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 Travel & Outdoors | April 2006 
In Wake of Problems, Cruise Ships Cut Prices
 Avery Johnson - Wall Street Journal
| | One passenger died and 11 were hurt when fire broke out on the passenger decks of the Princess Cruises ship last month as the vessel sailed from the Cayman Islands to Jamaica. (Reuters) |
A spate of high-profile problems on the high seas, hurricane fears and weak demand for Caribbean sailings are leading cruise companies to offer fire-sale discounts in an effort to lure leery consumers aboard.
The problems are combining to make this the most challenging cruise season for the industry since 2003, when Iraq war fears and post-9/11 woes hurt bookings. The bulk of the issues are occurring in the Caribbean, the most popular cruise destination and where most first-time cruisers tend to sail. The busy port in Cozumel, Mexico, for example, continues to be under repair after being severely damaged by Hurricane Wilma last fall. Travel agents also say that memories of last year's brutal hurricane season are dissuading some would-be cruisers. And some travelers have been spooked by concerns about cruise safety. A number of recent onboard incidents — including a passenger disappearance and a pirate attack — have sparked a congressional inquiry and increased the likelihood of new legislation or regulatory oversight to help protect passengers.
Some of these factors are contributing to a slowdown in industry growth: This year the increase in North American passengers is expected to be 4.5% compared with almost two decades of growth that has averaged over 8% increases per year. Some analysts are downgrading their forecasts for major cruise companies, after Carnival Corp. reported fiscal first-quarter earnings late last month that showed signs of a slower Caribbean "wave season," the first months of the year when the cruise industry has traditionally sold the majority of its sailings.
To spur demand, cruise companies are now cutting prices, mainly for Caribbean sailings from now to the fall. Royal Caribbean Cruises, for example, is offering a deal on a number of Bahamas, Mexico and Caribbean trips in which the third and fourth cruisers can sail for $99. Carnival has a seven-night eastern Caribbean trip beginning on Aug. 26 with prices starting at $529. (Sailings later in the season go for around $749.) Norwegian Cruise Line, part of Star Cruises of Malaysia, has a Western Caribbean cruise for $439 per person for seven nights out of Houston on Oct. 21, which is about $100 lower than normal.
Other factors are also contributing to the lower prices: Travel agents say that Royal Caribbean's new mega-ship, Freedom of the Seas, is diverting some bookings from other cruises. When it makes its debut in May, Freedom of the Seas will be the largest cruise ship in the world, at 160,000 tons and with capacity for 3,600 passengers. (The ship will boast an adults only "solarium" with cantilevered whirlpools and a 1,215-square foot presidential suite.) Also, a warm winter in the Northeast is damping demand from sun-seekers.
There has been a broad array of bizarre cruise-ship incidents recently. Last summer, George Smith of Greenwich, Conn., disappeared from a Royal Caribbean ship in the Mediterranean while on his honeymoon. In November, pirates attacked a vessel run by Carnival's Seabourn Cruise Line off Somalia. In the past couple of weeks, a fire killed one passenger on a Princess Cruises ship near Jamaica, 12 cruise passengers on a bus excursion crashed and died in Chile, and incidents of a stomach virus broke out on a number of different ships.
In January, a group was formed called International Cruise Victims, which is composed of alleged victims of cruise-line crimes and of victims' families and friends. Rep. Christopher Shays (R., Conn.) convened a hearing in December to look into cruise safety in the House Subcommittee on National Security, Emerging Threats, and International Relations. A second hearing was held on March 7. Now, Mr. Shays says he's looking at the recommendations submitted at that second hearing by International Cruise Victims.
Still, cruise-industry officials point to a solid safety record. Fifteen cruise lines reported that from 2003 to 2005, 206 passengers or crew submitted complaints. There were 178 reports of sexual assault, 24 missing travelers and four robberies. That's during a time when the industry carried more than 30 million passengers, according to the International Council of Cruise Lines, an industry group.
Nonetheless, Michael Crye, the group's president, is actively taking measures to assuage critics. Last month he met with the Bahamian Maritime Authority (many of the major cruise ships are registered in the Bahamas) in order to work toward a bilateral treaty that would ease the way for the U.S. government to take action if an incident occurs on a Bahamian-flagged vessel. (Investigating crimes that occur on board cruise ships is sometimes complicated by factors including where the ship is based, where it is sailing and the nationality of the crew and passengers.) His group is reaching out to the Federal Bureau of Investigation and the U.S. Coast Guard to put together a memorandum of agreement about how to handle any future alleged crimes.
Safety concerns are putting off even some veteran cruisers. Debra Werner, a 39-year-old from Paramus, N.J., who has taken five cruises, says: "I am thinking of cruising again but am leery. I would love to do a Mediterranean cruise but am concerned for my safety." She's a former corrections officer and adds that, "I have dealt with murderers, rapists, and armed robbers and the stuff on cruises still bothers me."
Some of the deals are on the newest ships, and not just in small inside cabins with no view. Carnival, for example, has rates starting at $499 for seven-night trips beginning Sept. 24 on its Carnival Conquest ship, the first of its largest class of ships, which made its debut in 2002. About 40% of cruises take place in the Caribbean vs. 12% for the second-highest destination, the Mediterranean, according to the Cruise Lines International Association.
In the Caribbean, on trips for less than seven days, A.G. Edwards & Sons Inc. Equity Research found in a March 21 report that May and June prices for Carnival cruises have dropped by percentages in the single digits per day and Royal Caribbean is down by low double-digit percentages. For trips longer than seven days in the Caribbean in August and September, Carnival prices are down by mid-single-digit percentages and Royal Caribbean prices have dropped by percentages in the low teens.
Deals to other destinations are harder to come by because demand for Europe, Alaska and Hawaii remains strong. Still, some isolated cruises are weaker than usual and some price cuts are emerging. Regent Seven Seas Cruises, a unit of Carlson Cos., for example, is extending some of the discounts that would have already been closed by this time of year: It is still offering a free airfare deal on 12 Baltic cruises in June, July and August, which give customers a choice of a complimentary economy airline tickets, a $499 business-class upgrade, or a $1,000 discount off the price of the cruise. Silversea Cruises Ltd. has 30% savings on a Sept. 5 sailing between Vancouver and Los Angeles.
Dave Hickman, a 55-year-old retired marketing executive from Chino Hills, Calif., who takes about one cruise a year, cashed in on one such deal. He booked a September Caribbean sailing and snared a 500 square foot suite with a balcony — that normally would have cost $5,000 for two — for about $3,600. |
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