Independence of the Seas
When theIndependence of the Seas(see Figure 1.7) was introduced in 2008, it was the largest cruise ship afloat. However, as is the nature of cruise trends, this accolade was held for but afleeting moment. When the Independence was introduced, in close order after sister ships Freedom of the SeasandLiberty of the Seas, it marked a time that was seminal for the owning company and for the industry (Brida &
Contemporary cruise operations
Figure 1.7 Independence of the Seas
Zapata, 2009). Royal Caribbean Cruises Ltd (RCCL, the corporation) were making a major move to position Royal Caribbean Interna- tional (RCI, the brand) more centrally in the mass-market world of mega-cruising. RCCL were smaller than Carnival Corporation, but by building larger vessels they were increasing capacity while maintain- ing a smaller portfolio of vessels. At the same time, the Freedom-class ship made use of a novel design to create an interior space of light and scale in the form of a promenade or boulevard not attempted in cruise-ship design before but since developed further in the Oasis class of ships. The ship achieved this space by configuring the exhaust emission funnel to curve around rather than go directly through the middle of the ship (Royal Caribbean International, 2017b).
The ship provides a vast array of choice for the cruise guest and features state-of-the-art theatre productions, a three-deck-high main dining room supplemented by many other venue options for casual or formal dining. The ship also includes a surf simulator and a climbing wall–a signature onboard activity that shows the world what Royal Caribbean brings to cruising in terms of innovation and youthful pursuit (Kwortnik, 2008).
Contemporary cruise operations
A challenge that exists for all ships as they get older is to keep ideas fresh and keep the ship in best condition. This is achieved by regular maintenance and scheduled updating when the ship is taken out of the water for a service in dry dock. Companies like RCCL can then take ideas that have worked in newer ships and, when viable and of value, retrofit them to older vessels (McEleny, 2016). In the case of theIndependence, this means the ship will have new waterslides, trampolines, laser tag and youth entertainment areas added (Royal Caribbean International, 2017b).
The cruise market
The cruise industry is a dynamic and vibrant business. Despite a turbulent and debilitating period of economic downturn in the years since 2008, the industry has remained strong and, if anything, it has demonstrated its capacity to derive benefit from being able to deploy ships according to market opportunity (Parker, 2016). The cruise market is complex with a number of recognisable segments, including age, culture, nationality, language, lifestyle and income, all of which may be influenced by economic wellbeing, politics, and competition from other forms of holiday (Chen, Lijesen, & Nijkamp, 2016; Hung & Petrick, 2010; Shim, Kang, Kim, & Hyun, 2017). Types of cruise vacations can be categorised in simplistic terms as being contemporary, premium, niche/adven- ture or luxury (Bjornsen, 2003; Gibson, 2012; Li & Kwortnik, 2016), as is demon- strated in Table 1.9.
Acquisitions and mergers
The last 20 years have been punctuated by a series of acquisitions and mergers (Bjornsen, 2003; Gibson, 2012; Parker, 2016) that appears to indicate a market subject to constant upheaval and change. This wave of activity slowed down in the period up to 2010 and has resulted in a picture where three cruise companies dominate. Table 1.10 demonstrates some of the most significant examples. More recently, new cruise brands have emerged, such as Viking Cruises, as well as the much heralded announcement by Virgin of the introduction of its new cruise brand Virgin Voyages in 2020.
The current picture reveals that the four largest cruise corporations are Carnival, RCCL, NCL and MSC. These corporations’brands and the number of ships in each brand are given in Tables 1.11–1.14 (as at September 2017).
Carnival is headquartered in Miami and London, RCCL in Miami, NCL in Miami and MSC in Geneva.
Contemporary cruise operations
The largest cruise companies possess considerable purchasing power which gives them an advantage in building new ships and in keeping their fleets refreshed and at the cutting edge of development. New entrants to the industry are however attracted by the growth of the industry and burgeoning popularity of the cruise market. Emerging high-potential markets such as China also create opportunities for new developments. This can lead to competition for space in construction yards because there are only so many yards that have the skills and capacity to build modern cruise ships.
