Duopoly, Schmuopoly: Cruise Competition Is Alive & Well
Back in the summer of 2003, a hot cruise topic among the trade involved supplier competition.
The battle between Royal Caribbean and Carnival Corp. for Princess, won by Carnival Corp., was finally over. During that time there were frequent predictions that with Princess no longer an independent brand, the industry had turned into a duopoly. The thinking was that NCL or other brands would have trouble growing given the strength of the two largest companies.
Yet 15 summers later, during interviews with retail leaders, we find them discussing the latest expansion of NCL and MSC and the success of relative newcomer Viking Ocean Cruises. With Virgin Voyages and The Ritz Carlton Yacht Collection coming around the corner, the talk of the duopoly seems antiquated; over the long term, the two largest players were unable to sink their competitors.
Indeed, one issue now is the concern of too much competition for the biggest players, who themselves are growing at a rapid clip, leading to a big capacity increase. "We're going to find out how it works," said one top retailer a bit dubiously, adding: "The luxury segment, I think, is going to get really crowded."
But he was also hopeful: "The big difference is that if you look back 15 years ago, I don't think hotels are that much different today. I don't see amazing differences in a hotel property like I do with cruise ships."
On the supply side, Rick Sasso, President/CEO of MSC Cruises (USA), was also bullish about the latest wave of expansion when asked if he's concerned about overcapacity. "I have been asked that particular question every 10 years for the last 47 that I've been in this business," he replied.
"Back in the 70s, the question was, 'Oh do you think the industry can support so many ships doing three- and four-day cruises to the Bahamas?'"
The answer, he said, proved to be, "Yes!"
When Celebrity launched, the question was raised again. "In 1988, they said, 'Hey, you are building four ships and there are so many ships. Why?' And my answer was, 'In this industry, the supply has driven the demand for decades.'"
Today, he says that answer is more compelling than ever: "The hardware is better and there is technology that allows all the brands to market themselves so much more efficiently than they've ever done."
Much-enhanced global sourcing is another factor. "So I don't see that we could run into a situation where added supply of new ships being built leads to overcapacity," Sasso says. "There's a place for a newish company like MSC, and now Virgin Voyages, and others. There's a place for all of us."