Cruise chiefs talk expansion, recession

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Norwegian Encore after float-out from Meyer Werft.

Another year, another non-recession.

How long can this go on?

It has been a decade since the so-called Great Recession bottomed out in June 2009. Since then the U.S. economy has experienced a remarkable 125 months of uninterrupted growth, breaking the 120-month record set by the 1991-2001 expansion.

Ten years of steady climbing has had a predictable effect on cruise sales. According to executives of Royal Caribbean Cruises Ltd. and Norwegian Cruise Line Holdings, which recently reported third-quarter results, things couldn’t be better.

“I can’t stress enough the underlying strength of the business,” Frank Del Rio, CEO of NCLH said in a conference call with analysts.

Despite doing nothing strategically to extend the booking window, it expanded by 10% in the third quarter, Del Rio said, “underscoring consumers’ underlying appetite for cruising on our three brands.”

Cruise lines are at that happy point where, at least in North America, an abundance of bookings is creating scarcity, driving prices higher, and stampeding more consumers to book even earlier to lock-in early booking savings.

All good things come to an end, to be sure, but the chances of them coming to an end in 2020 aren’t that likely.

In its monthly survey of economists for November, the Wall Street Journal found that only 34.2% of economists expect the expansion to end in 2020, with another 29.3% saying it will end in 2021.

One of the main drivers of a classic recession, inflation, is expected to clock in at 1.9% in November, just below the Federal Reserve’s target. The unemployment rate next month is forecast at 3.6%, meaning most of the people who want a job have one, providing fuel for further consumer spending.

Economists used to talk about the Goldilocks economy – not too hot, not too cold – and without much fanfare, we may be in one. But one troubling footnote is that the growth in the current expansion – 25% since 2009 – has been only half as strong as the 42.6% growth in the 1991-2001 period.

“It’s been the slowest recovery in American history,” said RCCL chairman Richard Fain in a talk at Travel Weekly’s CruiseWorld event last week.

Fain said that expansions don’t die of old age; there has to be a trigger, which right now isn’t blindingly obvious to most observers. He said that when the recession does come, the cruise industry will do okay.

He recalled that the Oasis of the Seas, then the biggest cruise ship in the world with a startling capacity for 5,400 guests, was delivered in 2009 when the economy was flat on its back.

“The truth is it did beautifully even in 2009. Oasis was gangbusters, and it was because it met a need,” Fain said.
He added that it was important that Royal Caribbean’s cost-cutting during the last recession didn’t cut from the guest-facing functions.

“Lots of businesses say ‘Oh business is bad, we’re not selling so many shoes, so we’ll cut costs and lay off some people.’ If we fill our ships, we can’t let one customer feel like we’ve cut back in order to make our earnings look better,” Fain said.

“We’re going to continue to function, continue to operate, continue to market because it’s the right thing to do to be in business five years from now,” Fain added. “And everybody in this room will remember what we do.”

Galveston Continues Expansion of Cruise Products

The Liberty of the Seas sails year-round from Galveston

For the Port of Galveston, the major news for 2018 is the continued expansion of cruise products and related services available, according to Interim Port Director Peter Simons.

Carnival Cruise Line is moving the Carnival Vista to Galveston later in the year replacing the Breeze. The Vista will sail alongside the Liberty and the Freedom.

“To accommodate the Vista we are in the process of doing some infrastructure upgrades in Cruise Terminal No. 1,” said Simons.

Last fall, the port also welcomed the Vision of the Seas, and Simons explained that while she was originally intended to be a seasonal product, she is replacing the Enchantment of the Seas on a year-round basis.

“We will have three Carnival and two Royal Caribbean ships year-round, and Disney seasonally from October to January,” he added.

The current scheduling has two ships in port on Saturdays, two on Sundays, one each on Mondays and Thursdays, and Disney on Fridays.

Terminal Expansion

“We have completed the expansion of Cruise Terminal No. 2, and when we did the design for that, we planned for larger ships and more passengers. Both of our terminals are able to handle bigger ships and more capacity,” he said.

