The Cruise Market in 1998
In a troubled economic world where the financial markets, stock markets
and freight rate markets are experiencing violent and disordered movements, the cruise
industry remains on course: 1998 should be the best year ever recorded, according to the
managers of the major companies.
While all shipping sectors are affected to a greater or lesser extent by
the economic crisis and anxiety is shaking the markets, the cruise sector continues to
prosper and grow, much to the surprise of certain observers, who thought that this sector
might be extremely sensitive to stock market fluctuations.
It is true that the world crisis predicted by certain doom-mongers did
not happen and the economic development of the United States and the European countries
was relatively protected compared to that of some countries, particularly in Asia, which
were very severely affected.
It thus appears that the cruise sector, an integral part ofthe leisure
industry, was relatively little affected, in so far as the leisure and vacation budget in
the developed countries has become a necessary and intangible item,and therefore
relatively insensitive to stock market movements.This is seen even more clearly in Europe,
where the retired population has much less investment in the stock market than in the
United States.
The occupancy rates of the major American cruise companies in 1998
should be practically identical to those of the previous year, at around 105%. The selling
prices per day have increased slightly but, as one of the directors of Carnival remarked,
prices are now at the level of those charged in 1988, the companies progressing by better
productivity and by increasing the ancillary revenues per passenger and per day derived
from the various services offered on board.
This price stabilization is naturally a factor in the concentration
movements observed over the last few years, amongst the cruise companies.
This consolidation continued in 1998, with the purchaseof a highly
symbolic company, Cunard, by the Carnival group and the acquisition of Orient Lines by
Norwegian Cruise Line.
Cunard was sold for a price of $500 million, of which $375 million
in cash, to the Carnival group associated with a Norwegian group. At the time of the
acquisition the intention was to list this company on the Oslo stockexchange, but the
state of the financial markets has delayed this plan for the time being.
With the acquisition of Cunard, Carnival now manages six different
brands, thus offering a complete range of cruise products to its entire customer base.
Some of the Cunard ships have been incorporated into the Seabourn
up-market fleet, Cunard now operating only two ships, the "QE2" and the
"Vistafjord", underits own name, to which a new ship, currently understudy with
the project name "Queen Mary", should be added in the future.
Orient Lines, a company operating one ship, the "MarcoPolo",
20,500 grt, 800 berths, was sold to Norwegian Cruise Line (NCL) for $80 million, mostly
payable in NCL shares.
Certain companies, profiting from the euphoria on the financial markets
at the beginning of 1998, were able to organize their financing either by partial listing
of their capital on the stock exchange - this was the case for Royal Olympic Cruises,
which experienced no difficulty in placing almost 45% of its capital for a sum of
approximately $80 million - or, like Premier Cruise Line, by a successful issue of
high-yield (11.5%) bonds.
During the second half of the year the financial markets slumped, to the
detriment of some companies, such as ResidenSea and NCL, that were not able to implement
their listings in time and had to delay their development projects.
The rate of orders was maintained during the year with a total of 17
firm ship orders:
The Carnival group continues its expansion at an impressive rate, and
placed orders for several ships:
- with Masa, for Costa, an 82,000 grt, 2,100-berth ship for delivery in
Spring 2000, intended for the European market, at a price of approximately $390 million,
to be named "Costa Atlantica";
- with the same yard, for Carnival Cruise Line, three 82,000 grt,
2,100-berth units including two on option, for delivery at the end of 2000, 2001 and 2002,
at a price of $370 million per ship;
- with Fincantieri, for Holland America Line (HAL), one 61,000 grt,
1,380-berth ship, sister to the "Rotterdam", for delivery in Autumn 2000, at a
price of $285 million, followed by the confirmation of two giant vessels of the
"Destiny" class (102,000 grt, 2,760 berths) intended for Carnival Cruise Line,
to be delivered in October 2002 and June 2003 for a price of $450 million per ship;
- two new units were under negotiation for HAL at the end of the year and,
if contracts were signed, would bring the group order book to 13 ships including the
options.
