Quantum of the Seas sets sail in November and could mark the beginning of boom times for the industry. Or forever doom it to a niche vacation option with limited appeal.
A CGI rendering of Royal Caribbean's Quantum of the Seas.
Via Royal Caribbean
On a chilly Wednesday evening in late March, about 200 people gathered in a nondescript brown brick building up the street from the Jacob Javits Center in New York for what was billed as a "dynamic dining" event. Hosted by the Royal Caribbean cruise line, the event brought together travel agents, media, and others to showcase 18 new restaurants — including celebrity chef Jamie Oliver's first aboard a cruise ship — for passengers on the company's new Quantum of the Seas, a roughly 168,000-ton floating village that can carry just under 5,000 passengers and cost an estimated $969 million to build.
Quantum, which will sail out of Cape Liberty in Bayonne, N.J., and make its maiden voyage this November, represents for Royal Caribbean an updated and modernized take on the cruise experience. The vessel is a marvel of engineering, featuring 16 decks, 2,090 staterooms, 30 bumper cars, a rock climbing wall, and even an onboard skydiving simulator, in addition to the pools, casino, spa, and retail shops that are cruise ship staples. Its program — the excursions, entertainment, dining, and onboard activities offered — does away with the rigid scheduling and formality that many negatively associate with the cruise experience and instead gives passengers the flexibility to essentially do what they want when they want. The ship's new restaurant options, for instance, require no set dining time, no assigned seating, and varying dress codes so passengers can be as formal or as casual as they wish. Royal Caribbean, which ranks as the world's second-largest cruise company, even developed a "dynamic dining" app that allows passengers to pick where and when to eat either before departure or when on board, alerting them when the restaurant or reservation time conflicts with something else on their agenda and suggesting alternatives.
Quantum's arrival comes at a critical time for the cruise ship industry, the size of which Goldman Sachs estimates to be about $29 billion annually. Industry trade group Cruise Lines International Association (CLIA) forecasts that 21.7 million people will take a cruise this year, the largest annual total ever, but still a relatively small number that equates to roughly 4% of the traveling public last year. The key to moving cruising from a basically niche vacation option to mainstream adoption is getting new, rather than repeat, passengers. Indeed, growing the overall cruise market depends almost entirely on convincing people who have never been on a cruise before to take one, particularly those in the so-called "millennial generation." Changing cruising's perception among twentysomethings — who currently see it as stuffy, bland, against their DIY ethos, and possibly dangerous — is absolutely critical to its financial future since, to use CLIA's own words in its "State of the Industry 2014" report, "the greatest potential market for first-time cruisers include the 95 million millennials, a group between the ages of 18 to 37 that accounts for $1.3 trillion in consumer spending."
Statistics show that people who have been on a cruise before are roughly five times more likely to take another one. About three-fourths of Royal Caribbean's guests have cruised before, for instance, and more than 25% have sailed with the company previously, one of the highest repeat passenger percentages in the industry. But while the overall 21.7 million people who took a cruise last year seems large, it is only an increase of 400,000 over 2013, which isn't very significant when considering that the industry has added 29 new ships with an excess of 34,000 beds over the last two years.
Underlying the cruise industry's bid to entice new passengers is a sort of contrarian business logic — whereas in most industries demand drives supply, cruise operators believe supply drives demand. Put another way, the more new ships they build, the more people will want to take cruises. If that theory is true, then 2014 should mark the beginning of the boom years for the cruise industry. Between now and 2018, based on CLIA data, 36 new ships with more than 70,000 beds will be added to the industry's global fleet, from traditional cruise liners to smaller ships meant for river-based cruises, which is an emerging and more intimate style of cruise vacation.
"All of us in the industry recognize that the opportunity is to grow the cruise pie," said CLIA President and CEO Christine Duffy. "Cruising as a segment of the travel industry does extremely well once we get people on the ship."
Added Royal Caribbean CEO Richard Fain, "Reaching first time cruisers is a constant challenge. People need to experience a cruise to appreciate it, then they become obnoxious about how good they are. The best marketing we have is word of mouth."
Well, perhaps not lately. When asked about recent negative press coverage of the cruise industry, and how much he hates CNN in particular, Fain just laughed, smiled, and walked away.
Screenshot of CNN's "poop cruise" coverage.
