With the economy headed for the rocks, cruiselines are preparing for a tough yearWith the economy firmly on the rocks and sterling falling fast, this would not seem to be the happiest of new years for the cruise industry.

After reporting more than a decade of growth, the Passenger Shipping Association is predicting no growth in the UK cruise market for 2009.

That’s bad news for an industry that launched eight new big ships last year – capable of holding more than 20,000 passengers between them – and has another 13 due this year, adding capacity for another 26,000 cruisers.

That is a lot of extra people to get cruising at a time when clients, especially cash-strapped families, are looking carefully at their budgets. Inevitably, it has led to some unprecedented discounting.

Voyages of Discovery has halved early-booking fares for ex-UK cruises from Harwich next summer for clients who book by January 31, while Norwegian Cruise Line has been running an ongoing three-day sale online, offering 12-night eastern Mediterranean cruises from £749 per person, including return flights.

Cunard, meanwhile, is offering a transatlantic crossing on Queen Mary 2 from £699 per person, including a one-way flight to or from New York – which is its lowest ever price. “It’s an extraordinary response to extraordinary times,” president and managing director Carol Marlow said.

Yet the cruise industry remains optimistic, not only that it is best placed to come through this downturn because of the more inclusive nature of cruise pricing (it includes food and entertainment as standard, unlike many land holidays) but that it might gain long term if low fares persuade consumers to try a holiday at sea.

Royal Caribbean International associate vice-president and general manager UK and Ireland Jo Rzymowska said: “Holidays have become a necessity, but people are looking more closely at what they are going to get for their money. It’s a great chance for trade partners to promote the value of cruising.”

“If older people are not getting returns on their savings, maybe they will decide they might as well spend them”

Cruiselines are confident also that they can rely on past passengers reluctant to give up their cruise. Just before Christmas, Complete Cruise Solution sales director Giles Hawke said some P&O Cruises departures were 70% sold for 2009 as a result of strong past-passenger demand when the cruises went on sale in April 2008.

He said: “All cruise brands have their loyal following, people who will commit early to get the ship, cruise and cabin they want at the best price. They have learnt that prices have increased during the selling cycle.”

Hawke added: “Cruising is not recession-proof, but these people are older, more secure. If they are now not getting any returns on their savings, maybe they will decide they might as well spend them.”

Although many cruiselines reported acceptable booking levels as 2008 drew to a close, no one believes the next 12 months will be easy, especially as people wait to book, both because they are reluctant to commit their money with so much bad news around, and because they are waiting for a better deal. That could force cruiselines to drop prices again.

Speaking at the Seatrade conference in Venice last month, Carnival UK chairman David Dingle forecast there could be many with “white knuckles” in 2009 as people book late, but said he saw no reason why growth would not continue. “Demand is definitely there,” he added.

Rzymowska said Royal Caribbean’s Independence of the Seas 2009 summer cruises from Southampton – the main focus for the UK office – were 55% sold by the end of 2008.

She said: “It’s going to be a tough year but our prices are holding up. We are offering onboard credits instead of slashing prices, but are going to have to look at what to do on price for some sailings. There are some incredible prices out there for the Caribbean and Mediterranean.”

Costa Cruises UK managing director Marco Rosa said the UK office had its best October ever last year thanks to a big marketing campaign when all other cruiselines were quiet. By the end of the year, 72% of its summer 2009 target was sold and at prices not much lower than a year ago.

Rosa said: “I am confident we can build on that, but I’m not promising we won’t lower prices. Consumers in Italy, France and Spain are not used to the ‘jungle’ we have in the UK. They would not put up with cruiselines cutting prices later in the season, so we tend to get the distressed stock.”

Hawke agreed there was no guarantee prices would not be cut further in 2009. “Our intention is that won’t happen, but it’s a challenging market and some cruises might end up for sale at a cheaper price.”

Even though things are tough, rather than rein in spending, both CCS – which covers P&O Cruises, Princess Cruises, Ocean Village and Cunard – and Royal Caribbean have gone ahead with million-pound-plus TV and press advertising campaigns this month.

Rzymowska said: “Who knows what’s going to happen this year, how long this recession will go on. It will be a later-booking market but cruiselines need to be seen in January.”

Princess Cruises head of brand marketing Pieter van der Schee said: “By the end of 2009 I expect we will have carried the same number of passengers worldwide as in 2008, but we are having to work harder to get the bookings.”

Cruiselines focus on refurbishments

Cruiselines are switching investment from new builds to upgrades during the downturn, says cruise industry analyst Tony Peisley.

Speaking at a Seatrade conference in Venice last month, he said that, while the new ship order book is down on this time last year – there are 39 on order through to 2012, worth a combined $23 billion – cruiselines are spending big money on upgrading existing tonnage.

He said: “In recent months, while new orders have been few and far between, there has been plenty of spring-cleaning going on in existing fleets. And the scale of these, like that of the new builds, is continuing to increase.”

He cited Holland America Line’s $525 million Signature of Excellence fleet refurbishment, Princess Cruises’ decision to retro-fit features such as Movies under the Stars and the Sanctuary and Carnival Cruise Lines’ $250 million Evolutions of Fun upgrades.

‘Loss of Island and Ocean Village will stunt growth’

The Passenger Shipping Association has attributed its prediction of no growth in the UK cruise market next year to the loss of Island Cruises and Ocean Village, rather than economic troubles.

TUI Travel has acquired the outstanding half share in Island Cruises, which is being broken up in March 2009, when one ship goes to Spain’s Pullmantur.

Ocean Village is slowly being closed, with one ship leaving the fleet in autumn 2009.

Director Bill Gibbons said the result was that, instead of 3% growth, the number of Britons cruising in 2009 would stay the same as this year, at 1.5 million.

He said: “There is strong organic growth and that will continue because, in these tough economic times, the value of cruising will shine through.”

Gibbons said the growth will come in 2010, when P&O Cruises and Cunard are each adding new tonnage.