“What we are doing though on the channel side is adding mooring structures to accommodate the longer Carnival Vista, and we are also finishing a mooring improvement project at Terminal No. 2 that will enable us to handle even larger ships in the future. We are upgrading the main mooring to be 200-ton bollards – the longer dock will also allow us easier access to the loading doors.

“We are also in the conceptual stage, looking at the designs and options for a third cruise terminal. There is definitely demand to sail from Galveston on weekends and we want to be able to accommodate what we see as future growth in that market.”

Simons said the port is talking to cruise lines about how to fund the new terminal. He said the port’s options were either bank financing or teaming up with a cruise line.

Meanwhile, he is also looking at how to provide the next generation of ships with LNG.

Team Effort

At press time, Galveston projected just short of 1.9 million passengers embarking and disembarking on some 258 sailings for 2017, up from 1.7 million passengers for 2016. For this year, the forecast is for 308 sailings and more than 2 million passengers, according to Simons.

“We see a lot of people coming down a couple of days early for special events, so there is a fair amount of extra local spending in connection with the cruise traffic. The vast majority of the passengers are drive-ups regionally and usually from the lower Midwest, but even as far north as Illinois and South Dakota. The fly-ins are typically from the West Coast.

“There is also a wide variety of things to do both on Galveston Island and in the vicinity that we are working with the cruise lines on for pre- and post-stays,” he added.

Simons, who joined the port in 2012 and was director of operations before being named interim port director, credited the port staff, the longshoremen and the stevedores for Galveston’s growing cruise traffic. He said it was a team effort with very attentive and hard-working people, making the cruise lines feel comfortable here and helping to grow their business.

Royal Caribbean Will Invest $250 Million to Expand Presence in Miami

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Oasis Class and Quantum Class to call Miami Home

Big Thank You To David Block for this story.

Check out David’s Google+ site; https://plus.google.com/u/0/112416669860023952159/posts

Royal Caribbean Cruises has plans to open a new cruise terminal in Miami by 2018, increasing its presence in the U.S. market and giving its giant new-build vessels a potential homeport in South Florida.

Earlier this week, the Miami-Dade county Board of Commissioners signed a legislative resolution which will likely lead to a new home for Royal Caribbean’s ships in the region.

The resolution, obtained by Skift from the Miami-Dade county Board of Commissioners, shows that a long-term lease to accommodate Royal Caribbean’s large new vessels will likely be signed in the next four months.

According to deal, Royal Caribbean will invest more than $100 million to build a new cruise terminal in a ten-acre plot on the north side of PortMiami. Its expected investment over the course of the contract is $250 million.

Royal Caribbean Cruises will introduce eight new ships across its six brands by the end of 2020, including four more gigantic Oasis- and Quantum-class ships.

PortMiami says the deal is a good one for them because Royal Caribbean will bear the brunt of all upfront costs for building the new terminal. The port just completed a costly dredging project to let large cargo and cruise ships access its facilities.

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Port of Miami.

“Although much work remains to determine the cost ranges for various elements of this program, RCL will bear the full cost for constructing the cruise terminal, parking garage, ancillary facilities, and any bulkhead work,” according to the report.

PortMiami expects to earn $9.5 million annual from leasing the land to Royal Caribbean, an increase from the about $1.2 million it currently earns from cargo companies using the land. The initial lease will run for 20 years and will be renewable in ten year increments once the original terms expire.

Royal Caribbean’s biggest vessels now homeport at Port Everglades due to its infrastructure’s support for larger ships, and PortMiami wants the cruise line’s continued business.

“At the time that PortMiami failed to secure the Oasis of the Seas and the Allure of the Seas, the Port did not have facilities capable of hosting these vessels nor did it have suitable expansion plans,” reads the document.

Royal Caribbean can bring in other investors to help finance the new terminal, but will be on the hook for at least 20 percent of the venture when the project is completed.