airline) allows them to compete with the traditional cruise lines by offering lower prices. This means that not only can they corner more of the market share, but also expand their market base.

94 - The large US companies are also experiencing a substantial increase in their British passenger numbers, especially: a) RCC with its strong commercial division based in London and through its ties with First Choice; and b) Carnival via SeaVacations, who sees the Mediterranean as a natural location for its ships during the summer.

The main operators apart from the big groups are:

- First Choice is the fourth largest tour operator in the UK and has a sound economic foundation. It began selling cruise packages in the Mediterranean from April 1999, leasing the ship "Ausonia", owned by Louis Cruises. RCC and the Barceló group have been the organization's main shareholders since 2001, each holding 20% of the share capital. It has set up a joint venture with RCC called Island Cruises whose role is to operate the "Island Escape" ship (ex -"Viking Serenade": 40,132 GT, 1,514 berths, 1982, 3+ star) through the Western Mediterranean as of April 2002. Its base port will be Palma de Majorca (Spain).

- The tour operator Saga, which specializes in the senior citizen segment, was founded in 1952, and has a market presence in the US and the UK. It owns only one ship ("Saga Rose", 24,474 GT, 592 berths, built in 1965, 4 star), and does not allow anyone over 50 years of age on board. Since 1997 it has also had a large quota of berths on Cunard's ships.

- Sun Cruises began operations as a cruise line in 1995, and is another of the many divisions of the MyTravel Group that occupies third place in the European rankings. Its ships operate in the Mediterranean in the summer, and are based in Palma de Majorca, while in winter they operate in the Caribbean. In 1996 they reached an occupancy level of 100% in the Mediterranean. The company bought Direct Cruises (cruise line) in 1998. It offers a 3+ star product thanks to the incorporation of the "Sunbird", which is a higher level of luxury than had previously been Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM offered. The aim was to instil brand loyalty into first time passengers, who tend to look for a better quality product in second and subsequent trips. Its customer base can be broken down by nationality as follows: British (60-65%), Scandinavian (25%) and North American (8%). The company's fleet is registered in the Bahamas, and all the ships are under ownership. The vessels are : the "Carousel" (23,200 GT, 1,056 berths, year 1971, 3 star), the "Seawing"25 (16,607 GT, 790 berths, year 1971, 3 star), the "Sundream" (23,005 GT, 1,080 berths, year 1970, 3 star) and the "Sunbird" (37,584 GT, 1,432 berths, year 1971, 3+ stars).

- Thomson Travel Group (TUI UK), has been the leading tour operator in the UK market since 1974, and belongs to World of TUI (Former Preussag), which is also the European leader. After an unfortunate foray into the cruise business 11 years ago, until 2000 it operated a fleet of four ships, which it reduced to just two in 200126, operating all year round. They are the "Topaz" (27,000 GT, 978 berths, year 1956,

25 In 2001 it undertook a sale and lease back option with ROC for 5 years. The leasing is on a bare boat charter basis. 26 which explains the reason for stagnation in British cruise demand in 2001. 95 2+ star) based in Majorca, Malaga and Cyprus and the "Emerald" (24,851 GT, 977 berths, year 1958, owned by Louis Cruises, 3 star). It owns no ships as such, chartering them from Louis Cruises or Kyan Shipping (bare boat charter lasting 7 years with an option to buy). An unusual feature of the "Topaz" is that it is marketed with the all-inclusive package, which is more normally seen in the super-deluxe segments of the market (5 and 5+ stars). The fact that one of its ships operates in the Caribbean all year round is also a unique feature.

-Fred Olsen, a Norwegian cruise line, with 3 ships: the "Black Prince" (11,209 GT, 446 berths, year 1966, 3 star), the "Black Watch" (28,492 GT, 772 berths, year 1972, 3 star) and the "Braemar" (19,089 GT, 750 berths, 1992), which have all been recently refurbished. They operate in the Mediterranean, the Caribbean, the Baltic, and the Far East.

- Other operators working in niche markets include: Swan Hellenic (owned by P&O, see section 3.3.2) aimed at the cultural segment of the market with the "Minerva", and Page and Moy, which has a quota of berths on Fred Olsen's more prestigious vessels and also operates the "Ocean Majesty" (10,417, GT, 523 berths, 1966, 3+ star).

3.4.2.4. The German market

There are no major cruise line companies in Germany. The large number of German tourists using foreign cruise lines, however, play a very important role within the market. A survey with all the relevant data relating to the sector has been carried out by Alf Pollak on behalf of DRV, a German association of tour operators and travel agencies. See bibliography reference (50). Almost a quarter of the market is made up of river cruise passengers who are not taken into consideration in this report. There are three different types of company within the market: German cruise lines, international cruise lines (through their GSAs) and tour operators. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Table 3.XXVII. Sea cruises

Number of % Sales % Clients (DM thousands) German cruise lines 102,650 31.00 504,195 39.90 International cruise lines 96,555 29.16 281,565 22.28 Tour Operators 131,880 39.84 478,039 37.82 TOTAL 331,085 100.00 1,263,799100.00

Source: Alf Pollak. DRV. 1999.

Table 3.XXVII details the breakdown of sales of these three groups. It must, however, be stated that the total number of clients does not coincide with the data in table 3.XXVIII, as the figures in the second table include some river cruises. The main feature of the market is the strong presence of specialist tour operators and the relatively 96 small role of the North American cruise lines. The reasons for this can be attributed to the strength of the tour operators within the German holiday market, where booking conditions are much stricter than in other markets, and the language barrier. It is worth pointing out that the two main groups, World of TUI and Thomas Cook AG, have had to abandon the shipping business for the time being because of the poor results of their subsidiaries; this market has yet to become fully developed and the cruise itself is still a very expensive product. The growth rates are high (number of customers in 2000 rose 14.8% and sales rose 13.1%), but they are lower than those in the UK (17%), as the German market is still not as developed as the UK market.

The most important cruise lines are: Deutsche Seetouristik GmbH (DSR) via Aida Cruises (see section 3.3.2), Hapag Lloyd Seetouristik, Köln-Düsseldörfer-Deutsche Flubkreuzfahrte (specializing in river cruises) and Peter Deilmann Reederei. The partnership between P&O and DSR is a most significant factor, which may provoke a definitive take off within the market, leading to similar levels of development to the US and British markets. In the last three years, 2,650 berths have been added to the market (+26%). As a source market it dominates the North Atlantic (based in Iceland), the Norwegian fiords and the Baltic Sea.

• Hapag Lloyd Seetouristik. This is a brand of cruise ships owned by the tourism company Hapag Lloyd AG, based in Bremen, which in turn is controlled by the World of TUI group, the main European tourism consortium. It was founded in 1970 with the merger between the companies Hamburg-Amerikanische Packetfahrt AG (HAPAG) and Norddeutscher Lloyd (NDL). It currently has business interests in the airline sector (Hapag-Lloyd Flug GmbH, founded in 1972) as well as in the travel agency business. Cruise business in itself represents only 6% of its total. It recor- ded figures of 46,000 customers in 1999-2000, with sales of 3.2 billion euros. After the takeover of Hanseatic Tours in 1996, three divisions were created: Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM - Hanseatic Tours (for adventure and expeditions onboard the "Bremen" and "Hanseatic"),

- Hapag Lloyd Tours (for groups and holiday packages sold through the press, onboard the "Colombus") and

- Hapag Lloyd Kreuzfahrten (for super-deluxe cruises).

Its passenger cruise liners are as follows: the "Bremen" (6,752 GT, 164 berths, year 1990, 4 star), the "Hanseatic" (8,378 GT, 184 berths, year 1991, 5 star), the "Columbus" (14,903 GT, 420 berths, year 1997, 3+ star) and the "Europa" (28,437 GT, 408 berths, year 1999, 5+ star). All are registered in the Bahamas and have German officers. The "Columbus", which is bare boat chartered , sails in the Mediterranean, the Baltic and the Great Lakes in the US. The remaining two ships are 5 star vessels. The "Europa", is specially aimed at the deluxe market

97 with all of its cabins looking out onto the sea and with a smaller capacity than its predecessor. One of its main features is that it has one of the highest GT/berth ratios (70.1 as opposed to 36.1 of its rival the "Deutschland") as well as being the only cruise ship with a 5+ star category in the Berlitz Guide 2002 (see bibliography 5).

• Peter Deilmann Reederei was a cruise line mainly devoted to cargo in the sixties, entering the passenger business in the seventies. Its volume of sales in 1998 was 200 million DM and 43,000 customers. It operates in the three star segment. Its ocean-going fleet is made up of the "Berlin" (9,570 GT, 420 berths, year 1980), the "Lili Marleen" (750 GT, 50 berths, year 1994) and the "Deutschland" (22,000 GT, 545 berths, year 1998), which has an interior decor similar to the grand transatlantic cruisers of the twenties and thirties, with its art-deco decoration. It also gives special importance to food on-board, aimed at the traditional and older customers. They sail through all the seas, including the Mediterranean, and the "Deutschland" is even designed to be able to sail in the Arctic. All the ships are German registered and have German crew and officers. It also has a major river cruise fleet comprising six ships.

Table 3.XXVIII. Distribution of cruise lines within the German source market

Cruise Line Number of clients 1997-1998 1998-1999 1999-2000 Phoenix Reisen 45,500 75,000 70,658 DSR / AIDA Cruises 39,500 48,907 79,350 Hapag-Lloyd Seetouristik 39,500 43,000 43,000 Mediterranean Shipping Cruises 27,500 n/a n/a Peter Deilmann 26,800 35,000 38,000 Costa 24,000 32,000 37,000 Seetours 26,000 - - Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Transocean 21,000 21,000 23,907 Festival 12,600 15,000 20,000 Hurtigruten 11,400 17,400 19,400 Others 74,400 n/a n/a TOTAL 348,200 n/a n/a

Fuente: FVW International.

The main tour operator companies sell packages for the big cruise lines (NCL and RCI) as well as chartering and contracting berths on different vessels. The most notable of these are Transocean Tours and Phoenix Reisen. The first has chartered the "Astor" (20,158 GT, 590 berths, year 1986, 4 star) and the "Arkona" for ten years and it also has a major river cruise division. Phoenix Reisen runs two ships, the "Albatros" (24,803 GT, 940 berths, year 1957, 3+ stars) and the "Maxim Gorkiy" (24,981 GT, 650 berths, year 1969, 3+ star). All of these ships sail throughout the world and normally use Genoa as a base port in the Mediterranean. 98 3.4.2.5. The French market

The main features of the market are the lack of a market-leading cruise line and the difficulty experienced by the main international companies in penetrating the market because of the language barrier. Despite this, the tour operators are nevertheless interested in the market, which may be a key element for its future growth . There is a weak national cruise line presence, the most notable of which is Club Mediterranée. In order to protect and strengthen its shipyards and to promote its overseas territories, the French government grants tax benefits to ship investors, along with added benefits should the ship be French flagged and registered in the Kerguelen Islands (overseas territories in the South Pacific). Several companies have benefited from these policies to date, in particular the North American cruise line Radisson. Festival has the "Mistral" registered in France, having leased it out directly from the shipyard that built it: Chantiers de l’Atlantique.

The most representative national company in the business was Club Mediterranée, owned by the holiday group of the same name, but it sold one of its sailing ships ("Club Med I") to Windstar halfway through 1997. It holds a 7% share in the French cruise market, and it still owns "Club Med II" (14,745 GT, 392 berths, year 1992, 4 stars), a 5-mast sailing ship that sails in the Caribbean and the Mediterranean.

The source market is dominated by Costa, who sell Caribbean and Mediterranean cruises directly on the market. One of its ships is based in Marseille throughout the summer. During the winter it organizes charter flights from Paris to Guadeloupe for cruises on its ships in the Caribbean.

Nouvelles Frontieres is the number one tour operator in France. The German group World of Tui owns 41.4% of the business. It has a comparative advantage, like its British and German counterparts, of having considerable vertical integration within the market (airline, tour operators and hotels). It chartered the "Van Gogh" (15,402 GT, Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM 1,100 berths, year 1975) during 2001 through the Caribbean, using Havana (Cuba) as its base port.

3.4.2.6. The Italian market

Italy has a great cruise tradition, and it also has some major cruise lines, including Costa and MSC. The market is clearly dominated by Costa Crociere, which is not only the absolute market leader in Italy, but also in Southern Europe (see section 3.3.1.4).

The second company is Mediterranean Shipping Cruises (MSC), with its headquarters in Naples, which has increased its available capacity in the last few years, based not only on Italian customers (reducing its share to 20%), but also on German and British customers, and since 1998 it has been very active in the US source market. The company's fleet is made up of the following ships: the "Monterey" (20,046 GT, 592 berths, year 1952, 2+ star), the "Rhapsody" (17,593 GT, 822 berths, year 1977, 3 star), and

99 the "Melody" (35,143 GT, 1,098 berths, year 1982, 3+ star) which operates in the US market. All of them are registered in Panama and use the Mediterranean ports of Genoa and Naples as their base. There are several Spanish and French ports of call during the cruises. It is consolidating its market position by creating its own catering company called Italcatering. During the winter months its ships are transferred to the Caribbean, where it competes with Costa and Carnival. It has two twin vessels on the order book [MSC1] and [MSC2], (60,000 GT, 1,590 berths, 2003 and 2004).

The entry of the tour operator Valtur into the market in November 1999 is also worthy of note. Its headquarters are in Rome, and it has chartered the "Valtur Prima" (15,000 GT, 520 berths, year 1948, 3 star) for five years. This vessel is the property of the cruise line N.I.N.A. SpA., and is based in Cuba for cruises in the Caribbean.

3.4.2.7. The Spanish market

Table 3.XXIX details the main information on total sales, with Costa cornering a third of the market, followed by Royal Hispania, with a share of around 25%. The rest is shared out among Festival, MSC, Royal Caribbean and Silversea. Passenger cruise line sales for 1998 rose to 63,050 billion pesetas, an increase of 21%.

Table 3.XXIX.

Company Year 2000 Year 1998 Turnover (mill. euros) Clients Clients Costa Crociere 19.1 30,500 20,000 Royal Hispania 15.0 n/a 12,000 Festival 2.1 7,000 2,500 Others (MSC, RCI, Silversea) n/a n/a 10,500

Source: Nexotur. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

The traditional gap with regard to other similar markets, such as the French or the Italian market, is mainly due to three causes:

- the lack of cruises with Spanish base ports,

- the weak peseta and

- the lack of a major national company.

The first two causes have completely changed. The third cause has begun to change over the last two years and there are now clear business initiatives in place that sug- gest it will disappear . These initiatives are described below.

The main Spanish passenger cruise line within the market is Cía. Trasmediterránea, and it has made in-roads into the cruise business. Firstly, with Royal Hispania, which had 100 only one ship in operation, the "Don Juan" (9,805 GT; 448 berths; year 1967), until October 1999. In October 2000 it set up a joint venture called Spanish Cruise Line (SCL) with Festival Cruises and the majority Spanish company Iberojet, with each company holding a third of the share capital. Packages are sold to source markets in Spain, Portugal, Holland and Germany, and the ships have a distinctively Spanish feel to them, in a similar vein to the Italian influence in Costa Crociere. Operations began in April 2001, with a programme of 32 7-day cruises around the Western Mediterranean. Expected sales in Spain are 39,000 customers in the first year. It has chartered the Festival Cruises-owned ship the "Bolero" (16,107 GT, 761 berths, year 1968, 3 star) for three years.

In 2001, the tour operator Pullmantur (Marsans group) bought the "Oceanic" (38,722 GT; 1,124 berths; year 1966) from the now defunct Premier Cruises. It operates in the Mediterranean and in the Bahamas on seven-day cruises.

The hotel chain Hoteles Playa, thanks to its participating cruise line Vistamar Canarias (formerly Marline), owns the "Vistamar" (7,498 GT; 295 berths; year 1989). It was registered in the Canary Islands Special Register at the beginning of 2001, and sails along the South American Pacific coastline, the Mediterranean and the Caribbean, and is run by Plantours & Partner, with 95% of its customers being German.

3.4.3. Cruise lines operating in the Asian source market

According to WTO figures (see bibliography 29), the tourist demand in Eastern Asia and the Pacific is that which exhibits the highest growth levels of all. In the 1995-2020 period it is hoped that international tourism will grow cumulatively at a rate of 6.5% per year, with Japan being the main source market. The WTO's paper entitled Global Tourism Forecasts to the year 2020 and beyond, (see bibliography 28), states that "there are three key development areas within the sphere of transportation", with air Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM traffic being the obvious one, but another being "the growth of the cruise business, not only in the Caribbean but throughout the world, and above all in the Far East and Europe".

This is a clear example of the enormous possibilities for future cruise demand that are running in parallel with development of local business structures, all of which are in their infancy, with the exception of Star Cruises. One might think that, as the UK is the European leader, so then Australia should lead the way in this region. However, its long distance from the US ensures that not many ships are assigned to these waters, as the cruises which are sold have to be over seven days long and are normally 14 days, which greatly reduces the growth potential of the supply. Added to this is Australia's low population density, which is why Australia does not have the dominant position that may be expected of it. Therefore it is more difficult to transfer the US experience to the area.

101 As well as the main reasons cited in the above paragraph, there are also other reasons detailed below which stem partly from those above. The information has been set out in conjunction with data from the PATA paper, cited in the bibliography (33):

- The general lack of adequate infrastructures,

- High operating costs (port tariffs, ship supplies, taxes, flights),

- The lack of information among potential clients.

The same paper also cites the following as strengths in the region that help promote its potential:

- The growing interest in local demand,

- A growing attraction as a holiday destination,

- Being a unique destination.

Business structure is characterized by the following:

- The absolute dominance of Star Cruises (see section 3.3.4), which is acting as a catalyst with a notable effect on the port of Singapore.

- Local business attempts in the major source markets of India and China, which at present are limited to coastal cruises.

- The fragmentation by market is much greater than in Europe, mainly because of language, ethnicity and culture. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM - As far as Japan and the Republic of Korea are concerned the interconnection between markets is nil. For cultural and linguistic reasons the markets are based on national monopolies. Large corporations play a major role in the market, through the Incentives and Conferences segment.

- The slow but growing presence of the big operators: HAL, Orient Lines, Princess and Silversea. The limiting effect of the distance away of the main source markets has already been stated, but it is worth highlighting the only local company, with the exception of the Star Cruises Group, which is P&O Cruises Australia: it belongs to the P&O Princess group (see section 3.3.2) and operates the "Pacific Sky" (46,087 GT, 1,200 berths, year 1984) from Sydney.

The fleet within the region represents a 3% total of the world ocean-going cruise line fleet. There are no ships currently under construction, which suggests that the figure will drop over the next few years. See table 3.XXX.

102 Table 3.XXX. Distribution of ocean-going fleets (January 2002)

Group/ Total Fleet Order Book Cruise Line NS18 GT18 GT/ Berths Average NS GT GT/ Berths Berth Age Berth P&O (Australia) 1 46,087 38 1,200 17.0 0 0 - 0 Indian Ocean C. 1 10,400 17 613 34.0 0 0 - 0 NYK Cruises 1 28,856 48 600 10.0 0 0 - 0 Mitsui OSK 2 45,243 37 1,210 11.5 0 0 - 0 Japan Cruise L. 2 54,518 41 1,326 4.0 0 0 - 0 Hyundai 3 67,029 30 2,257 29.0 0 0 - 0 TOTAL 10 252,133 7,206 17.9 0 0 - 0

Source: Own study based on data from PSA and Lloyd’s Cruise Int.

Indian Ocean Cruise Lines is the most influential company in India, offering coastal cruises from Mumbai. Since the year 2000 the "Ocean Majesty" (10,400 GT, 613 berths, year 1967) has been operating in the Indian Ocean during the winter. Its customers are mainly Indian and to a lesser degree American.

The most recent business initiatives within the Chinese market have been aimed at coastal cruises, which, in spite of not forming part of this study, are detailed below as an example of an incipient business in this country.

China Shipping Group operates the "Xin Shang Hai" (3,857 GT, 648 berths, year 1983) that sails around Asia. Star Cruises has bought the "Wasa Queen" (16,546 GT, 1,100 berths), which, as of January 2002, has begun business in the Chinese market through Cruise Ferries. It sails from Hong Kong (China) to Xiamen.

3.4.3.1. Japan Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

The lack of available free time for the working section of the population, cited in section 2.1, makes any development in demand very difficult. Nevertheless, taking into account that it is a country with a rapidly ageing population, the outlook is very promising. Seafaring conditions make cruising all year very difficult. As has been previously stated in this report, Japanese people wish to travel on Japanese cruisers, for cultural and linguistic reasons. Approximately 75% of the total demand sail on Japanese cruisers, although this high percentage is gradually decreasing . The cruise market began in the eighties thanks to the study tour, a major feature of this market, which is basically an incentive and training trip, in which it is quite normal for employees to share up to 4-bed cabins. Below is a description of the ocean-going cruise lines:

- NYK Cruises. It belongs to NYK Yusen KK, the biggest shipping company in the world, which had sales of over 9 billion dollars in 2001. Crystal Cruises also belongs to the same group (3.4.1.1). It has the "Asuka" (28,856 GT, 600 berths,

103 year 1991, 4 star), which was the first Japanese cruiser to sail around the world in 1996.

- Mitsui OSK Passenger Line. It owns two ships: the "Fuji Maru" (23,340 GT, 603 berths, year 1989, 3+ star) and the "Nippon Maru" (21,903 GT, 607 berths, year 1990, 3+ star). The first deals with the corporate segment (incentives, conferences and personnel training), and does not deal with individual customers. The second cruiser is largely aimed at senior citizens. Both ships sail in Southeast Asia and also sail around the world.

- Japan Cruise Line is owned by SHK Line Group, a joint venture between Shin Nohonkai, Hankyu and Kampu, all of which are ferry companies. Their fleet is made up of two ships: the "Pacific Venus" (28,000 GT, 720 berths, year 1996) and the "Orient Venus" (26,518 GT, 532 berths, year 1998, 4+ star). The first ship is aimed at the individual market and the second at the incentives and groups segment. The ships operate in Alaska, Australia and Southeast Asia.

3.4.3.2. Republic of Corea

This market has the same limitations as the Japanese market as far as culture and language are concerned. The most notable operator is Hyundai Merchant Marine. After the failure of its initiative with Carnival Co., it began a joint venture with the North Korean state company of Asia-Pacific Peace Committee in order to improve relations between the two countries, adopting the name of Superstar Capricorn Ltd. It is advised by Star Cruises, from whom it purchased two ships, while V Ships supplies the ships’ crews.

It has a total of three ships: the "Pongane" (18,455 GT, 882 berths, year 1972, 3 star), the "Kumgang" (28,388 GT, 1,375 berths, year 1973, 4 star) and the "Hyundai Pungak" (20,186 GT, 751 berths, year 1971, 3+ star). It uses the port of Changon Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM (Democratic People’s Republic of Korea), where it has invested 72 million dollars, in order to carry out three-day cruises to Mount Kumgang (Diamond Mountain), which is a sacred shrine for pilgrimage. The base port is Tonghae (Republic of Korea).

3.5.- Commercial middlemen in the cruise business

3.5.1. Cruise trip distribution channels

Cruise lines normally sell cruise trips through travel agencies and, to a lesser degree, directly. The change in the travel agency’s source of income, caused by the increase of the cruise business and the cutting of flight ticket sale commissions, has favoured this general trend. Nevertheless the situation is changing, mainly because of two reasons:

104 - The considerable growth of tourist cruise sales requires a more complex selling structure, strengthened with the rise of CRSs27 and call centres.

- New technological advances, and above all the Internet, open up new distribution channels.

The result is a greater penetration of tourist cruises in the leisure holiday market, which in turn accelerates the process of business expansion and consolidation.

3.5.1.1. Travel agencies

Nearly all cruise companies sell reduced quantities of tickets directly to their customers so as not to alienate the travel agencies. Of all the trips on the market, the cruise, unlikely as it may seem, is the sector that most widely uses retailers as a distribution channel for its product, as can be seen clearly in table 3.XXXI for the US and Canada. As proof of the sector's reliance on them, one need only take a look at the slogan of the sub-sector's largest company, Carnival, which states "Carnival loves travel agents", and is aimed at 15,000 US travel agents, ensuring that they get to know the company's ships and even sail on them.

The category and quality of the product is a determining factor when establishing distribution channels. As the big cruise lines have a massive product, they rely on travel agencies, whereas specialist cruise lines prefer to maintain direct contact with the customer, and avoid travel agencies completely. The reason lies in the fact that a sound knowledge of the product is required in order to sell it.

Table 3.XXXI. Travel agency participation in the US in relation to total sales

Component of the trip % Cruise 95 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Aircraft 90 Train 40 Hotels 10-20 Hirecar 20-60

Source: CLIA 1999.

It is also worth noting the opposite case scenario, in other words the importance of the cruise for travel agencies. Table 3.XXXII reflects a very low weighting (10%), which is why not all travel agencies are keen to sell cruise packages. Of the total of 33,000 travel agencies in the US, two thirds are CLIA members; in other words they sell crui-

27 CRS: Computerized Reservation System. They originated with US airline companies. They offer customers the possibility of not only booking their flight tickets, but also other tourist services that include: car-hire, hotel, tour operator packages, cruises, etc. They differ from GDSs in that they offer no information about the destinations.

105 ses, and of these only 34% are specialized in exclusively selling cruises. Graph 3.e shows the evolution of CLIA member agencies. The decrease that starts in 1994 can be explained by the process of consolidation in the retail sector.

3.e. Evolution of the number of CLIA member travel agents 1980-1999

Source: CLIA.

It is a well-known fact that the productivity of specialist agencies is much greater than that of those which are not (see table 3.XXXIII). This phenomenon also applies to the cruise market, which explains why the total amount of specialist agencies has grown exponentially in the last few years (from 500 in 1988 to over 7,500 in 2001). Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Table 3.XXXII. Percentage distribution of agency sales in the United States

Component of the trip Sales volume Cruise 10% Aircraft (national) 50% Aircraft (international) 10% Hirecar 7% Tourist packages 8% Hotels 12% Others 3%

Source: ASTA281999.

28 ASTA: American Society of Travel Agents: US travel agent association.

106 Added obstacles to the increase of cruise sales are the fact that they are not an essential product for travel agencies and that commissions are very complicated and constantly changing. It must be remembered that the typical American travel agency offers over 1,000 products, making it very difficult for the agent to know all of them. CLIA's efforts are aimed at training travel agents through courses and seminars, and at directing the customer to the retail middlemen, mainly through advertising campaigns.

In 1985, in Coral Gables (Florida), the National Association of Cruise Oriented Agencies (NACOA) was founded. It has 780 US and Canadian travel agency members and 23 cruise lines, mainly North American. Like the CLIA, its mission is not to negotiate contracts between travel agencies and cruise lines, but rather to achieve the following objectives: a) to promote excellence and sound knowledge in the field of sales and marketing of cruise trips; b) to improve the training and communication of and between its members; c) to improve member communication with other agents on the market, such as airlines, cruise companies, suppliers and associations within the sub-sector. NACOA's success is fundamentally based on the high profitability of its members. See table 3.XXXIII.

The current situation can therefore be summarized as follows: cruise lines are very dependent on retail sector distribution, although the opposite is not the case. The situation, however, is changing, with the weakening relationship between cruise line and retailer, and the increasing importance of the opposite case scenario: the importance of the retail sector-cruise line relationship. As stated at the beginning, specialist cruise lines tend to opt for direct selling to the customer, given the complex nature of their product.