Royal Caribbean International placed firm orders for fours hips,
accompanied by three options:
- with Chantiers de l’Atlantique, two "Millenium" class
ships (85,000 grt, 1,900 berths) for Celebrity Cruises, to be delivered in June 2000 and
January 2001, at a priceof $350 million per ship;
- with Meyer Werft for one "Voyager" class ship (85,000 grt,
2,000 berths) for RCCL at a price of $345 million, for delivery in February 2001;
- with Masa, confirmation of the third "Eagle" class giant
vessel, 142,000 grt, 3,100 berths, for delivery in Spring 2002 for a price of around $500
million.
The Malaysian shipowner Star Cruises confirmed an order negotiated over
a long period with Meyer Werft for two "Libra" class ships (85,000 grt, 2,300
berths), tobe delivered end 2001 and first quarter 2003, at a price of $380 million.
Despite the Asian crisis, this fast-expanding shipowner thus confirms its growth option.
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| With the market reaching greater maturity and the
extension of the range of products, the up-market segment,where activity had remained low
up to now, is strengthening, with new orders for ships of more modest capacity. Carlson, in association with the Vlasov group in Monaco, ordered a 25,000 grt,
490-berth ship, based on an incomplete hull in Russia, from Mariotti, for delivery in
August 1999, to be named "Seven Seas Navigator". The Carlson group has a bold
expansion program and, at the end of the year, concluded a long-expected order with
Chantiers de l’Atlantique for a luxury ship of about 45,000 grt, 720 berths.
Silversea Cruises also confirmed two 25,000 grt, 395-berth ships in
Italy with Mariotti for July 2000 and May2001 deliveries at a price of $150
million each. The hulls will be built by Visentini.
Renaissance Cruises confirmed the order for "R Five"and
"R Six", 30,000 grt, 690 berths, from Chantiers de l’Atlantique for
February and May 2000. These will be sister ships to the preceding vessels in the series
and the order price was $180 million each.
As 1998 drew to a close, the firm order book contained a total of 36
ships under construction, representing approximately 63,000 berths, giving the prospect of
an increase of more than 10% per year in North American capacity over the next three
years.
Twelve ships were delivered during the year, including the
much-anticipated "Disney Magic", delivered to Disney Cruise Lines by
Fincantieri.
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Disney Magic 83,338 gt, 2,400 passengers,
blt 1998 by Fincantieri,
owned by Walt Disney Company© |
The newcomers to the market in 1998 were:
- "Elation": 70,000 grt, 2,040 berths, delivered by Kvaerner Masa
to Carnival Cruise Line,
- "Vision of the Seas": 72,000 grt, 2,014 berths, delivered by
Chantiers de l’Atlantique to RCCL,
- "Pacific Venus": 26,000 grt, 720 berths, delivered by IHI to
Japan Cruise Line,
- "Deutschland": 22,000 grt, 650 berths, delivered by HDW to
Peter Deilmann,
- "Grand Princess": 109,000 grt, 2,600 berths, delivered by
Fincantieri to P&O,
- "Disney Magic": 85,000 grt, 2,400 berths, delivered by
Fincantieri to Disney Cruise Lines,
- "R One" and "R Two": 30,200 grt, 690 berths,
delivered by Chantiers de l’Atlantique to Renaissance Cruises,
- "Superstar Leo": 75,000 grt, 2,300 berths, delivered by Meyer
Werft to Star Cruises,
- "Paradise": 70,000 grt, 2,040 berths, delivered by Kvaerner
Masa to Carnival Cruise Line,
- "Le Levant": 3,000 grt, 95 berths, delivered by Alstom Leroux
Naval to Compagnie des Iles du Ponant,
- "Sea Princess": 77,000 grt, 1,950 berths, delivered by
Fincantieri to Princess Cruises.
