What is interporting? It is the practice of taking on new passengers in various ports of call along the cruise itinerary. What used to be a singular beginning and ending for all of the passengers on a given cruise itinerary will now be more like a train or hotel where the faces change every couple of days.

For example, a cruise that begins in Barcelona and stops in Marseille and Rome before it is returns to Barcelona will now pick up passengers in Marseille and Rome and keep those passengers onboard until the ship returns to the same port.

This is a very new concept for the mainstream American cruise fleet, although it has been pretty common in Europe for awhile now. Still, I don’t like the idea personally. It is also interesting that the two lines now announcing it are not in the Carnival Corp. family.

Norwegian cruise lines just announced it will start interporting on Norwegian Epic in the 2013 summer season. You will be able to board the ship and Barcelona, Marseille or Rome and stay onboard for seven days. Each passenger will receive a lifeboat drill within a few hours of arrival and before the ship sets sail, according to the new worldwide CLIA policy, which means each passenger will attend one drill and endure the distraction while other passengers have their own drills days later.

Royal Caribbean also announced interporting on its 2,100-passenger Brilliance of the Seas. The ship will embark passengers in Puerto Rico on a series of seven-night Southern Caribbean cruises during the 2012-13 winter season, and also embark and disembark others in Guadeloupe on day four of the cruise. The idea here is to have American and Canadian passengers sailing round trip San Juan and South American cruisers sailing roundtrip from the island of Guadeloupe a few days later.

Actually, I don’t understand exactly why South Americans should prefer Guadeloupe over San Juan since the distance from Caracas to Puerto Rico is about the same as it is to Guadeloupe. Plus, the native language in Puerto Rico is Spanish just as it is in Venezuela, while Guadeloupe is a French-speaking island. They will still have to go through U.S. immigration when the ship hits San Juan, as far as I know, anyway.

So, now we have more ships doing interporting as a regular practice. This means that when you board Brilliance of the Seas in Puerto Rico it will already be inhabited by hundreds of South Americans already half-way though their cruise. Restaurants and spa appointments will already be booked by those onboard before you arrive.

In addition, the South Americans will experience a new influx of passengers in Puerto Rico in the middle of their cruise. And in their case the “English-speaking people” will have already booked up the first half of their cruise with restaurant and spa reservations.

Interporting breaks up the continuity of a cruise. Those cruise rituals we cruisers have come to know and love; the welcome aboard party where new passengers meet the captain and chef, and the farewell celebration towards the end of the cruise will most likely disappear. Otherwise they will become all but meaningless. Embarkation and disembarkation as a procedure will go more quickly with fewer people, but it could also lead to complications for visitors not disembarking in a given port.

I find it interesting that CLIA would make the announcement that muster drill is now mandatory before a ship sets sail to address a problem specifically created by the practice of interporting, only to see cruise lines announce within a few days an increase in the number of cruises where interporting takes place. It seems more logical that the Concordia accident would have compelled the cruise industry to end to the practice.

That’s just the way it is sometimes, but wouldn’t have made sense to at least let the Concordia news die down a little bit before announcing the increase in interporting? I am guessing that the cruise lines have wanted to do this for quite awhile now, but held back due to complications around scheduling muster drills. But now that CLIA has gotten all cruise lines to agree to hold all muster drills the same day they see it as a green light to use interporting as much as they want.

So, who is the winner in any of this? The cruise lines will make more money and it will be more convenient for some people to embark closer to home, but I think it will make the cruise experience far less personal and more like a floating hotel. The biggest losers will definitely be the crewmembers who now have to spend far more time loading and unloading passengers and hosting three life boat drills per cruise.

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I have little doubt that the excitement of the debut of the Oasis will receive unprecedented media coverage; filled with glowing adjectives about the never before seen innovations, and the truly remarkable technology and design features which will adorn the largest cruise ship ever built. And in many ways it will be justifiably earned. I’m also quite certain this ship will be a huge hit for Royal Caribbean, and for quite some time garner higher demand for bookings, and higher fares than other ships in the Royal Caribbean family, and indeed competitor’s ships, new or old.

