A year and a half before the Carnival Spirit made its October debut in Australia, where it is now based year-round, a team of marketing pros was mulling what it would take to adapt America's "fun ship" for the land Down Under.
Re-work the menus and wine lists, for one; brew better coffee, for another. Then add more activities for the whole family, swap out machines in the casino, and ditch the American comedy routines, which just don't translate.
"We call it Aussification," said Terry Thornton, senior vice president for itinerary development and revenue planning at Carnival Cruise Lines. Last fall, the Miami-based line introduced the 2,124-passenger ship -- the largest to home port in Australia -- with the intention of filling just about all those berths with locals.
Among the foreign ports and tourism groups seeking to expand visitor numbers is the Hong Kong Tourism Board, which is spreading the word about the new $1 billion Cruise Terminal at Kai Tak, designed by Lord Norman Foster, that opens in June.
Bill Flora, U.S. director for the board, said the destination is eager to spread the word about the new terminal, which will be able to accommodate two 5,400-passenger ships at once when it is fully open next year, to cruise line executives and itinerary planners. Flora said the demand to cruise from Hong Kong has been greater than capacity, but that will soon change.
"Cruising is a growth market overall, and it especially has monstrous potential when you consider China as a source market for cruising in the future," Flora said. "Because Hong Kong is the cruise hub of Asia and so close to mainland China, it will be a perfect opportunity for us to be able to enjoy some of that upcoming growth."
China's development and Carnival's move into Australia illustrate how the world's largest cruise lines are increasingly biting off bigger pieces of the planet. This year, the luxury Seabourn line is heading to Antarctica for the first time, with five days of landings planned on each of four 20-plus day trips. It's an itinerary that is requiring Seabourn to add Zodiac inflatable boats for the landings, said President Rick Meadows, as well as expedition leaders and even photographers to coach passengers on getting the best shot.
"One of the things that we pay close attention to is our guests and where they tell us they want to go," Meadows said. "We have heard 'Antarctica' for years."
Asia is on most lines' must-visit list, with Azamara Club Cruises making its first call on Myanmar, SeaDream Yacht Club venturing for the first time into Asian ports from Sri Lanka to Hong Kong, and Holland America Line recently announcing it will increase its capacity in Asia with two ships for the 2013-14 season.
Celebrity Cruises just announced its "world tour" for 2014-15, which includes sailings to ports on all seven continents. And the luxury Silversea Cruises, which is based in Monaco but has U.S. headquarters in Fort Lauderdale, Fla., is launching Silver Galapagos in the Galapagos Islands in September.
According to the Cruise Lines International Association, deployment of the 26 North America member lines since 2008 has increased 155 percent in Australia, New Zealand and neighboring islands; 302 percent in Asia; 49 percent in the Mediterranean; 57 percent in other parts of Europe and 57 percent in South America. Meanwhile, capacity in the Caribbean has increased just 33 percent and in Alaska, it has dropped by 5 percent in the past five years.
And for U.S.-based operators that have long catered to North Americans, the experiences abroad are providing an education in globalization -- and risk management.
"The world is a big place and stuff happens, so you never know when you're in the right or the wrong area," said Larry Pimentel, a longtime cruise industry executive who heads up the boutique Azamara Club Cruises line for Royal Caribbean Cruises Ltd. "You never know when more domestic itineraries are a blessing or it's the year when everyone wants to go to the place where you're not."
Last year provided a double whammy of an example in Europe, where North American lines have been increasing deployment: First, the Costa Concordia struck rock and capsized in Italian waters in January, sending demand and cruise fares in the region plummeting. Then European economies started tanking, pulling down profits in the region.
The year before, unrest related to the Arab Spring in the Middle East and North Africa forced cruise operators to change hundreds of sailings at great cost -- bad news for Africa, which gets few ocean cruise visitors outside of Egypt, Tunisia and occasional long voyages. Also in 2011, the earthquake and tsunami in Japan disrupted scheduled sailings to the region.
For Royal Caribbean International, which was about to start the year's cruises to Japan, the disaster meant that sailings to the country that had been booked years earlier had to be abandoned and the company had to scramble to sell voyages from Singapore.
"By diversifying where the ships go and where we source, inevitably there's a greater chance that something happening in the world will affect us somewhat -- and lesser chance that it will affect us a lot," said Adam Goldstein, president and CEO of Royal Caribbean International. "That is a reality that we understand, and so we try to be as prepared as we can be and still we have to expect the unexpected. If we have to adjust itineraries, one of the great attributes of our industry is that we can move the ships. It's not necessarily painless."
Goldstein said that the brand he oversees has been sailing in Europe and Asia for the past 20 years, but with a different goal in mind initially.
"The intent of those programs was to take Americans on increasingly far-flung cruises. And while we still do that and we still like to do that ... there's been a profound evolution," he said. "And now the majority of our customers on cruises outside of North America are from the local markets where the ships are based."
