COVER STORY
Weakening dollar strengthens cruising in Europe
Posted on Mon, Apr. 28, 2008
By MARTHA BRANNIGAN
hen Miami banker David Schwartz takes his family to Europe this summer, they'll pick up a Royal Caribbean Cruise Lines ship in Barcelona, Spain.
''We booked a European cruise, and we were fortunate,'' says Schwartz, president of the Florida International Bankers Association. With the dollar plummeting to new lows against the euro, he says, ``A decent hotel is 300 euros a night, over $450 a night.''
Of course, it doesn't take an international finance whiz to realize cruising is a smart hedge against the weak dollar when vacationing in Europe: Americans are flocking to the option because they can pay for tickets and onboard purchases with greenbacks.
U.S.-based cruise lines, capitalizing on the exchange rate, have deployed more capacity in Europe this coming summer than ever before, and European-based lines are building new ships and expanding in their own right.
Cruise capacity in Europe in 2008 is expected to jump more than 15 percent over last year, reminiscent of the boom in the U.S. market in the 1980s and 1990s. And it's not just the Yanks who are lining up to fill all those new berths. European cruises are suddenly luring more Europeans as well.
Europe is ''the next center of gravity for cruising. Look at the current growth rate and the potential and the number of new ships,'' says David Dingle, CEO of Carnival U.K., who not only oversees Miami-based Carnival Corp.'s British brands but also is chairman of the European Cruise Council, a trade group.
Not long ago, Europe was a place where cruise lines sent their old, tired hardware. Now it has blossomed into a showcase for the industry's newest and largest ships.
A key driver: European cruises fetch higher prices than those in the Caribbean and most other spots, enabling the lines to pocket bigger profits.
On April 17, Royal Caribbean took possession of the new Independence of the Seas, one of three Freedom-class vessels holding the title of the world's largest cruise ships. The 160,000-ton behemoth will make her maiden voyage from Southampton, England, May 2 and do Mediterranean cruises this summer.
The 3,634-passenger ship is the largest ever home ported in Europe. ''Typically our new ships come to the U.S. to sail to the Caribbean first,'' says Susan Hooper, senior vice president of Royal Caribbean. ``This is the first time a new [Royal Caribbean] ship is starting in Europe.''
Even Carnival Cruise Lines, which espouses a strong Caribbean focus, plans to sail its newest and largest ship -- the 113,000-ton Carnival Splendor -- in Europe this summer. The ship will debut in Dover, England, in July, sailing northern European cruises, then head to Rome's port in Civitavecchia for Mediterranean tours. She'll finally head for Fort Lauderdale in late October.
Joining her is the Carnival Freedom, which last year made her maiden voyage, a nine-day Mediterranean cruise, from Venice. She returns to the Mediterranean in May.
Europe is not only attracting bigger ships, but they're staying longer. Cruise lines have stretched the European season well beyond the traditional summer months to run from April to November. Some U.S.-based lines have begun deploying ships year-round in Europe and the Mediterranean, joining Italian cruise operators Costa Cruises and MSC Crociere in that market.
Brilliance of the Seas, for example, will stay year-round in Europe in 2008 -- a first for Royal Caribbean. ''With the [Mediterranean] -- one of the most popular destinations in the world -- in your backyard, you have to say this is an underdeveloped opportunity,'' says Susan Hooper, a senior vice president who oversees Europe for Royal Caribbean. The biggest challenge, she says, is getting consumers to rethink their old habits of cruising in the summer.
Still, she and other cruise experts see plenty of potential for extending the cruise season in Europe. ''There is a consumer who doesn't want to visit the classic Ephesus archaeological site in August because of the sweltering heat,'' says Christopher Hayman, chairman of Seatrade Communications, a maritime conference and publishing concern. ``To do it mid-summer for older people is very, very challenging.''
Norwegian Cruise Line, which is pulling back on Hawaiian cruises, renamed its Pride of Hawaii the Norwegian Jade and sent her to Europe for year-round cruises this year -- a first for NCL too. That is one of three big ships NCL has devoted to Europe this summer, its greatest capacity ever in the region.