Table 3.XXXIII. Productivity of US and Canadian travel agencies specializing in cruises

CLIA member agencies Productivity* Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Non-specialist 170 Only cruises: - Traditional business (shop) 240 - From home 67 "Only cruises" average 203 CLIA average 181 NACOA average 425

(*): measured in dollars gross/hour for each booking. Source: CLIA.

During the nineties, airline companies noticeably reduced their sales commission paid to travel agencies in the US, causing 2,300 agencies to close down and leading to an increase in the difference between sales commission paid by the cruise sector and the

107 airlines of about 5 to 7 percentage points29. This has resulted in the consolidation of large agency groups in the US. The two biggest are: The Travel Company (TTC) and Travel Associates Network (TAN). The latter is a consortium of 5,800 independent agencies and the cruise sales leader, with a sales volume of one billion dollars per year, while TTC is the second largest, bringing in 600 million dollars worth of business. These mega-agency chains are facilitating the substantial increase in sales of the cruise product, in the lower and middle categories.

Carnival President Bob Dickinson predicts that within 10 years direct bookings will increase from their current 5% share, rising to 10-20%. It must not be forgotten that the hotel sector, for example, distributes 90% of its product in this way. Up until now it has been common practice for all cruise lines to include the number for direct bookings in their advertising material. The response is minimal, representing, as we have already said, only 5% of total sales on average. Figures are even lower for the big cruise lines, with Carnival for example, having only 1% of total sales deriving from direct bookings. This is mainly due to Carnival's policy on selling directly, as its call centres do not offer discounts or lower rates for groups over the telephone, thereby passing on many bookings to travel agencies.

On the other hand, CLIA states that within the last five years, 10% of cruise customers have never used a travel agency, in other words they have made the booking directly, while the remaining 90% book through travel agents. Of this figure, 57% took advice from the travel agency, using the agency as more than a mere ticket-issuing service.

The fact that 70% of bookings are made during the weekend or in the evening, falling outside normal working hours for most agencies, is helping to promote other forms of distribution, such as the Internet and the direct selling through the call centres. A notable shift in this area can be seen in Carnival group's franchises. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM The Carnival franchising system

The system began in 1998, with the concept of "Vacation Stores", which attemp ted to change and relax the strict rules on opening times and personnel of traditional travel agencies, in the hope of breaking through the 2% participation ceiling of cruises within the holiday market. Franchise requirements are as follows: a) the location must be in a busy public thoroughfare (such as shopping centres); b) the shop must be open until 9pm as well as opening during the weekend, as 70% of customers shop during the 6pm to 9pm period and at weekends; c) the personnel must be selling experts and not merely ticket dispensing agents, and should be remunerated according to their productivity.

29 After the 11th of September 2001, cruise lines have reduced their commission to US agencies selling flights on the fly&cruise package of a cruise from 10% to 5%.

108 The success of these holiday shops is inversely proportional to the number of products and directly proportional to the seller's knowledge of the products he/she is selling. Holiday shops need to be lively places, as opposed to the traditional travel agencies. Other retail branches have experienced resounding success with this formula, with a notable example being the largest bookshop chains in the US. The holiday business is also beginning to experiment with the formula, and Dynamic Travel & Cruises is a celebrated case in point. Its shop is about 500 square metres in size, with a children's play area, a cafe, a bookshop and an area dedicated to selling holiday accessories. Great attention to detail is paid to the music played in the shop, evoking exotic locations, to the smell of the shop (ranging from pine trees to orange trees). Each night there is a book presentation by a renowned author, or a photography presentation given by a famous photographer within the industry, etc.

United Kingdom

There have also been cuts in flight commission rates, just as in the US market, and the use of new technologies, in particular the Internet. There is also consolidation within the retail sector, although the reasons are not the same as for the US. The reason lies within the main role played by the tour operator in the UK, a fact that does not affect the US. The tour operator has become an essential factor in the development of the cruise in the British market. The process of vertical integration began in the eighties, by virtue of which the tour operator controls or tends to control all the elements in the value chain, so as to increase its profits. There are basically four big groups in a rapidly changing business environment. Each group is made up of the following elements: the tour operator itself (the parent company), an airline charter company, a cruise line, one or several hotel chains and a network of travel agencies. The table below details the main agency chains. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Table 3.XXXIV. Tourist groups in the UK in 2000

Tour operator group Distribution channels Travel agency Number Total* Direct sale chain of Agencies Agencies Thomson Travel (TUI UK) LunnPoly 791 835 Portland Airtours (MyTravel) Going Places 717 1.191 Direct Holidays Thomas Cook UK Thomas Cook 772 772 Thomas Cook Direct First Choice Travel Choice n.d. 300 Eclipse

(*) includes associated travel agencies. Source: Travel Weekly UK.

109 Tour operators also run their own call centres, used for selling direct to the public, many of which are open 24 hours a day. A noteworthy case, in a similar vein to the previously mentioned Carnival franchises, is the Holiday Hypermarkets, of which First Choice has a 25% share. They are very similar to a traditional supermarket: large surface area and long opening hours.

The re-entry of tour operators into the cruise business has entailed the following:

- Sales of cruise trips benefit immediately from the CRS systems that are greatly used by tour operators.

- Stimulating retail interest in the product, given the close links between the tour operators and the travel agencies. Thus, for example, Lunn Poly has become the market leader in cruise sales (10-15% share), not only marketing sales for Thomson Cruises, but also for other cruise lines, such as P&O Princess.

The actions of the PSA in training agencies has been crucial to success. They have used guidelines set out by PSARA (Passenger Shipping Association Retail Agents), which has over 1,300 members. Just as in the US, once the cruise business began to grow, the specialist agencies formed their own association in 1999 called the Guild of Professional Travel Agents.

Tables 3.XXXIV to 3.XXXVI are a breakdown of data regarding the UK retail sector. It can be concluded that the observations made for the US market are valid in general terms in relation to the interdependence of the cruise lines-agencies, with the added and unique presence of the tour operator serving as a central axis within the travel industry.

Table 3.XXXV. Distribution of travel agency sales in the UK in 1999 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Business Sales Share (billion dollars) (%) All-inclusive packages 6.06 66.90 Ferries 0.33 3.60 Cruises 0.42 4.60 Aircraft 2.25 24.80 TOTAL 9.06 100.00

Source: Association of British Travel Agents (ABTA).

110 Table 3.XXXVI. Distribution of cruise sales in the UK in 1999

Middleman Cruise sales Share (million pounds) (%) Travel agencies 256.6 85 General Sales Agent (GSA) 15.1 5 Direct 15.1 5 Tour operator 15.1 5 Total 301.9 100

Source: ABTA.

3.5.1.2. New technology in distribution: Internet, CRS and digital TV

There are a number of different opinions with regard to what impact the Internet may have on the industry, given the complexity of the cruise in relation to other travel elements, such as hotels or flights. At the moment the Internet is not used on a large scale for the purposes of selling cruises. It is instead used mainly as a source of information, much like an electronic brochure. According to CLIA, 9% of repeating cruise passengers state that they have used the Internet for their next cruise trip, but only 5% of cruise passengers and potential travellers have ever booked a trip via the Internet, and this has never been for a cruise.

It is evident that it will not become the sole distribution channel, but it will nonetheless co-exist with agencies, becoming a powerful tool for them in the long run. It is expected that first time cruise passengers will go to an agency, while frequent passengers will look to the Internet for booking cruises in the middle to low category (equating to 3 to 4 star in accordance with Berlitz classification), with an estimated quota of 3 to 5% expected for cruise sales with RCI, Carnival, Princess and similar cruise lines. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

What is certain is that the Internet:

a) has a multiplying effect, both in direct sales and via agents.

b) will make the whole process more efficient, with a consequent increase in profits.

It is hoped that within the next ten years, 20%-40% of bookings will be made via the Internet, with a third corresponding to direct sales, and the remainder coming from Business to Business (B2B), in other words through the agencies. CLIA believes that the B2B portion of the market will develop even more than is expected, which is why it is gearing its training sessions towards this area.

111 It is already a well-known fact that the Internet has a greater impact on the market in the US than in Europe. The reason is simple: 40% of US homes are on-line, compared to only 9% of European homes, although it is expected that this will rise to 13% by the year 2001. According to the German international market research institute, IPK International, the situation for holiday booking via the Internet in Europe is as follows:

- 5 million bookings by Europeans in 1998, which is 2% of total travel sales.

- Growth in comparison to the previous year was spectacular: +300%.

- Sales and bookings are not only for flights, but include booking of accommodation, and car hire (500,000 bookings made).

- As can be seen from graph 3.f, the forecast is very impressive, with sales figures expected to increase fourfold for the 1999-2003 period. Cruise bookings will evidently form part of this increase.

3.f. Evolution of holiday bookings made in Europe by internet 1996-2003

millions

Forecast Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Source: IPK International - European Travel Monitor 2000, Munich Sample: 400,000 Europeans, over 15 years of age.

Details of more recent commercial initiatives involving the Internet are as follows:

a) The start up of digital TV, and above all the interactive Travel Channel, allows Internet users to make on-screen bookings.

b) The Travel Shop, which began in 1998 with a telephone booking system, has recently accepted Internet bookings.

112 c) The Travel Company has created an Internet-based system called "Cruise Control" for travel agencies. It comprises two basic elements: a client database and a Cruise Information Guide (ships, itineraries, ports of call, availability, prices, etc.)

d) RCC has created the "CruiseWriter" on the Internet, allowing the travel agent to tailor make brochures for each customer.

The introduction of the CRS has been sluggish in distributing cruises, because of its low penetration in source markets, and the relative complexity of its product. This explains the reason why it has fallen behind the airline, hotel and car-hire sub-sectors in the application of these booking centres, to which only travel agencies have access. Amadeus stands out as the market leader, having launched the Amadeus Cruise in October 2000. The following cruise lines are connected to it: Celebrity, RCI and Princess Cruises, with Carnival Cruises and NCL expected to join shortly.

The RCC group is the most advanced in the use of the CRS, having introduced its own CRS system in 1991, called "CruiseMatch 2000". Approximately 7,000 of the 27,000 travel agencies that sell cruises use this new system. Celebrity Cruises, which was bought by RCC, also took on the same system. A consequence of its application is the notable increase in the number of bookings that each company has made. The importance of the system in 1999 was clear for all to see, with 27% of its bookings from the US source market being made via this system.

3.5.2. Other agents: independent ship managers, shipping agents and ship brokers

There are a number of agents that play a very important role within the actual running of the ship. They are as follows: Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM a) Independent ship managers

The way in which ships are operated within the sub-sector differs depending on the size of the company and the area of operation (see section 7.1). Unlike other types of shipping traffic (oil, grain, containers, pallets, etc.) passenger cruise liners and ferries rarely employ the services of an independent ship manager.

Businesses have been undergoing a process of consolidation and centralization over the last few years, resulting in a lower number of larger cruise companies. The situation for the smaller companies is more precarious within the current climate, and they have to ensure that the business is run on better cost/efficiency ratios. These circumstances have favoured an increase in the use of these managers.

113 The management of passenger ships is very different from the management of cargo ships, which is why independent ship managers tended not to be used by the sub-sector. A wide knowledge of specific regulations is required along with an excellent level of service and a great deal of experience. Given the lack of independent ship managers until relatively recently within the business, some companies had taken on the management of other company's ships, in spite of the potential conflict of interests that this might entail. Independent ship managers supply officers and crew for the ship's three areas (deck, machines and hotel). They also manage the purchasing of ship supplies, ship maintenance, insurance, dry dock placements, and even improvements in performance and user complaints. They can also get involved in the buying, selling and chartering of ships through brokers. This enables the smaller cruise lines to do away with an operations department, in an act which can be classified as out-sourcing, which only recently has become accepted business practice.

b) Shipping agent (also known simply as agent)

They act as correspondents and local representatives for cruise companies in base and secondary ports. They take care of the ship as well as the passengers once the ship is in the destination port. Their main job is to supply the ships with all they need during their port calls, including provisions, supplies, stocks30, fuel, etc. They are also in charge of making all necessary payments and collecting payment for all cruise trips that were sold locally by the ship manager. In general, these companies register ships from several ship managers. They also have a dual role in the sale of the trip, in the guise of a GSA, and in organizing hotel accommodation (if the port is a base port) and on-land activities (sightseeing, meals, sports, etc.) just as a travel agency would.

Normally, the main shipping agents, who have a long history within the cargo shipping business, have gone on to set up their own cruise divisions. They play an Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM important role in the development of the cruise trip package.

c) Ship broker

Acts as a middleman in the chartering, buying and selling of ships. For obvious reasons they are not responsible for finding the passengers to fill the boat, as this is left to travel agencies, tour operators and occasionally shipping agents. The broker's job is to keep in contact with buyers and sellers of ships, and sometimes act as a go-between, informing both parties of any offers and counter-offers that have been made, in the hope that the business will be completed with the signing of contracts. In order to gain some sort of idea of the extent of their business, table 3.XXXVII provides data on the major deals that were brokered in the 1996-2001 period. The financial value of the business deals that are made are not fully known,

30 Stocks: naval term for spare parts.

114 although it can be stated that nine deals made in the first six months of 2001 accounted for 145 million dollars, while nine of the deals made in the year 2000 were for 165 million dollars.

Table 3.XXXVII. Buying, selling and chartering of ocean-going cruisers

1996 1997 1998 1999 2000 2001*** Buying and selling NS 20 42 14 12 12 11 Average capacity* 594 705 458 540 453 587 Average age** 29,4 28,4 25,4 34,4 27,0 25,9 Chartering NS 5 18 12 6 10 10 Average capacity* 306 542 678 752 470 470

(*) Capacity in berths; (**) Age in years. (***) First six-month period. Source: GP Wild (International) Ltd.

3.6. Main conventions and special trade fairs

This section will deal solely with the most important events devoted exclusively to the tourist cruise sector. All events are exclusively for industry professionals and are therefore closed to the general public. They are attended by different agents from within the market that include: airlines, IT companies, consultancies, equipment manufactu- rers, food & beverage suppliers, government organizations, shipping equipment suppliers, the press, port authorities, ship brokers, shipyards, cruise operators, ship managers, cruise lines, tourist offices, incoming agencies, financial services, travel agents, tour operators and interior designers. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

3.6.1. Seatrade Convention

The Seatrade Cruise Shipping Convention is held every March in Miami Beach (Florida, US) in the city's Convention Centre, and is sponsored by the FCCA (Florida-Caribbean Cruise Association). It is the tourist cruise sector's most important world meeting. Visitors to the event are big players in the sector. The convention programme lasts for four days, and covers a wide range of topics from marketing to distribution, as well as trips, ship projects, food & beverage and human resources.

Given the success of the event in Miami and the expansion of the cruise market, its organizer, Miller Freeman, has set up regional Seatrade conventions, with the same format as the Miami convention, including conferences and an exhibition site, as well as a "Travel Agent Training Programme", aimed at travel agents and tour operators. These regional conventions are as follows:

115 - Seatrade Mediterranean Cruise and Ferry Convention in Genoa (Italy), which is also aimed at the ferry segment. It is held in September in every even-numbered year with backing from the ports' association MedCruise.

- Seatrade Europe, in Hamburg (Germany), is held in every odd-numbered year and is devoted to cruises, ferries and river cruises. It is sponsored by Cruise Europe.

- Seatrade Asia Cruise Convention in Singapore or in Hong Kong (China), every two years in odd-numbered years.

- Seatrade Pacific Cruise Convention in Cairns (Australia), is held in alternate years to the above-mentioned convention, (i.e. in even-numbered years).

- Seatrade Middle East, Dubai (United Arab Emirates), is held every year in January.

3.6.2. Other Conventions

- The Annual Conference & Trade Show Information, organized by the Marine Hotel Association (MHA), is attended by the main companies, who send high-ranking delegates. It is held every year, usually in Florida. Cruise lines, buyers and suppliers all attend the convention. It is geared more towards the commercial aspects of the industry rather than tourist related topics.

The Marine Hotel Association is an international organization, based in Sausalito, California (US) that is run by and for the cruise sector. Its objective is to improve the general quality of the cruise experience. For this purpose it has the Onboard Management Development Programme, jointly managed by Johnson & Wales University of South Florida and The Maritime Hotel Academy of Salzburg, Austria. They offer basic to advanced on-board hotel management programmes. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

- The Cruise + Ferry Conference is a biennial affair and is held in London in the month of May. Some 4,000 professionals and over 250 companies attend the conference.

3.6.3. Activities aimed at travel agencies

As well as the aforementioned programme of Seatrade fairs and the PSARA programmes (see section 3.5.1), mention must also be made of the efforts undertaken by the market leader for demand: the US.

The tourism magazine "Travel Trade" organizes three meetings a year aimed at the retail sector. They are as follows:

116 a) "Passport to profits Idea-A-Thon" that is always held in Las Vegas (Nevada) during the month of September.

b) "Leisure Travel Conference & Winter Cruise-A-Thon".

c) "Cruise-A-Thon", which includes ship inspections and a high-level panel of speakers.

It also convenes the Travel Summit Conference, every year during the first quarter, which is attended by the highest-level executives within the tourism sector along with strong representation from cruise line companies. It has no fixed location.

ASTA also pays the product a great deal of attention by organizing seminars for travel agents, with the most notable being the ASTA Cruise-Fest, normally held in Miami in March/April.

NACOA normally holds its annual conference in June, alternating between Fort Lauderdale (Florida) and San Juan de Puerto Rico. It also organizes seminars and workshops in the US. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

117 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM 4 THE PRODUCT: CRUISE PACKAGES

The traditional concept of "product" is linked to substance and format. In the case under study, the product is made up of the itinerary that the cruise line offers on the market. The specific, structured and marketed itineraries, along with the port infrastructure, the ships and the distribution channels, all combine to make up the tourist cruise offer.

4.1. Creating the itinerary

The selection of an operation area, which partially or totally contains the so-called destination regions, is considered in the preliminary phase of examining the itinerary to be offered. The following are factors which influence selection: a) the degree of attraction for potential clients; and b) the medium-term growth prospects. This explains why the Port Authorities and the destinations join forces to promote different operating areas, as the cruise must be considered as a multi-destination or multi-port business. Normally there are six main destination regions (that will be studied in detail in section 4.3), which are: Alaska, the Caribbean, Northern Europe/the Baltic, the Mediterranean, the Middle East and Asia. The selection of an area for operation must be combined with an optimum distribution of the cruise line's total fleet.

Once the area of operations has been decided, the determining factors in creating the itinerary are:

- the beginning and end of the holiday season for the region in question;

- the choice of base port or ports, depending on whether it is an open or closed itinerary; and

- the number of times a year the said itinerary is offered (frequency). Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM There are two seasons: winter and summer. The average frequency of itineraries varies between two and eight, depending on the duration of each itinerary. Itineraries are normally closed loops, except for those that are called repositioning itineraries. The itinerary can be offered as a whole or just part of the journey may be reserved, which is why some secondary ports may be used for the embarkation and disembarkation of passengers. The product normally includes stays before and after the actual cruise.

The main idea is to make the itinerary appealing for potential customers, with the ports and destinations of the beginning and end of the itinerary of utmost importance.

The category of ports is selected as follows: a) main ports; and b) secondary ports. Base ports are ideal locations for ship maintenance and providing basic and essential supplies, which is why the term technical port of call is also used. Secondary ports have a greater tourist appeal (culture, beach, leisure, fashion, shopping, etc.) in order

A) Commercial aspect, taking into account:

A1) the potential client profitability,

A2) the economic aspect and quality offered by the port,

A3) the prices to be published in the brochure,

A4) the existing competition in the area,

A5) the available sales network of: shipping agents, travel agencies and tour operators.

B) Logistics, taking into account:

B1) the technical conditions of the infrastructure's facilities (passenger terminal, depth of water, dock length, dock width, supplying the ship without disturbing the passengers, manoeuvrability) and port services (navigation, ship on tow),

B2) the saturation level of docking berths,

B3) the proximity to other secondary ports,

B4) the tourist services and leisure facilities in the city and its surroundings,

B5) the accessibility to other modes of transport: proximity to the international airport and possible connections to main cities, in the case of fly+cruise, and Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM the accessibility of land transport, including access to the city centre and rail links,

B6) the possibilities of provisioning and supplying fuel,

B7) political and religious holidays, opening times of museums and city attractions in each city visited.

C) Target customers' wishes:

C1) preferences of on-board passengers,

C2) preferences of on-land passengers: tourist attractions in the city and the possibility of sightseeing on terra firma,

120 C3) market potential of local passengers: purchasing power, size of demand,

C4) security matters, with regard to actual physical security and political stability.

The choice of secondary ports is made according to the same basic criteria as the base port, as previously discussed, with points B6 and C3 obviously not really being relevant, and to a lesser degree points A5, B1 and B4.

Times at sea should be balanced with port stays, as the modern concept of the cruise ship as a destination in itself must not be forgotten. The tourist must be given the opportunity to enjoy the on-board restaurants, service and entertainment, while never getting bored due to an overly long voyage. The perfect distance between two secondary ports is normally set at one sailing night.

In the development and programming of itineraries, experience gained from the same company and other companies on the chosen destination is very important.

It is interesting to note the breakdown of how an itinerary is designed, provided by Sainz de los Terreros, Director General of Spanish Cruise Lines, in his work cited in the bibliography (46). He believes that there are five phases that complement the marketing process, as can be seen in the graph below.

Itinerary design and marketing process

1 and 2 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM 8 and 9 Number of months...

Phase 1 Itinerary design Phase 5 Promotion and distribution Phase 2 Market research Phase 6 Formalizing the itinerary Phase 3 Make-up and cost of itinerary Phase 7 Carrying out of the itinerary Phase 4 Designing the brochure Phase 8 Payment of the itinerary Phase 9 Quality control

Source: Sainz de los Terreros.

The first phase has already been discussed and its complexity depends on the complexity of the cruise line business structure and the size of its fleet. The financial aspect of the company stems to a greater or lesser degree from the decision-makers, technical directors and marketing managers in each port, along with local authorities and the Chamber of Commerce. Evidently, the port's own interests in actually having this type of traffic is also an influencing factor. Initially there is a sounding out of the likelihood

121 of the port accepting inclusion in the itinerary, followed by on-site assessment of the facilities, services, docking berths and availability of the same, links to airports, on- land transport terminals, tourist areas, etc.

The cruise line must assess with regard to the points set out previously, what are its strong points when doing business with the Port Authority. When dealing with local authorities, given that the arrival of the cruise ship will be very beneficial to them, the cruise lines attempt to gain greater assistance and special conditions that will benefit their cruise passengers.

During the second, market research phase, as much information as possible is requested from the Port Authority regarding cruise forecasts, mainly dealing with possible saturation of the facilities, to gauge whether or not the passenger will like the location, the obtaining of discount fares from the tourism authorities, information about local holidays, etc.

With the previously gathered information, the definitive selection of base and secondary ports is begun, which constitutes the third phase or the make-up and cost of the itinerary. Negotiations with the Port Authorities are based on two areas: docking berths and tariffs. With regard to the first area, the following basic concepts must be considered:

- the security in granting docking berths,

- the awarding of more suitable docking berths with better operating conditions (proximity to sea terminals, accessibility, esplanades, parking for both coaches and accompanying vehicles, fuel and water outlets), which reflect positively on the image and services that the cruise passengers are likely to form of both the ports and the company itself. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM The success of the independent ship manager with regard to the awarding and granting of the most suitable docking berths depends on the following factors: the saturation level of the port, the existing infrastructure and degree of use, and the Port Authority's interest in capturing or consolidating the client. This is motivated by:

- the pressure exerted on the port by the city.

- the optimization of facilities.

- the generation of business for services indirectly linked with the port.

- the conditions and project presented by the cruise line.

- the number of passengers in each port call and the frequency of the calls.

- the duration of the port calls. 122 - the requested services.

- the forecasts for future operations.

- the season of operation: winter or summer.

- the length of time the cruise line has been a client.

- the prestige of the company and of the ship, in so much as it influences the promotion of the port.

The fourth phase is the brochure design and production, which in tourism marketing terms is called the packaging of the product. It is normal practice to divide the financing of this packaging between the destinations, the port authorities and the cruise line.

The fifth phase is defined as distribution channel or network collaboration. If the programmed itinerary is completely new and it is during the off-season, then the most important relationship is with the tour operators. This is not the only element to be taken into account, as approval ratings amongst customers with regard to the new itinerary must also be considered. The importance of the relationship with receptive travel agencies is also paramount, as they must be able to offer suitable sightseeing trips.

The annual planning of itineraries is a great deal more complex for the larger cruise lines. It depends on each company's structure, but more often than not it involves five different departments. The Port Planning Department takes on a central role, and must work closely with the other four departments, which are:

a) The Sightseeing Department, which must be involved in establishing the complementary attractions that will be offered at the base ports and the ports of call, Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

b) The Sales Department, which gathers information to gauge the acceptance of the proposed itinerary among potential customers and distribution channels, especially travel agents,

c) The Fare Costing Department: which calculates the fares that will eventually be published in the brochures,

d) The Yield Management Department, which has become ever more accepted in the world of the tourist cruise, and which tries to avoid the pernicious and yet custo- mary matter of discount policies.

The initiative lies firmly in the hands of the Port Planning Department, which develops the previously examined phases, with the full support of other departments along the way.

123 4.2. Cruise package cost

The sales price of the cruise (SPC) is the sum of the following concepts:

1. Cost of direct raw materials

2. Cost of external services

3. Direct labour salaries

4. Marketing costs

5. Indirect salaries

6. General costs

7. Profit

8. Marketing and distribution costs

The cruise line is obviously looking for the following equation to be fulfilled:

SPC > Costs Profit > 0 (3)

in the hope of maximizing profit. In spite of the fact that cruises tend to be traditionally sold as an all-inclusive package, the tendency is for cruise lines to obtain additional revenue as detailed in section 4.2.1, which is why the balance (3) cannot be considered on its own. The aim is to always achieve a sales volume that is greater than the profitability threshold (in other words to get past breaking even). It is important to note

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM that costs in relation to sales volume is in itself discontinuous, which explains why the price fixing mechanisms are very complex.

Any system used for calculating tourist fares has to include the risk factor of not being able to store the actual product. Solutions tend to improve the occupancy levels of berths, as well as improving the degree of rotation, by using repositioning itineraries.

A major facet, due to the fact that the product cannot actually be stored, is the offer price (discount), which many cruise lines offer when the product is close to its expiry date, when normal sales have not reached a profitable occupancy level.

The pricing system may vary in the following:

a) Prices offered to the public, as in the case of regular lines.

124 b) In block prices that are fixed by the normal operation of the cruise. Mainly using a method such as part-charter, which may involve Bulk Tariffs (BT), consisting of net rates for a specific number of berths.

In the first case, the cruise lines market their own berths in accordance with a seg- mentation strategy, grouping cabins together to form several different price bands. Modern management techniques, such as yield management, ensure that the berths on offer are allocated a great deal better, thereby increasing occupancy levels, which is the variable that most affects profitability. Each fare is given its own characteristics defined by: the moment in which the booking was made, when payment is made, the category of cabin and the itinerary.

The use of GDSs by some cruise lines means that the setting of prices may change, making it more and more problematic to establish the real market price. The prices assigned to GDS products change many times throughout the day. The situation is almost that of an ideal market and similar to the most apt for shipping traffic. Something similar occurs with the auctioning of holiday trips on the Internet, a process that is slowly beginning to spread throughout the US, constituting what is called price setting based on demand.

