New Woes for Mega-Ships
Cruise lines have been battling for decades to outclass their competitors’ ships by making vessels longer, bigger and full of amenities such as mall-size promenades and ice skating rinks. What started as small refurbished ferries with little to do onboard have turned into vessels bigger than aircraft carriers.
Carnival Corp., the top cruise operator, launched the world’s largest passenger ship last year: The luxury liner Queen Mary 2 stretches nearly four football fields. But the monarch’s reign isn’t lasting long: Rival Royal Caribbean Cruises Ltd. will start sailing an even bigger ship next year, the Freedom of the Seas. The ship launched Friday in Finland.
As the industry builds ships that keep getting bigger to meet growing demand, these mega-ships also create new problems. The lines have to balance the preferences of passengers who want flashy new amenities with those who are looking for quiet vacations. Many ports say these vessels make it tough to process thousands of people in just a few hours. Environmental groups also complain that bigger ships mean more pollution.
Cruise executives say they have worked to relieve those problems. For example, passengers can now check in online to reduce congestion at the port.
Nevertheless, most passengers are clearly happy with the massive ships. Passenger numbers have risen an average of about 8% a year for more than a decade.
“A cruise on the big new ships is primarily what people want to buy. People are clearly voting with their wallets,” said Adam Goldstein, president of the Royal Caribbean International brand. “We would be very happy to operate smaller ships if they could generate greater profitability than the big ships, but they don’t.”
The industry isn’t shunning smaller ships altogether, said Micky Arison, chairman and chief executive of Carnival. He noted that some of Carnival’s 79 ships could carry only up to 150 passengers and that some could accommodate 3,800 passengers.
“We’ve got ships for all different types of people and all different sizes, just like the hotel industry,” Arison said.
The first modern cruise ship in the 1960s held just 560 passengers, and in the 1980s, the Carnival Cruise Lines brand got three new ships that could hold nearly 1,800 each. At the time, many observers wondered whether there were enough travelers to fill them, and even Arison has said the move was “a little bit crazy.”
The Freedom of the Seas will be able to hold 4,370 passengers. Carnival is kicking around the idea of building a ship to take the title back, but it doesn’t have any firm plans.
Frequent cruiser Lee Schwartzberg hopes that the companies don’t get too caught up in the race to outsize one another. She is turned off by mega-ships’ long buffet lines and fights over deck chairs.
“I can go to a mall at home. I go cruising to relax,” said the 42-year-old catalog director for a mail-order company from Warwick, N.Y.
But Miriam Romain loves giant vessels because she is able to play miniature golf and people-watch. Romain, a 45-year-old from Chicago who hosts an online forum on CruiseCritic.com, gets excited just talking about these ships. She says there’s a never-ending list of activities -- art auctions, barhopping, as well as people watching.
“If you get bored, you’re not looking in the right places,” she said.
All those amenities and the size of those ships mean they cost more than $800 million to build, but they can save cruise lines money. Operating bigger ships lets them carry more passengers, and that extra revenue offsets the cost of investment over time, said Bill Warlick, a senior director at Fitch Ratings.
Carnival posted a 40% increase in net income to $735 million for the six months ended May 31 on $4.92 billion in revenue, up 16% from a year earlier. Royal Caribbean Cruises reported $290 million in net income during the first half of 2005, up 33% from a year earlier; revenue grew 8% to $2.2 billion.
“The larger companies with the stronger balance sheets are in the position to lay out solid capital and generate consistent returns,” Warlick said.
But maneuvering and fitting those ships into ports put pressure on destinations, especially smaller ones. For example, Antigua’s port recently spent $22 million to accommodate larger ships, but it’s unclear whether the Freedom class will fit there, said Cameron Fraser, Antigua Pier Group Ltd. director.
“We would find it difficult, as many other small ports would so recently after preparation for larger vessels, to raise the sort of capital required for another significant round of dredging,” he said.
Fraser said many smaller ports also were worried that cruise ships might avoid them as passengers’ tastes change: “There is always a concern that new trends, new destinations may undermine your ability to attract the industry.”
Although these mega-ships aren’t a problem for Southern California’s port complex, which is the nation’s biggest, other large harbors have had trouble. The Port of Miami is spending $350 million to make improvements to handle more people. They include better roads, bigger parking garages and two new terminals. Post-Sept. 11 security requirements also mean more port improvements.
“We have to be able to accommodate them, and they come with larger logistics challenges in the amount of time that is required,” said Charles A. Towsley, the Port of Miami director. “No one envisioned the industry as we see it today, and we’ve continued to reinvent ourselves.”
Cruise lines also say the newer, larger ships have better technology that protects the environment from the sewage and other pollution that vessels produce, but they don’t convince environmentalists.
“As cruise ships continue to grow in size, we’ll continue to see ever-increasing amounts of pollution,” said Russell Long, founder of the environmental group Bluewater Network. “Since today’s vessels are equivalent to small cities in size, the volume of waste discharged every day is rapidly growing.”