BUY­ING, SELL­ING, AND CRUIS­ING: NEW AND OLD CRUISE SHIPS IN THE CAR­IB­BEAN

The Star (St. Lucia) - Business Week - - FRONT PAGE - BY ED KENNEDY, STAR BUSINESSWEEK COR­RE­SPON­DENT

It is no pun to say cruise ships are al­ways com­ing and go­ing. Sail­ing from port to port, some­times un­der the com­mand of a small and new op­er­a­tor, but of­ten un­der old and fa­mous flags that can trace their her­itage back decades. Just as the cruise in­dus­try can trace its be­gin­nings all the way back to the mid-1800’s!

Be­cause cruise ships al­ways sail into port with con­fi­dence, glam­our and a glit­ter­ing itin­er­ary of cap­i­tals they will visit, it’s easy to imag­ine for a mo­ment that a cruise line’s busi­ness is per­pet­ual, un­end­ing, and un­chang­ing. That it is al­ways smooth sail­ing, and the ships un­chang­ing from sea to sea. Be­hind the scenes, though, the pic­ture can be very dif­fer­ent.

While a cruise line may main­tain its op­er­a­tions seam­lessly, the ships it uses at the heart of its busi­ness are of­ten be­ing bought new, or sold on to oth­ers. This arena of ex­change is an ‘in­dus­try within an in­dus­try’ and a busi­ness sec­tor that war­rants an in-depth look as the cruise in­dus­try is only set to grow stronger in years ahead. So let’s now look at the buy­ing and sell­ing of cruise ships.

THE LIFE, DEATH, AND RES­UR­REC­TION OF A CRUISE SHIP

When a cruise ship is launched for the first time it is al­ways a huge af­fair. When done prop­erly, its maiden voy­age can be a party to end all par­ties, one that pas­sen­gers still talk about years later.

Names like the Queen Mary, the QE2, and even the Love Boat AKA Is­land Princess have not only been iconic ves­sels but found their way into pop cul­ture his­tory. Just the same as no men­tion of cruise ships in pop cul­ture can fail to list the Ti­tanic and its epic story of dis­as­ter.

But most cruise ships are not like the Queen Mary (or thank­fully) the Ti­tanic. Many of them are con­stucted, have a pe­riod of ser­vice and then, for what­ever rea­son, find their own­ers no longer have use for them in the same way. So what hap­pens when a cruise ship leaves its first ser­vice?

Com­monly they are handed down from a top tier cruise provider to a bud­get-fo­cused one. There­after, the old cruiser may find ser­vice with an NGO or even as a car ferry. The many uses of Car­ni­val’s for­mer ships Trop­i­cale and Ju­bilee af­ter their ini­tial run of ser­vice is il­lus­tra­tive of this. But there is one par­tic­u­lar group that’s made es­pe­cially no­table in­roads in this sphere lately.

TUI CHARTS ITS COURSE

The An­glo-Ger­man tourism com­pany Tui bills it­self as the big­gest travel group in the world. Col­lec­tively, the Tui Group has five air­lines, over 300 ho­tels, 67,000 em­ploy­ees and op­er­ates in over 130 coun­tries with its 2017 an­nual re­port de­tail­ing 18.5 bil­lion Eu­ros in rev­enue over the year prior.

All of this is un­doubt­edly im­pres­sive, yet it’s Tui’s most re­cent ven­tures in the cruise sec­tor that rep­re­sent such an in­ter­est­ing new chap­ter for its busi­ness, and the Car­ib­bean re­gion it op­er­ates in. Presently the group has 16 cruise ships sail­ing in its fleet, and its re­cent moves in this space pro­vide a great in­sight into the com­ings and go­ings of cruise ships on the mar­ket.

It’s now ex­pected that Tui will have 18 ships by 2023. It has pur­sued its strat­egy to be­come a heavy­weight in the cruise in­dus­try by not only com­mis­sion­ing new ships like the Mein Schiff 1 and 2, but also by ac­quir­ing the sole own­er­ship of the Golden Era thanks to the end of a joint ven­ture with SkySea, and by the pur­chas­ing of the Leg­end of the Seas by Royal Car­ib­bean.

