One Sec Tech

Cited: Daily Finance

The Pentagon is clueless to the battle that is brewing at sea because it involves cruise line ships and not battleships. It seems that cruise lines are launching their biggest boats ever in a fight for customers. The largest ship today is the Royal Caribbean International’s (RCL) Oasis of the Seas is, at 1,187 feet, which is 89 feet longer than the USS Nimitz aircraft carrier. Carnival’s (CCL), Carnival Dream, is only 1,004 feet in length, which is just 40 feet shorter than the Chrysler Building.

Both companies themselves deny that there’s an arms race. “We have built bigger, but it’s not about being the biggest,” says Royal Caribbean representative Erica Harris. “It’s really about offering the most guest experiences on board.”

But in the worst cruise market in years, it’s clear the contest is on — and while size matters, so do lavish offerings. The 5,400-passenger Oasis of the Seas boasts its own “Central Park” — the size of a football field, with live trees and shrubs. The Carnival Dream, with room for 3,646 guests, features the longest water-slide at sea, about 300 feet, and a 24,000-square-foot spa with a thalassotherapy pool and thermal suites.

Want to see the Blue Man Group, or the only big-top circus at sea? Step aboard Norwegian Cruise Line’s 4,200-passenger Norwegian Epic, scheduled to set sail next summer.

This Vegas-like razzle-dazzle is nothing new to the cruise world. But in a turbulent market, some wonder whether all this money — the Oasis of the Seas reportedly cost $1.5 billion to build — is wisely spent. Passenger revenue in the first half of 2009 tumbled 12 percent, to $6.98 billion from $7.9 billion a year earlier, says Douglas Quinby, senior research director for travel-industry research firm PhoCusWright. The market is worse now than it was in 2002, he says, after 9/11 jitters and the bursting of the stock-market bubble kept travelers off the boats.

Will these behemoths become ghost ships? They’re hitting the waves, remember, just as staycations have gained favor over vacations. Ticket prices have dropped as much as 17 percent to fill berths this year. “There is a question among many as to whether the market could really bear this,” Quinby says.

But there could be better days on the horizon. PhoCusWright forecasts a “very modest” recovery next year. An improving global economy is one reason; another could be the launches of these megaships, whipping up excitement among cruise fanatics. “These ships are bringing a tremendous amount of new products on board,” Quinby says. “It really provides a tremendous jolt to the industry.”

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Cruisers are an impassioned bunch, with a more than 50% repeat rate. “It has a high number of people who aren’t just consumers but also advocates,” Quinby says.

For their part, cruise companies say their ships have already made a splash. Leading operator Carnival says there’s plenty of interest in the Carnival Dream’s two-day “cruise to nowhere” (starting at $354), which leaves New York next Friday. “We have complete confidence in our ability to fill the ship,” says Carnival representative Jennifer de la Cruz. “Overall, we view it as a tremendous plus to introduce the largest ship we’ve built to date.” The ship was delivered to the company, based in Miami and London, in mid-September.

Miami-based Royal Caribbean, the second-largest operator, took delivery of Oasis of the Seas in late October and is similarly positive. “From what I’ve been told, it’s been selling extremely well,” Harris says. A four-night cruise leaving Fort Lauderdale on Dec. 1 for Labadee, Haiti — the company leases a private peninsula there — starts at $899.

Cruise expert Stewart Chiron, who runs cruiseguy.com, says this is a great time to launch the world’s biggest cruise ships. “It’s going to invigorate interest in cruising,” he says.

Carnival is going after the family market, de la Cruz says, with Carnival Dream offering staterooms with two bathrooms for the first time. The mammoth waterslide is part of the WaterWorks aqua park, which will also feature “splash zones” and squirting fountains. There’s also an adults-only two-level outdoor deck with plush furniture and cocktail services by the whirlpool. The ship’s “Fun Hubs” will let passengers locate like-minded passengers — to find a bridge partner, say — and read bios on the crew. “Carnival Dream is going to be the first ship to feature its own social-networking platform,” de la Cruz says.

Over on the Oasis of the Seas, high-flying passengers can choose from the first loft-style suites at sea; the 1,524-s.f. Royal Loft Suite features a baby grand piano, library, and indoor-and-outdoor dining rooms, seating eight. Also aboard are the first zip-line at sea, a nine-hole miniature golf course, and the first floating Coach outlet. The huge ship is divided into seven “neighborhoods,” with the Central Park section garnering the most attention. “You don’t need to be on a pool deck to get fresh air,” says Harris. “The center of the ship has been gutted and totally open to the sky, from deck seven on.”

Will all this fuss translate into a better bottom line? On Nov. 3, Royal Caribbean said third-quarter sales fell 15% to $1.76 billion, resulting in 44% lower net income of $230.4 million. And the company forecast a fourth-quarter loss. Still, CEO Richard Fain said on a conference call, “The first quarter [2010] will be better and the full year will be better,” according to Bloomberg.

Carnival’s third quarter wasn’t much better: revenue fell 14% to $4.14 billion, resulting in 19.5% lower net income of $1.07 billion. But during its Sept. 22 announcement, Carnival said it was encouraged by booking volumes and raised its full-year profit expectations, according to Breaking News 24/7.

According to Chiron, travelers can get great deals because the cruise companies are struggling to get passengers back on board. For example for as low as $2,599, a traveler can get an 11-night European cruise that could include a balcony stateroom and round-trip airfare. Only a year ago this type of package would cost a traveler $4,599. That is almost half off!

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My Take: Maybe someday I will be able to afford a European cruise. Maybe someday I won the lottery too! This is great news for those who can afford to take a cruise whether it is a European or Alaskan cruise. If the package includes airfare, then people do not have to search for cheap airfare. At least if they taking a cruise they do not have to worry about finding discount group airfare.

I wonder, do they have Pilates exercise equipment on board those cruise ships? I know there are a lot of people that do Pilates workout on a daily basis. They might be able to coax some of the Pilates people into taking cruises if they do.

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