Cruise Ship Industry: The SS Consolidation : Leisure: Larger companies are shipshape, but some smaller lines are expected to go under.

The nation’s cruise industry, amid cutthroat competition and increases in the number of ships, is facing a shakeout under which several smaller lines may go out of business or be taken over, analysts say.

But as major cruise companies continue to grow and smaller ones founder, consumers will benefit from lower fares on newer ships.

In the latest evidence of a consolidation, industry leader Carnival Corp. on Wednesday said it is discussing acquiring a majority stake in debt-heavy Kloster Cruise Ltd., owner of Norwegian Cruise Line and Royal Cruise Line. Last weekend, troubled Regency Cruises shut down abruptly, leaving passengers stranded and others seeking to get their money back.

The shakeout comes as the industry is enjoying steady growth in cruise travel over the past two decades, analysts said.

The number of cruise passengers is down about 5% this year, partly because of publicized incidents of ships running aground, outbreaks of illness and hurricanes, said analyst David Leibowitz of Burnham Securities in New York.

“But the dip in passenger count will be a passing phenomenon,” he said, noting that cruises are still gaining in popularity.

About 7% of the nation’s population overall has taken a cruise, up from about 3% in 1980, according to the Cruise Lines International Assn., the industry trade group. More than half those travelers have been on more than one cruise.

Such growth has spurred the addition of more ships, and competition has gotten more intense as larger companies have lowered prices to match smaller, budget-priced lines, industry watchers say.

Several small companies are having trouble staying afloat because they cannot easily withstand the stiff price cutting, said Brian Major, an editor at New York’s Travel Agent magazine. Smaller lines will continue to “either be absorbed by other companies or fall into oblivion,” Major said.

Michael Driscoll, an editor of Cruise Week newsletter in Greensboro, N.C., agreed, saying that until Carnival entered talks with Kloster, “there was a lot of concern that [Kloster] would be the next to go under.”

Driscoll said he anticipates only half of the more than 30 cruise companies operating in the United States to remain in business in the next few years.

“The big cruise lines are getting bigger and more profitable,” he said of Miami-based Carnival, the world’s largest cruise company, and Princess Cruises and Royal Caribbean Cruise Line.

Regency, which had marketed itself to the budget traveler, could no longer compete against the larger companies that offered trips on newer ships at comparable low fares, analysts said.

Today, passengers that had been stranded aboard the Regency’s Regent Sea are reportedly scheduled to disembark in Nassau, the Bahamas. The ship turned back from a trip to Rio de Janeiro last weekend when the New York-based line ceased operations.

Two other Regency vessels, the Regent Rainbow and the Regent Spirit, were reportedly seized last weekend for alleged non-payment of debts.

An industry consolidation would mean consumers can expect good deals on vacations to interesting destinations on newer ships, but they should protect themselves against trip interruptions and cancellations, travel agents said.

Cathy Rizzi of Associated Travel in Monrovia said tickets are so cheap, “we keep joking they’re practically giving them away.”

For example, Rizzi said, Carnival is offering a seven-night cruise from Miami to the western Caribbean for $649, down from a brochure rate of $850.

Carnival also offers a four-day cruise for $284--normally $399--from Los Angeles to Catalina and Ensenada, said Diane Seymor of Seaside Travel in Long Beach.

But travel agents are becoming more wary about which cruise lines they send their customers on.

Susan Perez, executive director of Cruisin’ With Susan in Costa Mesa, said the agency has 24 passengers on board the Regent Sea.

From now on, Perez said, the agency will require cruise customers to pay with credit cards or buy trip cancellation insurance to make sure they get their money back in case the company shuts down.

Regency is covered by a $15-million guaranty, the minimum required by federal maritime law. That money will be available to customers who are not reimbursed by Regency, said Bryant Van Brakle of the Federal Maritime Commission.

Regency’s downfall stands in stark contrast to the growth of Carnival, analysts said.

Carnival and Kloster’s parent company, Vard, are discussing a proposal in which both would own Kloster. Carnival would own a majority interest and control the venture, Kloster spokeswoman Fran Sevcik said.

Carnival acquired $101 million of Kloster’s $300 million in 13% senior secured notes last week, Sevcik said. Kloster, based in Coral Gables, Fla., is operating under a 30-day grace period after missing a $20-million interest payment due Wednesday.

Carnival, which operates Carnival Cruise Lines, Holland America Lines, Windstar Cruises and Seabourn Cruise Line, launched two new ships last year and plans to add seven more over the next four years, said Tim Gallagher, a company spokesman.

A Carnival acquisition of Kloster would strengthen the industry, said Brian Robb, vice president of marketing at Carlson Wagonlit Travel in Minneapolis.

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Berths of a Nation

While the cruise industry has seen passenger growth explode in the last 10 years, the business is dominated by larger lines, with several smaller lines expected to go out of business or be acquired.

1995 MARKET SHARE

Carnival: 28%

Royal Caribbean: 17%

Princess: 9%

Kloster: 9%

Cunard: 6%

Celebrity: 5%

Other: 26%

PASSENGERS

In millions:

1994: 4.6

Note: Market share figures are estimates; all figures are for the United States and Canada.

Sources: Cruise Lines International Assn., Strategic Decisions Inc.

Researched by EMI ENDO and JENNIFER OLDHAM / Los Angeles Times