West Coast Cruise Cuts Hit Hard

The reduction in short-itinerary cruise capacity out of Southern California ports is hitting some travel sellers hard, carrying a particular sting for agencies with strong group cruise business in the contemporary segment.

“We are losing capacity and it’s going to hurt us,” said Terry Moore, co-owner of a Cruise Planners franchise in Plymouth, Calif. “We miss the year-round ships that do the three- and four-night cruises to Mexico.”

With the planned West Coast pullout of Royal Caribbean Cruise Line’s Mariner of the Seas in January 2011, travel sellers will have very little short-itinerary product left to sell out of California ports.

“The most immediate effect is that it’s much harder to book the one ship that remains,” said Stan Jenson of Costa Mesa, Calif.-based All Ways Cruising and Out Cruising. Jenson was referring to a Carnival ship that still does the short cruises out of Los Angeles. “Carnival now has a monopoly on short cruises, and that monopoly is reflected in their pricing and availability. You can’t set up group space on a three-night cruise any closer than six to eight months out.”

When Jenson tried to book a client request for a February 2011 Valentine’s Day group cruise, the earliest availability he could secure was in May 2011.

Why We Have to Go
Royal Caribbean is not the only line to pull capacity from California homeports. The combination of recession, violence in Mexico and possible over-capacity has made it more difficult for cruise lines to earn a profit in the short-itinerary contemporary market out of the West Coast.

Cruise lines shift capacity “in response to a wide variety of business objectives and strategies, such as consumer demand and optimizing yields,” said Bob Sharak, CLIA’s executive vice president of marketing and distribution.

In response to an interview request with Royal Caribbean for this article, a spokesperson referred Travel Market Report to a blog entry by Adam Goldstein, RCCL’s president and CEO. The entry was posted in May when RCCL first made the announcement about pulling the Mariner of the Seas out of California.

Goldstein acknowledged that “there are tens of thousands of loyal Royal Caribbean cruisers who live in the Western U.S. and cruise on Mariner of the Seas,” and the ship usually goes out full. Despite those two realities, he wrote, “the ship does not perform at an acceptable level to be able to remain in California … We are obligated to our shareholders to deploy her where she can earn superior returns.”

Goldstein also wrote that RCCL “has tried multiple ships over multiple decades at various lengths of cruises in California. We may very well try again in the future as we would love to be back on the West Coast.”
 
Sailing Away
Meanwhile, cruise capacity is dropping in California. Cruise ship calls at the three major West Coast ports dropped an estimated 22% in 2010 compared to 2009. Passenger counts from the ports dropped an estimated 23% over the same period.

For 2010, activity from the Port of Los Angeles will include an estimated 153 sailings carrying 755,000 passengers. In 2009 port activity included 798,886 passengers on 162 sailings.

The Ports of San Diego and San Francisco are experiencing even steeper erosions in cruise capacity.

In 2010, activity from the Port of San Diego will include an estimated 152 sailings carrying 514,775 passengers. In 2009 port activity included 223 sailings carrying 842,353 passengers.

This year activity from the Port of San Francisco will include an estimated 120,000 passengers on 41 sailings. Last year’s port activity in San Francisco included 172,837 passengers on 62 sailings.

Big Loss on Short Cruises
In 2011, Crystal Cruise lines will add 7- and 12-night sailings out of various California ports, increasing capacity in the upscale, longer-cruise market. While that’s great news for the West Coast cruise market, many travel sellers remain concerned about the loss of three- and four-night contemporary market Mexico cruises from West Coast ports.

These cruises generate repeat demand “because they’re short and fun,” Moore told Travel Market Report. “They’re easy to put groups together for because they’re relatively inexpensive. We see all kinds of people wanting to go on the short cruises.”

The short sailings also help introduce cruising to first-timers, he added. Clients don’t want to fly to Miami for a four-day cruise to see if they like cruising or not; they want a local port of departure and a relatively inexpensive option, Moore said.

It’s not just first-time cruisers that travel sellers could lose with the reduction of short-itinerary contemporary product from the West Coast. Jenson told Travel Market Report that some of his experienced cruise clients who were drawn to the shorter itineraries because they can’t take a full week off from work are finding other alternatives that don’t require flying – and don’t require him to handle the booking.

Travel sellers are searching for alternatives for their clients. Moore said he will try to move his clients onto Carnival’s short cruises and Holland America’s longer cruises. He will also focus on booking clients on the short re-positioning cruises that sail in the spring and fall, and move other cruise business to departures out of ports in Texas and New Orleans.

Fewer Worries Upscale and Up North
Travel sellers in Northern California, particularly those who focus on the luxury market, are not as hard hit by the losses in the southern part of the state.

“There will be a small impact, if any, quite honestly,” said Scott Pinheiro, president of Santa Cruz Travel Inc. and president of the Northern California chapter of ASTA. Pinheiro said he has not heard concerns about the loss of capacity from ASTA chapter members.

“Those agencies that have a relationship with Royal Caribbean will be impacted to a degree. I don’t want to downplay that,” he said. “Agencies with a group program they continually offer on an annual basis may have to go out and find an alternative.”

Less capacity reduces the opportunity for travel sellers to offer would-be cruisers a variety of choices, said Dan Ilves, CTC, MCC, vice president of sales and marketing for the TravelStore, which operates six locations in California. But, he added, “Savvy travelers are not attracted by the Mexican Riviera itinerary, and for those that have done it once or twice, there’s little to compel them to do it again.”

TravelStore will not be affected “in any significant manner” by the capacity reductions because it does not do large volume on Mexican Riviera itineraries. “Let’s face it, commissions from those sales are less attractive than other itineraries,” he added.

For the same reason, Pinheiro said he’s more interested in the fact that Crystal Cruises will introduce seven- to 12-night sailings out of various California ports next year, something he sees as a huge opportunity for agents. “We lose a little bit of the [contemporary market] but personally I think we gain something much bigger and greater in the capability of being able to sell Crystal,” Pinheiro said.

For agencies with clients who are used to and interested in sailing on Carnival, Royal Caribbean and Norwegian Cruise Line, up-selling them to Crystal is not easy, said Cruise Planners’ Moore. Even so, he hopes Crystal has a lot of success with its coastal sailing, so other lines will decide to follow suit and offer similar itineraries.