The Changing Face of Luxury
With Regent, Oceania, and Seabourn growing in the future, the face of the luxury category is changing.
Specifically, Seabourn will build a second new luxury ship to be delivered in spring 2018. Like the next Seabourn ship scheduled for delivery in late 2016, Adam Tihany will design the newbuild in its entirety.
Meanwhile, shortly after its purchase of Prestige Cruise Holdings came through, Norwegian Cruise Line Holdings essentially illustrated that they are willing to do with Oceania what they did with Norwegian from the getgo: invest heavily in improving the fleet.
The company is not only spending a reported $82 million to purchase the Ocean Princess, but a further $40 million to overhaul the former R-Class ship into an Oceania-style vessel. The ship, to be renamed Sirena, will then fit in nicely with three other former R-class vessels in Oceania’s fleet: Insignia, Regatta and Nautica.
Factors Driving The Change
Mark Conroy, principal of Mark S. Conroy & Associates, says what’s driving the growth in the upper-end sector is a good economy for the wealthy and aging baby boomers who have a lot of discretionary income.
“The wealthier people are getting more wealthy despite the recession and the number of baby boomers getting to age 65 is growing,” he sums up.
That’s leading to improved results for the upper-end lines. “If you look at the results, they’re quite strong,” says Conroy. “You can’t see Seabourn results within Carnival Corp., but you can assume they’re doing well since they’re ordering new ships.”
Meanwhile, Regent and Oceania continue to fill ships at strong rates which Conroy says leads to their respective brand growth..
“So I think there’s plenty of reason to expand on the luxury side,” he says. “The beauty of the luxury cruise business is it feeds off the premium and contemporary market. Most luxury cruisers are not first time cruisers. So the message becomes not, ‘Will you try a cruise?’ but the easier, ‘Now that you like cruising, here’s what’s different about taking a luxury cruise.'”
New Ships Brighten 2015 Outlook
The most recent expansion by the cruise business is seen by leaders of retail groups as positive for 2015 business and beyond.
For instance, several major agency groups, including Cruise Planners, Expedia CruiseShipCenters, CruiseOne/Cruises Inc., combined conferences with two nights aboard Quantum and all came back raving about how the ship represented something different.
Matthew Eichhorst, President of ExpediaCruiseShipCenters, observes, “Quantum was amazing. We love the new technology and hardware.”
He believes the newest ships positively change the outlook for ’15. “I love the new Regal Princess and that Norwegian continues to reinvent themselves. So we’re bullish over the next three to four years.”
Eichhorst emphasizes the positives won’t be immediate but adds that this business has cycles and seems to be emerging into a more positive time period.
“I’ve been in the industry now for 13 years so I’m not a veteran by any stretch, but there’s been these cycles of all these new ship builds and there’s always a halo effect after all these ships are coming out. We have 4000 agents and giving them interesting things to talk to consumers about is always a good thing.”
Adding Newcomers to Trade, To Cruise
Expedia CruiseShipCenters itself has 150 new locations planned in the next three years.
“We’ll have added 30 this year, plan to add 40 next year and 50 the next year,” reports Eichhorst. “I would say our growth is different [from the past] in the sense of how we’re going to market to get people to join our organization.”
He calls it an aggressive expansion. “We have a dedicated franchising team that awards the franchises as well as starts them up very well at the beginning to set them up for success. So we’ve invested a lot in that area in the last couple of years.”
There’s a certain skew toward first-timers. “We attract people who have never been in the business before, not only our franchise partners but also the 1200 agents that we added this year,” says Eichhorst. “We look for people new to the business and they tend to have a circle of influence that isn’t necessarily cruisers.”
While first-timers are the rage in terms of the trade, it’s still repeat business when it comes to consumers. “In the last 3-4 years the repeat business has been performing better than the first-timer,” he observes. “But I think we’re making progress.”
He credits new pricing promotions with helping entice them: “What Celebrity is doing, what Norwegian is doing, and the other lines with aggressive promotions in the marketplace is attracting a different type of cruiser. Some of the experimentation around all-inclusive may not work 100% of the time, but it is making a positive difference.”
The end result? “We’re having more conversations these days with people that have never been on a cruise that would like to go on one than we’ve had in the last couple of years.”