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Smooth sailing for cruises despite sinking economy

BY MIKE WILLIAMS

Cox News Service

PORT CANAVERAL, Fla. - Gas prices are leaping toward $4 a gallon, food prices are soaring, the economy is in a tailspin and families are cutting back expenses to weather the crisis.

All that might seem to spell a gloomy forecast for the travel and vacation industry, but at least one segment, cruise lines, say they expect to weather the current choppy economic seas without major disruptions.

"No segment of the travel industry is recession-proof, but cruising has proven in the past to be somewhat recession-resistant," said Bob Sharak of the Cruise Lines International Association, a trade group. "Americans want the most out of their vacations, and dollar for dollar the total package you get with a cruise is the best vacation value."

While not exactly bullish, cruise lines say they are on track to continue their impressive record of growth in 2008. They expect to take 12.8 million customers to sea, a slight increase from the 12.6 million that boarded in 2007.

Those numbers are almost rosy as other segments of the travel industry brace for a downturn due to crimped budgets and high gas prices.

Investment analysts at Moody's warned earlier this year that some segments of the travel industry might see a drop in earnings in 2008, and Marriott International slashed its outlook for revenue per room.

Florida travel officials said visitor numbers in 2007 fell 2 percent, with a big portion of that due to a 5 percent drop in visitors driving to the state.

Looking for value

Gas prices seem a big part of the equation, as cash-strapped families are forced to cut back.

Still, some in the industry say many Americans are adamant about not cutting out hard-earned vacations, although they may scale back ambitious plans, stick closer to home and scour the Internet looking for bargains.

Cruise lines say the value question works in their favor.

"In times like these, people will still take their vacations but they may trade down to a trip for less money," said Howard Frank, vice chairman of Carnival Corp. "That's what cruises are all about, value. Overall our bookings are holding up quite well."

One component of the current economic downturn -- the falling value of the U.S. dollar against other currencies -- may actually be helping cruise lines. Europe is a hot destination for cruisers this year, likely because travelers are learning that the falling U.S. dollar makes a land-based trip to Europe quite expensive.

"If you want to go to Europe and take a cruise, you pay for your lodging, most of your food and your transportation between locations in U.S. dollars," Sharak said. "With the value of the dollar falling, American tourists in Europe might stop at a sidewalk cafe for coffee and a light meal and the bill is something like $90. With a cruise, people are insulating themselves against the cost of a vacation to Europe."

Steady growth

Since 1980, the number of cruise passengers has grown steadily, averaging about 7 percent a year, an impressive record that includes weathering a number of other past economic downturns, as well as the drop in travel following the 2001 terrorist attacks.

Last year the industry enjoyed another solid performance, sailing at 105 percent capacity, a figure made possible because capacity is rated at two persons per stateroom and many families often bring along kids who stay in the room with them.

The industry has responded to its steady growth by building new, often-larger ships and adding activities, entertainment and better dining options. Cruise lines have also focused on the family market, hiring counselors who run day-long activities for kids, giving harried parents time to enjoy themselves on their own without worrying what their children are up to.

Increased fuel costs

The cruise lines, have, of course, been hit with the same rising fuel prices that have put the pinch on consumers and other segments of the travel industry.

Some lines have responded with fuel surcharges, a strategy that drew complaints from customers and prompted an investigation by Florida's attorney general after some operators applied the charges retroactively.

Carnival and Royal Caribbean voluntarily agreed to settlements and are refunding the surcharges to customers who booked before the added fees were announced.

With other segments of the travel industry also feeling the fuel price sting, analysts say cruises remain an attractive option.

"Overall the picture is pretty bright," said Mike Driscoll, editor of Cruise Week magazine. "It's a bad economy for travel, but cruise bookings are holding their own."