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As Europe Grows - The Future of Cruising
As the European Cruise Council released its 2007 cruising statistics in Brussels last week, it is worth now having a look at the trends that are affecting Europe and also how the "Big Two," Carnival Corporation & PLC and Royal Caribbean Cruises, are seeking their share of this growth. For the first time, in 2007, the European market surpassed 4 million cruisers and is now about one third the size of the North American market of 12.6 million, for a ratio of about 25:75. The 4 million mark was surpassed in the North American market fifteen years earlier so the scope and opportunity would appear to be there in a much enlarged Europe.
Growth in European Markets
As mentioned two weeks ago in this column, growth in the number of cruisers in Europe, at 595,000, was higher than growth in North America, where it was estimated at 500,000. Overall, the European market grew by 17.5%, the biggest contributor being the UK with 133,000 additional cruisers, 11% more than 2006. But the UK accounted for less than a quarter of the overall growth.
Spain generated 127,000 more cruisers, for a growth rate there of 32%, with Pullmantur Cruises and Iberojet Cruceros playing a big role. Another 123,000 new cruisers came from Italy, where the market grew 24%, with the addition of new tonnage from Costa and MSC Cruises.
Far behind this was France, with 38,000 more cruisers (many on Italian ships) and 17%, but still a higher rate of growth than in the UK. Somewhat surprisingly perhaps, of the major markets, the Germans came last, with only 8% growth, or 58,000 new cruisers in 2007, but in a market larger than either Italy's or Spain's. Nevertheless, this was still double the 4% growth seen in North America and more growth is forecast.
What is really interesting about the latest statistics is that of the 12.6 million North Americans who cruised in 2007 about 4 million took short "party" cruises of 2, 3 and 4 days, which if deducted means about 8.6 million took "serious" cruises of a week or more. In Europe, only 252,000 took "party" cruises, meaning the two "serious" cruise markets can be compared as 3.75 million Europeans to 8.6 million North Americans, for a ratio of about 30:70.
Moreover, out of these "serious" cruisers, the proportion of Europeans taking 7-day cruises was just 50% in 2007 compared to almost 80% for North Americans. The potential for selling longer cruises is thus much better in Europe, where holiday entitlements are so much higher than in North America, where many workers get only two weeks a year compared to five weeks in Europe.
While North American statistics are not yet available for 2007, the number of Europeans taking cruises longer than a week was 1.88 million, which is actually more than the estimated 1.75 million North Americans to have done so. This of course means that there are potentially much higher revenues available in Europe.
The UK Market (1.34 million on 2007)
We will touch only briefly on the UK market this week as it is known to be the largest in Europe and second in the world, accounting for exactly one-third of the 4 million Europeans who cruised last year. This is down slightly from 36% in 2003, caused by faster growth in Continental markets.
That both Italy and Spain were able to come within 10,000 passengers of the UK market's growth last year is notable. Nevertheless, the UK market's importance was underlined last month when three new ships were named in ceremonies in Southampton and Dover - one British, one American and one Italian.
Germany (763,000 in 2007)
Although Germany has its own cruise lines in Hapag-Lloyd Cruises, Transocean Tours, Phoenix Reisen and Hansa Kreuzfahrten, last week saw the first shot fired in a new battle between Carnival Corporation and Royal Caribbean in the German mass market, with the announcement that Celebrity Cruises' 1,870-berth Galaxy would become TUI Cruises' first ship.
A 50:50 joint venture between Royal Caribbean and Germany's TUI, parent company of luxury and expedition line Hapag-Lloyd, TUI Cruises will introduce a remodelled and renamed Galaxy to the Baltic market, then to the Med and Caribbean, one year from now. Going head-on-head with Carnival's AIDA Cruises, the TUI product will reportedly be a little more upmarket than AIDA's "Club" ships, where much of the dining is buffet style.
TUI Cruises, headed up by former AIDA executive Richard Vogel since 2004, will commission two newbuildings to join the former Galaxy. TUI has no lack of cruise experience, as in addition to Hapag-Lloyd Cruises it operates the five-ship Thomson Cruises brand in the UK mass market, as well as Island Cruises, a two-ship joint venture between TUI's more recent acquisition First Choice Holidays and Royal Caribbean, using former Royal Caribbean and Celebrity tonnage.
AIDA, meanwhile, operates five ships in the German market, with the delivery of the latest, the 2,050-berth AIDABella taking place two weeks ago, following sister ship AIDADiva last year. The third of the series, AIDALuna, will join next year and a fourth in 2010. Ironically, all the AIDA ships, although German-officered, fall under the purview of Costa chief executive Pier Luigi Foschi, and are registered, along with Costa's own ships, in Genoa. This led to TUI running an advertisement in German papers on the event of the AIDABella's christening saying "Ciao, bella! Buon giorno. TUI Cruises."
Italy (640,000 in 2007)
Italy forms a slightly less segmented market than Germany, with the main competition being between Carnival's Costa Cruises and independent MSC Cruises. Both have been introducing new ships to the Italian market and deserve credit for increasing the number of cruisers from 346,000 in 2003 to 640,000 last year, up 85% over four years. Although Costa carried 1 million passengers last year, it is obvious that they were not all Italians and the line had to rely on other European nationalities to fill its ships.