Cruise lines establish financial and operating conditions with:

A) Tour operators, both in selling cruise packages which include flights to and hotel stays in the base port, and when tour operators sell pre-established quotas. The latter scenario is very popular among European cruise lines and more often than not tour operators hire berths with a firm commitment to buy. Quotas may also be hired, stipulating the price according to the time when sales are closed and not from the moment when the marketing pre-agreement was made. In this case, the hiring is risk-free for the tour operators, which means that they have been assigned a quota at a special price, which they can sell as they choose. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

The following are negotiated: commissions, special discount rates on sales, sharing the cost of advertising campaigns, advertising exchanges, financial help for producing a brochure, integrated discounts in tour operator packages, methods of payment, etc.

B) Recipient travel agencies, especially sightseeing tours that are not included in the package price, as they are optional features.

C) Port Authorities. It is not only port tariffs that are negotiated, as their capacity to act and persuade with regard to tariffs for services provided by other local suppliers must also be taken into account.

A great improvement in sales management is the companies’ use of yield management. During the eighties and at the start of the nineties, discounts were used widely, particularly for Caribbean products. This process became more acute with 125 the US recession in 1991. Demand was stimulated by low prices. The sector continues in its use of discounts, but this is done in a more moderate way. Basically, the mechanisms devised for calculating price variations have changed. In the eighties, prices were raised or lowered the Carnival Cruises President same for all customers. This is now done by groups, thereby Bob Dickinsonbelieves that reducing the total amount of the discount. the cruise product is under- valued: "Holidays in a hotel Halfway through the nineties RCC introduced a new system cost 50% more than on a called breakthrough, in which the prices in the brochure were cruise. Cruise lines could lower for those clients who booked their trip in advance. This increase their profits by up has been improved and now shows "from-to" prices for each to 50% and still be on a cabin category and for each itinerary. par. They could even lower prices by 20%, given that There is currently a range of prices for cruises, depending on the hotel sector suffered when the booking is made. The market is not experiencing so much during the ninetie overcapacity, but rather demand is low. It is absolutely neces- that it can no longer redu- sary to create demand with better offers such as, for example, ce its prices and still make three for two deals, as the North American consumer simply a profit. does not expect to pay full price for anything."

Table 4.I. Comparison between different 7-night holidays (in dollars)

Component On-land holiday Eastern Caribbean cruise Basic price 680 1,475 Flight 400 Inclusive Transfers Inclusive Inclusive Meals 350 Inclusive Service charges 93 n/a Tips n/a 60 Taxes 76 89

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Excursions 35 40 Entertainment 55 Inclusive Drinks 150 100 Total 1,839 1,764 Per day 263 252

Source: CLIA.

It is interesting to note the comparison between both types of holiday made by CLIA in table 4.I. The cruise's "all-inclusive" feature is well reflected in the table. Cruise lines from the upper end of the market segment, 5 and 5+ star, use all-inclusive formulas to the full, but this is not the case with the others, as the loss of on-board revenue would have to be reflected in the price published in the brochure. Nevertheless, there are all- inclusive experiences within the 3 and 4 star segment: tips are included in the cruise sale price and drinks may also be included. Thomson, hoping to repeat the success of the all-inclusive formula of its hotels, has announced that it will begin all-inclusive packages in the Caribbean and then in the Mediterranean for its ship the "Topaz". It is a 126 little early to judge its success, but this initiative has not been copied by any of its rivals. The trend seems to be the opposite, as reflected in section 4.2.1.

Table 4.II registers published brochure prices of the main cruise lines, measured in dollars/day, based on a double cabin, with no flights included and taking an average of peak and low seasons for the US source market. Examination of the table reveals a decrease in the general average price that can be attributed to the price cut in the offers of RCI and Carnival, due to the improved profitability of the modern and larger cruise ships. NCL's drop in prices however, derives from another source, as it is a clear attempt to capture quotas by price, but without changing the platform of operation. The tariff bands defined in the table coincide with the berth classification that was made in section 3.2.

Table 4.II. Prices published in the US (in dollars)

Company Price brackets Average price Tariff band 1997-1998 1999-2000 1997-1998 1999-2000 1997-1998 Carnival Cruises 188-246 143-231 217 Carnival Cruises 188-246 Celebrity 205-268 201-360 236.5 Celebrity 205-268 Costa 158-413 172-416 285.5 Costa 158-413 Orient Lines 225 225 225 Orient Lines 225 Disney 209 209 209 Disney 209 RCI 237-346 168-343 291.5 RCI 237-346 Star Clippers 215 275 215 Star Clippers 215 Princess 300-375 300-375 337.5 Princess 300-375 HAL 291-368 255-375 329.5 HAL 291-368 Norwegian 261-355 110-170 307 Norwegian 261-355 Crystal 448-465 468-475 456.5 Crystal 448-465 Windstar 471-489 390-415 480 Windstar 471-489 Cunard 410-925 509-632 667.5 Cunard 410-925 Radisson 550-613 650 581.5 Radisson 550-613 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Seabourn 767 589-907 767 Seabourn 767 Silversea 850 850 850 Silversea 850 Average 158-925 110-907 425.5 Average 158-925

Source: Own study based on data from the magazine Travel Trade.

It can almost be said that the brochures merely give a rough idea of prices, given that the published prices apply to only 25% of packages sold. The market has a capacity for accommodation that is growing rapidly and there are a multitude of prices thanks to the use of yield management and discount offers such as: 2 for the price of 1, advance booking, last minute bookings, etc. These aggressive discount policies have reached such an extent in the US market that the Mediterranean has been offered for 100 dollars/day, when the normal minimum price was 120 dollars/day.

Another important factor in cruise+flight package growth has been the creation of airline company loyalty programmes. Flights can be obtained by the customer in exchan-

127 ge for accrued air miles, which is why many US companies opt to publish only the cruise portion of the price. This explains the reason for the drop in fly & cruise sales in the US market. Some airline companies, such as British Airways, offer special cruise discounts within their loyalty programmes in association with P&O Cruises, Carnival Cruise Line, etc.

Events which affect the tourist's feeling of security also have an effect on prices, as there is a drop in demand. This was the case with the war in the Balkans, which provoked a drop in 1999, to 399 pounds/package for the summer in the Mediterranean on a fly&cruise package and 599 pounds/package for the Caribbean.

In the UK, the ratio between price/cost is more advantageous for tour operators than for traditional cruise lines, because of the competitive edge arising from their vertical integration, as reflected in tables 4. III and 4.IV. Tour operators have their own airlines and combine cruises with their holiday programmes in their own resorts or contracted hotels. Discounts become more widely available thanks to the entry of British tour operators into the market, using the same sales techniques they apply to other tourism products.

Table 4.III. Prices* of fly & cruise packages in the Caribbean (winter 1998/1999)

9 nights 15 nights TOUR OPERATORS Airtours Sun Cruises 669 979 Thomson Cruises 799 1,159 TRADITIONAL CRUISE LINES P&O n/a 1,695 (13 nights) Princess 1,095 1,645 RCI 999 1,281 (13 nights) NCL 995 1,885 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

(*) calculated in pounds sterling from UK brochures. Source: Anthony Peisley

According to PSA data, almost half of the cruises booked in the UK in 1997 (44%) were sold for less than 1,000 pounds. It is interesting to compare this to 1993 figures, when only a quarter were sold for less than 1,000 pounds. This trend continued in the year 2000, with 51% of packages being sold for less than 1,000 pounds, which drove the average price down by 8.7%, from 1,169 to 1,081 pounds. The reason for the drop in average prices in the last few years can be found in the increase in fly & cruise packages to the Mediterranean, which tend to be shorter in duration.

128 Table 4.IV. Prices* of cruises in the Mediterranean (summer 1999)

TOUR OPERATORS 7 nights 14 nights Aitours Sun Cruises 499 829 Thomson Cruises 499 899 First Choice 589 999 Traditional cruise lines P&O 695 1,395 Fred Olsen 1,128020 1,440 Cunard 1,148 (8 nights) 3,040

(*) calculated in pounds sterling from UK brochures. Source: Anthony Peisley

The general reduction in prices over recent years has been more notable in summer (28% of holidays cost less than 500 pounds in the year 2000) than in winter (8%). This is explained by the shorter average cruise duration, which implies lower prices, coupled with the arrival of packages that are accessible to the public at large and are therefore a great deal cheaper. Basically this is the same public that also books on-land packages with tour operators. This can be seen more clearly in the summer season (see table 4.VI.) in the northern hemisphere, than in the winter season (also northern hemisphere), which attracts a great deal more senior citizens.

The German market is, however, different, with an increase in prices since 1996. According to data supplied by BRD Kreuzfahrten, who measure average prices in the German market that also include flights within the package, prices rose by 5% in 1998, reaching 362 DM/day or 3,872 DM/package. In 1999 this was 379 DM/day, an increase of 4.7%, and 3,905 DM/package (+0.9%) and in 2000 it was 381 DM/day (+0.5%) and the package worked out at 3,848 DM/day (-1.5%), given that the average cruise duration dropped by 0.2 days. Alongside this, total revenue increased by 13.1%, higher

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM than the number of packages sold. Along with lack of development within the German market, its different behaviour can be attributed to the reduction in the 3 star offer, the bulk of which were cruisers from the former Soviet Union that were retired from service in the nineties. The reverse trend of 2000 is probably down to the fact that P&O has decided to enter the market, through Aida Cruises.

129 Table 4.V. Evolution of prices in the British market 1994-2000 (in pounds sterling)

% passengers < 500 501-1000 1001-1500 1501-2000 2001-2500 2501-5000 >5001 2000 23 22 24 13 7 8 4 1999 24 27 29 10 4 5 1 1998 11 38 31 10 6 4 1 1997 5 39 25 15 7 8 2 1996 6 34 25 15 6 10 3 1995 3 36 22 13 9 14 2 1994 3 22 34 25 8 6 2 Fly & cruise 2000 30 23 22 9 5 6 4 1999 30 31 24 7 3 5 1 1998 12 41 31 9 5 3 0 1997 7 49 23 7 3 8 2 1996 8 43 22 8 4 11 3 1995 2 37 21 14 8 15 3 1994 2 21 35 26 7 6 3 Source: PSA

Table 4.VI. Distribution of prices in the British market by season for the year 2000 (in pounds sterling)

% passengers < 500 501-1000 1001-1500 1501-2000 2001-2500 2501-5000 >5001 Total Summer* 28 21 22 12 7 7 3 Winter* 8 25 29 16 7 9 5 Fly & cruise Summer* 40 21 19 7 4 5 4 Winter* 10 28 29 14 6 8 5 (*) Northern hemisphere Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Source: PSA

4.2.1. Revenue generated on-board

On-board spending is an ever more important part of cruise line revenue, with figures often reaching 35% of the total. A recent study, carried out by the North American company Market Scope, states that, on three, four and seven-day Caribbean cruises, passengers under 45 years of age spend an average of 357 dollars, 45 to 65 year olds spend 345 dollars and the over 65s spend 242 dollars. Most is spent on gambling and drinking, together representing 50% of the total. Spending on sightseeing trips and playing sports on-land is 124 dollars, 144 dollars and 94 dollars for the age groups previously described, while spending in on-board franchises or shops is 103 dollars, 116 dollars and 123 dollars respectively. Europeans tend to spend less than their US and Canadian counterparts, with an average of 30 dollars spent in on-board shops.

130 The distribution of revenue generated on-board for NCL cruises, excluding the bar and gambling, is as follows: clothing/fashion (31.6%), jewellery (31.9%), gifts (11.5%), perfume (8.5%), spirits (3.0%), sweets (2.5%), tobacco (1.7%), cosmetics (1.3%) and others (8.0%). See graph 4.a.

The general trend is to add an even greater number of revenue generating elements onboard the 3-4 star categories. The "Grand Princess" has a virtual reality centre and each of the games on offer is charged separately. On RCI's Eagle class the customer has to pay for ice-skate hire in order to skate on the ice skating rink. The new Radiance class also has two paying restaurants. The majority of modern ships have computer- generated golf courses, which also have to be paid for. There has also been an increase in the availability of satellite telephones, Internet and e-mail in each cabin. On-board sales are even higher in Asia, and above all in Japan, with the generalized formula of the add-on.

4.a. Breakdown of revenue generated on-board

Source: Norwegian Cruise Line Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Cruise lines state that charging people also helps to keep consumption within reasonable limits, as well as recouping the investment of millions of dollars on facilities such as the ice-rink and the virtual reality centre. The greater offer of activities and services and the charge for use is a direct consequence of the increase of the platform offered by modern cruises as well as the greater demands of the customers, but this comes at the cost of undermining one of the main attractions of the sector, which is the all- inclusive price.

4.3. Main regions of operation and destination

The growth in passenger fleet capacities means a parallel increase in the amount of destinations on offer, with the most significant result being the transfer of the Caribbean experience to other areas. This process is speeding up with the entry into

131 service of the VLCVs, which have been designed to sail exclusively in the Caribbean, while other vessels under 70,000 GT will consequently be repositioned to other areas where the competition is not as strong. The focus of attention will therefore centre on other destinations, especially in Alaska and the Mediterranean.

The summer-winter season, as stated in section 4.1, is linked to the destination region. Graphs 4.b and 4.c reflect the movement of cruise capacity from one stage to another depending on the season, and it is interesting to note the shift from the Mediterranean, Atlantic Europe and Alaska (April-September) to the Caribbean (October-March). The fact that the VLCVs are post-Panamax ships means that there are several restrictions imposed on the actual location of these vessels, especially between the Caribbean and Alaska, and that the number of crossings through the Panama canal will be limited over the next few years.

4.b. Capacities offered worldwide by season in 2000 (thousands of berths x day)

April-September October-March

Source: GP Wild (International) Ltd. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Another important fact is that the search for new destination regions is coupled with the stimulation of local demand. This, along with the actual placement of the ship, are two factors which are very closely linked in achieving optimum running of the cruise. The large cruise lines are also trying to reduce their great dependency on US and Canadian demand. RCI, for example, has set a target of 15% - 20% of its customer base coming from other markets and Carnival has increased its share in non-US source markets from 5% to 10%.

132 4.c. Capacities offered in the UK by season in 2000 (thousands of berths x day)

Fly & Cruise From British ports

Source: PSA.

The role played by the Mediterranean in all of this is the key to success, having achieved fully autonomous development which is practically independent of the US and Canadian markets. In the face of continued increase in supply, cruise lines need to find new destinations. The length of the flight from the US is an important factor, limiting the appeal of cruises along the Asian coast, in spite of all the efforts that have been made to change this. The region has been reserved for Asian cruise lines and above all Star Cruises. This is another reason why new markets have to be found, with the South American market the most promising of all, as it has hardly been utilized by the big cruise companies.

The destination regions of Asia-Pacific and South America will play an important role in absorbing increases in capacity that will be incorporated within the next few years. Over the long-term, and to a lesser extent, the same will also happen with other sub- regions such as: Australasia, the South Pacific, the Middle East/Arabian Gulf, South Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Africa and the Indian Ocean. All of these regions are sunny during the winter (in the northern hemisphere) and can therefore potentially become a substitute for the Caribbean during this part of the year.

The distorting effect of the events of September 11th on the deployment of fleets has been noticeable, given that it has greatly affected the main source of cruise demand, which is the US. Although the effects may be transitory, it is nevertheless worth noting briefly the consequences of these events.

a) A notable increase in the sale and supply of packages that do not include flights, given the initial fear of flying and that 75% of US demand is based around coastal states. This has favoured the incorporation of new base ports.

b) An increase in destinations close to the US, including: Mexico, Alaska and of course the Caribbean, to the detriment of the Mediterranean. This destination, however, has been compensated by the increase in European demand, specifically 133 British, who prefer to stay in the area, and in winter (northern hemisphere), which is an interesting line of business.

c) It has accelerated the process of business consolidation, with effects on costs (higher levels of security), operations (slower embarkation and disembarkation and a consequently lower turnaround of ships) and revenue (drop in demand and heavy discounts). The bankruptcy of Renaissance is a clear case, with a consequent reduction in US supply of 11% in 2001 and 7% in 2002.

Table 4.VII Capacities offered in the US and Canadian markets (thousands of berth days)

Region 1987 % 1995 % 2000 % Caribbean 8,828 43,3 15,255 42,8 21,510 39,9 The Bahamas 1,922 9,4 2,761 7,7 3,200 5,9 The Mediterranean 841 4,1 3,478 9,7 6,277 11,7 Europe 358 1,8 1,583 4,4 3,745 7,0 Western Mexico 1,131 5,6 1,754 4,9 2,680 5,0 Alaska 1,715 8,4 3,008 8,4 4,197 7,8 Bermuda 1,141 5,6 1,095 3,1 988 1,8 Trans-Canal 970 4,8 2,277 6,4 2,573 4,8 Hawaii 603 3,0 602 1,7 2,857 1,6 South Pacific 353 1,7 574 1,6 1,155 2,1 Africa 0 0,0 347 1,0 503 0,9 Far East 466 2,3 327 0,9 202 0,4 South America 620 3,0 256 0,7 826 1,5 Transatlantic 339 1,7 479 1,3 1,016 1,9 TOTAL 20,377 100,0 35,662 100,0 53,863 100,0

Source: CLIA.

Table 4.VII shows the offer of berth days by region for the US and Canadian source mar- Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM kets. It can be clearly seen that the Caribbean (the Caribbean + the Bahamas) is the number one destination, with almost half of the capacities deployed. Europe (Northern Europe + the Mediterranean) occupies second place with 18.7%, followed by Alaska (7.8%). The highest increases for the 1987-2000 period can be seen in the European end of the market, rising from a share of 5.9% to 18.7%, i.e. a tripling of its share in a market in full expansion, mainly at the cost of the Caribbean. Also see graph 4.d.

134 4.d. Capacities offeres in the US and canadian source markets (thousands of berths x day)

1987 1999

Source: CLIA

Given the enormous weight of North American demand over the world, it is widely accepted that CLIA statistics can be extrapolated without reflecting a major difference in the total. However, it is interesting to note the information given by the Swedish Marine Trading Group in their publication entitled ShipPax Information, that calculates figures month by month and takes into account the world ocean-going fleet. This information can be seen in graphs 4.e and 4.h, which shows that the only real difference is in the Asia Pacific region, with a share of 7.9% as opposed to a figure of 4.1% given by CLIA for the year 1999.

4.e. Monthly distribution of global capacities in 1999 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Source: ShipPax Information

These graphs give a clear indication of the importance of the season for different regions. 135 4.f. Monthly share of capacities in Europe in 1999

Source: ShipPax Information

4.g. Monthly share of capacities in the US in 1999 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Source: ShipPax Information

136 4.h. Monthly share of capacities in Asia-Pacific in 1999

Source: ShipPax Information

The relationship between Europe and the Caribbean is second-to-none. A more detailed analysis in the light of ShipPax's data allows one to state that, contrary to what it may seem, the majority of ships in Europe which sail between April and September origina- te in South America, Africa, the Indian Ocean and all over the world, and not just the Caribbean. It is worth mentioning two cases in point: those ships based in Europe that are transferred to the Caribbean in the October-March season, and the opposite, whereby ships based in the US are transferred to Europe during the April-September season. The transfer of the VLCVs is made from the Caribbean to the Northeast Atlantic (the "Carnival Triumph") or to Europe (the "Grand Princess") in the months of March and April.

European demand is mainly based around the Mediterranean, which is a warm sea Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM during the months of October to March, playing a similar role to the Caribbean for North America. The jump from 133,000 to 200,000 cruise passengers in the UK in just one year is a very significant fact, with the amount of cruises having increased fivefold in the 1994-99 period, mainly due to the tour operator push within the market, basing their formula around the fly & cruise package, as can be seen from the table below.

137 Table 4.VIII. British source market by main destinations

Region 1995 1996 1997 1998 1999 2000 The Mediterranean 37,000 41,000 43,000 60,000 38,000 45,000 Atlantic Islands 20,000 25,000 23,000 22,000 28,000 37,000 The Baltic 18,000 24,000 34,000 37,000 46,000 37,000 Total departures from Ports within the UK 100,000 118,000 126,000 166,000 143,000 45,000 The Mediterranean 104,000 133,000 200,000 226,000 333,000 288,000 Caribbean 80,000 91,000 116,000 160,000 143,000 141,000 Atlantic Islands n/a n/a n/a 19,000 39,000 26,000 The Baltic 8,000 12,000 9,000 8,000 9,000 14,000 Total "Fly & Cruise" 228,000 284,000 381,000 454,000 589,000 561,000 TOTAL 340,000 416,000 522,000 635,000 746,000 754,000

Source: PSA.

Geographical proximity plays a major role in the source market-destination relationship, in spite of the major price reductions in long-haul flights. In simple terms, and in light of table 4.IX, it is possible to speak of the European Union-Mediterranean pairing and the US-Caribbean pairing. Note also the great weight of traffic in the Europe-Caribbean and Germany- Baltic Sea pairings.

Table 4.IX. Base and destination matrix

Base Germany United Kingdom France United States Destination Share (%) Share (%) Share (%) Share (%) 97 2000 97 2000 97 2000 97 2000 The Mediterranean 33.6 32.7 46.6 44.2 53.6 54.5 11.3 11.7 The Baltic 20.9 19.3 8.2 7.8 12.5 10.5 6.0 7. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Western Europe/Atlantic Islands 10 11.1 4.5 8.4 0.1 0.1 - USA/Caribbean 21 25.6 22.2 18.7 23.2 28.6 57.0 47.6 Alaska 0.0 0.0 0.0 0.0 - - 8.4 7.8 Overseas (USA not incl.) 14.5 11.3 18.5 20.9 10.6 6.3 25.7 25.9 TOTAL 100.0 100.0 100.0 100.0 100 100.0 100.0 100.0

Sources: Own study based on data from BRD Kreuzfahrten, PSA, Croisimer and CLIA.

Table 4.IXa shows the relationship between the main cruise lines and the operating regions that have been defined in this chapter, measured against the supply in 2002 in accordance with the Berlitz Guide (see bibliography 55).

138 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM able 4.IXa. Operating regions of the main ocean-going cruise lines 2002 T Source: Own study based on data from the Berlitz Guide (see bibliography 55).

139 4.3.1. The Caribbean

The modern concept of the cruise grew up around Miami as a base port, which is why one should not be surprised that the region maintains its dominant hold on the market, with a worldwide share of over 50% of berths supplied. This statistic changes in the months from April to September when the share drops to 23%. It is a typical kind of destination, which can be defined, instead of the traditional sun and beach holiday, as sun and sea. The keys to its success are: its proximity to the world’s main source market, its year-round temperate climate, the generalized use of the dollar as a means of payment, the vast English-speaking population, its cultural diversity (colonial, Mayan…) and the general political stability. Nevertheless, the process of globalization is eating away at its high market share.

Three relevant facts stand out:

a) The introduction of larger capacity ships. Examples include the introduction by Carnival, RCC and P&O Princess of VLCVs into the region, operating all year round. Profits increase drastically with this intensive large-scale operation. Carnival currently has three of these ships in service and another three under construction, Princess has two in service with another three under construction and RCC also has three in service and another two under construction, which will add another 24,000 berths to the market for the 2002-2005 period.

b) The operation of European companies in the region. This will be examined a little later on.

c) The relationship between the islands* and the cruise lines. The region is characterized by the fact that the ship is a destination in itself, and the ports of call are merely additions to the trip. The ship is simply a floating hotel. This has created

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM major competition between cruises and on-land destinations, which are backed up on both sides by aggressive advertising campaigns comparing the price of one holiday option with the other.

In an attempt to ease the tense situation the Florida Caribbean Cruise Association (FCCA)31 was created, as a forum and mutual meeting ground for cruise lines operating in the region and for island governments, in order to discuss joint problems and highlight the financial implications that the cruises have on the islands.

The Caribbean states proposed the endorsement of passenger taxes, which were required in order to compensate for the increase in costs of decontaminating the environment. This is why cruise lines, with RCI at the head, have begun to incorporate gas turbines in their new vessels, which although more expensive, are less polluting than diesel engines.

* The extent of competition between on-land and seaboard holidays is such that each company has its own private island, with the exception of Carnival, as this goes against its "Fun Ship" philosophy. These private islands have all manner of facilities, including shopping centres, yacht clubs, scuba-diving, etc. 140 31 See section 3.1. The region is normally split into five country subdivisions: the Bermuda Islands, the Bahamas, Western Caribbean, Eastern Caribbean and Southern Caribbean. See Table 4.X. There are fluctuations in the internal sharing out of Caribbean destinations. This is what happened in 1995, a year of considerable changes that included a 53% increase in berths offered in the Western Caribbean and a 19% drop in the Bahamas. The reason lay in the high taxes that were imposed that year by the Bahamian Government. In order to ease its impact, the Cruise Ships Overnight Incentives Act was approved, allowing casinos and shops to remain open throughout the stay of the ship in the port, and offering benefits to the regular cruise lines, by reducing the tax per passenger, depending on the total number of passengers received per year.

Table 4.X. Sub-regions within the Caribbean

Western Caribbean Eastern Caribbean Southern Caribbean Jamaica American Virgin Islands Mexico Cayman Islands British Virgin islands Belize Turks and Caicos Islands Saint Martin Honduras Cuba Dominica Nicaragua Haiti Barbados Costa Rica Florida Saint Lucia Panama Dominican Republic Martinique Colombia Puerto Rico Guadeloupe Venezuela Saint Vincent and the Grenadines Aruba Saint Kitts and Nevis Curaçao Antigua and Barbuda Bonaire Granada Trinidad and Tobago Anguila Monserrat Saba Saint Eustatius Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Source: Own study.

The Eastern Caribbean was the first sub-region to implement 7-day itineraries and continues to be one of the highest growing areas, mainly thanks to its success in being able to capture the first-time cruise passenger.

The Bahamas and the South Caribbean are aimed more at the seasoned cruise passenger in search of different itineraries. Both sub-regions also have itineraries of different durations: the Caribbean is normally offered in a 7-day package, while the Bahamas tends to have 3-4 day trips. The Bahamas is an all-year round destination, with hardly any difference between one season and the next. The Eastern Caribbean has a larger ship presence during the winter, and its boats can be found in the Mediterranean or in Alaska during the summer. These two distinctive traits begin to be blurred with ships that operate throughout the whole year either from Miami, or San Juan de Puerto Rico and cruises that combine three days in the Bahamas with 4 days

141 on the west coast of Mexico. Product innovation is prevalent in this setting, including the 7-day "Texaribbean cruise" offered by NCL from Houston.

Another factor that is helping to reduce the saturated supply in the Caribbean is the disappearance of fringe companies, who are unable to compete on price, such as Premier Cruises and Commodore Cruises in 2000. In spite of this, there has been no tonnage reduction in the Caribbean, nor does there appear to be any possibility of this within the next few years. The entry into service of the new post-Panamax ships in the 2002-2005 period, along with the effects arising32 from the events of September 11th, have helped create an increase in capacities for 2002, which means that a few years will have to pass before supply in the Caribbean is reduced.

The main operators in the Caribbean are Carnival, RCI, Celebrity and NCL. These four companies account for two thirds of the demand, although Disney is increasing its short-cruise market share in the Bahamas. Princess, which only operates in the winter, will once again operate all year round with the arrival of its "Grand Princess" class of ships. HAL, which had also withdrawn from summer operations because of its commitment to Alaska, has now returned with the "Zaandam". By company groups, RCC and Carnival have absolute control of the market, with a 70% share of supply.