Oasis wasn’t built just slightly larger than the presently largest ship in the world, she’s almost a half again as large as the largest cruise ship presently at sea. Also, she isn’t going to be just a larger version of the same ships which came before her. She will be jam-packed with features never before seen on cruise ships. You can read about many of them here…
CruiseMates Oasis of the Seas Article Compendium

There are some concerns voiced that a ship this size will overrun the islands she visits on port calls because of the shear volume of passengers she carries. Frankly, I don’t see that being a problem. There is going to be so much to see and do on this ship on a seven day cruise that I envision a great number of people who sail her not getting off the ship at all during port visits. And that is where some of my concerns about her impact on the industry begins.

With all she is going to be will Oasis simply be a resort, which happens to be on water, rather than on land?

For some time the cruise industry has seen land based resorts and all-inclusive as their primary competitor for people’s vacation dollars. Over the last decade all of the cruise lines have been adding features which they believe help them to compete with that land based market. Such things as additional dining choices (along with flexible dining times), increasing choices for entertainment and shipboard activities, variety in stateroom plans and choices, and doing away with the traditionally more restrictive dress requirements cruise ships used to adhere to, have become common on all new ships from all the cruise lines… all in an effort to compete with land based vacation options.

Like most people I’ve appreciated many of the changes I’ve mentioned above. I enjoy the additional options and amenities. Yet, I do have to wonder if the Oasis won’t take this that step too far; a step that may change the industry as we know it.

I worry that Oasis, and her sister Allure currently under construction, will become the template for the cruise industry. Will the other cruise lines within the mass market cruise industry feel they have to go down the same road to compete with the sure success of the Oasis of the Seas?

In my mind I still see a cruise as holding a bit of sense of mystery and adventure. I’d be rather disconcerted if down the road that feeling dissipates and I start looking at them as nothing more than amusement parks at sea.

Will the Oasis of the Seas be a boon to the industry; a boost it needs in tough economic times, or will it set in motion a change in the industry that we’ll someday regret?

I admit it will take a long time before these types of ships begin to dominate the industry. But a decade goes by surprisingly quickly. Will we soon see the cruise industry as nothing more than a sea full of floating resorts, where the best thing about them is seen as a choice where you never want or need to get off the ship? If that turns out to be the case, they could save fuel and just remain tied up at the pier. At least that would lower the cost of the “cruise”.

- A View From the Kuki Side of Cruising -

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1. Oasis of the Seas? Kuki is ALL WET!
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Before I start this editorial I want to give full disclosure; I am currently a shareholder of Royal Caribbean stock and the editor of this web site where Royal Caribbean is a sponsor. However, I do not work for Royal Caribbean and I bought the stock with my own money – it was not given to me as a perk. This is not a recommendation to buy any stock *, it is just a personal opinion of recent events.

My esteemed colleague (giving him all the deference he would receive in British Parliament), Kuki, wrote a piece on Wednesday in which he points out all the recent policy changes Royal Caribbean has made, which in the context of the current economy he contends are boneheaded and damaging to the company’s reputation.

I love a cruise enthusiast, and so does the cruise industry, these days most ships are filled by at least 60% repeat cruisers. But I have a different view and I contend only an avid cruise enthusiast like Kuki, or a Wall Street analyst, would put Royal Caribbean under the microscope as he has done. I congratulate Kuki for being a very discriminating shopper, but I want to address Royal Caribbean’s recent moves one at a time.

Kuki’s list of recent Royal Caribbean missteps appears as a tempest in a teapot to me. I believe these transgressions will go largely unnoticed except by the most avid cruise line watchers. Meanwhile, the story of Royal Caribbean running the newest, most innovative and exciting cruise ships in the world is about to ferociously dominate the cruise news cycle – as soon as Oasis of the Seas is unleashed on the travel world.