Costa, which includes Germany's AIDA Cruises in its management portfolio, is also expanding into new markets under its own brand with cruises from Dubai, Mauritius and Shanghai, as well as its traditional bases in Brazil and Florida. Latest ship to be added to Costa's eleven-ship fleet is the 3,004-berth Costa Serena, introduced last year, to be followed by the 2,260-berth Costa Luminosa next year and another Panamax sister ship in 2010 ,and three more 3,000-berth ships, Costa Pacifica in 2009, plus two for delivery in 2011 and 2012. This rapid growth could see the line shedding some of its older and smaller ships which it has been using to develop new markets.
MSC, on the other hand, christened its 2,550-berth MSC Poesia in Dover last month, which when followed by the 3,274-berth MSC Fantasia this December will bring its fleet to ten ships. Although MSC has also been doing well in the Brazilian market, its inroads in North America have not been as good as desired. So in addition to ex-Celebrity chief Rick Sasso heading up their US operation, ex-UK managing director Claudia Baino is being drafted into a new position at Naples head office to head up international project development.
Baino, a Canadian citizen, has background in both Italy and Brazil as well as having once headed up Carnival Cruise Lines' international sales. But unlike Costa, who have decided to stay away from the UK, MSC operates a ship in Europe's largest cruise market. The 1,566-berth MSC Armonia sailed this Sunday from Dover for her first cruise to the Norwegian fjords, doubling the capacity that was offered last year with the 788-berth MSC Rhapsody.
Spain (518,000 in 2007)
The advent of Pullmantur Cruises and Iberojet Cruceros and the more recent acquisition of Pullmantur by Royal Caribbean (November 2006) and a joint venture between Carnival and Orizonia's Iberojet operation in the new Iberocruceros (September 2007), speak highly of what Spanish cruise lines have been able to do. They have built a market of 307,000 in 2003 into 518,000 cruisers in 2007, an increase of more than two-thirds over four years, with half of this growth occurring last year.
Starting with ships such as the 1,124-berth Oceanic and three ex-Renaissance ships, the 684-berth Blue Dream, Blue Moon and Blue Star (two have now formed the Azamara brand, while the third went to Oceania), the ten-year-old Pullmantur Cruises has become the mainstay of the Spanish market. Ironically, in view of Carnival's investment in Iberocruceros, Pullmantur is now the home of the 1,200-berth Sky Wonder (2006) and the 1,350-berth Ocean Dream (2008), both acquired from P&O Australia, now a Carnival company. That Carnival would be willing to sell the Ocean Dream to a Royal Caribbean brand evoked surprise from many but she is due to enter service with Pullmantur this weekend.
The Pullmantur fleet now also includes ex-Royal Caribbean ships in the 1,378-berth Zenith and 1,600-berth Empress, transferred from what were Celebrity and Royal Caribbean's Bermuda operations in 2007 and 2008, as replacements for the Azamara ships. Pullmantur's latest acquisition, to join later this year, is Royal Caribbean's 2,306-berth Sovereign of the Seas, the world's first custom-designed mega cruise ship when built in 1988. She will become the largest cruise ship in the Spanish market upon joining Pullmantur.
Iberocruceros operates in a different manner, however, as the joint venture in which Carnival holds a 75% interest and Spanish tour operator Iberojet 25%. The original two-ship operation will grow with the addition of new tonnage from other Carnival fleets. Like AIDA in Germany, Iberocruceros falls under the responsibility of Costa's Pier Luigi Foschi. Costa already has an interest in Spain through a half interest in a new cruise terminal in Barcelona. Starting with the 1,196-berth Grand Mistral and 840-berth Grand Voyager, Carnival has now added the 1,486-berth Grand Celebration to the Iberocruceros fleet, thus increasing lower berth capacity by almost three quarters. Undoubtedly, more Carnival ships will follow over time.
France (280,000 in 2007)
One of the "Big Two" is taking a very active part in the French market from this month as Royal Caribbean, with its Croisiéres de France brand, formed last September, introduces its the 752-berth Bleu de France. Best known as Hapag-Lloyd Cruises' 600-berth Europa between 1981 and 1999, she has been transferred to its new French operation from Pullmantur, for whom she had been operating as Holiday Dream. The Bleu de France is aimed directly at the French-language market.
This will set them apart completely from Costa, which acquired Paquet Cruises in 1993 as part of a deal that saw that company's French owners take a 12% share in Costa. Costa continued to operate Paquet's Mermoz between 1993 and 1999, but after Carnival bought Costa in 1996 it was not long before Costa ships began boarding French passengers at Marseilles, a procedure since copied by MSC Cruises.
Having completed a €30 million refit, Bleu de France enters service from Marseilles later this month, with cruise offerings starting from €899. CDF have decided to go the all-inclusive route, with alcoholic beverages, wines, port charges and gratuities all included in the fare. This move by Royal Caribbean, with its entirely French product, will doubtless have an effect on Carnival's Costa passenger boardings at Marseilles, but Costa still have the edge with brand-new ships. Elsewhere, CMA CGM's Ponant Cruises have recently ordered two 256-berth cruise ships from Fincantieri for delivery in 2010, which will bring its small-ship fleet up to five units, but with no more than 864 berths.
From all of the above, with more and more American-based cruise ships also being posted to Europe each summer, and the growth of the winter cruise market in the Mediterranean (NCL will now base its Norwegian Jade in Europe year-round), it is clearly a case of watch this space.
(Source: By Mark Tré - Cybercruises.com)