Cruise CEOs say ship renovations key to maximizing revenue

Cruise CEOs say ship renovations key to maximizing revenue

Enchantment of the Seas

FORT LAUDERDALE — The cruise industry will increasingly emphasize growth in revenue yields rather than the number of cabins and ships it is adding, according to the CEOs of its top companies.

Four chief executives spoke together on a panel at the annual Seatrade Cruise Global convention, held for the first time this year at the Broward County Convention Center.

“You’re going to see a more balanced approach to building new ships,” said Frank Del Rio, CEO of Norwegian Cruise Line Holdings. More dollars will flow toward maintaining the existing fleet at the highest level so that higher prices can be supported fleetwide, he said.

“We have no choice,” chimed in Arnold Donald, CEO of Carnival Corp. “The fastest we can grow is at about 6% a year, even with the largest ships. And there’s only so many shipyards.”

Donald said investors in any of the companies represented on the panel would not be satisfied with a 6% return on investment. So attention is turning to investing more in existing ships to bring up yields and to introduce innovations that customers will pay extra for.

In sheer numbers, Carnival’s fleet has already plateaued. Since mid-2011, Carnival Corp. has added only one net ship to its 101-ship fleet, according to a presentation by Giora Israel, Carnival’s senior vice president of global port and destination development. But in that timeframe, it has added 32,000 berths because bigger new ships are taking the place of smaller old ones.

Arnold pointed out that new ships on order are increasingly split between China and other markets, which means growth from North America could only be 2-3% a year if it had to depend solely on new capacity.

On another topic, the CEO panel agreed that cruises to Cuba, while of high interest, await approvals from the Cuban government.  And they said the infrastructure to support cruise tourism is lacking for anything larger than mid-sized ships.

MSC Cruises, which is privately owned and headquartered in Geneva, is currently the only major cruise company sailing in Cuba. Pierfrancesco Vago, executive chairman of MSC Cruises, said that when its 2,150-passenger MSC Opera ship docks in Havana, the 275-meter ship (about 902 feet) overhangs the end of the pier by about 80 meters (about 262 feet).

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