Cruise lines brace for a downturn as presidential election looms

Photo Credit: Elnur/Shutterstock

With less than a year to go until the 2020 presidential election, travel suppliers and sellers are bracing for the slowdown that typically accompanies an election year’s commotion and distractions.

Every four years, sales run into headwinds as politicians and interest groups load up on ad time and consumers, especially in battleground states, are besieged with debates about the fate of the nation. 

And this time, the quadrennial cycle could be a doozy, as impeachment proceedings run parallel to the election campaign.

“It will be a very interesting Wave season, for sure,” said John Chernesky, senior vice president for North American sales and trade marketing at Princess Cruises. 

Chernesky said Princess is taking steps to mitigate the anticipated pause in bookings momentum that has built up this year.

“I think at Princess we’re seeing a good forward booking curve going into 2020, but we’re not oblivious to the fact that, historically, there has been a business downturn in the election years,” Chernesky said. “So we’re trying to work with our trade partners as best we can to essentially base-load as much as possible into the [coming] year. 

“We know the marketing spend next year is going to be less effective than this year, because there’s going to be so many distractions,” Chernesky said.

In 2016, presidential candidates Donald Trump and Hillary Clinton spent $1.8 billion on the election, much of it for television ads, some of the same news, public affairs and sports programming favoured by cruise lines.

Eva Jenner, vice president of sales at Holland America Line (HAL), said what’s true for Princess and HAL is true industrywide.

“We all are aiming at the same goal of base-loading and having a further [out] booking window than ever before,” she said.

For agents, that means that some of the best pricing for 2020 is available now when consumer receptivity to the cruise line marketing message hasn’t yet become blocked by political static.

“If nothing more, it might be a great year for consumers,” said Michelle Fee, president of Coral Springs, Fla.-based Cruise Planners. “It’s the travel advisor’s job to let the consumer know, ‘Hey, this is a great deal. You might not see this next year.’ So we need to continue to be in the marketplace and get the word out.”\

Although travel advisors have been aware of it for years, the presidential election-year slump in sales was documented in research by the Virtuoso travel network that it released at its Las Vegas conference in August.

Virtuoso found that U.S. travel sales grew an average of 14.3% in a year before a presidential election, but only an average of 2.9% in the year of an election. In 2016, sales actually fell 0.2%, after growing 15.4% the year before.

One reason for the slump, according to some, is the reluctance of consumers to make big-purchase decisions while economic uncertainty hangs in the air. Some support for that theory comes from data on auto and home sales.

Meyers Research, a real estate data firm, examined the past 13 presidential elections and found that home-sales activity dropped 15% in the November of an election year, versus 8% in the same month a year later.

And a 2016 study for Dealer.com, a site for car shoppers, found shopping behavior dropped 9% year over year in the months going into a presidential election in battleground states where no one candidate was a clear favourite.

James Grace, then director of analytics product management at the site, attributed some of the slumps to a spike in the cost of digital advertising, leading to fewer car ads and diminished shopping.

Sheer uncertainty could also factor into the presidential election-year slump. For example, travel sales in the U.K. have sputtered this year as the government has repeatedly tried and failed to resolve the terms of its exit from the EU.

But Fee said the daily combat between Trump and Democrats might have already caused consumers to tune out.

“If you look back historically, there are things that happened that used to shut our business down,” Fee said. “If something would happen in Europe, it was six months before people would travel there.” 

Not anymore, Fee said. “Today, we’re numb to all of it, so they might be numb to the presidential election, too.”

Fee is telling Cruise Planners agents to stay positive and stick to business. 

“I feel like we need to focus on people who we know travel through it all and who might be celebrating some kind of milestone,” she said.

With newly developed analytics, agency groups such as Cruise Planners can find prospects celebrating a 25th wedding anniversary or a 60th birthday, for example. 

“They’re not going to wait until next year to go because of an election year,” Fee said.

Another positive for agents that could help offset the election-year drag is a tsunami of new cruise ships. Twenty-one vessels are set to debut in 2020, including first vessels from new lines such as Virgin Voyages and the Ritz-Carlton Yacht Collection as well as the first ship with a roller coaster being rolled out by Carnival Cruise Line.

Doug Seagle, Seabourn’s vice president of business development, said, “A good counter to everything that’s going on in the world is that there’s a lot of new product out there. New product raises consumer awareness and creates excitement. Our travel partners want to get that message out there so that it counters the negativity in the marketplace.”

Carnival’s environmental hurdles detailed in court documents

The world’s largest cruise company, Carnival Corp. faces a herculean task in eliminating single-use plastics from its ships, a mission that has taken on increased urgency in recent months.

The plastics challenge was underscored by the disclosure in federal court that Carnival brands last year bought some 239 million single-use plastic items, including some 50 million plastic beverage bottles.

Other purchases by Carnival include 67 million plastic straws, more than 39 million plastic bags, 16 million plastic cups and 11 million individual amenity bottles.

Those numbers were disclosed in a filing submitted as part of a court hearing on Carnival Corp.’s ongoing probation for a 2016 conviction of its Princess Cruises brand on environmental charges.

Prosecutors are concerned about the final destination of all of that plastic, a major focus of the government’s post-trial scrutiny.

They are also pressing Carnival to speed up what prosecutors say has been an unhurried approach to tackling plastic waste.

Throughout the cruise industry, companies are adopting new approaches to plastics because the stuff has the potential to wind up as indigestible food for marine life and nondegradable litter in the ocean.

Lines with smaller fleets and fewer brands than Carnival have been able to act quickly. For example, Lindblad Expeditions-National Geographic in July declared itself free of single-use plastics.

Carnival has set a target of a 50% reduction in single-use plastics on its ships by the end of 2021.