European operators control around 10% of the market, the most notable of which are the Italian cruise lines Costa and MSC and the British companies P&O, Airtours and Thomson. A common feature of these companies is that they use other base ports as opposed to the traditional ports of San Juan de Puerto Rico, Miami, Port Everglades and Port Canaveral. This is due to the fact that the majority of 7-day itineraries are combined with holidays in some part of the Caribbean, mainly in the Dominican Republic, Jamaica or Mexico, to make up a two-week package holiday, given that the length of the flight from Europe is 8-9 hours.

4.3.1.1. Main Ports

Miami is the main port, accounting for almost 3.4 million passengers33 in 2000 (See Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM table 4.XII). Passenger traffic has remained almost constant since 1987, with slight variations, as increases in traffic affecting the region have been absorbed by the neighbouring ports of the Everglades and Canaveral.

Miami is the world’s main base port, with a total of 17 ships, including the majority of VLCVs currently in service, which is why it can be said that it is specializing in these types of cruises. The following companies use the port: Carnival, Cunard, NCL, RCI, Hapag-Lloyd and Seabourn. Embarkations and disembarkations are mainly centred around the weekend (from Friday to Sunday), as the itineraries offered normally last 3, 4 or 7 days.

According to the Official Directory on the Port of Miami (See bibliography 40), the five- year port improvement programme, valued at 346 million dollars, has helped to renew

32 The "Rhapsody of the Seas" will have its base port in Galveston (Texas) during the summer of 2000, instead of cruising through Northern Europe as had been previously planned. The "Millennium" and the "Mercury" will swap the Mediterranean/Northern Europe for sailing around the South Caribbean/Panama Canal. 33 Figures published by the ports themselves are difficult to compare, as some include embarkations, 142 disembarkations and transfers in the total, while others only include an average of embarkations and disembarkations. This is why the sum of these three concepts is taken into consideration for the purposes of calculation, unless otherwise stated. existing structures and installations as well as building new ones. Given the great investment in port installations that they require, the dependence between the VLCVs and the ports is high.

A description of the port’s main features can be found in table 4.XI. There are two main areas of activity: container ship traffic and cruises. It has eleven terminals for passenger traffic, which are all along the main canal and closer to the city centre, occupying a third of the available space. RCI and Carnival have become involved in the management and development of the terminals. As a result, terminals 8 and 9 have been renovated and extended, at a cost of 28 million dollars, in order to accommodate the "Carnival Destiny". Carnival has signed an agreement with the port, agreeing to pay 180 million dollars over fifteen years, obtaining a reduction in passenger tariffs in exchange for keeping Miami as the base port for six of its ships over the same period.

Terminals 3, 4 and 5 have been renovated at a cost of 75 million dollars, in order to accommodate the "Voyager of the Seas", and were opened in March 2000. There are new waiting rooms, separating economy class from first class passengers, as well as duty-free shops. They are the largest and most technologically advanced cruise terminals in the world, able to cope with a high level of passenger embarkation- disembarkation (8,400 passengers/hour).

Table 4.XI. Main features of the Port of Miami

Surface area: 301.2 ha Total linear measurement 9,144 km Docking: 6 km in total for docking. Loading and unloading along the length of the dock via mobile cranes of up to 200tm. Loading with 10 gantry cranes on the container docks. Ro/Ro docking: 10 docks (2 platforms with 2 docks and 6 ramps) for loading from the bow and the stern. Approx. 1.31 km of docks for articulated ramps for side loading ships. 2 additional docks under construction. Approx. max. cap. 18,900 –22,000 TEUs34. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Firefighters: County firefighters: water, extinguishers, hoses, Coastal Tug and Barge Inc. also offer F/P35 services Passenger terminals 11 terminals, with the following features: Terminals 1-5 and 10: Length = 982 m Draught = 11 m Terminal 6: Length = 229 m Draught = 9.75 m Terminals 8 and 9: Length = 512 m Draught = 11 m Terminal 12: Length = 442 m Draught = 7.6 m Source: Port of Miami

Revenue generated in the port of Miami is growing year on year. In 1999 the figure reached 64.5 million dollars, with 50% coming from cruise traffic, while in 1989 it increased by 64% and total turnover was 30 million dollars. Port business is important, adding over 8 billion dollars per annum to the local economy.

34 Load capacity of container ships is measured by TEU (twenty-feet equivalent unit) 35 F/P: Fire Protection. 143 Other ports:

• Port Everglades lies some 33 Km to the north of Miami, and had an annual traffic of 2.7 million cruise passengers in the year 2000. A third port is also developing rapidly. This is P. Canaveral, to the east of Orlando, which serves as a base for Cape Canaveral Cruise Lines, some Carnival ships, and since 1998, Disney Cruises as well. Along with Miami they make up 50% of total traffic in the region.

• San Juan de Puerto Rico is a major base and secondary port. Its outstanding location, the excellent port-airport connections and its attractive Hispanic colonial culture are its strong points. It can take ships of a total length (Ltot) of 268m or less. It is staking much on the future: a new terminal will be opened in the year 2002 at a cost of 65 million dollars, capable of accommodating six cruise ships. RCC has invested in the Viejo San Juan terminals so that its VLCV the "Adventure of the Seas" can use it as its base port.

Table 4.XII. Cruise passenger arrivals to Caribbean destinations. 1990-1999 (in thousands)

Country 1990 1993 1996 1999 Antigua and Barbuda 227.3 238.4 270.5 328.0 Aruba 130.0 251.1 316.8 289.0 The Bahamas n/a 2,047.0 1,687.1 1,981.5 Barbados 362.6 428.6 510.0 432.9 Belize n/a 5.9 0.2 34.1 Bermuda n/a 154.7 181.7 192.7 Bonaire n/a 17.4 14.9 14.8 British Virgin Islands n/a 113.2 159.6 180.7 Cayman Islands 361.7 605.7 771.1 1,035.5 Cozumel n/a 744.0 985.7 1,304.1 Costa Rica n/a n/a 159.0 0 Cuba n/a n/a n/a 0 Curaçao 158.6 182.9 173.1 220.7 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Dominica n/a 87.8 193.5 202.0 Dominican Republic n/a 27.8 110.9 281.4 Granada 183.2 200.1 267.0 245.5 Guadeloupe n/a 262.5 589.5 292.7 Haiti n/a n/a 250.4 243.3 Jamaica 385.8 629.6 658.2 764.3 Martinique n/a 428.7 408.4 339.1 Monserrat n/a 8.8 0 0 Puerto Rico n/a 968.1 1,025.1 1,148.6 St. Kitts and Nevis n/a 83.1 85.8 137.3 St. Lucia 101.9 154.4 182.2 351.2 St. Martin 515.0 659.9 657.4 615.6 St. Vincent and the Grenadines 74.5 69.3 63.2 47.7 Trinidad and Tobago n/a 32.6 46.4 57.2 American Virgin Islands 1,119.6 1,208.7 1,316.4 1,402.7 Venezuela n/a n/a 200.6 115.1 TOTAL n/a 9,610.3 10,875.3 12,257.7

Source: GP Wild (International) Ltd. Quoting the Caribbean Tourism Organization/OMT. 144 • Barbados is building a new mooring quay for two SuperLiners in 2003.

• Bahamas Freeport Harbour will finish the building of a 10 million dollar terminal and facilities in 2002.

• The port of Cozumel along with its associated facilities of Playa del Carmen and Cancún (Mexico), have a promising future, given the excellent commercial area in which it is located, its port facilities (it has mooring berths that accommodate cruisers of Ltot ≥ 275m) and its historical and cultural interest (Mayan civiliza- tion). Its main activity is as a secondary port.

• Jamaica stands out in the Western Caribbean, and is currently undergoing major improvements. One of these is the investment of two million dollars in Port Antonio. Along with the ports of Ocho Rios, Montego Bay and Kingston/Port Royal, it is estimated that it will reach a figure of 550 port calls in 2002.

• The port of St. Thomas (American Virgin Islands) in the Eastern Caribbean has one of the highest rates of traffic in the area. It is worth noting that both RCI and CCL are investing 20 to 35 million dollars so that the port may accommodate the new generation of Panamax-max36 ships. Together with St. Croix and St. John, it had 1,134 port calls in the year 2000.

• The Southeast Caribbean is an area of rapid growth with a series of new facilities from Progreso (Honduras) to Panama. Costa Maya, Belize and Progreso offer excellent possibilities for 7-night cruises because of the distances between them, which is why there is currently talk of a new hub south of Cancun. An investment of 120 million dollars on new facilities for 2002-2004 is currently underway in Progreso (gateway to Merida and the Mayan ruins). It is hoped that Costa Maya will attract 400,000 cruise passengers in 2002 and 650,000 in 2003. It is calculated that Belize, in Central America, will achieve a figure of 76 port calls in 2002, Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM thanks to the attraction of the Mayan ruins and the coral formations.

4.3.2. Alaska

This is the most specialized region of all, a place where the tourist is in search of nature, as opposed to the Caribbean (sun+beach+sea). European competition lies in the Norwegian fiords. On-land excursions are a very important factor when tourists make a decision to travel to the area.

The characteristic features of its target customers are that they are mainly young and that it will probably be their second or third cruise trip, so they are not first-timers. This

36 Panamax-max: ships that are able to cross the Panama Canal, but whose tonnage is over 80,000 GT. The Panama Canal's sluice system restricts the maximum beam of the ship (Bmax = 32.25 m) as well as its length (Ltot= 294 m), preventing any ships with a capacity of over 1,500 berths from passing through. In order to increase this, a larger superstructure is being planned, with a reduced beam, in order to avoid transverse stability problems, and thereby increase the number of sea view cabins with a balcony. This solution is expected to allow ships to reach a tonnage of 100,000 GT 145 with 2,500 berths whilst maintaining their Panamax ship status. is why Carnival and HAL are designing excursions with a large element of active tourism, such as mountain biking and trekking, in order to attract the younger end of the market.

It is one of the most rapidly growing regions, and is third only to the Caribbean and Europe, with a share of 11%. It currently attracts 500,000 cruise passengers a year, with 80% of them coming from the US. It has grown 80% since 1990, thanks to the region's unspoilt natural setting, the greater distances travelled by the ships and the increase in the major city-to-city flights in the US. 1996 was when the boom began, with a supply of 500,000 berths, exactly double that of four years previously. The increase has dropped since then for environmental reasons.

The season has been extended, starting at the beginning of May and continuing until September (see graph 4.g). There are two factors which limit its growth:

a) Infrastructure: ports are at full capacity, with HAL, for example, having to spread its departures over five days a week.

b) Environment: access to the Glacier Bay reserve is already reaching its limit; even so, the US National Park Service is considering increasing the number of entry permits it awards, from 107 to 184.

As previously stated, second-time passengers are the ones most influencing what is on offer. The fact that it is now the third most popular destination in the world has raised the awareness of the authorities to the dangers of pollution within the region. This is why attempts are being made to control companies who operate in the area; HAL, for example, was fined two million dollars in 1998 for the illegal dumping of waste products. As wildlife protection organizations oppose the increase of cruise numbers in certain whale mating areas, companies are forced to look for new and interesting locations within the region. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM The main base port is Vancouver (Canada), and its business activity is a sure indicator for gauging this market (see table 4.XIII). Between 1996 and 1998 cruise passenger traffic grew by 15% per year, reaching a figure of over 410,000 passengers in the year 2000, helped by the improvement in its accessibility by plane, after an investment of 350 million dollars from 1996.

The relationship between NCL and the port of Seattle (US) is most significant. It is a result of the US Jones Act, which prohibits the departure of cruises to Alaska from the nearest US port, which is Seattle, despite its excellent connections with the rest of the country. Instead, the majority of cruises depart from and end in Vancouver. This is due to the fact that non-US registered ships are not allowed to travel directly between two national ports, and cruise lines do not want to incorporate an intermediate Canadian port before reaching Alaska.

The port of Seattle has tried to attract cruise lines, which is why it signed a four-year deal with NCL, with the aim of converting it into a base port for the "Norwegian Sky", 146 for a minimum of 19, 7-day cruises to Alaska from 2000 onwards. The port has raised 450,000 dollars in port taxes and passenger tariffs in the first year and it has promi- sed to invest 4.1 million dollars to complete the passenger terminal and improve facilities. It also participates in cruise marketing campaigns, with the total figure rising to half a million dollars over three years. It hopes that this will enable it to maintain passenger figures above 40,000 per year and that financial profits will rise to a total of 56 million dollars. The use of Seattle as a base port means that companies have to use faster ships, which need to travel further before reaching the tourist areas.

The trend seems to be to use open jaw cruises, in other words, with different embarkation and disembarkation ports, combining sailing with on-land excursions. This means in practice that ships depart alternately from Vancouver (Canada) or from Anchorage/Seward (Alaska).

Table 4.XIII. Cruise passenger traffic in main ports in 2000

Port Cruise Passengers NS (*) Vancouver 413,668 29 Seward 130,586 10 Seattle 53,923 12 San Francisco 23,140 7 Juneau 9,218 13 Whittier 3,248 2 Ketchikan 1,844 4 Glacier Bay 360 1

(*) NS: number of ships. Source: GP Wild (International) Limited.

The two main operators are Princess and HAL and each has its own on-land tour-ope- Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM rator, which are Westours and Princess Tours. Both combine the seafaring experience with glacier photography and excursions on-land by bus or by train. Capacities are increasing gradually, as new ships are replaced by more modern vessels. After the Celebrity takeover, RCC has also become a major player in the area.

4.3.3. Atlantic Europe and the Baltic Sea

It has experienced a boom over the last ten years. Its world market share between 1995 and 2000 has almost doubled, rising to 7.5%. The participation of the German source market is of major importance given its geographical proximity to the Baltic Sea. It is possible to state that the current growth in the region is the same as that of Alaska five years ago.

147 The price per night is very expensive, which means that its target public is the high income category. Historically the region, like Alaska, has been a very profitable area, but with the arrival of RCI and HAL-owned VLCVs, it has become very competitive, to the detriment of European cruise lines, whose profit margins have been cut.

The market is mainly based around European companies and a customer base of Europeans, although the presence of US operators in the area since 1997 has been felt strongly. Europeans are coming round to the realization that cruise trips are a wonderful way of visiting various destinations, despite the excellent land connections in Europe. The benefits are that cruise passengers can stay in the same hotel (on the ship), with the advantage of only having to pack and unpack once and the greater space offered by a ship compared to an aircraft.

The season begins in the second half of May and ends in September, although the trend is for it to begin a little earlier, at the beginning of May. See graph 4.f to compare it with the seasonality of the Mediterranean. The duration of cruises offered varies from 7 to 14 days. The market is broadening and now offers itineraries of less than a week, in order to attract more European customers, especially the younger end of the market. It also has the added logistical benefit that passengers can reach the port by many different means of transport, not just by plane.

The Baltic Sea's main attraction lies in its cultural diversity, with 10 countries, 8 capital cities and the natural beauty of the Norwegian fiords. This is why the area of operation encompasses the Norwegian fiords, the Baltic Sea (Scandinavian cities and St. Petersburg), the British Isles, northern France, northern Spain and even the Atlantic islands. Classic itineraries are: the Northern Cape (with port calls in Copenhagen and Oslo), the Baltic (St. Petersburg, Stockholm, Helsinki, Copenhagen) and around the UK (Ireland, Wales, Scotland, England and the Channel Islands). Theme cruises are also beginning to take off in the area, with one example being a cruise dedicated to "The Hidden Treasures of L’Hermitage". Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

The supply is extremely fragmented, with the most notable coming from Princess, P&O, NCL and RCI. The situation by groups in 2001 was as follows: P&O Princess (24% supply), Carnival (21%), RCC (9%) and Star Cruises (6%).

4.3.3.1. Main ports

Its strong points are:

a) Great tourist attraction, given the important cultural and historical heritage of the region, along with an excellent infrastructure for tourists and high quality services.

b) Excellent port facilities with the vast experience gained from heavy ferry traffic in which large numbers of passengers need to embark and disembark in short periods of time and with the utmost safety.

148 c) Very high logistical support, both in supply of provisions and in the repair and maintenance of equipment. This is the reason why operating costs are considerably cheaper. It should also be remembered that the main shipyards specializing in the building of cruisers are in Western Europe.

The region's main ports have been in partnership under the name of "Cruise Europe" since 1991. It deals with general marketing strategies, while each port deals separately with its own direct sales. They all try and offer cruises portraying a different image and aimed at specific population segments, given their vast experience in selling destinations. They tend to favour pre- and post-cruise extensions. This is why the attraction of a place like London plays such an important role. In an expanding market like this, ports also indirectly promote tourist cruises, as they attract the local population when the cruise ships make their port calls.

The main ports of traffic are Southampton and Lisbon, followed by Copenhagen and Stockholm (see table 4.XIV). Lisbon is the port that has undergone the largest growth in recent years, thanks to its excellent links to the city centre and the airport. Copenhagen is also well connected with the British and German markets. It is an excellent base port for cruising around the Norwegian fiords or the Baltic Sea. Just like Dover (UK), it has compensated for its loss of ferry traffic, caused by the opening of the Eurotunnel and the Öresund bridge between Denmark and Sweden, with cruisers. All cruisers in the Baltic are obliged to call at St. Petersburg (Russia). The archipelagos of the North Atlantic are also usually included within this region. They are the Canary Islands, The Azores and Madeira. They have considerable traffic, as can be seen from the following table.

The most notable developments are:

• The port of Hamburg (Germany), which, from a very modest start, is now under- Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM going heavy investment in order to convert itself into a major base port. The highlight is the regeneration of a 162 ha neighbourhood that will take place from 2000 to 2010. The development project, known as "HafenCity", will include residential, shopping and play areas. A specific terminal is also being constructed, called the Hamburg Cruise Centre, which will eventually replace Grasbrook. Accessibility to other destinations and source markets will be improved thanks to a new high- speed train link to Berlin, with a journey time of just 55 minutes.

149 Table 4.XIV. Cruise passenger movements in the main ports (in thousands)

Port Country 1996 1997 1998 1999 2000 Southampton UK 224 212 259 246 332 Lisbon Portugal 113 112 139 161 189 Copenhagen Denmark 150 151 212 148 183 Funchal Portugal n/a n/a 149 157 171 Stockholm Sweden 78 87 105 119 157 St. Petersburg Russia 76 81 102 115 149 Dover UK 102 120 146 155 143 Helsinki Finland 75 64 94 99 140 Tenerife Spain n/a 73 132 137 126 Gdynia Poland n/a 54 86 94 115 Tallinn Estonia 54 59 95 109 110 Oslo Norway 65 59 90 117 109 Cadiz Spain 49 53 68 109 103 Amsterdam Netherlands 63 74 107 81 99 Bergen Norway 68 73 83 87 91 Las Palmas Spain n/a 24 61 66 83 Bremerhaven Germany 31 29 19 55 55 Kiel Germany n/a 20 50 40 48

Source: Cruise Europe.

• The port of Amsterdam (Netherlands), which is one of the region's main base ports, opened a new terminal in 1999 that cost 55 million dollars. This enables the port to operate three cruisers of up to 2,500 passengers at the same time. The port is hoping to double its revenue per passenger from the current figure of 75 million dollars with the new terminal now in place. The impact on local employment will be great, helping to create 1,500 new jobs. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

• Port of Bilbao (Spain). It is a river and sea port. Extension works on the Abra Exterior, opened in December 1998, will allow it to undertake an ambitious project to separate cruise ships from ferries. A specific cruise terminal will be built on a dock in the Abra Interior, measuring 350 m long with a draught of 14 m, in the same area as Guecho marina.

4.3.4. The Mediterranean

It has a total world market share of 30%, except in winter when it drops to around 5%. Its 700% growth, measured in overnight stays, for the 1987-1999 period, has been spectacular, surpassing 11 million in the year 2001. During 2001, 38% of passengers came from the US and Canada, while 20% came from the UK, and the remaining 43% from other countries. Its major dependency on the US source market has had a consi-

150 derable effect on its development. Successive crises (the terrorist attack on the "Achille Lauro" in 1991, the war in Kosovo in 1999 and September 11th 2001) and the political situation in the Middle East, have always entailed the withdrawal of tonnage from these source markets, affecting the Eastern Mediterranean more than the Western Mediterranean. If these problems can be overcome it would then facilitate the possible marketing of the winter season for cruises in the Red Sea and the Black Sea.

This is why it is very important that it should become a totally autonomous region, with ships operating throughout the year, just as in the Caribbean and the Asian Pacific. Fabio Capocaccia, the President of MedCruise, believes that this is due to: a) the great array of tourist products on offer (culture, gastronomy, religion, shopping, etc.) that do not require sunshine; b) the loss in revenue due to the halting of business, entailing the transfer of ships to the Caribbean; c) the search for fine weather along with new itineraries to the west, including the Canary Islands, West and North Africa, and to the east towards Aqaba (Petra), Shaim el Sheik through the Suez (Pyramids), Oman and Dubai (the desert experience).

Elaborating on what has previously been said, it is possible to highlight four facts that have been fundamental in its development:

a) The growth of the UK source market, especially with the re-entry of tour operators in 1996. This has led to the use of the discount and the arrival of low cost operators, supported by extended commercial networks.

b) The arrival of genuine European cruise lines such as Festival and MSC.

c) The arrival of VLCVs, which mean that the Big Four are obliged to search for alternative business outside the Caribbean. The placement of large ships for first time in 1998 was of major significance (the "Grand Princess", the largest in the world, and the "Norway", the longest in the world). Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

d) The arrival on the scene in the years from 1996 to 98 of the US giants. The business ventures between Carnival-Airtours-Costa and RCC-First Choice are explained by the powerful marketing network behind the European partners, which gives Carnival and RCC excellent possibilities for commercial penetration of the European market.

The region has enormous growth potential, thanks to its port facilities, its on-land tourist attractions and its mild climate. It must not be forgotten that Spain, France and Italy are countries that border the Mediterranean Sea and are leaders in world tourism.

It has become the main destination for British citizens. It is now possible to speak of the UK-Mediterranean pairing in the same breath as the US-Caribbean pairing. The rest of the European source markets are not as well developed as the UK. Table 4.IX shows that German participation is much lower, with a figure of 33% compared to a 44% British share. The growth potential in EU source markets is therefore extremely high. 151 Another notable phenomenon is the emergence of Cyprus as an autonomous market, with ports of call in Israel and Egypt, arising from the considerable activity of the cruise line Louis Cruises. It began its operations with old ships aimed at the three star market. Sales are either made by the company's representatives on the island or else they are sold as a package by UK tour operators. The cruise line attempted to add some Greek islands to the itinerary, but this was not possible, given the Greek regulations on coastal traffic.

The season tends to last all year, mainly thanks to the region's temperate climate, as can be seen in graph 4.f, which is similar to that of the Caribbean.

In order to attract more European customers, they are offering shorter duration itineraries for long weekends and based on the success of the US cruise lines in the Caribbean. It can be said that there is great potential in the 3-4 day itineraries in October-March in the Northern Europe source markets, particularly Scandinavia and Germany.

4.3.4.1. Main ports

Destination plays a major role, which is why ports joined together in 1996 to form an association called "MedCruise". There are currently over 70 in the group. It includes ports from Lisbon and the Azores to the Black Sea and the Red Sea. Given the problems that can arise between ports and cruise lines, the MedCruise association works to two main principles:

a) the formation of a Mediterranean association of cruise lines belonging to the FCCA.

b) the creation of a federation of port associations.

The level of security in ports varies considerably and is a major problem for US cruise Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM lines given the sensibilities of US cruise passengers on this subject. MedCruise estimates that 400 million dollars are currently being invested in new facilities, with the majority going to the Italian ports of Livorno and Civitavecchia (Rome). Funds are 50% public, with the other half coming from private sources. Some of these sources include Costa and MSC in the case of Genoa port (21%), given the ever-greater trend towards privatization of European ports.

The main port developments are as follows:

• Livorno (Italy), the port of Pisa and Florence, has invested 12.5 million dollars in new docks and improving existing terminals, a process that was completed halfway through 1999. Port of Livorno 2000 was set up as a new private company established to fund the building work and run the passenger services side of the business. It has introduced discounts for cruise lines which increase the number of cruise passengers. Its objective is to convert itself into a base port.

152 • Civitavecchia (Italy) is involved in a 250 million dollar regeneration programme for the whole port area. When completed, the passenger and cargo areas will be completely separate. In the summer of 2000 two new terminal buildings worth 20 million dollars were opened. There is also a 20 million dollar project underway to build another cruise terminal.

• The government of Malta has given its approval for an international consortium to build three new terminals in La Valetta for cruise ships and ferries, that will be capable of accommodating three post-panamax37 cruise ships at the same time. The terminal will be completed in the year 2001. Cruise passengers/hour forecasts are set at 2,000 for two of the terminals and 1,000 cruise passengers/hour for the third. The required investment is 26 million dollars and building is very near the historic city centre, and will include a shopping and leisure centre.

• Marseille (France) has built a new terminal that entered service in the summer of 2001, mainly for the embarkation and disembarkation of passengers.

• Limassol (Cyprus) has a major building plan under way, including a new terminal capable of dealing with up to 13 cruise ships.

• Port of Barcelona (Spain), has nine mooring berths with a draught of up to 12 m and six passenger-only terminals. Four of the terminals are being managed by Creuers del Port de Barcelona, while the other two are managed by the Port Authority. There is also a seventh terminal on Adossat dock, due to be unveiled in the year 2002, with a surface area of 2,000 m2. Port Vell is considered an ideal model of integration between port and city.

• Palma de Majorca (Spain). It has three specific shipping stations with five mooring berths. The highlight of the port is the restructuring plan set for 2001-2004. The west dock will have an area of 70,000 m2, freeing up cargo space in the old dock, Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM and allowing the housing of the scheduled passenger terminals for Trasmediterránea. This will allow the construction of a new cruise terminal with a coach-park.

• Port of Malaga (Spain). The lengthening of Levante Dock by 1,297 m has led to the creation of a mooring berth for ships with a greater draught (up to 20 m) insi- de the dock, and was completed in the summer of 2001. The construction of a passenger cruise terminal, with an estimated cost of 9 million euros, will form the second phase. This will give the port total of seven mooring berths.

• Port of Valencia (Spain). Following the example set by the port of Barcelona, the new building work will turn the area into a privately managed leisure area called "Balcón del Mar" (Sea Balcony), just next to the northern breakwater, with a change of activity for the inner dock and its surroundings. The project will be comple-

37 Post-Panamax: a term that refers to ships with a maximum breadth greater than 32.25 m, the maximum permitted for passage through the Panama Canal. 153 ted with a drawbridge. The area will be free of goods traffic and will be used for docking cruise ships.

Table 4.XV shows the main Mediterranean ports. Piraeus has lost its overall leadership, and the ports of Palma de Majorca, Barcelona and Limassol have increased in importance. The decline of the Greek cruise lines that operate mainly in the Aegean Sea explains the reason for the decline of Piraeus.

The reason why the port of Limassol occupies first place in the Mediterranean rankings is due to the success of Louis Cruises, as previously mentioned. The important role of the North American cruise lines is a major contributory factor in the rise of the port of Barcelona up to third place in the year 2000, and likewise with the involvement of British tour operators in the port of Palma de Majorca. Cruise lines use these as base ports, combining one week on-land with another at sea.