''We have a very broad spread, going from the North Cape [of Norway] just south of the magnetic North Pole all the way down to Egypt and running East-West from Istanbul to the Canary Islands,'' says Colin Veitch, Norwegian's CEO.
Behind the intensive European focus, says Veitch, is the double-barreled trend: the boom in Americans choosing to cruise in Europe to shield against the weak dollar, plus the burgeoning demand among Europeans. ''The idea of cruising is catching on among Europeans,'' Veitch says. ``That segment of the market is booming and shows no signs of abating.''
The rise of low-cost air travel within Europe is helping fuel demand among locals, who now can easily reach ports on the continent.
And cruise operators see plenty of growth on the horizon. Only about 1 percent of Europeans take a cruise annually, compared with about 3.5 percent of Americans, according to Carnival's Dingle. And Europeans typically have more vacation time than Americans and spend a higher proportion of disposable income on leisure.
MARKETING BLITZ
''Suddenly, this under-penetrated marketplace is getting this blitz in marketing and in product,'' says Rick Sasso, president and CEO of MSC Cruises USA, a unit of MSC Crociere of Naples, Italy. ``Europeans are starting to cruise and falling in love with this great concept, just like Americans did 20 or 30 years ago.''
European-based lines like MSC aren't sitting by while the North Americans blanket the continent with new capacity: They're rapidly adding new ships and destinations themselves, capitalizing on the growing public awareness of European cruising that comes with international competition.
Sasso, who opened MSC's U.S. headquarters in Fort Lauderdale to tap the American passenger base, says the number of North Americans flying to Europe to take an MSC cruise has quadrupled in the past two years.
STAR POWER
MSC, the No. 2 European-based operator after Costa Crociere of Genoa, Italy, just unveiled its latest ship, the 3,013-passenger MSC Poesia, at a splashy naming ceremony in Dover, England, April 5. The affair featured actress Sophia Loren as the ship's godmother, a performance by tenor Andrea Bocelli, and attendance by the Prince and Princess Michael of Kent.
Europe's emergence as a cruising hot spot follows years of rapid industry consolidation in which U.S. lines gobbled up European operators to gain market share. Miami-based Carnival Corp. snapped up Costa Cruises, German line AIDA Cruises, and British operator P&O Cruises to round out its portfolio.
Royal Caribbean, in turn, bought Pullmantur, a Spanish brand, and it recently launched CDF Croisieres de France, targeting the French, who haven't really embraced cruising to date.
DEFINING A NICHE
CDF Croisieres ''is focused 100 percent on the French. We make no bones about it: French is spoken. There's French food and French traditions,'' says Royal Caribbean's Hooper. ``Everyone is watching with bated breath to see if this is the way to go.''
The growth has reached a point where some European ports are suffering from congestion, which is spawning logistical challenges and a rising chorus of complaints from local residents, reminiscent of the heavily trodden Caribbean cruise haunts.
The giant ships bring visible smoke, loud music and noisy tenders, says Laurent Monsaingeon, ports managing director for the Riviera Ports Authority in Nice, France. ``There's not a month I don't receive some complaint from a mayor or local authority.''
With the expansion, the selection of itineraries in Europe is getting ever wider. The North African coast and Tunisia are opening up. The Croatian coast is becoming very popular. Yachting ports on the Riviera, such as Antibes and Golfe Juan, are now hosting cruise vessels.
RAPID EXPANSION
Cruise Baltic, a network of port cities looking to develop cruising, has grown to 26 members from 19 in recent months. Bo Nylandsted Larsen, Cruise Baltic's director, says the group gathers four times a year to strategize about educating American cruise agents about the region so they'll pitch it to customers. Long winters are an obstacle to growth. Still, he says, this year Copenhagen will get several Christmas cruises.
Holland America Line, with its biggest presence ever in Europe, has arranged its schedule to offer combinations of two 12-day cruises and two 10-day cruises that don't repeat ports of call.
Princess Cruises, one of the first North American lines to pioneer the concept of moving to Europe in the summer and selling to North Americans, has six ships offering 87 voyages to more than 115 ports. That includes calling on Albania.
Says Jan Swartz, senior vice president of sales and customer service for Princess Cruises and Cunard Line, both units of Carnival, ``Many of our guests repeat, so we pursue new itineraries.''
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