Cruise companies reducing Mediterranean presence

Ongoing instability in the Mediterranean region is prompting cruise companies to trim capacity there, with the latest example coming from Celebrity Cruises, for summer 2017.

Celebrity said it will keep the 2,850-passenger Celebrity Equinox in Miami next spring after it completes its winter cruise schedule, instead of returning to the Mediterranean, where this summer it will operate cruises out of Athens and Barcelona.

The move will draw down Celebrity’s Europe deployment next summer from five ships to four and give it a year-round ship in the Caribbean for the first time since 2010.

Other companies also plan to move capacity out of the Mediterranean and into the Caribbean.

Carnival Corp. in a June 28 conference call said it expected a 10% capacity reduction in the Mediterranean region next year, and a 5% increase in Caribbean capacity.

“We are rebalancing our portfolio to optimize the current demand environment,” Carnival Corp. CEO Arnold Donald said.

The moves come as the Mediterranean was again rocked, this time by a failed coup attempt in Turkey and the truck massacre in Nice, the third major terrorist attack in France in the past nine months.

Cruise lines had already largely stopped calling in Istanbul after a series of terrorist attacks there this year. After the coup, many cruise lines also suspended calls elsewhere in Turkey, such as Kusadasi.

Most are in a wait-and-see mode, such as Carnival Cruise Line, which replaced the Carnival Vista’s calls in Kusadasi on July 17 and 20 with sea days and said it will evaluate future calls there “in the coming days.”

Some travel agents said client demand for Europe remains healthy.

“For us, our European business is still very strong,” said Jeffrey Bateman, vice president of operations at Crown Cruise Vacations in Princeton, N.J.

Bateman said most of his clients on Equinox cruises that had been scheduled for Europe next summer had rebooked other Celebrity European cruises.

Prices have been softening for Europe, according to a survey by SunTrust Robinson Humphrey analyst Patrick Scholes, who said advertised prices for cruises in southern Europe in June fell 1.3% year over year, compared to a 7.4% increase in May.

Frank Del Rio, CEO of Norwegian Cruise Line Holdings, said cruise lines remain reluctant to drop Europe in the summer.

“Analysts ask me, why don’t you put the ship in the Caribbean in the summer instead?” he said. “Well, because even a bad year in Europe is better than a good year in the Caribbean, especially in the summer.”

In 2014, a mass migration of ships from Europe to the Caribbean led to a pricing bloodbath. Donald said that’s unlikely in 2017, when Carnival’s expected Caribbean capacity growth will be 5%. In 2014, it was 20%.

The Equinox will add to the overall capacity in the Caribbean, but several travel agents liked having more itinerary options for Celebrity in the summer.

“I view the year-round vessels in the Caribbean as a plus,” said Valerie Harris, a CruiseOne franchisee in Atlanta. “They lend a hand with creating and maintaining a cruise line’s presence in the region, which in turn may establish brand loyalty.”

10 Years: How 9/11 changed travel

10 Years: How 9/11 changed travel

By Bill Poling

More 9/11 coverage

• Memorial caps New York’s decade of reinvention
There are two parts to the New York recovery story: The first is the rebirth of lower Manhattan. The second is the way the entire city remade itself.

• Industry recollects, assesses new reality
Read executives’ thoughts on how the travel industry has changed in the 10 years since 9/11, and share your own.

• From the Window Seat: Sept. 11, 2000; Sept. 11, 2002
Comparing stories written a year before and a year after 9/11 reveals its impact.

Ten years ago, when terrorists flew hijacked airliners into the World Trade Center’s Twin Towers and the Pentagon, most of us said, thought or heard the phrase, “This changes everything.”

Left unspoken was the realization that this wasn’t ordinary change. It was momentous and cataclysmic. Spoken aloud, the emphasis was never on “changes.” It was on “everything.”

But at various points during the last decade, many of us came to realize that not everything changed.

