At upcoming Seatrade Europe Cruise and Rivercruise Convention the cruise industry offers insight into its latest decisions and the technical evolution of recent vessels.
Cruising is a booming business.« This is a well-known statement about the cruise industry which started more than 100[ds_preview] years ago with a cruise on the German ocean liner »Augusta Victoria«.
Cruising is and has been growing steadily for decades and still is one of the most fastly expanding sectors of the tourism industry. Although global passenger numbers can only be estimated and may differ from source to source, approximately 19 million cruise passengers travel the world this year. Compared to five years ago, the number of worldwide cruise passengers has increased more than 20 %. As far as the German market is concerned as a source, an increase in passenger numbers of more than 70 % was observed in the same time span.
Corresponding to this development, Seatrade Europe, the internationally renowned European convention for the cruise and river cruise industry, is going to take place for the sixth time in Hamburg from September 27th to September 29th, 2011. Organized cooperatively by Seatrade and Hamburg Messe und Congress, the key aspect of this conference and exhibition is to emphasize current cruise as well as river cruise business topics. More than 250 exhibitors from 50 nations are expected to participate and display their latest products or services. Already 30 conference speakers are confirmed while 60 senior cruise line executives have registered. The conference will cover diverse topics and focus strongly on the cruise industry’s impact on the environment.
Cruise vessels resemble small cities
About 360 ocean cruise ships with capacities for more than 60 passengers sail the oceans worldwide with an average age of 19 years and an average lower berth capacity of 1,200 passengers. Consequently, the total ocean cruise capacity amounts to more than 436.000 beds. Four big players dominate the ocean cruise industry. These big players are Carnival Corporation & plc featuring several international brands, including (but not limited to) Carnival Cruise Line, Costa, AIDA, Cunard and Holland America Line, to name but a few, with a total of 101 vessels, Royal Caribbean Cruises Ltd. with 40 vessels, Genting Hongkong (including Norwegian Cruise Line) with 18 vessels and MSC Cruises with 11 vessels. In contrast to an average cruise ship providing capacity for 1,200 passengers at a length of 194 m, the largest ships, namely »Oasis of the Seas« and »Allure of the Seas« which belong to Royal Caribbean International’s Oasis Class, can accommodate up to 6,300 cruise passengers at a length of 361 m. Looking at these figures, the Oasis Class vessels of Royal Caribbean International are able to accommodate more than five times the passenger numbers of an average cruise ship and are 86 % longer than an average cruise vessel. These discrepancies in dimensions are enabled both by technological progression at shipyards and developments in cruise ship design and construction. Today, such technologically advanced vessels provide various facilities similar to a small city in terms of diverse onboard-equipment, supporting waste treatment or the production of drinking water. [1]
When looking from today’s perspective at the worldwide ocean cruise orderbook, 19 ocean cruise vessels are to be delivered until 2016 with a total capacity of approximately 56,000 lower berths. [2] This represents an increase in capacity of 12,9 % compared to the capacity of the existing fleet at an increase in number of ships of only 5,2 %. This difference shows the trend towards larger ship sizes. Economically this phenomenon can be explained by capitalizing the effects of economy of scale and the attempt to find the perfect fit for ships expenses, customer preferences and operational optimization. As cruise vessels have grown in capacity, rising importance was given during design and construction to the implementation of onboard facilities to generate unique selling points and to offer additional means of revenue. Numerous ships with divergent capacities are to enter the market, but not all of these will serve the same target group. Next to the traditional ocean liner various product concepts such as fun cruise ships, sailing cruise ships and mega yachts turn the cruise industry into a concept- and product-rich segment of tourism.
Respond to the growing European market
Ocean cruise passenger numbers for Europe are annually conducted by the European Cruise Council and show 5,45 million [3] European cruise passengers for 2010. Although the North American cruise market is still twice the size of the European cruise market, cruising in Europe has become quite popular and has a total impact of 300.000 jobs [4] within Europe as well as 35 million € [5] of economic output. This impact again shows the importance of this industry as well as the relevance of dialogue at a conference such as the Seatrade Cruise and Rivercruise Convention in Hamburg. During this conference renowned personalities of the cruise industry are going to address opportunities and challenges of the cruise industry today. Many highly important topics will be discussed in detail within separate sessions.
The International Maritime Organization (IMO) defined »Emission Control Areas« (ECA), where fiercer regulations apply than outside these ECA. Furthermore, IMO continuously adapts the regulations of the ‘International Convention for the Prevention of Pollution from Ships’ (MARPOL), which changes the regulatory environment for cruise ship operations. Since July 2010 regulations on the discharge of sulphur oxides (SOx) [6] has been to 1 % m/m SOx emissions of ships sailing within the ECA Baltic Sea (prior 1,5 % m/m). After 1st of January 2015 the further reduced limit of 0,1 % m/m SOx will be allowed, which shows the need for technical improvement of propulsion and used fuel to increase efficiency and decrease emissions. Furthermore, the recent emergence of external electric power and gas supply while ships stay in port (cold iron) will be an aspect discussed further during the »European Rules« session, which is supported by the Global Maritime Environmental Congress (gmec). Numerous experts will discuss opportunities and challenges within the given changing environment. Not only environmental restrictions, but also increased deployment of national as well as international cruise ships in European waters (Baltic / North Sea / Mediterranean) shall be brought into focus during this discussion. The fact that large like small highly frequented ports will have to handle the waste of cruise ships and its passengers may turn into a logistical and operational challenge for both, cruise lines and ports.