Of the operators, the undisputed leader is Costa Crociere. Second place is taken by MyTravel (formerly known as Airtours), followed by ROC and then World of TUI UK (formerly known as Thomson). This is a clear indication of British tour operator power within the region. The North American companies Princess and RCI jointly account for over 10% of demand. It is also possible to speak of a reciprocal effect with the European cruise lines’ representation in the Caribbean.

When considering cruise passenger and financial implications, one has to consider the dynamic effect that the entry of RCI has had on the market, choosing Barcelona as its base port. One must also highlight the importance of the European cruise lines Festival Cruises and MSC. German operators have a less than 5% share, and they still do not have the corresponding influence that their potential source market demand suggests they should have. Nevertheless, this situation is changing thanks to the entry of Aida Cruises using Palma de Majorca as its base port. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM The Eastern Mediterranean, and above all the Aegean Sea, is dominated by the Greek cruise line Royal Olympic Cruises.

154 Table 4.XV. Cruise passenger movements in the main Mediterranean ports (in thousands)

Port Country 1996 1997 1998 1999 2000 Limassol Cyprus 583 606 604 690 885 Port Said Egypt 545 542 433 535 600 Barcelona Spain 277 359 466 546 574 Palma de Majorca Spain 282 422 393 582 507 Piraeus Greece 423 420 432 335 476 Naples Italy 195 237 335 503 405 Genoa Italy 361 285 365 569 398 Civitavecchia Italy 166 170 256 296 392 Venice Italy 263 299 335 97 337 Haifa Israel 246 255 234 255 250 Livorno Italy 114 179 196 251 237 Nice-Villefranche France 123 128 156 194 195 La Valetta Malta 72 130 147 193 172 La Goulette Tunisia 66 130 101 156 170 Marseille France 62 66 153 149 165 Palermo Italy 99 90 83 135 157 Malaga Spain 99 97 106 167 134 Mesina Italy 35 72 121 112 126 Alexandria Egypt 53 46 43 57 121 Savona Italy 14 98 103 89 120 Ajaccio France 66 72 87 77 117 Casablanca Morocco 121 94 154 183 116 Cannes France 51 55 56 61 106

Source: MedCruise.

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM 4.3.5. Asia-Pacific

This region experienced a growth of 134% during the 1992-2001 period. In 2001 it reached a figure of 2.1 million nights and a global market share of 3.5%. Traditionally the region is divided into four sectors: South Pacific (Australia, New Zealand, Solomon Islands, Indonesia, Papua Asia and New Guinea, etc.), Southeast Asia (Malaysia, the Philippines, Singapore, Vietnam, Cambodia, Thailand, etc.), Far East (Japan, Republic of Korea, Democratic People’s Republic of Korea, China, etc.) and Trans-Pacific (Hawaii, Guam, Fiji, French Polynesia, etc.). The distribution in 2001 by sub-region was as follows: Far East (0.215 million nights), Southeast Asia (0.430 million), Trans- Pacific (0.067 million) and South Pacific (1.16 million). In spite of its distance from the US, the effects of September 11th were noticed briefly, given the high demand from the US. Nevertheless, the local source market was hardly affected by the events.

Within the Big Four, P&O Princess, the company with the most experience in this market, estimates that the number of cruise passengers from European and US source mar- 155 kets doubled in the period from 1985 to 1996, reaching a figure of 85,000. It is very difficult to improve on this figure as there are major restrictions, including: the price of flights, the length of the flights, US holiday availability and the lack of adequate port infrastructures. The demographic segment of North American demand which it attracts is focussed on the baby boomers who are quite partial to soft adventure.

Hence, the real potential for this market lies in selling products designed by Asians for Asians. It is very different from the European market, especially with regard to the demographic profile of demand, as has previously been stated in section 2.2.3. The fact that Asians have less holiday time at their disposal also has to be taken into account. However, it must not be forgotten that young people follow the example of their US counterparts when it comes to lifestyle, which is a guarantee of success for cruise holidays.

Ship design has to be adapted to Asian requirements: it must have greater entertainment possibilities, such as karaoke and casinos, as well as having restaurants specialized in Japanese and Chinese cuisine.

It is interesting to highlight three facts that demonstrate its potential:

• Star Cruises, with its headquarters in Singapore, hopes to exceed 14,000 berths in 2004, which would place it fourth in the world, if the additional 16,700 berths of its holding interest in NCL are also taken into account.

• Singapore is one of the fastest growing ports in the world (see table 4.XVI). The increase in cruise visitors in the period from 1991 to 1996 was spectacular, going from 130,000 to 750,000 cruise passengers, thanks to the new Singapore Cruise Centre and its international airport, which acts as a real connecting hub for the whole of the region. If one takes into account regional cruises of only one night, which have not been counted in table 4.XVI, the figure exceeded the one million Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM cruise passenger mark in 2001, in spite of the Asian economic crisis.

It is investing heavily in new facilities. In 1998 its new cruise centre opened. The total investment was 13.8 million dollars and it can accommodate cruise ships of

up to 300 metres total length (Ltot< 300 m). The work undertaken included: the extension of three mooring docks (from 245 to 300 m, from 190 to 250 m, from 150 to 180 m), and the high-quality regeneration of the cruise and regional ferry terminals. Combined with Thailand and Bangkok it offers itineraries for the Conferences and Incentives segment, with short three-day cruises.

• The effect of the 2000 Olympic Games in Sydney may have a similar effect to that of Barcelona in 1992. During the games, Sydney used 10 cruise ships as additional hotel accommodation. The "Barcelona effect" may be strengthened by the fact that many Australians choose to start their cruises from non-Australian ports, with Singapore the most popular of all. The cruise terminal has been transformed thanks to a 22 million Australian dollar investment. Despite having reduced port tariffs, total revenue has increased as a result of commercial concessions. 156 The region's strength lies in its many destinations and it is estimated that in the near future it will have the critical mass of world category ports, enough to be able to offer its great cultural diversity. Apart from the previously mentioned multi-million dollar investment in the Port of Singapore, other notable investments include the ports of Port Klang (Kuala Lumpur), Penang (Malaysia) and Langkawi (Malaysia). In addition to the diversity of destinations, Southeast Asia also has a temperate climate, which allows it to offer cruises throughout the year (see graph 4.h). In the case of Australia it has the added benefit that summer there corresponds to winter in the northern hemisphere. Its active Cruise Down Under (CDU) association groups together national and local Convention and Visitor Bureaux, port authorities and service providers.

The main operator is Star Cruises, with NYK, Princess, RCI and Cunard some way behind. Cunard has stated its intention of selling at least 75% of its berths on its "Legend of the Seas" in the markets of Japan, Taiwan (Chinese province) and the Republic of Korea. The "Star Princess" (109,000 GT) sailed its maiden voyage from Singapore in February 2002. The "Queen Elizabeth 2" sails in the area and as of 2003 the new "Queen Mary 2" will also be added. It also makes port calls in Colombo (Sri Lanka), where security measures have been greatly improved.

Other operators are: Cruise West, offering 14-night itineraries from Bangkok to Hong Kong (China) or from Hong Kong (China) to Tokyo, and HAL, with ports of call in India, Thailand, Malaysia, Singapore, Cambodia, Vietnam and Hong Kong (China).

Table 4.XVI. Cruise passenger traffic in the main Asia-Pacific ports in 2001

Port Sector Port calls Cruise passengers* Singapore Southeast Asia 168 231,522 Hong Kong (China) Far East 106 179,158 Port Kelang Southeast Asia 110 139,510 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Phuket Southeast Asia 114 132,516 Fukuoka Far East 90 83,516 Papeete South Pacific 136 78,888 Bora Bora South Pacific 119 68,096 Moorea South Pacific 116 64,250 Sydney South Pacific 57 62,238 Bangkok/ Laem Chabang Southeast Asia 85 61,016

(*) Very short cruises and regional cruises are not included. Source: GP Wild (International) Ltd.

157 4.3.6. Emerging regions

Middle East / Arabian Gulf / Indian Ocean

This vast region grew by 88% in 2001, and yet still only represents 0.38% of world night stays, from 0.10% in 1992. European cruise lines will be able to play a major role in the region's development, as the US consumer has an unfavourable view of the area. The target market is therefore European, with the breakdown of cruise passengers by nationality in 2001 as follows: UK (41%), Germany (14%), Benelux (16%), local (18%), US (5%) and others (6%).

It is seen more as a destination for seasoned cruise travellers rather than first-timers. The cruises have an element of soft adventure about them, with on-land activities including sand-skiing, driving through the dunes and camel races. It is becoming ever more popular during the winter season, in direct competition with the Canary Islands and the Azores in the Atlantic. One of the main problems holding back its growth are the very complex customs procedures.

The main port is Dubai (United Arab Emirates), from where 7-day and 14-day cruises set sail. It has a new cruise terminal measuring 3,300 m2, which was opened in March 2001 and costed 2.8 million dollars. Its major international airport and its close links with Cunard/Seabourn are playing a major role in its development.

Another important destination is Oman, with ports in Muscat, Salalah and Khasab in the Musandam, which has had a cash injection of 26 million dollars. By sheer numbers of port calls in 2000, the following ports are worth mentioning: Salalah (25 port calls), Fujairah (United Arab Emirates, 12 port calls), and Doha (Qatar, 12 port calls). Mumbai (former Bombay, in India) is also developing into a base port. Iran must also be mentioned, with 24 port calls received in 2001. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM The main operators are: P. Deilmann, Hapag Lloyd, Cunard/Seabourn, Silversea, Crystal Cruises, MSC, RCI and Star Cruises. The presence of RCI stands out in the Indian source market, selling 20,000 cruises per year in the country. HAL is also strongly committed for 2002 and hopes to double its port calls compared to 2001.

South America

Its importance resides in the fact that it had 1.15 million night stays in 2000, which was considerable growth compared to the 1999 figures of 658,000 and 940,000 in 1998. The main season is winter (in the northern hemisphere). Typical products and itineraries include "Caribazon Cruises", from Port Everglades (US) and Bridgetown to the mouth of the Amazon river. It should not be considered a peripheral region of the Caribbean, but as an independent region in itself. However, neither Venezuela nor the Caribbean coast of Colombia are considered part of this region, but as part of the Southern Caribbean.

158 As of 2001 it began to attract large 1,500 berth vessels, such as the "Mercury" (owned by Celebrity) and the "Norwegian Dream" (owned by NCL). The most important operators are: Costa (10%), Celebrity (9.6%) and NCL (10.4%). Smaller lines include: Orient Lines, Princess and HAL.

The main base ports are detailed in the table below and are: Buenos Aires (Argentina), Manaus (Brazil), Rio de Janeiro (Brazil), Valparaiso (Chile) and Ushaia (Argentina). The port of Baltra (Ecuador) is of major importance for short cruises to the Galapagos Islands.

Table 4.XVII. Cruise passenger traffic in the main ports

Base ports NS Cruise passengers Baltra 5 35.880 Buenos Aires 12 23.775 Río de Janeiro 8 16.940 Valparaiso 14 24.525 Ushaia 7 10.483

Source: GP Wild (International) Limited. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

159 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM 5 THE INTERACTION BETWEEN THE CRUISE AND ITS ENVIRONMENT

5.1. Financial implications of cruises on their destination

The great difficulty in carrying out this research is the lack of available information and the great disparity between figures published by port and tourist organizations. Given such a situation, one needs to approach the subject methodically, examining demand and consumption of goods and services during the port of call in accordance with the literature cited in the bibliography (48). This analysis is made in section 8.1, for the Mediterranean. There is also data worthy of note from the Caribbean in the study (see bibliography 16).

Along with this relative lack of information is the delicate nature of the subject, with three main agents coming under consideration: the cruise line, the Port Authority and the city. The last two share the common interest of attracting cruisers. The difficulty, however, arises when it comes to establishing the degree of participation of each of them in promoting and marketing the area in order to attract the cruise ships. The debate is normally centred around investment required in the port to cater for the cruises and the real financial return from the port calls.

5.1.1. Definition of main services provided

A port call38 by a cruise ship requires the provision of logistical, tourist and commercial services, which will be described and studied in greater detail so as to gauge their relative importance and quantities involved. There are three main types of activity linked to a port of call within an actual port, city and region, and which are either technical or tourist related.

A) Port services:

- Technical assistance provided for the cruise ship. The first condition that must

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM be established in every port of call is the approach of the ship, which involves the participation of three different categories of professionals, providing services in navigation, ship on tow, and docking. Once the ship is secured, (either docked or anchored), the ship then falls under the remit of the shipping agent, who will be responsible for the ship's consignments and its passengers (section 3.4.2 examines this person’s role).

- Welcoming Cruise passengers. This is decisive in portraying the image of the port and the city, and is a service provided jointly by the Port Authority, the dock services provider and the local council. Along with welcoming cruise passengers on-land, each port can add its own personal touch, such as organizing exceptional welcoming parties (with fireworks for the first port of call) and more normal events that include sampling local food and wine or a reception with musical groups.

38 As stated in point 7.2 the traditional distinction between base port and secondary port is adhered to. Docking or anchoring of the ship with transfer to or from land of part of the crew and/or passengers is designated a port call, and can be made either in a base or secondary port. 161 Worldwide Cruise Ship Activity © 2002 World Tourism Organization B) On-land logistics:

- Transporting cruise passengers. Whether dealing with a simple passenger transfer to the city, a guided tour or an excursion, or ferrying passengers from cruise ship to airport, the conditions that must be established for on-land transport require special attention given their commercial impact and effect on the image of the city. This explains why special attention is paid to taxi driver associations in all cities. First of all, the idea is to prevent negative reactions from cab drivers, which might result in cruise line cancellations or complaints. Secondly, the idea is to improve services: learning English, signposting for taxi ranks, and the setting up of guided city tours with the taxi driver acting as the guide. The same can also be applied to coach drivers.

- International connections. As seen in section 4.1 they play a major role in the selection of a base port.

- Accommodation offers. The city must have sufficient accommodation space within its hotels, capable of catering for the large cruise ships, and which must also be of a sufficiently high quality to enable the five to five star plus cruise ships to dock in the port. Currently, the great improvement in the array of available hotels in most cities is a clear threat to existing base ports.

C) Tourist activities:

- Sightseeing and excursion programmes. This is a major component of many itineraries, as it is a means of adding to their attraction. The nature, duration and price of these trips have become a major source of profits for ship managers. Cruise lines take ever greater care in their choice of receptive travel agencies, taking great care in selecting the most suitable coach

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM drivers, tour guides, interpreters and restaurateurs. In the case of the Mediterranean (see bibliography 48), the average level of passengers participating in these trips is increasing: 44% in 1992, 64% in 1993 and 75% in 1994. The Caribbean, however, is a much more mature destination, and figures remain almost constant (79% in the 1995-98 period), although it must be stated that the possibility of going on an independent on-land tour has become one of the reasons for booking a cruise (26% in 1995 and 41% in 1998).

- Restaurants in ports of call. This tends to be included on whole day sightseeing trips. On the majority of half-day sightseeing trips, however, lunch is taken on board the ship. Dinner is normally eaten during sailing time, except when the port call is longer than one day. Base ports tend to promote this on- land service, making specific reference in their information brochures to the delicacies and specialities of the local gastronomy. Use of restaurants is often

162 associated with that of taxi drivers and is limited by the available time of the cruise passengers and their eating habits.

- On-land shopping. Normal cruise passenger activities can range from small purchases (souvenirs such as postcards, t-shirts) to larger purchases such as electronic goods, perfumes or watches, which is all dependent on the socio- economic class and nationality of the customers in question, along with the shopping on offer at the destination. These purchases arouse the interest of not only the cruise companies, who edit and distribute shopping guides, but also of local councils, who organize shopping tours. Local traders are also very interested in these occasions and at times even pay commission to the cruise lines.

The share of passengers who actually purchase goods is greater in the Mediterranean (90%) than in the Caribbean (76%). This can be explained by the greater influence that destination plays on the cruise within the Mediterranean, as previously stated in section 4.3. It is interesting to understand the reasons behind shopping. The FCCA, in its report entitled Caribbean Cruise Shopping (see bibliography 43) states: "lowest prices" (63% in 1998 as opposed to 61% in 1995) and "greater selection", which dropped from 26% in 1995 to 18% in 1998. A figure of 54% were recommended things to buy by other cruise passengers, compared to 38% in 1995, which is a clear indication of growth within the market. The main recommendations come from family and friends (70%).

5.1.2. Analysis of spending by ship managers, cruise passengers and crew

5.1.2.1. Port services Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM - Provided by the Port Authority. Tariffs (TPA) vary depending on ship tonnage and number of cruise passengers.

- Provided by port industry professionals (SPIPROF):

1. Practical service, usually compulsory and depending on cruise ship GT.

2. The ship on tow service is charged depending on passenger capacity and the number of tugs required, although this is used less and less, as modern cruisers are equipped with transverse propellers.

3. Boat service for anchored cruise ships.

- Shipping agents remuneration (SSHIPA). Profitability is low, given the extensive competition that exists, along with the progressive disappearance of revenue from services and additional supplies that generate a substantial additional income. 163 Total cost per port call for the ship manager depends on the ship's tonnage and the total number of passengers.

Other less frequent complementary services and supplies must also be taken into consideration:

- Fuel supply, which normally takes place in large ports.

- Provisioning, which forms part of the ship's general supplies along with the supply of parts as well as oils and grease for main and back-up engines, and food provisions for the on-board restaurants and catering. As the ship is both a means of transport and a hotel, it generates a considerable need for supplies, fulfilled by specialized suppliers. This is why ship managers have their own management service. This is the case of Zerbone, a subsidiary of Costa, which is responsible for guaranteeing and organizing these basic supplies, either directly, or by a series of catering subcontractors, or with the help of shipping agents.

The nature and amount vary a great deal depending on the different supply categories. Given the diversity of situations and the needs of each vessel, depending on its importance, it is not really possible to make an objective calculation or work out an average figure.

- Ship maintenance and repairs have similar features to the provisioning of the vessel, with extremely varying degrees of need and intervention costs. This is not the case, however, for the purchase of spare parts that are not available on-board, or small and light equipment, which is normally carried out by the shipping agent and subcontractors.

- Major intervention, such as the annual technical stop or major careening, are only carried out in ports that have specialized shipyards. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

5.1.2.2. Services provided by the retail and tourism sector

These two sectors are the main beneficiaries of cruiser port calls, as confirmed by available data on the subject. Chambers of Commerce and Tourist Offices attempt to improve the information given to cruise passengers, which can be seen in the on-board information leaflets that are given to the tourists before they disembark.

- On-land shopping. The amount of shopping varies considerably depending on the socio-demographic profile and the nationality of the cruise passenger and the category of the cruise (the star rating) making the port call. British passengers have a reputation of not spending very much in cities, which is the opposite of German passengers. The Russians are a case apart and have a very high spending average. The Japanese are also seen as very good customers for shops within the ports that are visited. The spending of US customers varies a great deal depending on the type of cruise. 164 - On-land restaurants also comprise a major spending block. When considering these levels of spending it must not be forgotten that potential customers tend to be cautious when it comes to spending at a port of call.

- Spending per crew member is based purely on the port of call itself and on the type of merchandise sold and services offered.

- Sightseeing trips. They have become an essential service for ship managers, who recoup a third of the sale price, while travel agency margins vary between 8% and 12%. The sightseeing market is undergoing a major change thanks to the diversification in demand, and this is especially the case of small luxury cruise ship managers, who are keen to offer their passengers exceptional sightseeing trips. This has gone on to generate the creation and sale of other high-level formulas, such as gala dinners with music in historical or unique locations.

- Other specialized services. There are specialist agencies that organize visits with a high cultural and artistic content. During the provisioning of the ship, there are also specialist suppliers who are able to respond to the specific detailed requests of these ships, whose needs (in quality, quantity and in speed of delivery) are comparable to large vessels.

5.2. Effects on marine life: sustainability

The very fact that cruise ships accommodate a high number of people on-board (crew and passengers) means that the level of waste products is high. If one also adds to this the high volume of traffic in some regions (as detailed in section 4.3), it is easy to understand the growing importance of environmental issues that are being taken into consideration by the sector. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM International, national and local authorities establish measures to limit both air and sea pollution, which are mainly concerned with the treatment of solid and liquid waste. The main international organizations are the International Maritime Organization (IMO), which is a specialist UN agency, and the ICCL (see section 3.1).

The IMO has two committees: Marine Environment Protection (MEP) and Maritime Safety (MS), see section 5.3. Regulations help protect the interests of coastal regions and countries in which the ships are registered, environmentalist groups and the shipping transport sector, taking into account scientific, technical, economic and environmental issues.

The IMO, in its International Convention for the Prevention of Pollution from Ships (MARPOL 73/78 annexes I, II and V), defines the concept of "special areas" as "any area of sea which, for recognized technical reasons related to its oceanographic and ecological conditions along with its particular shipping traffic features, requires the

165 adoption of special compulsory regulations in order to prevent sea pollution by hydrocarbons, harmful liquid substances and waste products, as the case may be".

The request to be considered an extremely sensitive marine area or special area must be presented to the Marine Environment Protection Committee (MEPC), who will consider whether the area can be added to the World Heritage list, or if it can be declared a Biosphere Reserve, etc. Examples of extremely sensitive marine areas are as follows:

- The Great Barrier Reef (Australia), that stretches over 2,300 Km. along the East Coast of Queensland. Ships transport in the region of 1.2 million passengers a year, either on one-day excursions or on longer cruises through the area. Pilotage is required for all ships whose total length is greater than 70 m.

- The Sabana-Camagüey (Cuba) archipelago, lying in the middle of the Northern part of Cuba, and extending 465 Km. between Hicacos peninsula and Nuevitas bay. It has over 2,515 islands and keys. It has been classified as a maritime area that should be avoided by ships.

The criteria taken into account are as follows:

a) Ecological criteria: singularity or rarity, endangered habitats, representative features, diversity, productivity (egg-laying or reproduction areas), integrity, vulnerability and bio-geographic importance.

b) Socio-economic and cultural criteria: financial profitability, tourism and human dependence.

c) Scientific and educational criteria: research, reference, protection and educational studies. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

With regard to shipping traffic, the following features are taken into account:

- Operational factors: ship types, traffic characteristics and the transportation of harmful substances.

- Natural factors: hydrography, meteorology and oceanography.

Corresponding protection measures for extremely sensitive marine areas as defined by the IMO are:

- Controlling emissions of sulphur trioxide and the application of special restrictions imposed on ships travelling in the said areas.

- Adopting notification systems for ships and organizing shipping traffic in accordance with the International Convention for Safety of Lives at Sea (SOLAS). 166 - The creation and adoption of other measures designed to protect specific marine areas against environmental damage caused by ships, including compulsory pilotage systems or systems to regulate maritime traffic.

Evidently, the dumping of waste into the sea is strictly regulated by the IMO40. Nevertheless, it is interesting to note ICCL's development of waste management practices and procedures. The NWCA (North West CruiseShip Association) is involved in this, as Alaska is considered to be one of the most sensitive areas. The said measures were approved at the end of 1999 and included the following aspects:

a) Solid waste. This involves the on-board collection of recyclable waste products (which cannot be burned), which will be off-loaded in ports with appropriate facilities. Off-loading at ports in Southeast Alaska is minimal, and this normally takes place in Vancouver. Cruise lines attempt to keep these waste products down to a minimum for financial reasons.

b) Ballast water41. The concern lies in releasing non-native species contained in the ballast water, which is why discharged water must come strictly from the north western Pacific and nowhere else.

c) Response to crude spills. Each ship follows a programme of prevention and response that has been approved by the US Coast Guard, with procedures detailed in the "Shipboard Oil Pollution Emergency Plan". It includes aspects of crew training, ship equipment and planning to ensure an effective cleaning process in the case of a spill. Cruise lines which are members of NWCA, along with Southeast Stevedoring and SEAPRO, have developed a common response programme. SEAPRO has cleaning craft in strategic locations for a fast response. Yearly drills take place with the aforementioned US Coast Guard service.

d) Air emissions. These are of major importance in coastal areas and in Juneau, Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM because of its unique geographical setting. Restrictions affect the ship's propulsion system, the type of fuel used, manoeuvrability requirements, maintenance and operation, the number of ships in port, etc.

In June 2001 the state of Alaska approved the strictest US environmental protection laws for cruise ships, authorizing the state to analyze atmospheric and sea emissions, and charges an eco-tax of one dollar per cruise passenger to fund the programme.

The operational area has an influence on the type of propulsion mechanism that is chosen. In Alaska ecological restrictions force ships to release fewer gas emissions, which is why the most appropriate type of propulsion mechanism for the area is a

40 Bilge water is a mixture of salt water and leaks from water cooling circuits, fuel, lubricating oil, drai- nage from sedimentation tanks and particles of dirt and soot. Bilge water can only be discharged when these impurities have been removed, in accordance with IMO resolution – MEPC 60-33. 41 Ballast: weight transported by the ship that serves only to improve its stability. It is normally salt or sea water. 167 combination of gas turbine and electric engine. Gas turbines are being used more and more, in spite of their higher fuel consumption, because they use cleaner fuel than a diesel propelled engine. The higher maintenance costs for gas turbines are compensated to a degree by the smaller space they occupy, creating valuable extra room for generating extra revenue. The Millennium and the Vantage, which are the newest class of ships belonging to the cruise line leaders, have adopted a COGAS combination (gas and steam turbines).

In order to satisfy the strictest requirements on gas emissions and fumes in the more delicate regions such as Alaska, ships are installing specially designed diesel engines. For example, Carnival has jointly developed with the manufacturer Wartsila a diesel engine that emits non-visible gases. The German company MAN B&W has developed the IS system (Invisible Smoke) for Star Cruises.

Examples of the efforts being made to minimise solid waste products are highlighted in two recent projects: the Complete Green Ship Philosophy 21, which has systems that limit and treat burnable waste material, fuel exhaust gases, glass and cans, organic waste and grey and black waters; and the Norwegian Green Ship Concept, which adheres to three principles in the treatment of waste: incineration, recycling and storage.

5.3. Safety aspects for cruise passengers

This section will consider the two main aspects of safety: the first is safety against accidental risks such as fires and the sinking of the ship, and the second is the threat of external forces such as hijacking or terrorism. The importance of the first aspect is based on the growing GT size of ships, which does not permit a lineal extrapolation of current procedures. The second aspect has been brought to the fore after the terrorist attack of 11th September 2001. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

Although VLCVs have been designed to incorporate safety systems and equipment that go beyond the safety standards required by the SOLAS41 and MARPOL conventions, and even though they have an excellent safety record, the IMO is extremely worried about the possible consequences (with regard to loss of life, loss of goods and environmental damage) of a serious event that could be considered a disaster. Work has only recently begun on these matters, and as yet the IMO has still not come up with an adequate definition of what a VLCV really is. Consideration is being given to basic criteria that are used as guiding principles or as a declaration of intent. For current large sized passenger ships, work will continue to revolve mainly around the human factor (operations, management and training).

The IMO's Maritime Safety Committee (MSC) set up a working group coordinated by the US in November 2000. The concern lies in emergency response procedures for

41 The SOLAS convention began as a document which came into force in 1914, resulting from a Conference held to study the consequences of the sinking of the Titanic in 1912. 168 cruise liners. A Mass Rescue Operation would have to be organized. The group understands the subject, and has established the following guiding principles along with some others based on an extensive study by ICCL:

a) Future guidelines and regulations should firstly serve as a means of avoiding such disasters.

b) Future very large passenger ships should be designed with improved floatability, so that in a disaster case scenario, passengers could remain safely on-board while the ship heads towards the port.

c) Very large cruise vessels must have the necessary equipment in order to guarantee the health, medical assistance and security of the passengers on board until specialist assistance can be given.

