Shipping forecast

Anyone who shares the common misconception that cruising appeals only to the wealthy blue-rinse brigade had better wake up. In just 15 years, cruising has grown from being a small niche player to the fastest growing sector in three of the world's largest holiday markets: North America, the UK and Asia.

This May, the UK's Passenger Shipping Association (PSA) reported that cruising holidays had overtaken skiing for the first time in the UK, with the number of cruise passengers in 1999 breaking the 800,000 barrier.

Cruising now appeals to all ages and all market sectors. "If you had to identify the product, it would be a floating resort with transportation included," says Dietmar Wertanzl, senior vice-president, hotel operations, for six-star line Crystal Cruises. "And of course, we are all after the vacation dollar."

The cruise industry is poised to expand at an unprecedented rate. A more bullish market has boosted shipbuilding and, between now and 2004, some 60 ships coming on to the market will increase berths worldwide by 73%. This means that some 14 million cruise passengers a year will have to be found, against the 8.2 million who cruised in 1998.

The staffing requirement on these 60 ships will be as much as 60,000. Given that some 80% of staff on a cruise ship are involved in hospitality, as opposed to navigation and safety, and that a ship carrying 1,000 passengers (and therefore at least 500 crew) is considered medium-sized, it is all too easy to see the potential threat to the land-based hospitality industry.

But can the cruise industry sustain this growth? Soon, supply may well exceed demand for the first time. Discounting is already driving prices down, and cruise lines are having to become more and more creative to keep adding value. Needless to say, much of this creativity is being modelled on the hotel industry. All-inclusive products, suites instead of cabins, celebrity chefs, a return to tiered service (like a floating version of the executive floor), lavish spas, a thriving wedding and honeymoon market - heard any of this before?

Industry observers believe that cruising has a strong and unique appeal. "Cruising has grown so quickly in popularity because of the different types of holiday on offer, from sailing to working ships, luxury ships, larger ships or a two-week ‘cruise and stay' that combines a holiday on land with one at sea," says William Gibbons, director of the PSA. "And once people have taken a cruise, they are almost always hooked."

In the UK, growth over the past four years can be partly attributed to tour operators Thomson, Airtours and First Choice, each of which has launched a cruise programme. Thomson's alone accounts for 100,000 passengers, or one-eighth of the UK market. "When we started cruising in 1996," says Thomson Cruises general manager David Selby, "we attracted exactly the clients we were expecting - first-time cruisers, previous Thomson customers, and some traditional cruisers who were taking their second annual cruise."

But this has not taken customers away from the tour operator's core hotel-based business. "Given that cruising represents 2% of our business, the impact is insignificant," says Selby.

So does cruising threaten the more expensive, resort-based holiday? At the luxury end, it is clearly perceived as an alternative to a resort holiday. "Look at the ‘top 100' ratings in the world's best leisure magazines for the past five years," says Wertanzl, "and you'll see at least two cruise lines in the top 10."

Wertanzl himself trained as a hotelier in Austria and at Cornell, and has experienced both sides of the fence. "One of the beauties of cruising is the value it delivers," he says. "The food is free. On our ships, you can eat a meal that would cost $150 (£104) in a restaurant. You ask for caviare, you get it."

A big selling point of a luxury line such as Crystal, Wertanzl says, is the personal attention guests receive. "We are able to give a very personal service," he says. "We are focusing on durations of 10 to 12 days, and a lot of repeat customers who come back for the same ship but a different itinerary."

But it is not just the upmarket lines that attract repeat business. According to the Cruise Lines International Association (CLIA), which represents the industry in North America, cruising has the highest satisfaction levels of any type of vacation, with repeat levels exceeding 60% and, on some cruise lines, as high as 85%. Cruise passengers will often take several trips a year, all of them at sea. Values placed on cruising in the 1998 CLIA market profile survey included "relaxing", "pampering", "the chance to visit several destinations" and "activities".

Repeat business, however, is not enough to fill the new products, and cruise lines are hungry for new markets.

The biggest sector on both sides of the Atlantic is the baby boomers. According to the PSA, one-quarter of all UK-originating cruise passengers in 1999 were aged between 45 and 54. Over the past decade, the average age of people taking cruises has fallen by five years to 54 years old.

Younger audience

But this is still not young enough for the big, mainstream cruise lines. "There are an awful lot of new ships and we have all got to find new guests - it's not enough simply to expand the base of what we are doing now," says Norwegian Cruise Line's (NCL) executive director UK, Bill Ellerington. "We're looking at a younger audience, which we will target with our new concept, and empty-nesters who may not like the traditional perception of cruising."

The concept to which Ellerington refers is Freestyle Cruising, which is being introduced throughout the NCL fleet during 2001 and aims to blow away old-fashioned images of life at sea. Dinner sittings have been abolished and passengers will sit where they like, when they like. Formal nights become optional, and the activity programme will include computer classes, financial planning seminars and health and wellbeing programmes - a far cry from bridge classes and deck quoits. Dining options on the line's newest ship, Norwegian Sun, due for launch in September 2001, include a sushi bar, a teppenyaki room, an Asian fusion restaurant, a tapas bar and a "healthy living" restaurant.