Royal Caribbean opened offices to focus on local markets in China and Australia in December 2008 and in Brazil the following August, a market Goldstein said requires the line to offer "a party 24/7, music and dancing in and outside at virtually all hours of the day and night."
Today's strategy can be traced in part to the aftermath of the Sept. 11 terrorist attack in 2001, when Americans were spooked by air travel and cruise lines realized they were too heavily reliant on American passengers, said Teijo Niemela, editor and publisher of the Cruise Business Review.
"I would say that probably the most vulnerable was the Caribbean, the North America-based source market," Niemela said. "They needed to put the eggs in more baskets."
The baskets that are getting the most attention from North American lines these days are Australia, Brazil and especially Asia, though they still make up a fraction of global deployment. Dubai, where Royal Caribbean International started sailing in 2010, appears to have fizzled; the line is exiting the emirate after this spring because, a spokesman said, "we need to deploy our 22 ships to new and emerging, as well as other established regions around the world that can help drive the best returns for our company."
Europe is still a heavy deployment area, but cruise lines are realizing it is not the moneymaker they hoped when they started shifting additional ships there several years ago.
"At the time you had a lot of fast-growing economies in Europe, you had Spain, Germany," said Tony Peisley, a London-based cruise industry analyst and author. "I think part of it was they could see the way the wind was going with airfares."
While cruise lines would not reveal what kind of investment goes into establishing a new source market, Peisley said it is a multimillion-dollar endeavor that varies depending on the location and how developed the infrastructure is.
The downside to that kind of expansion, Peisley said, is now evident as Spain's economy has faltered along with much of southern Europe. Those woes, he pointed out, "just about wiped out Royal Caribbean's profits last year" after the parent company took a nearly $414 million write-down on its Spanish-focused Pullmantur brand.
Peisley said cruise lines are reacting, moving capacity back to North America from Europe.
"They got too many ships in anyway probably too quickly, and that's happening in Australia already," he warned.
In addition to entering the Australian market last year -- with sailings not even listed on its American website -- Carnival is marketing aggressively in the UK to attract residents to European cruises. Carnival Cruise Lines will have two ships in Europe this summer, though it scaled back the schedule for one of them. Royal Caribbean Cruises said in an earnings call last month that Europe would make up 27 percent of capacity for 2013, a 10 percent decrease, while Asia-Pacific voyages would increase 45 percent to make up 10 percent of capacity.
"It's particularly interesting to note how well both Australia and China have held up," Royal Caribbean Cruises Chairman and CEO Richard Fain said during the call, noting that yields in both destinations were expected to remain steady or tick up despite the addition of capacity and a dispute between Japan and China over islands in the East China Sea that has already forced changes to many port calls.
Australia and Asia will account for 10 percent of capacity as well for Carnival Corp., the world's largest cruise ship company with 101 ships spread across 10 brands. California-based Princess Cruises, a premium line that will have 17 ships by this summer, is launching a full season of itineraries from Japan in April with the 2,022-passenger Sun Princess. The line has already announced it will add the 2,670-passenger Diamond Princess in 2014 and depart from three ports, including Otaru, which is new to the industry.
With the help of a Carnival Corp. team based in Japan and market research, Princess Cruises expects passengers from around the world but has designed the voyages specifically to appeal to Japanese markets, basing itineraries around cultural festivals and incorporating traditional ceremonies into the sailing experience.
Key crew members will speak Japanese, and the dining room will include sushi offerings as well as Japanese breakfast, noodle bar, sake menu and regional tea tastings. The line is keeping its signature Princess features, including a variety of food and entertainment options, open-air movies by the pool and the quiet Sanctuary area.
Jan Swartz, executive vice president of sales, marketing and customer service for Princess Cruises, said the champagne waterfall that frequent Princess guests will remember will be joined by a traditional sake barrel opening ceremony called a kagamiwari.
"It's a beautiful juxtaposition of all the things that Princess brings to passengers, but also is a nod to the country that we're sailing from and their traditions as well," Swartz said.
Later this year, Royal Caribbean will also have its largest deployment yet in Asia, with two 3,114-passenger ships sailing from Singapore, Shanghai and Tianjin. Goldstein said the Chinese deployments must have crew members, entertainers and tour guides who speak Mandarin, and a balance of new foods as well as traditional Chinese comfort food.
"It is certainly a more complicated undertaking than if we were just taking Americans in English to all parts of the world," Goldstein said. "But that's not really what our business and the modern cruise industry is about."
Still, North Americans remain crucial to the industry. According to the Cruise Lines International Association, U.S. passengers made up more than 56 percent of cruisers in 2011; second place went to the United Kingdom, with just over 9 percent of the total.
Miami-based Norwegian Cruise Line has four ships in Europe this summer, but President and CEO Kevin Sheehan said the company is trying to get as many Americans as possible on board.
"Europeans don't spend on the shore excursions as much as Americans," he said. "They don't spend the same way in the casino."