Other factors to be taken into consideration are evacuation problems, which are mainly concerned with how to control large numbers of people, as well as passenger demographics during an emergency. Nevertheless it is believed that the ship itself is the best lifeboat of all. Consequently, new ideas must be considered to reduce to an absolute minimum the need to abandon the ship.

The London Conference entitled "The future of Large Cruise Ships, Safety and Environment" of May 2000 was organized42 by the IMO. There was growing concern with IMO regulations, especially SOLAS and to a lesser extent the Load Line Conventions. There was also a need to review crew training requirements, more commonly known as STCW (Standard of Training, Certification and Watchkeeping). SOLAS was agreed in the seventies, and facilities for aiding mass evacuation are being studied, as alternatives to the traditional lifeboat. The agreement established the DSD system (Dedicated Safety Deck) that integrates the so-called DSMs (Detachable Safety Modules), which, when joined together in sufficient numbers, form a platform that can Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM act as a heliport. The evacuation en masse via inflatable tubes or slides was first installed on the "SuperStar Leo" in 1998. Another innovative system that is currently being studied is SAT (Sound Alert Technology), which sends out distress alerts.

According to Peter Wild, when the new SOLAS regulations on the use of on-board combustible materials comes into effect in 2010, it is estimated that 80 ships totalling some 43,000 berths will have to be taken out of service, as the cost implications of adhering to the new regulations will not be financially viable. It will affect those ships built before 1960, although they could always be used for domestic traffic, in a navigation area that is not covered by the SOLAS regulation. Other major milestones drawn up by SOLAS have been or will be: the obligation to install smoke detectors on all cruise ships (1997) as well as the provision of sprinkler systems (October 2005).

42 jointly with the British Institute of Marine Engineers and the British Maritime and Coastguard Agency.

169 LSA (Life Saving Appliances) regulations state that lifeboats must have a capacity equal to 75% of the maximum permitted total number of people on the ship (passengers and crew), with a 37.5% share on each side of the vessel, with the remaining 25% coming from MESs (Marine Evacuation Systems, e.g. slides) and life rafts (for the crew only).

A combined study group of the IMO and the ICAO is responsible for harmonizing air and sea search and rescue services known as "life-saving at sea operations".

The second element of safety is centred on aspects such as: the taking of hostages, bomb threats, terrorism, hijacking and crime. This is why maritime life-saving co- ordinators must establish links with national crime prevention organizations.

International Maritime Security determines the order of priority for risks as follows: crime, illegal drugs, stowaways, hijacking and terrorism. As can be seen, terrorism occupies fifth spot, and even after the events of September 11th, the order of priorities remains the same. This can be understood considering that hijackings and robberies increased greatly in the year 2000 according to IMO data, above all in the Indian Ocean, the Malacca Straits and the Caribbean. The MSC, which deals with these matters, states that the incidents normally took place near the coast with the cruiser either anchored or moored.

The number of safety personnel is dependent upon the number of passengers and crew on board, varying between 5 and 14. The industry is pursuing an internationally recognized set of standards to be adhered to in the training of such personnel. Modern systems are also being installed on ships, including CCTV, electronic access areas, etc. Security measures are also being applied to Port Authorities.

Nevertheless, after September 11th, the IMO is continuing to review methods and

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM procedures for preventing acts of terrorism, which may endanger both passenger and crew safety and that of the ships. The measures put forward by the US are: automatic identification systems, security plans for ports and ships, checks on sea personnel and inspection of container contents transported by sea. Before the events of September 11th the US Coast Guard spent 1% of its budget on sea and port security, a figure which has since risen to 57%.

Within the current climate of concern for security, in January 2002 MedCruise launched a jointly funded project with the EU called "Improved security measures in Mediterranean ports".

170 6 MEDIUM-TERM TRENDS

Once an analysis of the three basic elements has been made: demand, supply and product (itineraries), the results will enable the observer to identify medium-term trends. This period of time spans four years, as changes occur very quickly, as can be seen in the annual cumulative growth rates. The four-year time span is believed to be sufficient, as longer term forecasts are difficult to predict with any degree of certainty and because major business decisions have been accounted for within the selected period of time (the building of a new ship takes between 1.5 and 2 years).

An influencing factor upon macro-trends that will be studied below is the process of globalization affecting the North American cruise experience: what happens in the US invariably applies to the rest of the world, after a slight time delay. This is why variables in the US market are taken as basic references for the market as a whole. The three trends that have been identified separately are closely interlinked.

6.1. Growth in European demand at higher levels than in the US

The tourist cruise market is currently experiencing a boom. The European source market has greater potential in the short to medium-term as it currently has the highest growth rates (1988-2000 measured at +13,4% cumulative per annum). The most important source markets are the UK, Germany, Italy, France and Spain.

6.1.1. Evidence

The two basic principles that will be used to estimate medium-term European demand are as follows:

- The tourist cruise is just another category within leisure trips as a whole. This point has been dealt with in section 1.1 and stated by Bob Dickinson, President of Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Carnival Cruises, who is one of the driving forces behind the modern cruise.

- The tourist cruise as a product is undergoing a period of growth, where the creation of supply is accompanied by a corresponding and parallel demand, as demonstrated in section 2.4.

The first principle permits a relationship to be established between the main national demands, especially those already established in section 2.1 (North American, British, German, Italian, French and Spanish). The second principle allows world demand to be calculated. Demand in the main European markets in the medium-term can be calculated by using a combination of the two principles.

43 For a fuller analysis please see Manuel Butler's 2002 Doctoral Thesis from the Polytechnic University of Madrid (Universidad Politécnica de Madrid) in Spain, entitled " Economic analysis and opportunities for Spain in the tourist cruise market." 171 Worldwide Cruise Ship Activity © 2002 World Tourism Organization A forecast of demand in European markets for the period 2000-2004 is calculated on the basis of these hypotheses, and in accordance with calculations that are detailed in section 8.2. See table 6.I.

Table 6.I. Demand for ocean-going cruises measured in thousands of cruise passengers

Country 1995 1996 1997 1998 1999 2000 1995- 2005d 2001 2000 2005d annual annual United Kingdoma 340 416 522 631 740 747 17.05% 1,155 11.51% Germanyc 217 235 283 306 327 380 11.86% 825 21.38% Italya 151 174 200 230 250 273 12.57% 522 17.57% Francea 100 112 126 154 224 266 21.61% 622 25.62% Spaina 24 34 41 52 82 87 29.38% 265 32.14% Othersa 134 141 185 187 167 200 8.34% - - European Uniona 966 1,112 1,357 1,560 1,790 1,953 15.12% - - United Statesb 4,378 4,656 4,864 5,243 5,894 6,880 9.46% 8,008 3.87%

Source: (a) PSA, (b) CLIA, (c) DRV, (d) own study.

It must be remembered that there may be deviations within a specific year, which is why these forecasts should be considered as such, indicating a medium-term trend. This trend coincides with:

- The commitment of Carnival Corporation (the market leader) to the European market as stated in its Annual Report 2000.

- Forecasts made by the Executive President of Fincantieri, the main shipyard specializing in the construction of cruise ships which, as cited in the reference in Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM the bibliography (2), states that the majority of new contracted berths belong to cruise ships that are specifically aimed at European demand.

172 6.1.2. Characteristics in the growth of European demand

THEORY Probability (Value scale) WHEN: Will it have an effect: Long-term 1 2 3 4 5 Immediately (over 6 years) X NOVELTY. 1 2 3 4 5 The effects will be: Completely known X Completely unknown FIELD: The number of affected 1 2 3 4 5 people will be: Very small X Very large SEVERITY. 1 2 3 4 5 The effects may be: Not very significant X Very significant FORESIGHT. 1 2 3 4 5 Public interest will be: Very small X Very large CERTAINTY. Will be presented 1 2 3 4 5 with a degree of certainty: Very low X Very high

6.1.3. Main consequences

a) The average age of the European cruise passenger is falling: this is due to the inclusion in cruise consumption of the European generation of baby boomers that is currently experiencing very high family incomes. This generation has changed its leisure needs as it is no longer constrained by its children, and tends to be formed of very well informed and demanding customers.

b) A rapid increase in the supply of short duration cruises (less than 7 days) within the European source market: according to data from the British PSA and the German DRV, the commercialization of short duration cruises is becoming widely accepted, thereby opening the market to a younger generation of customers. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM c) An increase in the Mediterranean as a destination: the development of European demand is centred around the Mediterranean (see table 4.IX), which is similar to the Caribbean's effect on North America. The main ports in terms of sheer amount of traffic and investment in cruise facilities are: Piraeus (Greece), Barcelona and Palma de Majorca (Spain), Civitavecchia and Livorno (Italy), La Valetta (Malta), Marseille (France) and Limassol (Cyprus).

d) France and Germany will take over from the UK as faster growing source markets within the period that is being studied. Spain, given its low level of demand, will have the highest growth levels of all.

173 6.2. Entry into service of greater tonnage vessels

The entry into service of a larger number of ever bigger SuperLiners is a fact. A SuperLiner is a vessel that has a tonnage of over 70,000 GT while the term VLCV is reserved for ships that exceed 100,000 GT.

6.2.1. Evidence

The position at the beginning of the year 2002 is detailed in table 6.II below, and is defined by an average tonnage of 42,841 GT. The future position will change with additions arising from the order book (OB), which are detailed in table 6.III. It shows an increase in the number of cruisers in the >100,000 GT and 100,000 to 70,000 GT segments. Meanwhile, the 70,000 to 30,000 GT segment remains stable. In the 2002- 2005 period, 31 vessels of at least 70,000 GT, belonging to the Big Four, will enter service. Each ship has a capacity of over 2,000 berths. The general trend is therefore towards greater tonnage ships, averaging around 91,500 GT and 2,150 berths, which are considerably higher averages than those of two years ago when figures were 75,000 GT and 1,800 berths.

Table 6.II. Position of main cruise lines (January 2002)

Group/ Total Fleet Cruise Line NS GT GT/ Berths Average GT Berths Berth age average average 4 Main Groups 106 6,152,670 38.1 161,411 9.9 58,044 1,523 Smaller North American 18 508,944 52.3 9,728 7.5 28,275 540 Smaller European 49 926,188 26.8 34,512 27.6 18,902 704 Smaller Asian 10 252,133 35.0 7,206 17.9 25,213 721

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM TOTAL 183 7,839,935 36.8 212,857 14.8 42,841 1,163

Source: Own study based on data from PSA and Lloyd’s Cruise Int.

Table 6.III. State of order book (January 2002)

Group/ Total Fleet Cruise Line NS GT GT/ Berths Average GT Berths Berth age average average 4 Main Groups 31 3,006,656 41.7 72,046 96,989 2,324 Smaller North American 3 203,000 66.7 3,044 67,667 1,015 Smaller European 3 178,600 37.6 4,746 59,333 1,582 Smaller Asian 0 0 - 0 0 0 TOTAL 37 3,388,256 42.4 79,836 91,574 2,158

Source: Own study based on data from PSA and Lloyd’s Cruise Int.

174 A more detailed analysis of this trend by cruise categories reveals some very interesting results. The three major cruise line categories are taken into account for this, details of which can be found in chapter 3: the big groups, the smaller North American groups which are 5/5+ star, the Europeans and the Asians.

- The trend towards larger tonnage ships was most noted in the US, with the Europeans taking some time to copy the trend and the Asians even further behind.

- The fact that European and Asian source markets are maturing is reflected in the fact that P&O and Costa Crociere have ordered the construction of their own VLCVs aimed exclusively at European demand (they will enter service in 2004 and 2003), and that Star Cruises has two in the order book, also scheduled for 2003 and 2004.

- This general trend is also affecting cruise lines that exploit niche markets and the higher-class categories of 5 and 5+ stars. The profitability threshold in application of economies of scale is fixed by the building of vessels of 30,000 GT. New displacements tend to lie in the gap [20,000 GT; 50,000 GT]. The importance of this lies in the fact that they are placed at the higher and more expensive end of the market. This explains why the 30,000 GT–70,000 GT segment remains stable, as the construction of 3-4 star vessels is becoming less and less, with more 5/5+ star vessels being built instead.

The reasons for the increase in cruise capacity are twofold:

a) Financial. The need to increase productivity means lowering the price of the ticket and return to economies of scale. The market will soon be dominated by ever-larger ships that can only be funded by the large cruise lines, given the massive amount of initial investment that they entail. This figure is over 300 million dollars and it is only the big cruise lines that can cope with such a financial risk. In other words, Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM the phenomenon of the large ships is undeniably linked to the process of business consolidation, which is analyzed is section 6.3. The correlation between the two can be clearly seen in the table below.

Table 6.IV. Position of main groups (January 2002)

Group/ Total Fleet Cruise Line NS GT Berths NS GT Berths average Average average average Carnival 46 50,502 1,339 14 97,693 2,329 P&O Princess 18 60,170 1,523 8 87,925 2,105 RCC 23 80,054 2,051 6 103,426 2,418 Star Cr. Group 19 47,644 1,327 3 105,000 2,700 4 groups 106 58,044 1,523 31 96,989 2,324

Source: Own study based on data from PSA and Lloyd’s Cruise Int. 175 Relationship between GT/berth ratio and date of construction

Source: Own study.

b) Technical. Tourist demands and the financial running of modern cruise ships require there to be a wide range of on-board attractions throughout the ship's voyage (see section 4.2.1). Revenue generated on-board plays a very important role in future revenue and profitability, which is why a greater platform is required to hold an ever greater array of services for passengers such as casinos, designer shops, perfume shops, shops which sell alcohol and tobacco, cosmetics shops, etc. The need for a larger platform means that the GT/berth ratio must increase. This concept is known as a floating resort, competing with on-land resorts, as stated on many other occasions throughout this report. This is what the customer actually wants and is the reason why it is so successful. The maximum exponent of the concept is the VLCV, which requires an investment of 400-500 million dollars, a cost which can only be met by the Big Four (RCC, Carnival, StarCruises and P&O Princess).

The entry of the VLCVs into service is most noteworthy, as they were originally designed to sail only in the Caribbean. The success of the "Grand Princess" (109,000 GT) in the Mediterranean throughout the summer of 1998 brought about a radical operational change, with Star Cruises also thinking of doing the same from Singapore. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM US and European cultural differences find a common denominator in this new generation of ships, clearly inspired by the Las Vegas hotel model, which is the most successful in the US. In 2002 there are 14 VLCVs on the order books, of which 2 are to operate exclusively in Europe, with another two set for Asia-Pacific.

As far as the upper tonnage limit is concerned, the order book up until 2006 shows that at the moment the largest ship is Cunard's "Queen Mary 2" (150,000 GT), which cannot really be considered a VLCV, but rather a gigantic cruise liner (see section 1.2). It must not be forgotten that the restrictions imposed on the ships are neither technical nor constructive, but instead operational and financial, essentially based on ship length for docking and the sheer amount of investment required to begin a project of this scale. The "America World City" project, consisting of 6,200 berths and 250,000 GT and dating back to 1986, still has the latter two restrictions imposed upon it: the lack of sufficient funding and the problem of its great length (387 m). In order to save the project, it is envisaged that four ferries will be incorporated into the cruise for transporting passengers from the ship's anchorage point to the actual port.

176 It is interesting to note the vision of the future as envisaged by Corrado Antonini, the Executive President of Fincantieri Shipyards, who states (see bibliography 2) that: "the mass-market development will be served by three types of ship: a) cruisers of 20,000-40,000 GT for the luxury segment; b) Panamax – which is currently set at up to 85,000-90,000 GT; and c) some VLCVs of over 100,000 GT."

6.2.2. Characteristics of the process of bringing larger tonnage ships into operation

THEORY Probability (Value scale) WHEN. Will it have an effect: Long-term 1 2 3 4 5 Immediately (over 6 years) X NOVELTY. The effects will be: Completely known 1 2 3 4 5 Completely unknown X FIELD. The number of affected 1 2 3 4 5 people will be: Very small X Very large SEVERITY. The effects may be: Not very significant 1 2 3 4 5 Very significant X FORESIGHT. Public interest 1 2 3 4 5 will be: Very small X Very large CERTAINTY. Will be presented 1 2 3 4 5 with a degree of certainty: Very low X Very high

6.2.3. Main consequences

This major increase in average cruise capacities is leading to: Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM a) The need to have the necessary docking berths at the ship's disposal at the right times. The size of the ship, the number of passengers and baggage handling are three important variables.

b) The distinguishing feature of this trend is that it entails a major demand in tourism services, which are more keenly observed in the case of port calls (which last approximately from 7 to 10 hours) and in disembarkations. As embarkations are staggered, they are less demanding.

c) The amount of investment required for port facilities (required draught levels for VLCVs and the sheer volumes of passenger traffic), may be extremely high and not at all profitable over the short-term. This is why private funding comes into play at this juncture. Examples of this include Carnival at the port of Miami, Disney, who designed their own Port in Canaveral, and RCC, who invested in the building of new docking berths for its Eagle class in Miami. The port of Barcelona, the Italian ports and the port of Singapore are also following this private funding initiative. The 177 result is considerable rigidity in the selection of destinations and ports capable of catering for these large cruise ships.

d) The feature of the VLCV ship as a destination in itself is not as essential in Europe or in Asia, where the destinations are very important for the customers. Nevertheless, in spite of this, the model that has been so successful in the Caribbean for the US is initially being applied to the Mediterranean, and to a lesser degree to the Asia-Pacific region. These large ships have a vast array of additional facilities (RCI's VLCVs even have a mini golf course, aquariums and an ice-rink), making them a product that is in direct competition with on-land resorts.

e) The large ships (> 70,000 GT) are exclusive to the Big Four cruise lines.

f) Dealing with large volumes of cruise passengers in a short time period may have implications for environmental quality.

g) The growth in the Mediterranean has created a transatlantic traffic derived from the association between destination and season (Mediterranean-summer45, Caribbean-winter). In the case of VLCVs, their great breadth (B>32.25 m) prevents them from passing through the Panama Canal, which is why they can only be easily placed in the Mediterranean. These itineraries, which are borne of the need to change the ship setting based on seasonality, are offered to the public as unique itineraries which are very expensive (due to the duration, as the average daily price tends to be considerably lower than the company average) which is why its customers generally have very high spending power.

6.3. Cruise line horizontal business consolidation

Horizontal business consolidation began in the US towards the end of the eighties in Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM the 3-4 star segment, involving large group consolidation and expanding into the European and Asian markets.

The trend described in section 6.2 is very closely linked to this, as both feed mutually off one another. The sector is becoming ever more concentrated and with an ever increasing global mentality. The need to lower cruise prices triggers off a very simple process: the large cruisers that are currently entering service ensure a financial operation that is very competitive, providing excellent quality services at very tight rates. The smaller, non-specialist cruise lines (3-4 star segment) are unable to compete with such competition. This means that the smaller companies are disappearing or being taken over, thereby increasing the consolidation. The events of September 11th have speeded up the process of consolidation, affecting not only cruise lines, but suppliers of equipment and goods as well.

45 in the Northern Hemisphere.

178 6.3.1. Evolution

Supply is dominated by the Big Four (Carnival Co., RCC, P&O Princess, and Star Cruises). The figures in table 6.V. are very significant with regard to this subject, denoting a centralization process in which actual supply is clearly involved. This is reflected in the period from 1989-2001, when the four groups went from controlling 54.9% to 71.7% of world berth capacity. Section 3.3 reflects the main business activities within the last few years. In March 2002 there were still two major business proposals to be resolved: the proposed merger between RCC and P&O Princess, or the takeover of the latter by Carnival Co., all of which means that soon we may be talking of the Big Three rather than the Big Four.

Probable forecasts indicate that this consolidation will increase over the coming years, regardless of what business activities may occur. A clear indication of this can be gleaned from examination of the order book, in which 90.2% of berths ordered for the 2002-2005 period belong to the Big Four. The result is a forecasted increase in share of total berth supply for the 2001 - 2004 period from 71.7% to 76.5%.

Table 6.V.

Group Capacity by berth at year end 1989 1991 1993 1995 1997 1999 2001 2004* Carnival 13,482 18,424 22,088 26,528 42,565 49,812 61,597 94,197 RCCL 8,992 13,504 14,326 15,168 29,314 29,310 47,184 61,690 P&O Princess 10,353 13,533 13,321 16,242 16,184 20,818 27,420 44,260 Star C. 13,144 13,007 15,831 14,097 14,968 20,824 25,210 33,310 TOTAL 45,971 58,468 65,566 72,035 103,031 120,764 161,411 233,457 World 83,800 100,650 114,110 132,530 160,100 174,845 225,000 305,000 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM (%) World 54.86 58.09 57.46 54.35 64.35 69.07 71.74 76.54

(*): in accordance with order book. Source: Own study based on data from Lloyd’s Cruise International and GP Wild (International) Ltd.

This forecast has been based on the presumption that there will be no further business activities such as takeovers or mergers, and that no non-specialist or medium sized cruise lines will be dissolved, as in the bankruptcy cases of Premier Cruises and Commodore Cruises in 1999 and 2000. It is therefore clear to see that the world supply of cruises is becoming more and more centralized, revolving around the dominant position of the Big Four, in a situation that can be described as an oligopoly.

It is interesting to note that the progress of the relationship between supply and demand also favours this process, as previously stated in section 2.4:

179 f) In the 1992-2000 period, the increase in net supply (∆supply = +93%, or +8.55% cumulatively per annum) was less than the demand (∆demand = +97%, o +8.87% cumulatively per annum), which logically means that average occupancy levels have improved slightly from 98.18% to 100.53%. In these circumstances the main cruise lines, who are the real protagonists when it comes to additional supply, have maintained their occupancy levels, with RCI showing the best results, followed by Star Cruises and P&O Princess to a lesser degree (see table 2.XVIII), and Carnival the worst of all. This situation is different from that of two years ago, suggesting that the excess tonnage of the smaller cruise lines has either been removed (bankruptcies of Premier and Commodore Cruises), or else it has been taken over by more efficient management of assets.

g) The outlook is similar for the 2001-2007 period, in that a slightly lower increase is expected in supply (+38.2%) than demand (+39.6%).

In the face of such growth in world berth supply, the strategy of the big groups has been based on committing heavily to a major expansion programme outside their traditional North American source market, particularly towards Europe (United Kingdom, Scandinavia and southern Europe), thereby obtaining greater risk diversification. It must also be remembered that the big groups have greater room in which to manoeuvre, as their financial standing gives them easier access to funding at more beneficial rates, as well as having a greater volume of their own generated resources (cash flow).

Table 6.VI. Share of the big 4 groups in 2000

Region Share Region Share Caribbean 76,9% Europe 41,1%

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Alaska 96,8% Far East 78,5%

Source: Christiania Bank og Kreditkasse ASA.

There is strong competition among the existing four main groups, with a clear business strategy aimed at the Mediterranean as well as the European source market. The reason can be seen in table 6.VI, as the opportunity for actual growth is greatest in this region. As has been stated throughout this report, it can be asserted that Europe/the Mediterranean has become the main area of competition for the four main cruise line groups. The activities undertaken bear witness to this fact. These groups have either deployed their most modern vessels to this area, or else they have increased the capacities of cruise lines in Europe in which they own a holding. Hence:

- In the summer of 2001 Costa (Carnival Co.) placed five ships from its fleet, totalling 7,000 berths, as well as accelerating the expansion of its fleet.

180 - P&O Princess continues to deploy the "Grand Princess" (2,600 berths), without forgetting the Festival takeover attempt that was a clear bid to convert it into the Mediterranean leader.

- RCC, through Celebrity, introduced the "Millennium I" (1,900 berths) and still has the "Legend of the Seas" (1,800 berths). Added to this is the recent joint venture with First Choice, which takes the form of the offer of "Island Escape" based in Palma de Majorca.

The arrival of two of the big US cruise groups in Europe, both in terms of market and destination, is helping to act as a catalyst for additional business enterprises that are greatly benefiting the development of the European market. Recent business activities in Europe speak for themselves:

- Carnival Co.'s purchase of 50% of Costa Crociere in 1997, which was completed in the year 2000.

- Carnival Co.'s 26% holding in the share capital of the tour operator Airtours (now known as MyTravel) in 1997.

- P&O Princess sets up a joint venture with Arkona Reisen called Aida Cruises (1999).

- The creation of the ROC cruise line (1997), from the merger between Sun Line and Epirotiki (both cruise lines).

- The merger between ROC and Louis Cruises (1999).

- P&O Princess's failed attempt to buy Festival in the year 2000. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM - The joint venture between the British tour operator First Choice and RCC (2000) and the acquisition of 20% of the share capital of the tour operator.

- The establishment of Spanish Cruise Line through a joint venture between Festival, Trasmediterránea and the Spanish tour operator Iberostar (2000).

Table 6.VII. shows the evolution in the market share controlled by the Big Four and other relevant cruise lines:

a) The situation has changed drastically in just six years, as in the period from 1995 to 2001, the Big Four have gone from controlling 44.1% to 50.0% of total berth supply.

b) The influence of local and independent operators, mainly Greek and Italian (Festival, MSC, Louis & ROC). The major push to modernize fleets, as detailed in chapter 3, should not be underestimated. 181 c) The German-speaking source market is a world unto itself. The relatively low share of German operators (Peter Deilmann and Hapag Lloyd) is only an indication of the poor development in cruise demand. It has already been stated (in point 6.1) that this market will take over from the British market in the medium-term.

d) The importance of the tour operator in the European holiday market is reflected in the notable presence of British tour operators (World of TUI UK and MyTravel).

The majority of holidays taken by Europeans are in southern Europe, above all along the Mediterranean shores, where people are searching for good weather. It can also be noted that the dominance of the Big Four is most marked in Italy, thanks mainly to the dominant market position of Costa Crociere, part of the Carnival Co. group since 1997. It is much weaker in Germany, which is something of a sealed market, due to the language and legal barriers and the economic strength and control of the major tour operators (World of TUI and Thomas Cook AG)46.

Table 6.VII. Classification of cruise lines by share in the Mediterranean

Cruise line June 1995 Group/ November 2001 Berths % Cruise line NS Berths % Carnival 1,580 3.68 Costa 7,157 16.67 Cunard 3,061 7.13 Airtours 1,836 4.28 Carnival Co. 13,634 31,76 Carnival Co. 23 19,037 22.3 P&O 2,241 5.22 P&O Princess 10 12,376 14.5 RCI 1,022 2.38 RCC 4 7,596 8.9 NCL 2,054 4.78 Star Cruises 3 3,626 4.3 4 groups 18,951 44.1 4 groups 40 42,635 50.0 Airtours 4 4,358 5.1 MSC 3 2,512 2.9 Thomson 2 2,040 2.4 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Radisson 3 1,060 1.2 P. Deilmann 3 1,002 1.2 Epirotiki 2,717 6.33 Louis Cruises 2,026 4.72 Louis Cruises 10 6,467 7.6 Festival 665 1.55 Festival 5 5,022 5.9 Crystal 960 2.24 Crystal 1 960 1.1 Hapag Lloyd 1,440 3.35 Hapag Lloyd 3 1,012 1.2 TOTAL 42,931 100.0 TOTAL 122 85,242 100.0

Source: Own study based on data from GP Wild (International) Ltd.