The idea originated with Singapore-based Star Cruises, which bought NCL last year. Star, which caters to a mainly Asian market, has applied hotel-style practice to its food and beverage operation from the beginning, with great success. NCL rolled the product out on one ship, Norwegian Sky, three months ago and passenger satisfaction levels have already increased. "NCL started the concept of the modern cruise about 35 years ago, and it hasn't changed radically since then," says Ellerington. "People do demand a different holiday experience now, and the resort-style vacation gives them great freedom of choice, which is not what they were getting on a cruise."

Everywhere, cruise lines are adapting their product to a younger, more demanding market. Disney Cruise Line and Carnival, with their reputation for casual lifestyles on board and destination-intensive itineraries, are addressing the young family market.

Royal Caribbean International (RCI) revolutionised on-board activities last year when it launched the massive, 3,000-passenger Voyager of the Seas, complete with ice rink, roller skating track and rock-climbing wall. Identical sister ship Explorer of the Seas will be inaugurated this month. The brochure elaborates: "A Royal Caribbean ship is a grand hotel and a beach resort; an art gallery and recreation centre; a favourite part of town with bars, restaurants, casino and theatre."

Celebrity Cruises, owned by RCI, has just pushed the floating spa concept a little further with the Aquaspa on its new ship, Millennium, offering 13 treatment rooms, the biggest hydrotherapy pool at sea and an ambitious programme of therapies. P&O's newest ship, Aurora, has sound and light equipment in its theatre that is more hi-tech, the line claims, than that in many West End theatres.

Other features on board Aurora are clearly designed to break the mould of the fuddy-duddy British cruiser - 24-hour bistro dining, a Champagne bar, a state-of-the-art gym and spa, and a lavishly equipped nursery.

Accommodation on ships, traditionally a weak area in comparison with a resort-based holiday, is changing too, with balcony accommodation fast becoming the norm at the top end. Radisson Seven Seas Cruises launches its new ship, Seven Seas Mariner, in February 2001 with all balconies and all suites, a step on from its last newbuild, Seven Seas Navigator, which has 90% balconies. "Money is not really an object to most of our clients, and the balconies are always the first to go," says UK vice-president, sales and marketing, Michael Baker. "It's like in a hotel - everybody wants a decent view. And once a client has had a balcony, they won't go back to a picture window."

Ultra-luxury fleet

Rival Silversea Cruises is doubling the size of its ultra-luxury fleet to four, with 80% balcony accommodation on the two new ships, Silver Shadow and Silver Whisper. In the mid-market, Italy-based Costa Cruises launched its new flagship, Costa Atlantica, in July with 65% balcony accommodation.

Interior design, too, is finally beginning to reflect the adventurous concepts of "designer" hotels. Royal Olympic Cruises' Olympic Voyager, launched in June this year, is a case in point. The design has rejected the traditional ship decor alternatives of chintz, glitz or swirly carpets and opted instead for beautiful, honey-coloured wood panelling, verdigris and hints of gold on the walls, and petrol-blue and coral fabrics. Light shines through translucent glass panels, and a delicate calligraphy theme runs throughout the ship.

So will the cruise bubble burst? There are a number of issues facing the industry, shortage of labour being a very obvious one.

Formal training and four- and five-star hotel experience is what the cruise lines want. "We hire from top hotels and hotel schools," says Wertanzl.

"We present ourselves within the hospitality industry as an exciting, alternative workplace. A cruise ship involves everything from food and beverage to entertainment, tour operation, casino and spa. We try to combine the old, traditional values of hospitality with a resort-like environment."

The life is not, however, suited to everyone. "It's not just a job, it's a way of life," says Liz Mort, general manager of recruitment consultant CTI Group, which hires for Renaissance Cruises, Celebrity Cruises, Disney Cruises, Festival Cruises, Carnival Cruise Line and Sun Cruises. "You can't leave it behind. There's a lot of discipline on board and you have to be a bit conformist. It's hard work - seven days a week, often for a seven-month contract."

Some lines, Mort says, moved towards hiring from eastern Europe for budget reasons but have now set their sights back on the West, as the command of the English language and the service ethic tends to be better. More upscale cruise lines - the four-star Orient Lines being a typical example - can afford to hire service staff exclusively from the Philippines and use this as a selling point in their brochures, driving home the message that service is one of the most important aspects of a cruise.

So should hoteliers be worried? Probably not yet, is the answer. "My own view is that [the expansion of the UK market] has probably reached its peak," says Selby. "The growth can't be sustained and last year there was too much discounting. You've got to make good money from cruising, whether you own or charter the ship, as the risks are huge. Having said that, the number of newbuilds coming on-stream is phenomenal."

Wertanzl agrees. "The proportion [of people cruising] is still small. Okay, there are 60 new ships, but when you think that Las Vegas alone receives 25 million visitors a year, it's tiny. But at least cruising is now recognised as a vacation alternative."