The cruise in­dus­try is a grow­ing one, and it can be said this is just good busi­ness for Tui. But for those in the Car­ib­bean watch­ing with a view to the next ship in port – and what it may mean for busi­ness lo­cally – the ex­pan­sion of Tui can be seen as il­lus­tra­tive of the growth in the cruise sec­tor as a whole. Yet this growth shouldn’t be re­garded as to­tally ab­so­lute or un­stop­pable lo­cally.

THE EVO­LU­TION OF THE CRUISE IN­DUS­TRY

Be­yond the busi­ness of buy­ing and sell­ing cruise ships alone, there are short-term and long-term trends emerg­ing in this sec­tor. The rise of the Asian re­gion as an eco­nomic pow­er­house is set to see greater pur­chas­ing power and dis­posal in­come grow across its res­i­dents.

That means an uptick in cruises in Asia and be­yond it. Just as cruise providers iden­tify an op­por­tu­nity to ex­pand here – and can look to Asia-only tours that meet this de­mand with­out chang­ing op­er­a­tions else­where – it’s also clear that some of the pros of this trend (more tourists from Asia vis­it­ing the Car­ib­bean and cruis­ing) will also bring a greater com­pe­ti­tion in some

While a cruise line may main­tain its op­er­a­tions seam­lessly, the ships it uses at the heart of its busi­ness are of­ten be­ing bought new, or sold on to oth­ers

ar­eas.

Sim­i­larly, the way in which younger gen­er­a­tions travel will pose new chal­lenges for cruis­ing long-term.

Stats show many younger trav­ellers of­ten seek a short and lux­u­ri­ous trip, such as a week­end get­away at a 5-star re­sort, over a longer one that’ll see them away for a month. The rea­sons for this can vary – whether its re­luc­tance to use all their va­ca­tion days in one go, less dis­pos­able in­come, or other fac­tors – but it means that as gen­er­a­tions shift, the ap­peal of in­ter­con­ti­nen­tal cruises may be tested.

Be­yond this, there is also the rise of dig­i­tal con­tent, as vir­tual re­al­ity and aug­mented re­al­ity (as seen in 2016’s hugely pop­u­lar smash hit game Poké­mon GO) come to the fore. There’s no sug­ges­tion here that emerg­ing tech like this could ever out­right re­place the feel­ing of ar­riv­ing on a cruise ship on a sunny day at Pointe Seraphine here in Saint Lu­cia, just in­stead that cruise providers will need to con­sider how to best in­tro­duce the new tech in a way that does not sim­ply ig­nore it, but em­braces it, and sees it en­hance the cruis­ing ex­pe­ri­ence.

SAIL­ING WITH THE WIND

The buy­ing and sell­ing of cruise ships is not a new process. But within the con­text of a time of great change not only for the cruise in­dus­try but the Car­ib­bean as a whole, the ‘in­dus­try within an in­dus­try’ of­fers us a glimpse of where its ma­jor play­ers iden­tify fu­ture growth trends, and com­mer­cial op­por­tu­ni­ties.

A greater un­der­stand­ing of this can ben­e­fit not only the cruise ship in­dus­try, but the wider tourism sec­tor in the re­gion. Just as the sell­ing on of cruise ships and the buy­ing of them by other providers can not only help sus­tain ex­ist­ing routes and re­lated busi­nesses, but build them stronger as an old boat gets a new lease of life. Lo­cal busi­ness that can build on the growth of the cruise in­dus­try will surely wel­come ev­ery ship to port, whether on its first voy­age or its 1000th.

TUI Group’s Cruises seg­ment is one of the Group’s strong growth pil­lars. Due to the con­tin­ued in­crease in de­mand, the world’s num­ber one tourism group is plan­ning to ex­pand the seg­ment by an ad­di­tional new­build of the Mein Schiff fleet. A ves­sel of iden­ti­cal de­sign to the new Mein Schiff 1 and Mein Schiff 2 with a ca­pac­ity for up to 2,894 pas­sen­gers will be built at the Fin­nish Meyer Turku ship­yard

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