Business centralization is also noticeably marked in Europe, but with two distinct facts influencing events. They are the importance of tour operators, because of the absolute

46 World of TUI (previously known as Preussag), a German industrial and tourism group, is the main European tour operator group, occupying first place in both the major European markets of Germany and the UK, with sales of over 13 million holiday trips. Thomas Cook AG (previously known as C&N) belongs to Lufthansa and the German distribution group Karstadt, and is the second largest European tour operator, with over 8 million holiday sales. As can clearly be seen, the dominance of German 182 capital within the European holiday business is very great. control they have over distribution channels, and multilingualism. This explains the existence of medium-sized independent cruise lines in the 3-4 star segment, such as Thomson, Festival and MSC.

The response of the big groups to these two challenges has been to create associations, by means of exchanging shareholdings, with the big tour operator groups (e.g. MyTravel-Carnival Co. and First Choice - RCC) along with the creation or takeover of specific brands for the main national markets (e.g. P&O Princess - Aida Cruises, Carnival Co. - Costa).

At present, only Germany remains outside this integrating current, with the exception of the joint venture instigated by P&O Princess. For as long as the two main German tour operators (World of TUI and Thomas Cook AG) remain on the business periphery, the demand for cruises will not take off in German speaking countries, and when they do enter the market fully it will have to be with the help of the big cruise lines. Consequently, the market outlook will be one dominated by the Big Four with strong links with the three main European tour operator groups (World of TUI, Thomas Cook AG and MyTravel plc), and duly adapting their multi-brand structure in order to respond to European multilingualism. An alternative to this scenario would be the incorporation of a fifth German group based on the holiday holding company World of TUI and its cruise line Hapag Lloyd.

6.3.2. Characteristics of business consolidation

THEORY Probability (Value scale) WHEN. Will it have an effect: Long-term 1 2 3 4 5 Immediately (over 6 years) X NOVELTY. The effects will be: 1 2 3 4 5 Completely Known X Completely unknown Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM FIELD. The number of affected 1 2 3 4 5 people will be: Very small X Very large SEVERITY. The effects may be:. Not very significant 1 2 3 4 5 Very significant X FORESIGHT. Public interest 1 2 3 4 5 will be: Very small X Very large CERTAINTY. Will be presented 1 2 3 4 5 with a degree of certainty: Very low X Very high

6.3.3.- Main consequences

This powerful development of business centralization is creating the following effects:

183 a) The disappearance of medium-sized independent cruise lines in the 3-4 star segment in the medium to long-term. Only specialist cruise lines that have a niche market and sound financial backing will survive.

b) The modernization of medium-sized European cruise line fleets in the short-term.

c) The reinforcement of this situation makes it difficult for new independent operators to enter the market. Those who wish to enter the market must do so hand in hand with the established players if they wish to guarantee their own success. This is not only for financial and technological reasons, but also commercial reasons, as they would need to be able to count on the support of the distribution channels that the latter control.

d) A transfer of US and European capital into the Tourist Sector. The clearest examples have been the acquisition of holdings by Carnival Co. in the tour operator group MyTravel plc (third European group) and by RCC in First Choice.

e) The greater bargaining power of the big groups on destinations. In spite of the fact that cruise lines are adopting a multi-brand policy, when it comes to doing business with the port authorities it is the group's synergies that are of major importance. On the other hand, there are also greater restrictions on itineraries offered, which are related to the heavy investment in cruise terminals required for handling VLCV traffic.

f) The cruise lines that operate in very specific niche markets (adventure cruises, expeditions and sailing boats) may possibly escape this powerful business consolidation. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

184 7 ANNEX I. SHIPPING TERMINOLOGY

7.1. Relative size of tourist cruise fleets47

In terms of fleet volume and traffic, the tourist cruise sub-sector occupies a very small percentage of merchant shipping. It must be remembered that the dominant shipping activity by quite some way is the traffic of crude oil. It represents a third of transported cargo in the entire world, in mt, and almost 50% of transport demand, in mt x nautical mile.

The importance of tourist cruisers lies in their high technological value, their rapid growth, and huge impact on the population, which plays a major role in public relations.

Table 7.I clearly shows the relative importance of tourist cruisers in global merchant fleets, measured in terms of gross tonnage (GRT48 -GT). In the same table, drawn up using data from Lloyd’s Register, in the section entitled "Other passenger ships", both cruise ships and exclusively passenger carrying ferries are included (mixed passenger- cargo ferries not included).

On the other hand, according to data from CLIA, which groups together the majority of the main cruise lines, the increase in berth capacity between 1991 and 2000 was over 90%. Taking into account that the GT/berth ratio has tended to grow throughout the nineties, it can also be stated without a shadow of a doubt that the increase in cruise ship tonnage (GT) increased considerably more than 90%. Therefore, in relative growth terms, cruise ship fleets have only been surpassed in the last decade by container ships.

Table 7.I. Distribution and evolution of merchant fleets worldwide

July 1989 January 1999 ∆ (%) NS GRT NS GT NS GT/ GRT Oil tankers 6.4 129.6 7 151 9.38 16.51 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Liquefied gas tankers 0.8 10 1.1 17.2 37.50 72.00 Combined 0.4 20 0.2 10 -50.00 -50.00 Bulk carriers 4.7 109.5 6.2 148.6 31.91 35.71 General cargo 19.5 72.1 18.9 65.7 -3.08 -8.88 Container ships 1.1 22.7 2.4 53.2 118.18 134.36 Passenger/ro-ro 6.5 6.5 2.5 12.5 -61.54 92.31 Passenger/general cargo 0.4 0.8 0.3 0.6 -25.00 -25.00 Other passenger ships 2.7 6.2 2.9 7.8 7.41 25.81 Other merchant ships 2.2 10.9 4.1 38.3 86.36 251.38 TOTAL 40.1 388.3 45.6 504.9 13.72 30.03

NS= number of ships (thousands); GRT = GRT millions; GT = GT millions. Source: Lloyd’s Register.

47 Throughout this section there will be prolonged reference made to the work cited in the bibliography (39), which is why it will not be cited continually. 48 GRT: Gross Registered Ton, referring to the ship's tonnage. See section 7.2. 185 Worldwide Cruise Ship Activity © 2002 World Tourism Organization Given that, on 1st January 1999, the cruise ship fleet comprised 337 ships with a total of 6.5 million GTs, it represented 1.2% of the tonnage of the merchant fleet worldwide. Figures are very similar to those of 2002. Nevertheless, as has already been stated, their technological and financial importance is far superior.

7.1.1. Sea cruises: scheduled or tramp49 traffic?

Maritime transportation can be clearly divided into two separate fields: tramp traffic and scheduled service lines. It is interesting to establish into which category the service offered by ocean-going tourist cruises falls.

The most characteristic feature of the scheduled line market is its cartelization, which is not present in tramp traffic. In nearly all major trading routes there is a group of shipping operators that have established a conference, which is a shipping company association that works in a set trade or within a certain geographical area. The conference also reaches common agreement on policies regarding cargo, frequency and supply capacity.

The majority of countries permit and even support conferences in their own legislations. In 1916, the US approved the Shipping Act exempting them from anti-cartel legislation, although the conferences themselves must be open. In the European Union, the Commission’s Directorate General for Competition (DG IV) maintains this exemption, although only with regard to shipping tariffs, as on-land tariffs are not applicable.

Conferences are characterized by the following:

- Establishment of common fleet tariffs which must be adhered to.

- They are normally exclusive associations, although US legislation states the oppo- Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM site.

- They frequently form pools, sharing cargo rights or income from freight among the members in accordance with a set of established criteria.

From what has previously been stated, it can be said without a shadow of a doubt that in the tourist cruise business such freight conferences do not exist, although there are cruise liner associations (CLIA, Croisimer and PSA, see section 3.1) in the most developed countries (United States, France, United kingdom, Germany and Japan), which cover the following objectives:

- To generally promote this new type of holiday.

49 Tramp traffic, the shipping equivalent of charter traffic. 186 - Represent common interests before other agents in the market and act as a lobby group before governments of respective countries.

- Focus the majority of its activities on marketing and joint publicity.

- Look after the holiday retail sector's training: travel agents.

Other features that distinguish tramp traffic from scheduled service lines are as follows:

a) Itineraries. Scheduled traffic has the same itineraries occurring at regular time intervals, while tramp does not. Tourist cruise supply is advertised annually in their brochures, and although this may vary from year to year, tourist cruises are still nevertheless closer to scheduled passenger traffic than tramp traffic.

b) Freight and conditions. In scheduled traffic, tariffs are made public and act as a standard-form contract, which is what occurs in the case of tourist cruises. Nevertheless, it is necessary to clearly distinguish between a tariff published in a brochure and the tariff actually paid, as a result of discount policies applied by the cruise lines.

c) Market transparency. Tramp traffic can be characterized as a transparent market, while scheduled traffic is far from being so. As previously stated, tourist cruises are a more transparent market than the scheduled lines and they function in accordance with the specific features of the Tourist Sector.

In conclusion, it can be asserted without doubt that the tourist cruise is closer in essence to scheduled line services, but nonetheless with its own unique features which prevent it from being considered purely as a scheduled line service. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

7.1.2. Financial agents

In the shipping business a number of figures stand out:

- Proprietor: the person or entity which owns the ship.

- Ship manager: the person or entity which supplies or fits out the ship by contracting the crew.

- Ship owner: commercially exploits the ship, being the borrower of the service from third parties.

- Passenger: the person who receives a transport service.

187 In the sub-sector currently being studied, business practice differs depending on the size of the company and the geographical field. The Big Four, who also operate in the US and Canadian markets, are proprietors, ship managers and ship owners all rolled into one, given their immense financial capacities. The situation in Europe is very mixed: tour operators play a major role, either as proprietor, ship owner or ship manager (as in the case of Airtours-MyTravel) or else they may just be a cruise line company (as in the case of World of TUI-Thomson), or may even reserve or buy capacity quotas on the ship (in the case of the German tour operators). In the smaller cruise companies there is also a whole range of possible situations: they may be proprietors, ship owners and ship managers all at once (as in the case of Radisson), or else they may just be ship owners and ship managers (as in the case of World of TUI-Thomson with Louis Cruises) or they may even be just proprietors and ship managers (as in the case of V- Ships).

With regard to ownership and management of the ship, there are several possibilities:

- Bare boat charter50: assigning of the ship by the proprietor to the leaseholder for a specific length of time, with the leaseholder fitting out the ship and thereby becoming the ship manager and acquiring the nautical and commercial management of the ship.

- Chartering: The ship manager or proprietor undertakes to place a fully assembled and manned ship at the disposal of the charter carrier.

- Shipping transport contract. This is the legal format used by the scheduled lines, whereby the ship owner assumes control of the charter in exchange for transporting goods or passengers from one place to another.

Within the business that is being examined in this report, the three types of operation are widespread and accepted, depending on the financial organization and the risks a Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM company can assume. Details of the main operations undertaken during the year 2001 follow in the table below.

50 In reality it is a financial lease.

188 Table 7.II.

Ship Operator Proprietor Type of Period Options Name contract Ocean Majesty Majestic Page and Moy Part-time 2001-2005 International chartering Lanzhuanshi Pacific Tropical Islandn/a n/a Cruises Serenade Louis Cruise Boulos Gad Part-time n/a Tourism and chartering Hotels Princesa Louis Cruise G8 Summit, Part-time 9 days, Victoria Genoa chartering July 2001 Arcadia Attika Great Lakes n/a n/a Shipping Cruises Pacific Italian buyers P&O Princess Bare boat August 2001 to Sale and Princess charter November 2002 lease back Bolero Festival Spanish Cruise Part-time April 2001- 2004 Cruises Line chartering Seawing Royal Olympic Airtours Part-time 5 years Sale and Cruises chartering from lease back January 2001

Source: GP Wild (International) Ltd.

7.1.3. Tourist cruiser registration

The International Convention on the High Seas drawn up in Geneva in 1958 states that the Register to which a ship belongs determines its nationality and thus the Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM legislation applicable to it on all subjects.

The selection of a flag is therefore important for the commercial and operational success of the ship. It is a well-known fact that running costs can be reduced substantially (by over 25% and even 40% in some cases) by running a ship under a flag of convenience (Panama, the Bahamas, Cyprus).

The nationality of the proprietor is being used less and less as the determining factor for choosing where the ship is to be registered: at the beginning of 1998, 53% of total tonnage of the worldwide merchant fleet of ships over 1,000 GT (734.5 million dwt) was registered under flags of convenience, compared to only 35% nine years ago.

There are certain links between free registrations and the actual ownership of vessels, determined amongst other things by the existence or not of bilateral agree-

189 ments on double taxation. For example, the relationship between the Cypriot register and Greek ship owners or the relationship between US proprietors and Panamanian and Liberian registers, or between Panama and Japanese ship owners.

It is well known that over the last 20 years, due to the proliferation of open registrations, the change in origin-destination matrices of global commerce and the increase of protectionist policies of developing countries, there has been a major drop in OECD registrations, along with a parallel increase in fleets from recently industrialized countries (NIC51) and the People's Republic of China.

Faced with this situation, European countries reacted by creating an additional and alternative framework with a second registration under their own national flags of convenience, without modifying the traditional registration. This is how off-shore and special registrations arose.

Ferries and shuttles basically operate in areas reserved for flags from the coastal state52, which is why flags of convenience are not really seen in this type of traffic. A major difference of the cruise ships, as previously stated, is the high number of personnel, which often exceeds 1,000 crew members, and is an important factor given that crew costs play a major part in the running costs. Consequently, flags of convenience are used very often and this can also be a determining factor in the choice of sailing route. For example, Seabourn and RCC register their cruises in the Norwegian International Register (NIS), in the Bahamas or in Liberia, while Carnival mainly registers its ships in Panama, and Holland America Line in the Dutch Antilles.

As can be seen in table 7.III, 23.7% of the total cruise ship fleet is registered in Panama, 23.3% in Liberia and 22.3% in the Bahamas. Of the world fleet, a total of 69% of vessels are registered in Free Registers and only 28% are registered in OECD countries. Norway and the Netherlands account for 16%. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Nevertheless, if the ship owner's nationality is taken as a rule, then 85% of ships are controlled by OECD countries, with the US top of the list, followed by the UK in a distant second place. The dissociation between actual ownership and the country of registration is even higher than the average of the world merchant fleet, which, as has been stated previously, is mainly because of the very high personnel costs of the crew on board a cruise ship. These costs are considerably reduced by the non-application of employment legislation from OECD countries.

51 New Industrialized Countries: Singapore, Taiwan (Chinese province), Republic of Korea. 52 Thus, for example, EEC Regulation 3577/92 reserves EU national cabotage traffic to ships that fly the flag of the said countries.

190 Table 7.III. Cruise fleet by country of registration

Flag NS Passenger Share GT Share of registration capacity (berths) % % Panama 34 38,527 23.7 1,267,184 21.6 Liberia 33 37,520 23.1 1,567,135 26.7 Bahamas 38 36,231 22.5 1,163,450 19.8 Norway 12 13,574 8.3 575,312 9.8 Netherlands 10 12,991 8.0 514,085 8.8 United Kingdom 7 7,646 4.7 297,997 5.1 Greece 11 5,045 3.1 116,217 2.0 Cyprus 6 3,918 2.4 65,995 1.1 Germany 5 2,468 1.5 107,789 1.8 Italy 3 1,418 0.9 63,541 1.1 France 1 1,196 0.7 47,900 0.8 United States 1 818 0.5 30,090 0.5 Wallis&Futuna 1 320 0.2 18,800 0.3 Bermuda 1 300 0.2 12,500 0.2 Croatia 1 300 0.2 5,650 0.1 Finland 2 300 0.2 4,922 0.1 Isle of Man 2 232 0.1 8,500 0.1 TOTAL 168 162,804 100.00 5,867,067 100.00

Source: Own study based on the Official Cruise Guide 1999.

7.2. Definitions and symbols used

• Tonnage: volume of closed spaces on a ship, measured in accordance with the 1969 International Convention on Tonnage Measurement of Ships. The reason why ships' tonnage is measured is so that they can adhere to fiscal legislation and International Maritime Law.

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM • Bare boat charter: assigning of the ship by the proprietor to the leaseholder for a specific length of time, with the leaseholder fitting out the ship and thereby becoming the ship manager and acquiring the nautical and commercial management of the ship. It is basically a financial lease.

• Port side: the left side of the ship looking from stern to bow.

• Rolling: the ship's movement from port to starboard or vice versa.

• Pitching: the ship's movement from bow to stern, alternately rising and falling.

• Cabotage: word deriving from the French caboter, which means to sail from cape to cape.

• Draught measurement: (D) distance between the waterline and the upper edge of the keel.

191 • Order Book: (OB), ships that have been commissioned and are pending delivery.

• Catamaran: a boat with twin hulls joined by at least one deck.

• Cruise passenger: term referring to the tourist that partakes of a tourist cruise.

• Displacement: amount of water displaced by the ship, measured in metric tons.

• Port Call: (PC) refers to the ship's anchoring or mooring at either a base port or a secondary port.

• Length (perpendicular): (Lpp) length of the ship measured at the waterline.

• Length (total): (Ltot) length of the ship measured between the two ends of the ship.

• Starboard: the right side of the ship looking from stern to bow.

• Ferry: term generally applied to passenger and private vehicle transport vessels that travel from one location to another.

• Fleet: group of ships. Fleet definitions are as follows:

a) Total Fleet (TF),

b) Inactive or moored fleet (IF).

c) Operational fleet (OF): the difference between total fleet and inactive fleet.

d) Scrap Fleets (SF): fleet that has been decommissioned.

e) New contracts (NC): firm ship contracts within a year. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

f) Future fleet (FF): FF = TF – S + OB + NC – C, (C being order book cancellations).

• GT: unit of measurement of ship volume, meaning gross tonnage. It measures the total volume of closed spaces on the ship, using a standard formula.

• HP (horse power): unit of power equal to 745.7 W.

• Ballast: weight transported by the ship that serves only to improve its stability. It is normally salt or sea water.

• Long ton (British): unit of weight, equal to 1.01605 metric tons.

• Moulded breadth: (B) maximum ship's breadth measured from the internal sides of the gangways.

192 • Maximum breadth: (Bmax) maximum ship's breadth measured from the external sides of the gangways.

• International nautical mile: unit of length equal to 1,852 metres.

• Knot: unit of speed, equal to 1,852 km/h.

• Deadworks: part of the ship that is not submerged.

• Underwater body: part of the ship that is submerged.

• IMO. The International Maritime Organization is a UN organization focused exclusively on maritime matters. The Organization's objectives are summarized in arti- cle 1 a) of the Articles of Agreement, which are: "to aid co-operation between governments in relation to regulations and government initiatives on all technical matters regarding international commercial navigation; to encourage and promote the general application of regulations as and when required for maritime safety, for improved shipping methods and the prevention and restraint of marine pollution by ships".

• Panamax: ships that can pass through the Panama Canal.

• Panamax-max: ships that can pass the Panama Canal, although they have a tonnage of over 80,000 GT. The Panama Canal’s system of sluices restricts ship breadth (Bmax = 32.25 m) as well as length (Ltot= 294 m), which equates to a cruise ship with a maximum capacity of 1,500 berths. In order to increase capacity, there are plans for a greater superstructure with a smaller breadth, thereby avoiding transversal stability problems and providing a larger number of outside cabins with a balcony. This solution is expected to allow 100,000 GT ships with 2,500 berths through the Canal whilst maintaining their Panamax status. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM • Lightweight: is the sum of the weight of the hull, the superstructures, and the main and back-up machinery, equipment, etc. without counting consumption products (e.g. cargo, fuel, lubricating oil, ballast water, fresh water etc.).

• Deadweight: is the difference between displacement and the lightweight of a ship. It is used mainly for merchant ships.

• Stern: the rear part of a ship’s hull.

• Post-Panamax: refers to ships with a maximum breadth of over 32.25 m, the upper limit allowed for passing through the Panama Canal.

• Bow: the front end of the ship’s hull.

• Base port: also known as berth port (PBASE), head port or main port. It is the place where the embarkation and/or disembarkation of passengers takes place at the start and/or end of a cruise. 193 • Secondary port: also known as port of call (PCALL), and is a concept that is related to the cruise industry, whereby passengers disembark, and then re-embark to continue with the cruise. The financial impact in the port is less than at the base port (see section 4.4).

• Moulded depth: (D) distance measured between the upper edge of the keel and the point defined by the intersection between the main deck extensions and the ship's side.

• Stocks: supplies.

• Ro-ro: a flush deck ship that permits the loading and unloading of vehicles by its own means. Modern ferries are normally ro-ro. The term is short for roll-on, roll-off.

• Short ton (US): unit of weight, equal to 0.90718 metric tons.

• Superstructure: the part of the ship that is above the hull.

• TEU: or twenty-feet equivalent unit, a unit used to measure cargo capacity of container ships based on a container measuring 20 feet.

• DWT: deadweight ton. Refers to the load and consumables of a merchant ship measured in metric tons.

• Tramp: type of shipping traffic that is the opposite of scheduled traffic. Similar to airline charter traffic.

• GRT: gross registered ton, a unit of measurement of a ship's tonnage.

• VLCV: Very Large Cruise Vessel, refers to a cruiser of over 100,000 GT. At present the largest is RCI's Eagle class, with a weight of 140,000 GT. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

7.2.1. Explanation of symbols and abbreviations used

As well as symbols used and explained in each equation and in the footnotes, the following abbreviations and symbols have also been used throughout this study:

PA = Port Authority

ABTA = Association of British travel Agents

ASTA = American Society of Travel Agents

B = moulded breadth

CC = Carnival Cruises

194 CLIA = Cruise Lines International Association

OB = order book

PC = port call

FCCA = Florida-Caribbean Cruise Association

FF = future fleet

TF = total fleet

g it = degree of development of the market "i" at a specific time "t"

GSA = General Sales Agent

GT = Gross tonnage

HAL = Holland America Line

Ltot = total length

NS = number of ships

NCL = Norwegian Cruise Line

WTO = World Tourism Organization

PBASE = Base or main port

PSA = Passenger Shipping Association Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

PCALL = secondary port

RCC = Royal Caribbean Cruise Line

RCI = Royal Caribbean International

ROC = Royal Olympic Cruises

D = average draught

VLCV = Very Large Cruise Vessel, cruise ships of over 100,000 GT

Vij = cruise demand from source "i" to recipient "j"

195 7.3. Addresses and websites of interest

7.3.1. Associations

Cruise Lines International Association (CLIA) Address: 500 Fifth Ave.Suite 1407 New York, NY 10110 (USA) Tel:212-9210066 Fax:212-9210549 www.cruising.org

International Council of Cruise Lines (ICCL) Address: 1211 Connecticut Avenue, Suite 800 Washington, DC 20036 (USA) Tel.: 202-296-8463 Fax: 202-296-1676 www.iccl.org

Florida-Caribbean Cruise Association (FCCA) Address: 2701 Ponce de León Blvd., Suite 203 Coral Gables, FL 33134 (USA) Tel.: 305- 446 7297 Fax: 305- 448 0931 www.f-cca.com

National Association of Cruise Oriented Agencies (NACOA)

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Address: 7600 Red Road, Suite 128 South Miami, FL 33143 (USA) Tel.: 2305-663-5626 Fax: 305-663-5625 www.nacoa.com

Passenger Shipping Association (PSA) Address: 4th Floor Walmar House 288-292 Regent Street LONDON W1R 5HE (United Kingdom) Tel.:0171-436 2449 Fax:0171-636 9206 www.psa-psara.org

196 Association des Compagnies de Croisières et Ferries. Croisimer Address: 8, rue Halévy 75009 Paris (France) Tel.:01 40 07 99 94 Fax:01 42 66 11 21 www.croisimer.com

Verband der Faehrschiffahrt und Faehrtouristik e.V. (VFF) Address: Mattenwiete 8 20457 Hamburg (Germany) Tel.:49-40-36 01-215 Fax:49-40-36 01-217 www.faehre-vff.de

International Cruise Council Australasia Address: P.O. Box 509 Harbord NSW 2096 (Australia) Tel.:02-99 05 9001 Fax:03-99 05 9856 www.cruising.org.au

Japan Oceangoing Passenger Ship Association Address: Kaiun Bldg. 2-6-4, Hirakawa-cho, chiyoda-ku Tokyo ( 102-0093) (Japan) Tel.:03-5275-3710 Fax:03-5275-3317 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM www.jopa.or.jp

The Marine Hotel Association Address: P.O. Box 1659, Sausalito, CA 94966 (USA) Tel.:+1 415 332 1903 Fax:+1 415 332 9457 www.mhaweb.org

7.3.2. Main shipping companies: websites

Aida: www.aida.de Airtours: www.airtours.co.uk American Hawaii Cruises: www.cruisehawaii.com

197 Carnival Cruises: www.carnival.com Celebrity: www.celebrity-cruises.com Club Med: www.clubmed.com Costa Crociere: www.costacruises.com Crystal: www.crystalcruises.com Cunard: www.cunard.com Disney: www.disney.com/DisneyCruise Festival: www.festivalcruises.com Fred Olsen: www.fredolsen.co.uk Holland America Line: www.hollandamerica.com Hapag-Lloyd: www.hlkf.com Louis Cruises: www.louiscruises.com Mediterranean Ship Cruises: www.mscruisesusa.com Norwegian Cruise Line: www.ncl.com NYK (Nippon Yusen Kaisha): www.asukacruise.co.jp Orient Lines: www.orientlines.com P&O: www.pocruises.com Peter Deilmann: www.deilmann-cruises.com Phoenix Reisen: www.phoenixreisen.com Princess: www.princesscruises.com Royal Caribbean International: www.royalcaribbean.com Radisson Seven Seas: www.rssc.com ResidenSea: www.redisensea.com Royal Olympic Cruises: www.royalolympiccruises.com Saga: www.saga.co.uk Sea Cloud: www.seacloud.com Seabourn: www.seabourn.com Seetours: www.seetours.de Silversea Cruises: www.silversea.com Star Clippers: www.star-clippers.com Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Star Cruises: www.starcruises.com.my Thomson: www.thomson-holidays.com Transocean Tours: www.transocean.de Valtur: www.valtur.com Windjammer: www.windjammer.com Windstar: www.windstarcruises.com

7.3.3. Other websites of interest

Seatrade Europe: www.seatrade-europe.com Seatrade Mediterranean Cruise & Ferry Convention: www.seatrade-global.com Seatrade Cruise Shipping Convention (Miami, USA): www.cruiseshipping.net Travel Trade Productions, Inc.: www.traveltrade.com

198 8. ANNEX II. NUMERIC STUDIES

8.1. Spending patterns in the Côte d'Azur (France) and in the Caribbean

At the end of 1994, in-depth and unique research was carried out in the cities of Cannes, Nice and Villefranche (Côte d'Azur), based on spending at destination generated by cruise traffic. (See bibliography 48). The research is based on a survey of a representative section of the population in each of the ports and on a series of statistics from the corresponding Chambers of Commerce and Industry. Tables 8.I, 8.II and 8.V reflect the main results of the study. Values have been updated to 2001, taking inflation into account.

The FCCA regularly analyzes the economic effects of cruises on the Caribbean islands, with the last report published based on the first quarter of 2001. (See bibliography 16).

This section uses the methodology developed in section 5.1.

