Cruise Ships Invade Australia

| 07.26.2011

During an Interview with Richard Fain I asked about the tide of Cruise Ships about to relocate to Australia.

Radiance of the Seas is getting dolled up for the hot Australian Market.

As more and more cruise lines plan to deploy more ships to Australia the outcome is anyone's guess. Australia has always had a small but ardent cruise audience, but in the last few years that interest has boomed. Meanwhile the cruise lines are equally interested in Australia, but it has nothing to do with Kangaroos or didgeridoos. The reason is the Aussie dollar, which has become one of the most powerful currencies in the world.

But there is only so much capacity any given market can handle, and the number of berths in Australia is set to nearly double in the next two years. Is it possible the cruises line will saturate the Australian cruise market?

I had a chance to speak privately with Richard Fain, CEO of Royal Caribbean International, about the exodus of ships going to Australia. First I asked him this question...

"Royal Caribbean (International) will have five ships in Australia in 2012; Rhapsody of the Seas, Radiance of the Seas, Celebrity Century, Millennium and Solstice. Doesn't that seem like an awful lot of berths for such a small country?" (All together, that will be roughly 11,000 berths to fill every week).

"Yes, we are afraid the island will sink," he replied jokingly.

"Seriously though," I followed up, "when you consider it is a relatively small population, 25-million people, one-third smaller than California, is it possible to overwhelm the market?" "I guess we will see." He replied. "Keep in mind the flexibility of our product. If something does not work out we can always change our plans and put our ships somewhere else." While true, the disadvantage is that the company also might eat a year of potential profit, but I didn't say that. I asked him this instead...

"We know that other cruise lines are also sending ships there. There is already a strong presence with Princess, P&O and Carnival is sending Carnival Spirit. So, when you are making such plans do you tend to look at the total number of ships going into a new market, or you mostly just concentrate on your own brand?"

He replied, "We really just look at our own brand," meaning the company puts more thought into positioning its own fleet around the world rather than devising a strategy of deployment based on the total number of ships in any given market. I found this answer interesting, since it explains why many cruise lines so often put ships into the same new ports in a given year. Next I asked...

"Do you do this because you have a deep confidence in brand loyalty by your customers - meaning you believe your primary market is loyal Royal Caribbean cruisers who will follow you to new markets?" "No, not necessarily," he replied. "That's part of it, but it isn't the whole story."

This seems to imply that Royal Caribbean hopes their ships will prove to be the most popular in Australia. The line does have beautiful ships. Radiance of the Seas just received a massive facelift with new dining venues previously only found on the brand new Allure of the Seas; Samba's Grill, Giovanni's Table, Park Café, Rita's Cantina and Izumi. The ship also installed a new 3-D movie projection system, an outdoor large screen movie and built a beautiful new Solarium containing several food options.

The Solstice-class of Celebrity ships are also beautiful, but it hasn't gone unnoticed that the ships do not command a premium price even though they are outstanding in design and d�cor. So the question remains - will the Australian cruise market grow fast enough to fill the flood of new ships about to arrive on its shores?

Australia does have a robust cruise audience, according the International Cruise Council of Australia. In 2009 2.9% of Americans cruised, 2.5% of Brits and 1.7% of Australians (425,000 cruises taken) - the third highest percentage in the world, more than Spain, Italy, Germany or France.

As recently as 2009 the number of regular cruise departures out of Australia was limited - From P&O there was the 47,000-ton, 1,900-berth Pacific Sun; and Pacific Dawn and Pacific Jewel, each 70,000-tons and 2,050-berths. Princess Cruises had two ships; Dawn Princess and Sun Princess (77,000-tons), cruising around Australia, to Tasmania, New Zealand, South Pacific islands and on an annual world cruise.

But the real story is that money changes everything - and the rise of the Aussie dollar in the last two years has been spectacular. In 2009 the Aussie Dollar hit a low of about 60-cents vs. the U.S. dollars, but since March, 2009, it has roared to $1.09 U.S. - almost double. To businesses bringing foreign goods that is a gold mine, but the effect is much less apparent to the average Australian. So, while the price of a cruise may remain roughly the same, the cruise lines make a much larger profit when sales in Aussie dollars are converted back to greenbacks.

None of this has gone unnoticed by the ever nimble cruise industry - able to reposition its cruise ships at any time. Here is the how the Australian fleet will look in 2012-13:

  • Royal Caribbean: Rhapsody of the Seas, Radiance of the Seas (4100 berths)
  • Celebrity Cruises: Century, Millennium and Solstice (6550 berths)
  • Princess Cruises: Sea Princess, Dawn Princess, Sun Princess, Diamond Princess and occasional visits by the Ocean Princess. (8500 berths)
  • Holland America will have the Volendam and the Zaandam there in the autumn of 2011. The Oosterdam departs Seattle for Sydney in September of 2012 where it will remain throughout the summer season. (4700 berths)
  • Carnival Spirit is headed there in October of 2012 - meaning there is still time to take the ship to Mexico next winter before it leaves. (2120 berths)
  • P & O Cruises will have four ships continuing to sail from Australia: Pacific Sun, Pacific Dawn, Pacific Pearl and Pacific Jewel (7650 berths).
  • Furthermore - there are a number of smaller lines offering one or more cruises down under; Captain Cook, Classic International, Hapag Lloyd, Oceania, Orion Expedition, Silversea and True North.
Will there be enough demand to fill all of these cruise ships? Australia is a huge land mass, but its total population is only about 25-million people. By contrast, the state of California has 37-million people - 50% more than all of Australia. Somewhat ironically, many of the ships headed to Australia are leaving the California market which has suffered a huge decline since its peak in 2006. In that year the port of Los Angeles alone had over 1.2-million cruise departures, but in 2012 that number will only be 460,000.

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