But let’s look at the current state of Royal Caribbean. The main thread of recent announcements is that RCL is charging more for some things, and reducing what it gives away for free. Why is Royal Caribbean now taking things back? In its first years, in assessing the almost miraculous success of Carnival Cruise Lines, RCL noticed Carnival didn’t supply its customers with much beyond towels, sheets and perhaps a bar of soap. So, RCL decided to become the cruise line that gave more.

Early customers received a full basket of cosmetic products, fruit bowls, ice buckets, fresh flowers and gifts at bedtime. For many years, RCL successfully tagged Carnival as “The K-Mart of Cruise Lines,” by making their passengers feel more special on Royal Caribbean ships.

But time moves on.

Today, Carnival has cunningly figured out a way to give each guest a “starter kit” of bathroom amenities in a basket of free samples supplied to them by the soap and notions makers. They installed body wash and shampoo dispensers in the showers. The is a great example of how cunning Carnival can be as a competitor.

Meanwhile, Royal Caribbean realized what it was giving away was costing them more than necessary, so over the years it has scaled back, but not as much.

As we learned from the Peter Greenberg CNBC special, onboard revenue is the differential that puts a cruise into profit-making territory. Every cruise line lives by onboard revenue. The Royal Caribbean moves are meant to increase onboard revenue, hopefully without hurting the sensibility of its customer base.

Here are Kuki’s complaints – and why they don’t matter to me:

Richard Fain’s proclamation of no deep discounting.

CEO Richard Fain recently made a statement that he would prefer not to lower Royal Caribbean’s cruise prices because it takes so long to get them back up again. I agree with him, but I don’t actually believe he means it. I have seen Royal Caribbean discounting. Perhaps not as much as other lines’ deep discounts, but in those cases it is possible that they don’t need to discount as much.

In normal practice, every cruise line lowers its rates as much as it takes to fill its ships. But watching the daily strategy of cruise line CEOs can be very entertaining. Quite possibly, Fain’s comments were nothing more than a head fake to the other cruise lines.

Carnival has been discounting, and its last quarter’s earnings surprised to the upside by a large amount, at $.33 per share vs. $30 last year; beating analyst expectations of $.19 per share. In a regular market that might be considered a blowout quarter, far better than expected. However, Carnival and Royal Caribbean both lowered earnings estimates going forward, something many companies have done lately. In truth, no one knows where this economy is going and it is always better to surprise to the upside than the downside.

The cruise industry is amazingly homogenous, rarely do you see one cruise line doing remarkably well while the competition is struggling. This is because every line keeps close tabs on the competition – adjusting pricing and special offers accordingly.

When Royal Caribbean announced they would prefer not to lower cruise fares it meant three things:

1) They still would drop them, they just weren’t happy about it.
2) They would not drop them as much as their competitors (Princess and NCL are under $380 in Alaska) possibly because they do not have to. I do not believe the part about not caring if they fill their ships. Every cruise line still needs to fill its ships.
3) Travel agents, who sell 90% of cruises, stand to make more selling the average Royal Caribbean cruise as long as the fares remain higher than the competition, giving them an edge in the important sales channel.

- the cessation of dividends paid to shareholders.
Obviously, this only affects shareholders. OK, it was bad for value shareholders, but anyone looking for dividends isn’t in leisure stocks. It was a good move if you are looking for higher earnings. It was amazing how much this move hurt both stocks, as if the dividend was ever a reason to buy them.

The stock price of RCL has dropped from its high of over $50/share two years ago to about $9/share today. I am not an analyst, but I can tell you the “opinions” by analysts as to how Royal Caribbean will do this quarter and in 2009 are all over the place. Some have said their stock is going to $1, some have said it will go higher than the current level.

Kuki notes Royal Caribbean “Reducing shareholder benefits” when those owning a minimum of 100 shares were able to receive a shipboard credit, they are still able to, but it is no longer combinable with other onboard credit offers, general loyalty offers, “dollars off” promotions and savings certificates. Guests have the option to choose between the shareholder benefit or the other offer.”

