Cruise industry still in troubled waters six months after Costa Concordia
Six months after a deadly shipwreck in Italy, cruise lines are still in rough waters. For travelers, the deals continue.
07/12/2012 5:00 AM
07/13/2012 9:59 PM
Six months after the Costa Concordia struck a giant rock and capsized, the cruise industry is treading water, faced with depressed fares in key markets, continuing negative headlines and would-be cruisers still spooked by the deadly disaster.
Relatives of the 32 people who died in the wreck gathered Friday on the island of Giglio to remember their lost loved ones. The 952-foot ship remains on its side in the water off the coast of Italy, awaiting the cranes that will pull it upright. If all goes according to plan, the Concordia will be towed away by the end of January 2013 — more than a year after the wreck.
As work to remove the wreck moves to a new phase, cruise operators — many based in South Florida — are still looking for a financial recovery. By the end of this year, they hope, their businesses will be on a straighter course.
In the meantime, lawsuits related to the Jan. 13 catastrophe are piling up. The captain blamed for the accident — still being investigated but no longer on house arrest — is making new headlines in television interviews.And the larger question of safety on cruise ships is earning greater scrutiny as longtime critics gain a wider audience.
“My gut is that we won’t see the new normal until we get past the year’s anniversary,” said Carolyn Spencer Brown, editor-in-chief of the website CruiseCritic.com.
Recently, she posted a question on the site’s Facebook page asking if travelers were still affected by the incident. Many said they still thought about it; some said they continued to cruise without concern, while others said they wouldn’t cruise or would stay away from Costa.
“That doesn’t surprise me,” she said. “It was horrific, the ship’s still in the water, we’re still hearing about it.”
For now, the sluggish business amounts to deals for cruising devotees — especially if they can afford a flight to Europe.
Some lines are offering European cruises for far less than $100 a day per passenger, which is comparable to prices in the Caribbean, where fares generally are far cheaper. One reason for the bargains: Costa Crociere, the Italian unit of Miami-based Carnival Corp., waited a few months after the Concordia grounding to discount prices, on the theory that even major deals wouldn’t be enough to entice a wary public right after the accident. Future bookings dropped by double digits for major cruise lines.
When Costa finally did drop prices in March, bookings jumped. But the discounting didn’t stop with one cruise line.
“It was a big price cut, and so that affects everybody,” said Robin Farley, a leisure analyst at UBS Investment Research. She said even other markets such as Alaska, which also requires most passengers to fly, could feel an impact if travelers are drawn to deals in Europe.
For the past couple of years, North American cruise operators have seen Europe as a key growth market where they could attract new customers and command higher prices. With more ships based seasonally in Europe than many previous years, cruise lines found themselves even more exposed to Concordia fallout and economic instability in European countries that are home to many cruise passengers.
Norwegian Cruise Line, which is based in Miami, decided about 18 months ago to base four ships in Europe this summer.
“Which at the time was a wonderful decision,” said President and CEO Kevin Sheehan.
But he said the summer season in Europe has not performed as expected.
“We held as long and as desperately as possible,” he said, referring to prices. “You get one nervous player and they start putting deep discounting into the market and you’re only as strong as your weakest competitor.”
Still, he said, he expects to get through the season “OK” and believes business will improve to “reasonably good” by the fourth quarter.
To bump business, MSC Cruises increased marketing and promotional efforts to reach passengers outside of the continent. It has all 12 of its ships in Europe this summer.
“There is always a way to step up activity in other parts of the world that are not as sensitive to economic concerns,” said Rick Sasso, president and CEO of MSC Cruises USA. “We have a confidence that we’re doing the right thing, we’re managing through adversity.”
In an earnings call last month, Carnival Corp., the world’s largest cruise ship company, said that bookings had increased year-over-year during the quarter that ended May 31. That business was likely stimulated by major promotions such as airfare discounts, price slashes and onboard credits or upgrades — tactics embraced by many cruise lines.
And travel agents report that business appears to have normalized for U.S. customers after a drop immediately following the wreck.
Michelle Fee, CEO of home-based travel agent network Cruise Planners — American Express Travel, said agents have been selling more cruises to American customers at higher prices than in previous years.
She said that confirms the results of a survey the company conducted after the Concordia wreck asking if past cruisers would be scared away from future cruise vacations. About 99 percent said it would not make a difference, though Fee said the survey couldn’t predict behavior for people who have never before cruised.
Industry leaders feared at the time that first-time cruisers — who are key to growing the business — would be most heavily impacted. Last month, Chairman and CEO of Carnival Corp. Micky Arison said in an earnings call that those fears were realized.
“Our surveys clearly show that [first-time cruisers] were impacted by the events,” he said. “And hopefully, the further we get away from those events, the more likely they will bounce back.”
The industry’s trade group, the Cruise Lines International Association, has worked since the accident to portray cruising as a safe and heavily regulated form of travel — a difficult task as news stories have zeroed in on the question of safety and crime on ships.
“The number one priority of the global cruise industry is the safety of passengers and crew,” said Mike McGarry, CLIA’s senior vice president for public affairs in a statement. “In the wake of the Concordia incident on behalf of the global cruise industry, CLIA launched...a comprehensive assessment of the critical human factors and operational aspects of maritime safety. In less than six months, this ongoing review has resulted in the implementation of six new global policies developed to achieve our longstanding goal of continuous improvement and innovation in shipboard operations and safety.”
Those policies include: having more lifejackets aboard ships than are required by law; limiting access to a ship’s bridge at potentially dangerous times; requiring cruise ship routes to be planned in advance and shared with all members of the bridge team; standardizing 12 key points that passengers will learn during muster drills and emergency instruction. and mandating that those emergency drills are performed for all embarking passengers before a ship leaves port.
Many of those changes should have already been in place before the incident, said CruiseCritic’s Spencer Brown.
“You’re starting to see the change,” she said. “You’re starting to see some standards. That’s an important positive.”
This report was supplemented with information from the Associated Press.
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