Plastics reduction is one of several initiatives the government added to Carnival’s responsibilities in an environmental-compliance program as part of a June settlement of charges that the cruise company had violated its probation conditions.

Carnival’s size and corporate structure make it hard to get an effort as big as plastics-removal going quickly. 

A monitor appointed to help the court, Washington lawyer Steven Solow, said in his first annual report that Carnival’s 10 brands function more like an association of companies than an integrated corporation. That was not a secret, of course. The brands have long celebrated their relative management independence.

Still, Carnival Corp. management, he said, could be bringing more to the table. 

“The company is not listening to what their own people are asking for,” Solow said.

Improving the corporate culture to make compliance with environmental laws a priority has been a major emphasis for Solow, a partner at the Baker Botts law firm in Houston who leads a team of lawyers with environmental and Department of Justice backgrounds.

Solow, whose job was created as a condition of Carnival’s probation, commissioned a study of the compliance culture at Carnival Corp. by Propel Sayfr AS, a Norwegian safety consulting firm with a speciality in “culture development.” 

The survey found Carnival’s compliance culture was “less mature” than 73% of other companies in the maritime and similar industries.

At a status conference on the case, Carnival Corp. chairman Micky Arison said the company was disappointed with the results of the survey. 

“Obviously, we have to improve,” he said. “We take the culture survey seriously.”

A Justice Department lawyer who prosecuted Princess for dumping oily water overboard in 2016 expressed some doubts.

“There are some signs we have a continuing problem,” said Richard Udell, a senior litigation counsel with the department’s environmental crimes section.

As an example, Udell said that Carnival ignored his request to tally the number of plastic bottles it uses each year. The company argued that since most of them are recycled anyway it didn’t matter. Udell said Carnival recycles some bottles in countries with “minimal infrastructure” and allows contractors to self-certify that the bottles were recycled.

“How do we know they’re recycled and not thrown back in the ocean or sent to a landfill?” Udell asked.

Vice Admiral William Burke, Carnival’s chief maritime officer, said at the status conference, “The reason I have a pretty good sense they’re getting recycled is that we’re getting paid for them.”

Udell said Carnival had not previously disclosed that and requested data about the prices Carnival receives.

Burke said he didn’t think beverage bottles were slipping through Carnival’s waste management machinery to end up in the ocean. 

“The stuff we’re having trouble with is the small stuff, the toothpicks and straws that are hard to find,” he said.

Carnival’s inability to sort plastic out of food waste before it was discharged overboard was one of the problems that led to a $20 million fine in June as part of its Probation Revocation Settlement Agreement.

Carnival is now two and a half years into its five-year probationary period, which is scheduled to end on April 2022. Some worry that it will reach that milestone without having put in place a sustainable compliance culture.

“Without the leadership saying this is imperative, that is the concern,” said Solow, whose team is paid by Carnival and whose budget for the first year of oversight is $6 million to $7 million, according to court filings.

U.S. District Court Judge Patricia Seitz said she had hoped that the 2016 probation oversight would have been much smoother at this point than it has proven to be.

“I feel like I keep pushing the rock up the hill, and it keeps rolling down on me,” Seitz said. “And we’re not going anyplace.”

She also expressed impatience at the continued problems with pollution but said Carnival has shown in the past it can improve its culture, particularly in the safety area.

“Looking at that, it gives me hope for this company,” Seitz said. “I believe it can be best in its class, but I keep seeing repeated incidents.”

Arison said Carnival had hired additional consultants.

“I think we’ve hired experts now that will, I hope, get to the bottom of things,” he said.

Arison on Carnival Corp.’s post-Concordia changes

Image result for costa concordia

There was some interesting back-and-forth last week in federal court between Carnival Corp. chairman Micky Arison and U.S. District Court Judge Patricia Seitz that started out predictably but veered into unexpected territory.

Arison had been summoned to a status conference in the ongoing probation proceedings that Carnival is involved in as a result of Princess Cruises pleading guilty to environmental crimes in 2016.

Seitz was there to hold Carnival’s feet to the fire, in a bid to stop continuing violations of environmental laws that have put her in a position of having to harangue Carnival about the problems.

Then she took a less confrontational tack.

“What do you love about being in your business, Mr Arison?”

Arison, one of the few people in a room full of lawyers and consultants who have actually worked on a cruise ship, recounted his 50-year career at Carnival, which included 32 years as its CEO.

“I’m very proud of what we’ve accomplished,” Arison said. “Obviously we wouldn’t be here if we were perfect.”

Seitz then expressed her admiration for how Carnival reformed some of its processes after the sinking of the Costa Concordia on Jan. 13, 2012.

“That was the worst day of my life,” Arison admitted in a hoarse voice.

Arison told Seitz that the Concordia illustrates some of the unique dilemmas in the cruise business that are not always understood by those outside the industry. As an example, he said, Carnival Corp. trains its bridge officers to work as a team. But the Italian Coast Guard, which trains Carnival’s Italian officer corps, had a different approach.

That meant that creating a uniform safety culture across Carnival’s 10 brands was hard to achieve.

“The Italian rules at that time were archaic,” Arison said. “The captain was the master. Other team members [on the bridge] could not question the captain.” Arison said Carnival lobbied hard with the Italian government to change the rules, but only after the Concordia accident were the changes made.

Seitz also had praise for the Arison Maritime Center, which Carnival opened in 2016 in Almere, the Netherlands. There, the company trains 6,500 bridge and engineering officers annually, in state-of-the-art simulators. That also gives the company a roadmap for change, she said.

Arison said that his family — and himself personally — was proud of having created the training centre. “We never put our name on a building in Miami,” he added, despite plenty of offers. “That was one building we were proud to put our name on.”