New liner symbolizes cruise revival

Queen Mary 2 fully booked on maiden voyage

January 13, 2004|By BLOOMBERG NEWS

The Queen Mary 2, the world's biggest ocean liner, set sail on its maiden voyage yesterday with all 2,520 berths filled, a reflection of the increase in demand executives say has been spurred by stronger economic growth.

"Our business is very strong," said Micky Arison, Carnival Corp.'s chief executive, who was aboard the 150,000-ton vessel as it departed Southampton, England, on a six-day voyage to Fort Lauderdale, Fla. "We have been booking at levels higher than our capacity increases since the summer. The geopolitical environment is stronger than it was a year ago."

The industry increased cruise ship capacity 11 percent worldwide last year and will add 8 percent this year, said Timothy Conder, an A.G. Edwards analyst. Carnival, with 72 ships sailing under lines such as Carnival, Holland America and the Queen Mary's Cunard, will increase capacity 18 percent for a second straight year.

About 9.6 million people worldwide took a cruise last year, according to the Cruise Line Industry Association.

This was a far cry from the months after the September 2001 terror attacks. War mobilization, rising unemployment and outbreaks of illnesses on cruise ships had reduced demand for leisure travel and forced price cuts.

Carnival's net-revenue yield, a measure of revenue per available berth, fell 7 percent in the quarter after the attacks. Royal Caribbean Cruises Ltd., the No. 2 cruise-ship operator with 27 vessels, saw revenue yield fall 11 percent.

Prices last year recovered to some degree. Royal Caribbean's fourth-quarter prices for Caribbean trips of seven days or less were about 20 percent higher than a year earlier, wrote Conder, the A.G. Edwards analyst, in a research note. Prices for longer trips rose less than 5 percent, he said.

Higher bookings spurred Carnival's profit in its fiscal third quarter, which ended Aug. 31. Net income rose 47 percent to $734.3 million on higher bookings. Still net revenue yield declined 5.2 percent in the third quarter and an additional 4.6 percent in the fourth.

Arison, Carnival's 54-year-old CEO, said the company's net-revenue yield will rise 2 percent to 4 percent in 2004. Fares for Queen Mary 2's maiden voyage ranged from $4,400 to $48,310.

To attract more of the 85 percent of U.S. travelers who have never taken a cruise, shipping lines are using "drive-to" ports such as Baltimore, said Mark Conroy, president of the Cruise Line Industry Association.

The practice started in 2000 and increased after the Sept. 11 attacks made travelers reluctant to fly to traditional cruise ports, he said.

The $780 million Queen Mary 2, which sports a casino, Canyon Ranch spa and 500-seat planetarium, not to mention a ballroom, basketball court, five swimming pools, 10 dining spots and a crew member for every two passengers, isn't Carnival's only initiative.

The company acquired London-based P&O Princess Cruises PLC last year to gain its mid-priced line and a bigger presence in Europe.

Its lowest-priced Carnival line is spending the most ever this year on television ads to attract first-time cruisers, said Arison, the company's CEO.

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