Cruise brands
Cruise company brands, such as P&O Cruises, Royal Caribbean, Costa Cruises, Celebrity Cruises, Princess Cruises, Saga Cruises and Norwegian Cruise Lines, guard their reputations with great care. As Moutinho (2000) states, branding for tourism organisations is perceived to present significant strategic advantages. Thus, a brand name can hold connotations about a corporation or a company or a cruise ship. The brand may be more than a name in that a design or symbol can also be
Table 1.9 Categorisation in the cruise industry
Segment Contemporary Premium Niche/
Adventure
Luxury
Cruise duration
3–7 days 7–14 days 7 days and
upwards
7 days and upwards Ships New, large and
mega
New, medium and large
Small Small and
medium Cruise
lines
AIDA, Carnival, Costa, Disney, NCL, P&O Cruises, Royal Caribbean
Celebrity, Cunard, Dream Cruises, Holland America, Oceania, Princess, Viking
Hurtigruten, National Geographic, Noble Caledonia, Windstar
Crystal, Cunard, Silversea, Seabourn, Regent Itineraries Caribbean,
Mediterranean
Caribbean, Mediterranean, Alaska
Worldwide, Antarctica, Greenland, Asia
Worldwide
Average cost per day (US$) per guest
100–250 200–500 400–1,200 300–600
Less Expensive More Expensive
Source: Bjornsen, 2003; Gibson, 2012; Li & Kwortnik, 2016
Contemporary cruise operations
Table1.10Examplesofmergersandacquisitions Consolidationbymerger,acquisitionorjointventure Year1996–19992000–20032004–20072008–20112012–20152016–2017 CarnivalBuysCosta(inpart)97 BuysCunard98 BuysSeabourn99 BuysCosta00 MergerP&O Princess02 Sells Windstar07 SellsSwan Hellenic07
Jointventurewith ChinaState Shipbuildingand ChinaInvestment Corp16 RCCLMergerCelebrity97Buys Pullmantur 06
Jointventure withTUI09Jointventurewith Chinesetravel companyCtripand SkySea16 NCL/ Prestige Holdings
BuysOceania Cruises07Takes50% controlofNCL 08 BuysRegent Cruises08
NCLbuysPrestige Holdings14 Viking Ocean Cruises
Introducesfirstshipin thefleet15 GentingHKAnnouncesnew brand,Dream Cruises15
Table1.10continued Consolidationbymerger,acquisitionorjointventure Year1996–19992000–20032004–20072008–20112012–20152016–2017 Virgin VoyagesShipbuildingunder- wayforfirstshipsin thefleet17 P&O PrincessBuysAIDA00 Mergerwith Carnival02 Kloster NCL/StarRenamedNCL96 BuysOrientLines99Boughtby StarCruises00Sells50%NCL toApollo08 CunardBoughtbyCarnival98 Chandris/ CelebrityMergerwithRCCL97 CostaBoughtbyCarnival97 EpirotikiFormsRoyalOlympic withSunCruises97 Majorityboughtby LouisCruises98 Source:AdaptedanddevelopedfromBjornsen,2003;Gibson,2012;Parker,2016
Table 1.11 Cruise brands–Carnival
Carnival Corporation Ships
Carnival Cruise Lines 25
Princess Cruises 17
Costa Cruises 15
Holland America Line 14
AIDA 11
P&O Cruises 7
P&O Cruises (Australia) 5
Cunard 5
Seabourn 4
Fathom 1
Total 104
Source: Carnival Corporation, 2017
Table 1.12 Cruise brands–RCCL
Royal Caribbean Cruises Ltd (RCCL) Ships
RCI 25
Celebrity Cruises 12
TUI 5
Pullmantur 4
Azamara 2
SkySea 1
Total 49
Source: Royal Caribbean International, 2017a
Table 1.13 Cruise brands–NCL
Norwegian Cruise Line (NCL) Ships
NCL 16
Oceania Cruises 6
Regent Seven Seas 4
Total 26
Source: NCL Holdings, 2017
selected to represent the brand values. P&O Cruises formerly used a familiar nauticalflag as the brand image, although that was replaced in 2006 with a rising sun motif. In addition, historical events add a recognition factor to some‘famous’ names. Examples include the White Star brand that is utilised by Cunard to identify its standard of service and its staff training (at the White Star Academy).
Cruise ships lend themselves very well to the process of branding. Passen- gers engage with the‘product’or the cruise in a series of complex ways that enhance the opportunity to develop brand loyalty. This is exemplified when reflecting on passenger routines, from the point of booking and considering the glossy images in a cruise brochure, to the point of embarkation when faced with the scale and impressiveness of the ship in port, through to consideration of life on board and then to the departure and disembarkation.
This form of vacation creates a unique relationship between passenger and ship, passenger and cruise, and passenger and brand.
Branding is important in order to target new markets, engender repeat business, highlight brand recognition, define a firm’s strategic approach to marketing and operations and, critically, to establish loyalty (Moutinho, 2000).
Laws (1997) identifies the advantages that are accrued by the major corpora- tions, in terms of resources and marketing strength, which means they can afford to underpin brand development with impactful brand-awareness cam- paigns, focusing in turn on the specific market segment that is deemed to be the target market for specific brand identities.