Sheehan said costly airfare from the U.S. to Europe complicated efforts to lure more Americans last year, a common wrinkle that can discourage cruising abroad, especially when plane tickets cost more than a week at sea.
To erase that hurdle, some lines have turned to packages offering free airfare when customers book a cruise. That's the standard for Regent Seven Seas Cruises and Oceania Cruises, Miami-based lines owned by Prestige Cruise Holdings.
"We believe that that offer works because air, quite frankly, is a major hassle," said Kunal Kamlani, president of both brands. "Prices tend to increase; air taxes tend to increase."
Making it easier for guests to reach ships is key for Regent and Oceania, which draw the vast majority of customers from North America to destinations around the world.
"In the last year or year-and-a-half, the bias seems to be more towards international; we've got a slightly different view," Kamlani said. "We're getting great growth internationally, but we think our bread and butter is North America."
Although the two-ship Azamara Club Cruises line caters to a majority of North American guests, those still make up less than half of passengers on any given cruise. But because of the brand's upmarket niche, even foreign travelers are comfortable with an English product, Pimentel said. Even so, the company features entertainment that appeals to broad audiences, daily news in more than 20 languages and culinary choices designed for an international mix.
For 2014, the famously destination-intensive brand is even offering some cruises in California's wine country geared especially to Australian and European guests.
"I think we will see a lot of people who are not Americans on that segment," Pimentel said.
As the customer base has expanded outside the U.S., so have the efforts of the Cruise Lines International Association, or CLIA, which represents cruise lines and travel agents. The trade organization announced in December that nine industry associations around the world were joining forces under the CLIA umbrella.
While working with travel agents abroad to make sure they are equipped to sell cruises, CLIA President and CEO Christine Duffy said the association is also focused on working on safety and security globally.
"That's why it was important to say that there was one unified structure, to say that there is one industry with one voice," she said.
At least for now, that industry appears to be focused on how best to tap the growing middle class in China and Japan. North American cruise lines that aren't in the region yet are pondering how best to start, while letting their forerunners explore the market.
Peisley said he believes cruise lines that really want to appeal to markets within Asia will need to build ships for that purpose, focusing less on bars and sun decks that are unlikely to appeal to local passengers and more on food and entertainment.
Carnival Cruise Lines' Thornton said the line can learn a lot from Italian sister brand Costa Cruises, which has been sailing in Asia for years. The American brand is studying which markets and deployments would be best to tackle initially. "The challenges are (that) Asia's obviously a huge geographic area and there are very distinctive source markets within Asia -- and all of them would require a sizeable market investment to start a brand," he said.
Norwegian Cruise Line, with majority shareholder Genting Hong Kong already based in China, also has an eye on eventually moving into the market. But he said there's no rush.
"Let's see how the market continues to develop and when it's more seasoned and not so much of a risk, we'll waltz in there," he said.
With only 11 ships now and two more coming by 2014, Sheehan said the priority now is making sure each of the ships sails in a market where the line is comfortable.
"I don't want to take any unnecessary risk with the business as it is at this level," Sheehan said. "If I had 100 ships, I could take a lot of risk."
For a giant cruise company such as Carnival Corp., experimenting with emerging markets is a small gamble, said Jaime Katz, equity analyst for Morningstar in Chicago.
"I think by putting one or two ships in a new market, you're not really rolling the dice," Katz said. "It could be a home run; it could be an absolute disaster. But at the end of the day, you have to get your feet wet in a new market and see if it holds up."
EMERGING SOURCE MARKETS
--Brazil: The 1,804-passenger Splendour of the Seas from Royal Caribbean sails seasonally from Sao Paulo catering to Brazilians.
--Mediterranean: Multiple North American lines have increased their presence in the Mediterranean in recent years, intensifying efforts to fill ships with Europeans.
--Shanghai: Royal Caribbean will send two 3,114-passenger ships to Asia this year, sailing from Singapore, Shanghai and Tianjin with a majority of local passengers.
--Tokyo: Princess Cruises starts a season of sailing from two ports in Japan in April with the 1,990-passenger Sun Princess; the line will add another port and a larger ship, Dawn Princess, in 2014.
--Australia: Carnival Cruise Lines stationed the 2,124-passenger Carnival Spirit in Sydney year-round with a goal of sourcing the ship entirely with Australians. Other lines including Princess and Royal Caribbean have capacity in Australia.
A GLOBAL INDUSTRY:
The North American cruise industry has most of its ships deployed in the Caribbean and in waters around Europe. Here's how global deployment stands for the 26 member lines of Cruise Lines International Association-North America:
--Alaska: 4.8 percent
--Caribbean: 34.4 percent
--South America: 3.9 percent
--Mediterranean: 21.7 percent
--Europe (excluding Mediterranean): 10.9 percent
--Asia: 3.4 percent
--Australia, New Zealand and surrounding islands: 5 percent
--Other markets: 15.8 percent
SOURCE: Cruise Lines International Association
By Hannah Sampson
The Miami Herald