CNN.com / Via situationroom.blogs.cnn.com
Valentine's Day 2013 was a lovely day for CNN, but a shitty one for the cruise industry. Literally.
It was on that day that CNN — one month into the tenure of new CEO Jeff Zucker, who arrived at the network from NBC Universal with a plan to lift it out of the ratings basement among cable news networks by "broadening the definition of news beyond just politics and war" — broke the "poop cruise" story wide open. Over a 24-hour period, CNN devoted 758 broadcast minutes, or 52% of its programming day, to covering the plight of passengers on Carnival's Triumph liner, who at that point had been stranded at sea for five days without working toilets. The coverage was relentless, and relentlessly negative, and though it wasn't a Royal Caribbean ship, the repercussions were felt throughout the entire industry. (CNN has since apparently turned its attention to wall-to-wall airplane disaster coverage.)
"We do realize that everything that happens in the cruise business is probably going to be hyped up by certain media establishments. CNN appeared to take a leadership position in that respect; they obviously felt that was in their interest to do so," said Adam Goldstein, who was recently promoted to president and chief operating officer of Royal Caribbean. "They're a for-profit business, and that was the decision they made. It was unfortunate that the extent of the coverage in fact affected the industry. We recognize that they are looking for every opportunity it would seem to take unfortunate occurrences and make the most out of them from a media standpoint. It's not just CNN, but I think our perception in the industry is that CNN took the most aggressive stance."
While CNN may have gone overboard with its coverage, the network also represents a convenient scapegoat for the industry. The reality is these unfortunate, "one-time, nonrecurring events," as industry executives describe them to investors, have occurred in five of the last six years. These incidents range from engine fires and norovirus outbreaks (vomiting, diarrhea, abdominal pain) to collisions and sinkings. In Senate hearings on "Cruise Industry Oversight" last July, Ross Klein, a sociology professor at Memorial University in Newfoundland and expert on the industry who runs the blog Cruise Junkie, said in written testimony that "between January 2009 and June 2013 there were more than 350 incidents involving mechanical problems or accidents."
Not all of these events receive mainstream media coverage, and most are often rectified quickly and without injury or inconvenience. Networks don't get ratings by covering planes landing safely or boats pulling into port without incident, after all. But the incidents that are covered, like a norovirus outbreak in January on Royal Caribbean's Explorer of the Seas that sickened about 700 people or the 2012 sinking of the Costa Concordia off the coast of Tuscany that killed 32 passengers and injured 64 others, tend to be major and frightening, particularly to people who have never cruised before. Just last week another outbreak of norovirus sickened 83 passengers aboard a Princess Cruises ship.
"The negative publicity in the media is so much beyond the reality of the situation, and people who have never cruised before have certainly been negatively affected by the coverage," said Tom Coiro, owner of travel agency Direct Line Cruises.
He has a point. Last year there were just seven norovirus outbreaks on cruise ships reported to the Centers for Disease Control and Prevention involving a total of 1,238 passengers. For context, that is just 0.006% of all cruise ship passengers in 2013, and magnitudes smaller than the 20 million norovirus cases that originate on land in an average year.
There has also been a steady drumbeat of stories about crimes ranging from burglary to rape onboard ships that has created the impression that cruising is a dangerous and risky vacation, particularly for women. Last year CLIA moved to combat this perception, commissioning a report by Northeastern University criminologist James Alan Fox comparing crime rates at sea from 2010–2012 to those on land. The report, which covered nearly 90% of the ocean-going cruise industry in North America, claimed that 44.8 million passengers cruised during that time and found 74 instances of reported rape, for a rate of 5.9 per 100,000 passengers, and 48 instances of assault with serious bodily injury, for a rate of 3.8 per 100,000 passengers. Based on FBI data over the same period of time, on land the rape rate across cities ranging in size from under 10,000 to over 1 million residents was 27.1 instances per 100,000 people. For aggravated assault, the rate was 248.9 instances per 100,000 people.
"By any measure, travel by sea aboard commercial cruise lines is exceptionally safe in terms of the risks associated with criminal activity," Fox concluded.
Cruise Junkie's Klein, however, said the problem is more pervasive than the industry would have you believe, adding that "it is not good for business to admit there's an issue." His written testimony before the Senate hearings last year included an addendum titled "Sex at Sea: Sexual Crimes Aboard Cruise Ships," that goes into intricate detail about the issues dating as far back as 1998.
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