The economics of cruising
The cruise business is represented by Chin (2008, p. 13) as being engaged in the‘production of pleasure for profits’. While the phrase is arguably an over- distillation of the machinations and drivers that explain the diverse corporate goals as held by business leaders in the cruise industry, it is a neat and somewhat elegant description. Of course, many business types share this goal –to derive profits from people as they enjoy their leisure time–but it is a very modern affair that reflects on a world where increasing numbers of people are sharing in the wealth that is generated as a result of multinational or global free trade and enterprise.
Table 1.14 Cruise brands–MSC
Mediterranean Shipping Company (MSC) Ships
MSC 13
Source: MSC Corporate, 2017
Contemporary cruise operations
In relation to Carnival Corporation and RCCL’s contemporary mass-market brands, Vogel (2009) describes a business model that has, over the years, become more dependent on revenue generated on board, or more accurately, additional sales above that which was paid for the cruise ticket. Typically, additional sales include: cancellation and travel insurance; shore excursions;
bar and beverage sales; casino spend; shops on board; hairdressing, spa and treatments; foreign exchange; supplementary charges on dining; special ser- vices; and entertainment or leisure activity surcharges. Not all business models work this way; for example, Silversea Cruises (2018) levy an all-inclusive charge that covers items such as alcoholic and non-alcoholic beverages, services of a butler, some shore excursions and all meals. Silversea vessels are much smaller than the industry giants, carrying 132–540 guests with a customer to staff ratio of almost 1:1. To achieve profitability Silversea position their business at the ultra-luxury end of the scale and charge accordingly. A seven-day voyage in the Mediterranean in summer 2018 was available at approximately £700 per night. In contrast, a similar seven-day voyage with Thomson Cruises (now called Marella Cruises) was available at £120 per night.
The costs associated with cruising include: the vessel itself (requiring consid- erable capital investment); the crew (labour); fuel and consumables (mostly predictable); and administration (again mainly predictable), and while these will each be examined further in subsequent chapters, it is worth noting that for a typical vessel most costs are known (Vogel, 2009) and can be identified as fixed costs (despite the number of people travelling on the ship, the costs generally remain the same). Variable costs relate mainly to onboard revenues which are entirely a matter for personal deliberation and individual choice.
Ultimately, the lower the costs and the greater the revenue, the more profit- able the company will be.
The cruise business is highly reliant on people, with low ratios of customers to crew generally averaging around 2:1 or 3:1. Therefore, the costs of crewing a vessel are significant–if there are 1,000 crew on board, each ship will also need an additional 500 crew to operate in a 12-month period to cover periods of leave and contracts. This additional crewing figure is referred to as the
‘establishment’ cost and for most cruise operators the figure is generally understood to be 1.5. The larger the ship, the more complex the task of securing sufficient skilled and semi-skilled workers at the right price to ensure the business remains profitable. This task is assisted by the ability of the cruise companies to operate internationally and to reduce operating costs accord- ingly. This will be further examined later in this book.
Summary and conclusion
The cruise industry is both potent and portentous. In many ways the industry reflects strengths that have emerged as a result of the relentless growth Contemporary cruise operations
connected with globalisation. Powerful corporations exist and they have the resources to keep pace with the constant demands that are required when investing in new ships. Countries that benefit from globalisation become wealthier, and as a result large swathes of their populations have increased ability to purchase cruise vacations. Increasingly, sustained growth means there is a greater level of confidence and in turn that there is increased innovation in developing cruise products. Demand coupled with positive publicity appears to create greater demand as the potential cruising popula- tion develops an increasing taste for this type of vacation. The industry also benefits from repeat customers, together with a high degree of loyalty.
This chapter has offered an introduction to the elements of cruising, high- lighting critical factors connected to its current status as a significant and growing part of the tourism and leisurefield. The historical nature of devel- opments has been reflected upon to examine the way that changes have occurred over time and to understand why these changes have come about. A number of cruise brands have been considered to contrast services and styles in the different types of cruises. This allows further discussion to be developed about the cruise brands themselves and to encourage an understanding of the nature of this complex market.
Chapter Review Exercises
1 Develop a definition of cruising that builds on the one presented in the early part of this chapter.
2 Examine Table 1.4 (Top 20 city destinations) and identify which of these destinations can be accessed directly or indirectly by cruise ship.
3 Reflect on Table 1.6 (A history of cruising) and identify specific moments in time in the list that could be considered political, economical, social or technological (or a combination of these).
4 Consider the case studies of thefive cruise ships and reflect on the logic of each ship’s size and scale, mix of facilities and services, and ratio of crew to guests in respect of target markets.
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