This is a “remains to be seen situation,” since the conditions are vague, but this is not enough to disenfranchise the average cruiser and it does not change the onboard experience. The credit is still there for those who care, they just have to be more careful when shopping. I chalk this up to the media. I recommended people should try this, and it looks like they did.

Kuki cites $3.95 Room service fees for room service orders after Midnight.

I agree this is a bad PR move. Like the others it is meant to make a difference in “yield” – the amount of profit per passenger per day. But this makes them look cheap and “nickel and diming” is a bad reputation for a cruise line. I doubt it will change anyone’s mind about a Royal Caribbean cruise, but they could have found a less controversial way to deal with wee-hour room service issues.

Kuki notes “a price increase for Johnny Rockets Diners onboard – to $4.95 per guest”

So it now costs a dollar more than it did. The line to get in was snaking down the deck. Who would have ever guessed Johnny Rockets would be such a hit on a cruise ship? Good for them, they are able to raise the price. I wasn’t even aware of this one.

$14.95 for a “better quality” steak in the Dining Room

I have no idea how this is working out, but I guess it adds a few hundred dollars per cruise. Was it worth the public relations tarnishing? No, it makes the regular steaks look bad by comparison. Carnival offers a delicious flat iron steak on the menu nightly. Still, only the most rabid cruise fans are going to notice this and no one is required to pay the $14.95.

Kuki cites, “A $7.95 charge for a children’s lunch and play program for those ages 3-11.” I have no comment here because I don’t have kids and don’t know how this compares. I can tell you this, kids LOVE Royal Caribbean ships. It’s the only cruise line that rates as high as Disney for children’s programs and fun factor.

Kuki notes that many of the recent announcements involve changed amenities for people in its loyalty program, the Crown & Anchor Society. First is “no longer offering complimentary cocktails at the Crown & Anchor repeaters party” This affects the “Crown & Anchor Society” members who cruise repeatedly to earn these loyalty points. However, as a shareholder I am thinking, “if they have so many loyal cruisers they feel they can cut this amenity without losing (m)any of them, they are very confident in their loyalty cruiser base.”

Another reduction of benefits to the most loyal members is no longer allowing “Diamond members” of the program (those with more than 9 cruises) access to their Concierge Lounges.

Free drinks in the Concierge lounge will continue for Diamond+ members, suite guests and upon the Freedom and Oasis-class ships. Loyalty-club members now have a reason to prefer the newest, biggest and most exciting Royal Caribbean ships. They also have a new reason to try for the next level in the program.

Kuki notes RCL now “reserves sun-loungers by the main pool for Suite guests only, as well as seats in the theatres and Studio B for ice shows (where applicable)- which naturally means restricting access for those who are not Suite guests.”

In fact, RCL is one of the first cruise lines to do this and it is one of the most commonly mentioned perks that suite passengers and loyalty cruisers want, but most cruise lines do not give to them. I think it is perfectly acceptable. If they choose not to use them the ship can give the seats to other guests.

Yes, I hear the shouts of “it’s not democratic”, but in fact it compels people to spend more to get more. That is good business.

Any cruise line that has so many loyal customers they must cut back on what they give away has more loyal customers than they know what do with. This suggests Royal Caribbean is in pretty good shape when it comes to loyalty.

What choices does the RCL current loyalty program cruiser have? They could go to a different cruise line and start from scratch, but this is still a good program for the mainstream market. Other cruise lines have also cut back, so starting from zero anywhere else is probably a worse idea than working for the next level in the Royal Caribbean program.

The Bottom Line

Kuki is correct that Royal Caribbean has recently made a series of announcements that some cruisers have chracterized as “bone-headed.” But I believe these announcements are going unnoticed by the vast majority of cruisers. Only the most loyal will notice these small changes and they aren’t enough to compel them to leave.

For Royal Caribbean to announce things like this in such a competitive environment and before Oasis debuts tells me two things: 1) Royal Caribbean is smartly getting all the bad news out of the way while the economy and their stock is down anyway. 2) They wouldn’t be doing this if their bottom line was not healthy enough to take these self-inflicted blows.