8.1.1. Spending category grouped by type

(S ) Total spending TOTAL can be defined by the sum of the following spending groups:

S = S + S + S + S (4) TOTAL PORT ON-LAND CREW SUPPLIES

8.1.2. Spending attributable to port services (SPORT)

a) On the Côte d'Azur:

- Provided by the Port Authority (TPA). For the purposes of the study the figures

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM set out are as follows: in the port of Le Havre a cruise ship with 500 berths is billed for 4,600 euros as a base port or 600 euros as a secondary port, with no taxes for passengers. In Marseille, tariffs are 7,600 euros for being a base port for the "Costa Romantica" (embarking and disembarking 500 of the 1,700 cruise passengers it accommodates) and 6,100 euros for the "Bolero" (200 embarking and disembarking of a total of 800 passengers) and 2,300 euros as a secondary port for the "Splendour of the Seas" (1,500 cruise passengers).

(S ) - Provided by port industry professionals PIPROF :

4. The pilot receives 1,500 to 3,000 euros on average for entering or exiting.

5. Ship on tow is billed at 1,500 to 7,600 euros.

199 Worldwide Cruise Ship Activity © 2002 World Tourism Organization 6. Boat service for anchored cruise ships; in the case of the port of Villefranche (France) this varies between 1,200 and 2,000 euros.

(S ) - Shipping agents remuneration SHIPA is based on an average of three to five people for two to three days varying between 1,100 and 3,000 euros/port call.

- Fuel supply, carried out in the ports of Le Havre and Marseille, because of the quality of its oil products and established in long-term contracts signed by ship managers. This amounts on average to 38,000 euros/port call in Marseille, to which must be added the supply of fresh water, which is normal practice in nearly all French ports, for a total cost of between 1,500 and 3,000 euros/port call (based on an average price of 2.1 euros/m3).

The total cost of port services per port call varies between 9,000 euros for a small cruiser in a secondary port (400 berths) and 27,500 euros for a large cruiser in a base port (1,500 berths). The average cost of a port call in French Mediterranean ports is estimated at 15,200 euros.

Spending in port (SPORT): The combination of port spending on the Côte d'Azur varies from between 11,450 and 15,600 euros/port call, which is distributed three ways between the Port Authority, professional port services (pilotage, ship on tow, mooring) and shipping agents. This represents around 32 euros per passenger. In accordance with the work cited in the bibliography (48) the following similarities can be found:

SPORT = Nrberths x SPORT = TPA + SPIPROF + SSHIPA

sPA = SPIPROF = SSHIPA (5) Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

b) In the Caribbean:

The previously mentioned figures are much less than those supplied by FCCA for the Caribbean. This is due to the higher numbers of cruise passengers (approximately double) carried by the cruisers that operate in the region. In 1994, companies spent about 18 million dollars on food and drinks and other hotel services. An example worth noting is that, in 1999, two HAL ships spent 6.3 million dollars on food and drink alone.

In the spending of both cases, technical matters as described below have not been taken into account. They include:

- Ship maintenance and repairs, the costs of which vary greatly and are therefore difficult to calculate as such. 200 - Major interventions. On the Côte d'Azur, the combined cost for technical services carried out in the port of Genoa by eight ships from the cruise line Costa is estimated at 15 million euros, in other words 1.8 million euros/ship year.

8.1.3. On-land passenger spending (SON-LAND)

a) On the Côte d'Azur:

- On-land shopping. Cunard customers, a high proportion of whom are British, spend 16 euros per passenger in the city, in other words three times higher than a British Airtours passenger, who is generally younger and has a lower spending power. The Russians are a case apart: their average spending is estimated at a minimum of 43 euros per passenger. The average spending of the Japanese is calculated at 32 euros per passenger. As for US customers, the average amount of spending varies between 30 and 46 euros per passenger.

Looking at tonnage and the type of ship, spending figures generated in a port of call in the French part of the Mediterranean on a 1,500 berth 4 star ship is similar to that of spending of a 5 to 5+ star ship with 300 berths. In both cases the average value is 30,500 euros per port call.

- Accommodation costs vary between 31 euros per passenger for Nice (European customer) and 72 euros per passenger for Cannes (US customer).

- On-land restaurants. This mostly impacts on base ports as opposed to secondary ports. Average spending ranges from 20 euros/meal on a one-day excursion to 120 euros for an evening in a castle. It is believed that meals in secondary ports just before departure (or on return) cost between 23 to 30 euros per cruise passenger in Marseille, rising to between 35 and 58 euros per cruise passenger in Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM ports along the Côte d'Azur.

- Sightseeing trips and excursions. Spending on these sorts of trips is dependent on the destination. For example, in Cannes, the cost of an average excursion can be as high as 62 euros per passenger, in other words, almost double that of Villefranche and four times that of Nice.

Sales in general vary between 23 and 30 euros for a half day and 45 to 75 euros with a meal for a whole day. Excursions are more popular with European passengers than US passengers, with participation levels varying between 55 and 65%. Guided city tours are being given in ever-greater numbers by specialist taxi drivers, and prices are based on 46 euros per hour per passenger.

- Other spending in the city: museum visits, visits to monuments, etc. drinks and food in outdoor cafés etc. represent totals of between 12 and 28 euros per passenger. 201 The study cited in the bibliography (48) also states:

- US passengers spend around 114 euros per passenger, which is almost double that of the Europeans. In the case of base ports the difference is even greater: 234 euros per US cruise passenger as opposed to 83 euros per European cruise passenger. This is due to the fact that: a) 50% of US passengers arrive at least one day before the ship actually sets sail, as opposed to Europeans, 80% of whom arrive on the same day as departure; b) 67% of US cruise passengers choose a 4 star hotel as opposed to 33% of Europeans; c) US cruise passengers spend twice as much time and money on gastronomy than their European counterparts.

- Cruise passengers who get off the boat, some 90% of the total, spend between 94 and 157 euros, depending on whether it is a base or secondary port.

It can therefore be concluded that on-land spending depends on the category of cruise, the type of port call, and the nationality of the cruise passenger. Spending patterns can be divided into two (sightseeing trips and shopping) in secondary ports, and into three (the above two categories plus accommodation and restaurants) in the base port. The average value of sON-LAND is estimated at around 120 euros per passenger.

PCALL: GON-LAND = Nrberths x gON-LAND = SSIGHTSEEING + SSHOPPING

sSIGHTSEEING= sSHOPPING (6)

PBASE: SON-LAND = SSIGHTSEEING + SSHOPPING + STOURIST

sSIGHTSEEING = sSHOPPING = sTOURIST (7)

b) In the Caribbean: According to table 8.III, total unitary cost is lower, with figures Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM for 1998 of 124 dollars compared to 145 dollars for the Côte d'Azur. Nevertheless, it can be seen that spending distribution is far from being uniform, as shopping offers are a very important variable. St. Thomas, which has one of the world's most profitable shopping centres, has a total unitary spending figure (sTOTAL) that is double the average and five times that of the lowest. Figures supplied by ports in Puerto Rico (see table 8.IV) establish two facts: on the one hand the rapid surge in growth, especially in the eighties, and on the other the totally different set of figures, in which, for example, in 1997, FCCA gives a figure of 158 dollars/cruise passenger compared to 76 dollars/cruise passenger. This illustrates the difficulty in comparing figures from different sources, given the lack of analogous statistical criteria.

202 8.1.4. Other spending patterns in destinations on the French Côte d'Azur

Below is information on spending patterns on the French Côte d'Azur that is comple- mented by data in table 8.V.

- On-land crew spending (SCREW). It is estimated that a third of the crew takes advantage of a port call to disembark. This equates to 15% of passengers, taking into account that the crew/cruise passenger ratio is between 2 and 2.5 to 1. There are many different influencing factors: the duration and type of port call (docked or anchored), the nationality of the cruise passengers and the cruise ship category. Spending per crew member is about 15 euros for 3 star cruises ("Ocean Majesty" and "Saphire"). In the case of 4 to 5 star ships or ships with a high proportion of Europeans, such as on Costa's cruises or the "Queen Elizabeth 2", spending per crew member is double and is even higher for 5+ star cruises.

Regardless of crew member nationality and the cruise ship class, the breakdown of crew spending is about 5 euros per individual on-land (drinks and meals), to which a similar sum must also be added in spending on taxis, and five times this amount in all manner of other shopping (telephone cards for Philippine crew members, souvenirs and other small items for European crew members). The average figure works out at 30 euros/crewmember, which is equal to a total of 3,000 to 7,500 euros/port call, depending on cruise capacity.

- Supplies (SSUPPLIES), above all fresh provisions, vary a great deal depending on type and quantity. Estimates based on minimum supplies (buying water), require a detailed study by port and by cruise. In the case of frequent port calls at base ports, the degree of uncertainty is less, as they give rise to regular supplies of products. Nevertheless, some of these products are acquired from abroad and therefore do not have an effect locally. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Table 8.I. Cruise passenger spending in secondary ports (two thirds of the total) on the Côte d'Azur

Spending * Secondary port Media Customer Average (euros) Nice Villefranche Cannes USA** EU** Russia Per cruise passenger 52 104 119 93 114 57 135 Breakdown: - Sightseeing trips 18 36 62 55 24 - Shopping 24 31 31 28 21 127 - Restaurants 6 15 12 11 7 7 - Others 6 19 11 31 6

(*): updated figures to 2001. (**) USA: United States of America. EU: European Union. Source: Nice Chamber of Commerce.

203 Table 8.II. Cruise passenger spending in base ports (one third of the total) on the Côte d'Azur

Spending * Base port Average Customer Average (euros) Nice Villefranche Cannes **USA EU** Per cruise passenger 135 0 187 158 83 83 Breakdown: - Accommodation 31 - 69 - 72 25 - Restaurants 36 - 48 - 60 28 - Shopping 35 - 55 - 72 18 - Others 27 - 24 - 35 11

(*): updated figures to 2001. **USA: United States. EU: European Union. Source: Nice Chamber of Commerce.

Table 8.III. Cruise ship spending in the Caribbean (in dollars)

Port Passengers (1997) Passengers (1996) Crew (1997) Aruba 65 n/a n/a Bahamas 83 60 91 Barbados 61 73 58 Curaçao 63 80 n/a Grand Cayman n/a 40 77 Key West 41 n/a n/a Montego Bay, Jamaica 57 85 98 Ocho Rios, Jamaica 101 85 98 San Juan 158 64 120 Saint Lucia n/a 46 57 St. Kitts 47 29 57 St. Thomas 225 241 47 Average 124 90 63

Source: Florida Caribbean Cruise Association (FCCA).

Table 8.IV. Cruise passenger spending in Puerto Rico (1960-1998) Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Year Cruise Cruise Spending* Spending numbers passengers (Million of dollars) (Dollars/cruise passenger) 1960 105 45,337 1.5 33 1970 301 136,604 5.9 43 1980 700 505,124 20.3 40 1985 906 866,090 50.3 58 1990 911 890,348 54.4 61 1991 943 1,63,370 56.9 53 1992 850 1,014,490 65.1 64 1994 793 968,112 66.7 69 1995 740 955,105 65.6 69 1996 751 1,045,104 75.4 72 1997 674 1,105,957 84.2 76 1998 701 1,365,622 102.5 75

(*): includes crew member spending. Source: Puerto Rico Ports Authority.

204 400 100 1.000 1.000 ) ) SEC BASE 700 (P Majesty” Romantica” Elizabeth 2” Classica” Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM 50% EU* 50% EU* 50% UK 50% EU* Spending (euros/cruise passenger) 225 - 78 - - - 62 Spending (euros/cruise passenger) - 55 46 46 46 93 - BASE SEC actually in port 790 3.950 7.900 6.350 7.900 17.400 5.500 P SUBTOTAL (B)SUBTOTAL On-land (one third)C. Spending (euros/crew member) ( C )SUBTOTAL 40 33.750 15 30 27.500 1.200 80 63.400 31 1.200 18.400 15 200 6.200 4.600 1.050 70 93.000 46 1.150 62.000 25 24 7.200 300 31 7.750 250 P SUBTOTAL (A)SUBTOTAL On-land cruise passengers 155 4.580 7.960 500 400 (P 15.850 10.300 15.850 31.750 11.100 verage euros able 8.V. Economic return in euros^ by portable 8.V. call on the Côte d'Azur early frequency 22 13 24 25 5 2 25 Source: Nice Chamber of Commerce. "Cruise passenger profile and spending". C. Crew Spending (A+B+C)TOTAL A Per passenger 39.530 36.600 247 85.450 69 29.750 21.600 63 131.950 52 80.850 196 88 62 T PortType BaseShip/Company Secondary Base Secondary Secondary “Star Clipper” Secondary “Ocean Cannes Base “Costa Nice “Saphire” Renaissance Marseille “Queen Ajaccio “Costa Bordeaux Le Havre Point à Pitre (^) figures updated to 2001 and not including supplies. (*) USA: United States EU: European Union, excluding France. Category (star)Y Capacity (berths)Nationality A. Port costs spending B. Passenger 5+ 160 50% USA* 3 80% UK 530 50% France 90% UK 1.350 4 100% USA* 50% USA 570 50% France 3 110 5+ 1.500 1.300 5 4

205 8.2. Forecast of cruise demand in the European Union and in the United States55

As stated in section 6.1, the two basic principles that are used to calculate medium- term European demand are as follows:

- The tourist cruise is just another category within leisure trips as a whole.

- The tourist cruise as a product is undergoing a period of growth, whereby, as supply is created, so there is a corresponding and parallel demand.

The first principle allows a relationship to be established among the main national demands, especially those already defined in section 2.1 (North American, British, German, Italian, French and Spanish). The second principle allows world demand to be calculated. Demand in the main European markets in the medium-term can be deduced by using a combination of the two principles.

When an economic development indicator is established for cruise demand in national markets, what normally happens is that the relationship between the number of cruise trips sold per year and the total population of that specific market in one year "y" for a market "j" are the variables taken into consideration. This is the relationship selected by Ken Trippe (see section 2.1).

A more appropriate indicator would be the relationship between cruise trips sold in a year "y" and the total demand for leisure trips in the middle and high segments for that same year "y" in a given market "j". This would then apply the first principle described. The problem arises when calculating the proposed divisor, as it is a figure that differs from national market to national market. In other words the standard variable is not constant. If we call this divisor removed foreign trip demand (D’), the calculation can

Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM then be made as follows:

D’= DTOTAL – C x DCD (8)

Short distance international trip demand (DSD) and the reductive coefficient (C) take two correcting effects into account when comparing the US with national European markets:

- The geographical size of the source market country: the bigger the source market country, the smaller the percentage of trips abroad.

- The cost of trips abroad: the cruise is competing in the middle to upper segment of international trips.

55 For a fuller analysis please see Manuel Butler's 2002 Doctoral Thesis from the Polytechnic University of Madrid (Universidad Politécnica de Madrid) in Spain, entitled " Economic analysis and opportunities for Spain in the tourist cruise market." 206 In the cases of Germany and the UK, short distance trips abroad (Tsd) are intra- European and of these about half are low cost, comprising the mass-tourism sun and beach package, which is why the reductive coefficient is C = a half.

In the cases of France, Italy and Spain, low-cost short distance packages are less popular, with the sun and beach package almost non-existent, which is why it is reasonable to establish a figure of C = a third.

In the case of the US, as it is so large, no other types of trip should be deducted, and therefore C = 0.

The new indicator that will replace Ken Trippe's indicator will be named "quota of tou- y rist cruise demand in a market "i" in one year "y" (Qi ). Given that the US market is the Y most developed of all, the relationship QUSA will serve as a reference value and if it is taken as a potential value, this will allow the grade of development to be calculated (giy), as defined in chapter 2. The grade of development is therefore seen as the relationship between cruise trip quotas and the corresponding figure for the US, and the closer it gets to this figure, the greater the slow-down in growth.

Previous hypotheses, with no appreciable deviations:

A. The competition of river cruises in Germany has zero effect.

B. No incidence of business activities on local demand.

C. Identifying North American demand with US demand.

D. Regular distribution of demand for the 2001 to 2005 period.

E. The variations in exchange rates and/or bank interest rates for the euro and the Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM pound with regard to the dollar do not have an appreciable effect on cruise trip demand.

F. The variations in GDP of western economies do not substantially affect cruise trip consumption.

On the basis of these hypotheses, and in accordance with the tables below (8.XII to 8.XX), a true calculation can be made to establish development grades and forecasts for the 2001-2005 period, (with supporting data in graph 8.a).

207 Table 8.VI. Source market: United Kingdom. Demand for foreign trips by destination in thousands of cruise passengers

Destination/year 1995 1996 1997 1998 1999 2000* Africa 928 915 1,057 1,074 264 n/a Americas 4,334 4,934 5,639 5,964 5,786 n/a Southern Asia 585 595 627 663 551 n/a Eastern Asia 2.300 2,448 2,538 2,751 2,698 n/a Europe (Deuro 34,919 33,991 36,886 41,632 38,654 38,159 Middle East 618 654 669 641 628 n/a Total (Dtotal) 43,684 43,536 47,417 52,726 48,581 42,501 Removed foreign trip (D’total) 20,405 20,875 22,826 24,971 22,812 23,422 Cruises 340 416 522 631 740 747 QUK 1.67 1.99 2.29 2.53 3.24 3.19

Source: Own study based on data from the WTO and PSA. (*) Provisional data.

Table 8.VII. Source market: France. Demand for foreign trips by destination in thousands of cruise passengers

Destination/year 1995 1996 1997 1998 1999 2000* Africa 1,769 2,038 2,286 2,104 1,366 n/a Americas 2,251 2,466 2,519 2,607 2,648 n/a Southern Asia 162 165 169 182 175 n/a Eastern Asia 1,038 1,037 1,077 1.070 1,037 n/a Europe (Deuro) 14,723 15,333 16,340 17,326 21,383 21,763 Middle East 299 425 453 340 434 n/a Total (Dtotal) 20,242 21,465 22,844 23,628 27,043 26,298 Removed foreign trip (D’total) 15,334 16,354 17,397 17,853 19,915 19,044 Cruises 100 112 126 154 224 266 QF 0.65 0.68 0.72 0.86 1.12 1.40 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Source: Own study based on data from the WTO and PSA. (*) Provisional data.

Table 8.VIII. Source market: Spain. Demand for foreign trips by destination in thousands of cruise passengers

Destination/year 1995 1996 1997 1998 1999 2000* Africa 273 282 318 352 289 n/a Americas 761 900 907 895 960 n/a Southern Asia 40 44 44 43 43 n/a Eastern Asia 130 135 133 141 152 n/a Europe (Deuro) 11,504 10,557 11,239 12,192 11,239 n/a Middle East 52 51 77 62 122 n/a Total (Dtotal) 12,759 11,968 12,718 13,685 12,805 9,401 Removed foreign trip (D’total) 8,924 8,449 8,972 9,621 9,059 9,401 Cruises 24 34 41 52 82 87 QS 0.27 0.40 0.46 0.54 0.91 0.93

Source: Own study based on data from the WTO and PSA. (*) Provisional data.

208 Table 8.IX. Source market: Italy. Demand for foreign trips by destination in thousands of cruise passengers

Destination/year 1995 1996 1997 1998 1999 2000* Africa 536 589 686 658 214 n/a Americas 1,087 1,286 1,373 1,419 1,366 n/a Southern Asia 144 136 144 176 183 n/a Eastern Asia 511 504 517 512 472 n/a Europe (Deuro) 13,348 13,843 14,835 15,363 14,190 n/a Middle East 352 462 509 460 760 n/a Total (Dtotal) 15,979 16,821 18,065 18,588 17,185 11,451 Removed foreign trip (D’total) 11,530 12,207 13,120 13,467 12,455 11,451 Cruises 151 174 200 230 250 273 QI 1.31 1.43 1.52 1.71 2.01 2.38

Source: Own study based on data from the WTO and PSA. (*) Provisional data.

Table 8.X. Source market: Germany. Demand in foreign trips by destination by thousands of cruise passengers

Destination/year 1995 1996 1997 1998 1999 2000* Africa 1,490 1,612 1,751 1,746 328 n/a Americas 3,016 3,546 3,471 3,502 3,540 n/a Southern Asia 298 271 287 299 293 n/a Eastern Asia 1,629 1,675 1,658 1,549 1,468 n/a Europe (Deuro) 67,171 70,741 71,407 71,391 113,260 22,965 Middle East 518 643 621 445 731 n/a Total (Dtotal) 74,123 78,488 79,196 78,932 119,620 27,159 Removed foreign trip (D’total) 29,342 31,327 31,591 31,338 44,113 15,617 Cruises 217 235 283 306 327 380 QG 0.74 0.75 0.90 0.98 0.74 2.42 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Source: Own study based on data from the WTO and DRV. (*) Provisional data.

Table 8.XI. Source market: United States. Demand in foreign trips by destination by thousands of cruise passengers

Destination/year 1995 1996 1997 1998 1999 2000* Africa 378 398 470 460 167 n/a Americas 44,637 46,050 44,924 43,249 40,424 n/a Southern Asia 301 321 345 357 317 n/a Eastern Asia 4,664 4,883 5,078 5,256 5,367 n/a Europe 15,536 16,391 17,871 19,486 13,145 n/a Middle East 409 417 430 449 383 n/a Total (Dtotal= D’total) 65,925 68,460 69,117 69,258 59,804 41,775 Cruises 4,378 4,656 4,864 5,243 5,894 6,880 QUSA 6.64 6.80 7.04 7.57 9.86 16.47

Source: Own study based on data from the WTO and CLIA. (*) Provisional data.

209 Table 8.XII. Demand quota for cruise trips in the main markets

1995 1996 1997 1998 1999 2000 QUK 1.67 1.99 2.29 2.53 3.24 3.19 QI 1.31 1.43 1.52 1.71 2.01 2.38 QS 0.27 0.40 0.46 0.54 0.91 0.93 QG 0.74 0.75 0.90 0.98 0.74 2.42 QF 0.65 0.68 0.72 0.86 1.12 1.40 QUSA 6.64 6.80 7.04 7.57 9.86 16.47

Source: Own study.

Table 8.XIII. Degree of development (gi) of main markets

1995 1996 1997 1998 1999 2000 2001-2004 gUK 0.25 0.29 0.33 0.33 0.33 0.19 0.30 gI 0.20 0.21 0.22 0.23 0.20 0.15 0.18 gS 0.04 0.06 0.07 0.07 0.09 0.06 0.08 gG 0.11 0.11 0.13 0.13 0.08 0.15 0.14 gF 0.10 0.10 0.10 0.11 0.11 0.08 0.11

Source: Own study.

Applying the second defined principle, which takes into account that increase in demand is conditional upon actual supply, and taking the following hypotheses into account:

A. Occupation levels remain constant.

B. The increase in berth numbers is equal to the increase of itineraries sold. Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM

C. The total berths that will enter service in the future are defined in the Order Book, and will be placed in the European and US source markets, with the exception of Star Cruises.

D. The number of berths that will be removed will be equivalent to the number of berths on ships which have been in service for more than 40 years.

E. There will be no further contracts or cancellations in the Order Book.

F. Only the cruise lines described in chapter 3 will be studied.

G. The prices as examined in section 2.4, per day and per person, will remain constant, given that the market is undergoing a phase of growth.

210 Table 8.XIV. Cruise Fleets

Company Capacity (berths) 1.01.2002 Order Book The Big Four Groups* 152,909 66,046 Smaller North American groups 9,728 3,044 European 34,512 4,746 TOTAL 197,149 73,836 World 225,000 n/a

(*) Only NCL and Orient Lines ships included. Source: Own study based on data from Seatrade.

TFUSA+EU = TF4groups – TFStarCruises + TFSmaller cruise lines USA + TFNSmaller cruise lines Europe =

152.909 + 9.728 + 34.512 = 197.149 camas

Table 8.XV. Estimated ships decommissioned between 2001 – 2005

Name of cruise Capacity Year of ship (berths) Construction "Princesa Victoria" 566 1936 "Valtur Prima" 520 1948 "Monterrey" 592 1952 "Stella Solaris" 658 1953 " Topaz" 978 1956 "Princesa Amorosa" 284 1957 "Ausonia" 701 1957 "Albatros" 940 1957 Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM "Emerald" 1,172 1958 "Norway" 2,130 1961 "Apollo" 1,256 1961 Total D 9,797

Source: Own study.

TF2005 = TF2001 – D + OB

Table 8.XVI. Variation in berth supply for the US and European Union

2000 OB D 2005 W x 100 Proposed Forecast 197,149 73,836 9,797 261,188 32.48

Source: Own study.

211 taking into account the following:

AUSA = increase in US demand for the 2001-2005 period. A = increase in world demand for tourist cruises in the same period.

Taking into account that the medium-term growth is inversely proportional to the real quota for cruise demand in a given market, in other words that the market will grow more quickly the less developed it actually is, and that in the medium-term the potential value is equal to that of the US, it can be given that:

Ai = AUSA / Gij

Which is why:

AUSA DUSA + AUK DUK + AD VD + AIDI + AE DE + AF DF =

= (DUSA + DUK + DG + DI + DE + DF) A = 8,633 x 0.3248 = 2,869

6,880 AUSA + 747/0.30 AUSA + 380/0.14 AUSA +273/0.18 AUSA +87/0.08 AUSA +

+266/0.11 AUSA = 2.869

AUSA = 0.1639094

Table 8.XVII. Demand for ocean-going cruises measured in thousands of cruise passengers

Country 1995 1996 1997 1998 1999 2000 1995- 2005d 2001-5d

2000 (%annual)

Aannual United Kingdoma 340 416 522 631 740 747 17,05% 1.155 11,51% Delivered by http://www.e-unwto.org Georgios Drakopoulos (307-99-294) Wednesday, March 02, 2011 3:29:43 AM Germanyc 217 235 283 306 327 380 11,86% 825 21,38% Italya 151 174 200 230 250 273 12,57% 522 17,57% Francea 100 112 126 154 224 266 21,61% 622 25,62% Spaina 24 34 41 52 82 87 29,38% 265 32,14% Otrosa 134 141 185 187 167 200 8,34% - - European Uniona 966 1.112 1.357 1.560 1.790 1.953 15,12% - - United Statesb 4.378 4.656 4.864 5.243 5.894 6.880 9,46% 8.008 3,87%

Source: (a) PSA, (b) CLIA, (c) DRV, (d) own study.

212 9. BIBLIOGRAPHY

(1) Ajamil, Luis (2000), “A holistic approach to destination planning”, Cruise and Ferry Convention, Conference Papers, Geneva.

(2) Antonini, Conrado (2000), Current balance between supply and demand and prospects for future newbuilds, Fincantieri-Cantieri Navali Italiani SpA, Geneva.

(3) Burleson, Belinda (1998), « Le choix d’un port d’escale », Cahier Espaces, Paris.

(4) Butler Halter, Manuel (1999), Colección de productos turísticos: Cruceros, 2nd Edition, Ministerio de Economía y Hacienda, Madrid.

(5) Butler Halter, Manuel (2001), “The Cruise Industry”, Tourism Market Trends, 2001 Edition, World Tourism Organization, Madrid.

(6) Capocaccia, Fabio (1998), “Considerations on the Mediterranean cruise market”, Seatrade Cruise Shipping Convention, Transcript, Miami.

(7) Carlier, Manuel (2000), Los procesos de liberalización en los servicios portuarios, Punto de vista de las empresas navieras, ANAVE, Madrid.

(8) Carnival Corporation (1997-2000), Annual Report, Carnival Corporation, Miami.

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