European Shipyards and the Asian challenge
The session of »Newbuilds & Refurbishments« is closely aligned with this aspect. Highly environmentally friendly cruise ships are demanded by the industry with diverse incorporated facilities to serve the needs of cruise lines, ports and passengers alike while they have to meet with approval by the law. Nevertheless, a slowdown in orders was present since the financial recession in late 2008. The average number of cruise vessels delivered amounted to 10 ships per year for the past five years, whereas for the next five years the average number of cruise vessel deliveries amounts to only four cruise ships per year, according to recent data. [7] Although new orders might still be placed for the upcoming years, the four leading shipyards for cruise vessel construction, which are all located in Europe, are far from being used to capacity as a slowdown in orders has been present for the past years. Moreover, the emergence of Asian competition in this sector increases the pressure on European shipyards dramatically. It will be interesting to see whether cruise companies and shipbuilders are to reveal innovations and new designs for future cruise ships and onboard experience concepts such as dining or entertainment at the Seatrade conference. Next to potential announcements of new vessels or concepts, the topic of current and future IT services, IT infrastructure and IT equipment will be outlined during the »Hotels at Sea« session. Due to enhanced importance of IT in correspondence to safety and security as well as passenger convenience and operations, this field of interest has gained dramatically in importance.
The overall increase in average ship size, fuel expenses, destination restrictions and competition among cruise lines influences their deployment decisions which further tend to depend upon the availability and suitability of destinations. In recent years the European cruise industry did not solely grow due to a larger number of European cruise passengers, but also due to developments in international markets. The formation of European itineraries by international cruise brands results in growing numbers of cruise ships in European waters. Due to this fact, cruise networks have been established to manage and exchange knowledge on a professional basis. As itinerary planning is a vital factor for the production of a cruise product, this topic correspondingly will be content of the Seatrade Europe Cruise and Rivercruise Convention. Delegates of related fields will discuss factors and forces that influence deployment decisions.
River cruises – a young market with elder customers
In comparison to the ocean cruise fleet, river cruising is mainly concentrated on Europe, Asia, Africa and America. River cruises within Europe are a perfect way to experience the European capitals in a most comfortable way without having to pack and unpack at each destination. Historically, Europe is an interesting continent and strongly but not exclusively in demand by English speaking guests (USA, Australia, UK) to discover the »old world«. The river cruise fleet on European waterways amounts to roughly 220 ships. River cruise lines have ordered 18 river cruise vessels for delivery until 2014, which totals an increase to the fleet of 8,1 %. The average river cruise vessel is 17 years old, 105 m long and 11 m broad. In recent years two categories of ships dominate the new builds on European waterways. Both the 135 m and the 110 m river cruise vessel class seemed to serve cruise lines best in means of usability. According to the dimensions of locks, bridges and the width of rivers, possible variations in ship design are limited. Hence, most river cruise vessels have a maximum beam of 11,4 m. Within the last years, next to the well-established rivers Rhine, Mosel and Danube, new destinations were tested and launched in Europe, most popular the Rhône / Saône in France and the Douro in Portugal. [8]
At this years’ Seatrade Europe conference, a special focus will be given to river cruises by offering a dedicated »River Cruise Day« for conference delegates. The river cruise industry will be represented by its international association, the IG RiverCruise, the professionally organized community of interests within the river cruise industry, which represents about 85 % of the European river cruise market. Although river cruising is an established sector of cruising, structures within this industry are not yet as standardized as in the ocean cruise industry. The Seatrade conference will spread knowledge about this sector and will lay open issues, challenges and chances for river cruise lines, management companies, shipyards and other corresponding service companies. In recent years, the appearance and image of river cruising has changed to a more modern one and now increasingly represents an active way of travelling. Various river cruise lines have established theme cruises and especially bike-cruises to attract a wider range of customers. Referencing numbers of the German cruise market annually conducted by the DRV indicate that river cruise passengers are on average 10 years older than average ocean cruise passengers with 48,4 years of age in 2010. [9]
Corresponding to the stable growth of the cruise sector, Seatrade Europe Cruise and Rivercruise Convention 2011 will give insight into ocean and river cruise vessel financing. The average investment volume of an ocean cruise vessel has amounted to about 390 million € [10] over the last three years. In contrast, European river cruise vessels have an average investment volume of 12–16 million € [11[ per ship. Cruise companies are not necessarily able to finance such amounts by their cash flows. Hence, various financing methods are available in the market. Between 2004 and 200912 there was a lack of medium-size and small cruise vessel deliveries in the ocean cruise market, which now causes a raised demand for these sizes. Moreover, these ship sizes suit alternative financing methods, especially. Diverse fundraising options and, most of all, bank conditions for financing the construction period shall be discussed with several of the industry’s important decision makers, bankers, representatives of issuing houses and financial engineering consultants.
In the course of this year’s convention, not only financing options for cruise vessels, new rules and regulations concerning the environment and safety issues or the general development of the cruise industry will be highlighted, but also the multifaceted topic of port developments in correspondence with today’s cruise evolution. Many cruise lines or ship sizes require port facilities, which are not sufficiently available in each destination. Therefore, investments in this sector will be necessary in the future. Logistically and operationally, larger cruise ships call for larger and more efficient facilities. Handling passengers becomes more complex and space requirements increase. Public funds might not be available in certain destinations, which causes raising interest in private investors here. A session on »Cruise Port Development« will therefore reveal the importance of the relationship between cruise lines and destinations. Furthermore, a session on »Cruise Ship Operations« will focus on fuel optimization, maintenance and dry-docking and take the logistically challenging supply into account.
Challenges to the cruise industry may not apply to all categories of cruise lines and ships. But it is important for the industry to understand and recognize current changes and future challenges alike. The anticipated dialogue between all involved parties connected to the European cruise industry shall help to successfully navigate this industry through future challenges and shall help to recognize emerging opportunities.
Helge Grammerstorf, Miriam Schmenner