This current economic climate has certain companies being cast as corporate villians. In the cruise industry this year, it appears to be Royal Caribbean. Why? I truly don’t know. Perhaps it is jealousy or just the penchant of certain people to indulge their skepticism. Royal Caribbean is investing heavily in the future during tough economic times. Some people just don’t understand how they can do that.

In fact, history shows slow economic times have spawned some of the world’s most successful companies. The disasterous 1970s, which were worse than current times (high inflation, interest rates at 20%, 10% unemployment and a flat stock market for ten years) created Microsoft, Southwest Airlines, Fedex, Apple Computers, Genentech and Oracle.

The one aspect for which I give Royal Caribbean the most credit is “having the long view.” The opposite of short-sightedness which is so common now. Yes, we are living in uncertain times, but there are still people who believe in the future and are invested in it. I respect that.

Oasis of the Seas will pierce the public psyche in a way that has never happened before. I believe Oasis and Allure will do for cruising what Disneyland did for amusement parks, what the Superbowl did for football. The image of cruising is about to change forever and Royal Caribbean is the reason.

There is already a group of cruisers who say the upcoming Oasis-class ships are “too big” and will never sail on them. But Oasis is not just a regular cruise ships on steroids. It is a revolutionary ship design that can easily accomodate its 5400-passenger load and offer a world of innovation at the same time.

I would bet every single one of the Oasis naysayers takes a cruise on her within the next five years. Some things feel too big when they’re new, especially to curmudgeons, but some things actually get better when they get bigger. I have had a 65-inch TV and HDTV for six years now. At first people said “wow” when they walked into my living room. Today it is common.

One thing you will never hear about the new Royal Caribbean ships is “the ship was boring.” Oasis of the Seas and her sister ship, Allure, will break the mold for cruise ships. The Freedom-class will become the new standard for good cruise ships. By comparison, the smaller Voyager-class and mega-ships from competing cruise lines are going to become average. The cruise experience will still be in demand on all ships, but the definition of a cruise ship is about to change.

Naturally, I am referring to the mainstream cruise market. I fully recognize mainly people prefer small ships and leisurely days at sea with no distractions. But that is not the sweet spot of selling cruises. When it comes to redefining the cruise experience, Royal Caribbean is the line taking the lead.

* One final note: this is not a recommendation to buy Royal Caribbean stock. This is still an uncertain market and one new ship is not enough to guarantee anything. This is just one person’s opinion and I buy and sell stocks frequently. Investing and trading should be done with care, and while I disclosed that I currently own these shares it does not mean I will announce when I sell them.

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Norwegian Cruise Lines (NCL) announced its first profitable quarter in two years, actually reporting a $171.2 million profit for the quarter just ended. This is good news, as the company’s parent company, Apollo Management , is the same investment group currently holding going out of business sales at another of their investments, retail stores Linens and Things.

NCL has a new CEO, Kevin Sheehan, upon the departure of the popular Colin Veitch who took over the position some eight years ago. Veitch and Andy Stuart, EVP of almost everything during the same period, ushered in the Free-style era at NCL, practically turning the long-standing concept of how cruises should be conducted on its ear.

Veitch moved over to an advisory role to the board of directors. Stuart has been appointed executive vice president of global sales and passenger services. Kevin Sheehan was NCL’s president and chief financial officer.

Royal Caribbean has a new TV ad campaign called “Why Not?” It shows people on cruise ships having fun and asks them if they are thinking about joiniong them. Indeed, you have to give the cruise industry credit for continuing to advertise actually even more when times get tough. Cruise lines know that when the economy gets tough the value equation of cruises actually becomes more appealing to vacationers. After all, there are incredible bargains out there, and once you get onboard you are in control of how much you spend. If you choose to easy on drinks and tours, you can actually have an incredibly inexpensive vacation.