Moreover, not everything that changed after 9/11 changed because of 9/11. This is a lesson the human race in general and Americans in particular must learn after every transforming event, including the Bomb, Sputnik, the Kennedy assassination, wars and natural disasters. The agents of change are legion.

Al-Qaida did not and could not “change everything.”

As early as September 2002, just a year after the attacks, the Congressional Research Service, in a report to Congress, concluded that in terms of the broad national economy, “9/11 is more appropriately viewed as a human tragedy than as an economic calamity.”

As numerous economists have pointed out in the years since, the overall economy showed remarkable resilience. Gross domestic product growth was slowed only temporarily, and while the Dow Jones Industrial Average lost nearly 700 points when the stock market reopened after the attacks, it gained 5,000 points over the next six years, reaching its all-time high in October 2007 when it topped the 14,000 mark.

The events of 9/11 can hardly be blamed for what happened next.

The Government Accountability Office forewarned in a 2002 report, “As the attacks become more distant in time, it may be less easy to disentangle their economic effects from other events that would have occurred anyway.”

But the conventional wisdom about the national economy doesn’t apply to every segment of the economy. For the travel industry, and most particularly the airline industry, the economic impact has been far more severe and more pervasive.

In August 2001, the month just prior to the attacks, U.S. airlines boarded 56.3 million passengers for domestic service, a number that plummeted to just 30 million in September. And for two anxious days after the attacks, the passenger count was zero. It would take three years for carriers to once again reach the 56 million mark.

In 2001, the U.S. airline industry had just enjoyed six consecutive years of profitability, their best streak since the 1960s. But they were about to lose money in seven of the next 10 years, ultimately racking up $74 billion in losses between 2001 and 2010. The three profitable years of that decade would offset that cumulative loss by only $30 billion.

WTC GROUND ZEROOf course, the airlines were buffeted by many forces, including general economic conditions, spikes in fuel prices and slumps in demand caused by war, epidemics and natural disasters.

Some of these were indirect effects of 9/11; some were not. More certain is that two lingering effects of 9/11 have stayed with the airlines and, by extension, with the broader travel industry: the “hassle factor” and the diversion of resources. And they remain with us today.

The hassle factor is obvious. Escalating airport security procedures have added time, inconvenience and anxiety for passengers while complicating airline and airport operations and adding to their costs. As a result, the cost-benefit equation for short-haul travel became seriously skewed, and many air travelers rediscovered Amtrak, the interstate highways and the bus.

But the hassle factor is merely one facet of a larger problem that the Congressional Research Service identified in its 2002 report when it asserted that “the lasting economic effect of 9/11” would actually be the economic effect of our response: “Large amounts of resources are and will be committed to making production, distribution, finance and communication more secure in the United States. Resources that could have been used to enhance the productive capacity of the country will now be used for security.”

That is clearly true of travel. A dollar spent for security, even if it is well-spent, has to come from somewhere. And if it is spent on security, then it can’t be spent on anything else.

But it is not only dollars that were diverted by our response to 9/11. Our energies and political priorities shifted.

We went to war in Iraq and Afghanistan, and the long-term impact of these military ventures might well overshadow the direct economic effects of the 9/11 attacks themselves.

To the chagrin of the inbound travel industry, government programs designed to attract visitors took a back seat to those designed to detain and inspect.

At last, after 10 years that the U.S. Travel Association termed a “lost decade,” these trend lines are finally turning. Even before the assault on Osama bin Laden’s hideout, a consensus had emerged to wind down our military presence in the Middle East.

And the passage of the Travel Promotion Act and the creation of the Corporation for Travel Promotion signaled a new recognition by the government of the value of welcoming and accommodating international visitors.

As for the hassle factor, airport security screening will never end, but the Transportation Security Administration, itself a creature of 9/11, has begun to introduce a risk-based assessment of “trusted travelers.”

Air travel might never be the same, but the economic effects of the 9/11 attacks have faded, and the political effects will diminish, as well. What makes that day a day of “human tragedy” is that personal memories will outlast them all.