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| Contrasting with the activity observed in the newbuilding
market, the second-hand market was relatively calm, with a volume of activity (in number
of ships) down by half compared with the previous year. The event
of the year was the establishment of a new Korean cruise company, under the aegis of the
Hyundai group, whichis opening a symbolic line between South Korea and North Korea to
visit Mount Kumgang, so dear to the hearts of the Koreans. Let us hope that this line
forms the basis of a more open relationship between the two countries. Hyundai has
chartered two ships for four years: the "Superstar Sagittarius",ex-"Sun
Viking" (built in 1972, 18,450 grt, 728 berths), which was purchased for $33.5
million by a Norwegian financial company, and the "Superstar Capricorn" (built
in 1973,28,380 grt, 1,022 berths), owned by Star Cruises.
Among the other sales, that of the two ships of the Indonesian company
Awani - which therefore terminates its brief excursion into cruising - is worth noting:
"Awani Dream I" (built in1966, 11,430 grt, 608 berths) for $14 million and
"Awani Dream II" (built in 1975, 16,800 grt, 800 berths) for $32 million to
Royal Olympic Cruises. These ships have been renamed "World Renaissance" and
"Olympic Countess", respectively.
Royal Olympic Cruises in turn sold the "Olympic" (built
in 1956, 31,480 grt, 950 berths), renamed "The Topaz", to Greek interests for
$17 million.
Airtours - Sun Cruises purchased the "Song of America"(built
in 1982, 37,580 grt, 1,414 berths) from Royal Caribbean International at a price of $94.5
million with a back charter until March 1999.
The Italian veteran "Ausonia", built in 1957 (12,600 grt,750
berths), was sold to Louis Cruises in Cyprus for around $5.5 million.
The second-hand market is becoming increasingly selective.This is no
doubt a consequence of the consolidations which are reducing the number of players in this
market to groups of companies giving priority to the building of new ships, but also of
the Asian crisis which has affected a region that showed high transaction activity in
1997. The capacity and the age of the ships are becoming the basic criteria of choice for
the buyers.
At the end of 1998 the cruise ship fleet comprised approximately 225
ships, 122 of which, representing approximately 123,000 berths, were positioned on the
American market (representing an average of 1,000 berths per ship) while 84 ships-about
51,000 berths (an average of 600 berths per ship)-were more particularly assigned to the
European market.
The total capacity of the fleet in terms of the number of passengers
carried annually is estimated at about 8.4 million, including nearly 6.5 million in the
United States, 1.4 million in Europe and 500,000 in Asia. In 1998, 5.3 million Americans
went on a cruise, generating an overall turnover of 11 billion dollars.
For 15 years the market has grown at an annual rate of almost 8%,
leading to predictions of at least 6.2 million cruise passengers in the American market in
2000.
The European market continued its growth at a higher rate than that of
the American market, while the Asian market stagnated as a consequence of the regional
economic crisis.
In Europe, the market has shown rapid growth only for a few years, but
the estimates for 1998 are for 1.4 million passengers, generating an overall turnover of
about 2.5 billion dollars.
Two million European passengers are expected in 2000; the growth in this
market, like that of the American market, should be boosted by the arrival of new ships
built specifically for European tastes (P&O, Costa, Festival, Hapag-Lloyd, etc.) and
by the new interest shown by the powerful European tour operators in cruise packages.
There is considerable growth potential in Europe, when it is considered
that no form of leisure or type of hotel accommodation that has been successful in the
United States has not become established in Europe little by little, albeit with some
adaptations.
Certain handicaps will have to be overcome, such as multilingualism,
eating habits, the winter climate, but Europe also concentrates the richest population of
the planet, with the longest paid holidays and never located more than a one-hour air
journey from a port.
Furthermore, the introduction of the single currency should also
contribute to the expansion of this market through simplified management of costs, tariffs
and revenues.
The European fleet, too old and too fragmented, must be modernized,
restructured and certainly consolidated on the American model over the new few years in
order to be able to offer the services expected by an increasingly informed clientele.
Homogeneous growth depends on this development, ensuring full employment
of the new ships and, above all, of the European shipyards specialized in the construction
of cruise ships.
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Shipping and Shipbuilding Markets 1999
I N D E X
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- Via Raffaele Paolucci 17r/19r - 16129 Gênes - ITALIE