What kinds of unbelievable bargans are we seeing this week? Some of the ones the press has picked up include an 8-day Caribbean cruise on the POSH Cunard Queen Mary 2 for eight days for $499. Our own newsletter shows a 7-night NCL cruise starting at $249 perp person. That is a jaw-dropping price.7-night Princess cruises to Mexico are currently selling for $375.

On the other end of the scale, Crystal Cruises tells me they couldn’t be feeling any better about how they are weathering what appears to be the worst since 9/11 for many other cruise lines. Mimi Weisband tells me…

“As for Crystal, we feel the luxury market is not immune, but it is more resistant. Luxury travelers are going to rely on brands they can trust, reputation and consistency – which is why the message of 15 years of Conde Nast Traveler awards (and this year with one of our highest margins over large and small ships) and 13 consecutive years of Travel & Leisure awards (also higher than any large or small ship) is a powerful tool.

We are less than 2% down for 2008 and already farther ahead for our 2010 World Cruise than where we were at this time last year for our 2009 World Cruise. 2009 is softer but we’re still confident that we’ll get through it.

With a more discerning customer, Crystal is in a good position.”

Well, I can certainly see her point. First of all, Crystal is West Coast based, and although real estate prices have been hurt there, they do not have nearly the same problems as Wall Street or the factory regions. Crystal is a great cruise line, as are the other luxury lines; Silversea, Regent and Seabourn.

Speaking of 9/11 – is this current crisis in cruise sales anything like that event? The short answer is “no.” That was a travel “scare.” People were actually afraid to fly and felt like targets in airports and even ships. This is purely about money. people are reticent to spend. personally, I am hoping for a good Christmas because in reality very little has changed for most people and there is little reason we could return to normal in a reasonable amount of time.

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The point is that you are saying Oasis is too big, and that you wouldn’t be caught dead on the ship. I just could not disagree with you more. I think Oasis is going to change the paradigm of how we see cruise ships from here on out. There will still be plenty of room for smaller/intimate ships, but Oasis is going to be the first of a new breed of ships which will take the cruise experience to whole new level and we will never look back.

Is it too big? Absolutely not. From an energy standpoint, it is better for the environment because you get far more efficiency in fuel usage per passenger than a small ship will ever give you.

But more importantly – for the guest – while you say it will too crowded to walk down the hallway without saying “excuse me” ten times; I disagree. The ship is laid out with many different “neighborhoods” each of which is capable of involving a thousand or more passengers at any given time.

Activities will be spread throughout the ship all day and night. There are THREE main entertainment venues for shows, plus several different nightclubs. The three main showrooms are separated and each will handle about 1/3 of the passenger load every night. You have the Opal Theater (standard production showroom), Studio B (the ice rink theater) and the AquaTheater at the end of the Boardwalk. Central Park and the Boardwalk are two entirely new attractions never before seen on a cruise ship. Each is capable of handling many cruisers so the rest of the ship will not feel crowded.

Central Park is the perfect analogy. Manahattan, the island, is “too crowded” as far as population is concerned, but the city’s Central Park is some 10 square miles, making it big enough to accommodate the entire city with a piece of serenity for anyone who wants to find it.

Oasis also has entertainment nightclubs that rival the best on ships anywhere. Personally, I am excited about the Comedy City Club, with stand up comedy all night long. That is a first for a cruise ship, and I think it is a great idea.

On the other hand, the nightclub “Blaze” will have a beautiful two-story stage overlooking the boardwalk and will have all kinds of music all night. Despite the name, I see it more as a Queen’s Room on Queen Mary 2.

Speaking of Queen Mary 2 – that ship has about the same passenger/space ratio as Oasis, and it does not feel crowded at all. It isn’t how big you make them, it is how you make them big.

Saying the next generation of cruise ships is “Too Big” is the oldest misperception in the cruise industry, one that has been proven wrong time and again. Next year at this time we will be watching major news shows talking about this ship, with either president Obama or McCain making some kind of comment about it for the reporters. It is revolutionary.

Please make your comments below, who is right, Kuki (too big) or me (revolutionary).

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