THE GEOGRAPHY OF CRUISE SHIPPING: ITINERARIES, CAPACITY DEPLOYMENT AND PORTS OF CALL Jean-Paul Rodrigue Dept. of Global Studies & Geography, Hofstra University, New York, USA Theo Notteboom ITMMA - University of Antwerp and Antwerp Maritime Academy, Belgium IAME 2012 Conference Taipei, September 6-8 2012 Ship Happens… Costa Concordia disaster Costa Cruises: -25% bookings (May 2011/12) Global Cruise Passengers Carried, 1990-2011 20 18 16 14 12 10 8 6 4 2 0 Recession 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 • Cruise industry emerged in the late 1960s Mass market using large vessels and adding more revenue-generating services onboard. Symbol of the globalization of the tourism industry (e.g. Weaver, 2005; Wood, 2000). Millions • • Cruise shipping in literature • Cruise shipping in literature: - Seasonality of the world cruise market (Charlier and McCalla, 2006) Industrial organization of cruise shipping (Papatheodorou, 2006) Demand for cruise tourism (Petrick and Li, 2006), Supply of cruise shipping (see e.g. Wilkinson, 2006 and Wood, 2000) Economic significance of cruise tourism (Dwyer and Forsyth, 1996; 1998 and Dwyer, Douglas, and Livaic, 2004) - Cruise ship passenger spending patterns (Douglas and Douglas, 2004) - Operational studies: • Optimal routing of cruise ships (see e.g. Hersh and Ladany, 1989) • Cruise ship port selection process (Marti, 1990) • Optimal cruise-liner passenger cabin pricing policy (Ladany and Arbel, 1991). - The service offerings and locational qualities of cruise ports: • McCalla (1998): site and situation requirements of cruise ports • Vagellas and Pallis (2010): different services provided by 20 European passenger ports • Gui and Russo (2011): structure of cruise value chains and the regional articulation of land-based cruise services. • Geography of cruise shipping remains an under-researched academic field in maritime and tourism studies. Focus of paper • This paper focuses on capacity deployment and itineraries in two major cruise markets: the Caribbean and the Mediterranean. • We argue that: - the cruise industry sells itineraries, not destinations, implying a level of flexibility in the selection of ports of call - The two cruise markets are interconnected in an operational manner - Cruise ports can be classified based on the role they serve within their regions. The Three Fundamentals of Cruise Shipping Itineraries • Attractiveness (seasonality) • Customers availability and preferences Capacity Deployment • Type of ship • Duration Ports of Call • Sequence and schedule • Choice of turn port Market Share of Main Cruise Lines, 2011: Horizontal Integration and the Illusion of Diversity Carnival Cruise Lines (49.2%) Royal Caribbean Lines (23.8%) Norwegian (7.1%) Carnival (21.1%) Royal Caribbean (17.0%) MSC Cruises (5.8%) Costa Cruises (7.2%) Celebrity (4.7%) Disney (2.9%) Princess (6.4%) Other (2.1%) Star Cruises (1.8%) AIDA (4.4%) Holland America (3.7%) Other (6.4%) Others (27.0%) Other (9.4%) Full House: Occupancy Level of North American Cruises, 2004-2011 14,000 Number of Cruises 12,000 10,000 8,000 6,000 4,000 2,000 0 Less than 70% 80% 90% 100% 110% Occupancy Level 120% 130% More than 140% Cruise Source Markets, 2010 Japan 0.195 Australia 0.370 Asia (w/o Japan) 0.890 Latin America 0.984 UK 1.560 Continental Europe 3.409 North America 10.781 0 2 4 6 8 Millions of Customers 10 12 The Global Cruise Port System Oceania / South Pacific Transatlantic South America Mexico Pacific/Hawaii Alaska Europe/Scandinavia Mediterranean Caribbean 2.9 3.1 5.3 5.7 6.7 8.5 42.7 0 A Supply-Based Industry 70% 23.0 5 10 15 20 25 30 Capacity in million bed-days 35 40 45 Most Active Cruise Ports by Passenger Visits, 2011 Katakolo Ketchikan Juneau Livorno Roatan Dubrovnik Southampton Piraeus Venice San Juan Grand Cayman St. Maarten Barcelona Port Canaveral St. Thomas Civitavecchia Miami Fort Lauderdale Cozumel Nassau 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 Cruise Passengers Visits, Caribbean, 2011 Cruise Passengers Visits, Mediterranean, 2011 Functional Typology of Cruise Ports Destination Cruise Port Gateway Cruise Port Balanced Cruise Port The cruise port is the sole destination. Limited, if any, excursions outside port area. The cruise port is not a destination, but a point of embarkment (turn port). Excursions outside port area. The cruise port is a destination and a point of transit for excursions. High quality cultural or physical amenities. No other significant amenities in proximity. Security and safety issues. No significant cultural or physical amenities. Port servicing major touristic destination. Various balances between the amenities offered at the port and in the region. Venice, Barcelona, Labadee (Haiti), Cococay (Bahamas) Civitavecchia, Livorno Miami, San Juan, Nassau, Piraeus, Lisbon The impact of shoreside power/coldironing • Large differences in CO2 emissions: - From 93 to 615 kg of CO2 per passenger-day - From 199 to 1,314 g CO2 per passenger–km • Juneau in Alaska was the first (2001) • Obstacles: - Challenges a city’s power grid Investment costs (also for retro-fitting ships) the cost of shore power the absence of international standards for shore power systems. • Environmental regulations in urban areas => move to less urban areas Is the Future Co-Location? Ensenada Cruiseport Village (HPH) Key Cruise Itinerary Design Variables Customer-related considerations (demand) • Optimal length of cruise, shore time/sail time balance • ‘Must see’ destinations, guest satisfaction • Seasonality • Synchronization with air transfers • Spending behavior and budget Operational considerations (supply) • Number and order of port calls • Determination of turn ports (+ synchronization with air transfers) • Vessel speed and vessel size • Berth capacity, accessibility of ports • Distances between ports of call Strategic considerations • Demographics of customer base • Itineraries of competing cruise operators • Anticipation of growth markets • Supply push to create new cruise markets • Revenue-generating potential of daytrips, onboard facilities, etc.. Revenue and Expenses per Average Cruiser, 2011 Revenue ($1,663) $38 $76 Expenses ($1,485) Other $57 $73 $51 $100 Ticket $208 Casino & Bar Excursions $1,286 Spa Other On-board services: 20-30% of revenues $295 $160 $217 $183 $193 $213 Agent commission Ship fuel costs Corporate operating costs Payroll Amortization Food & Beverages Looking for Fuel-Efficient Routes: 17 knots x 14 hours= 200 nm is ideal The Advantages of Mobile Assets: Types of Itineraries Perennial • Resilient demand (with high/low periods) • Stable weather conditions Seasonal • Periodic market potential • Usually summer Repositioning • Between perennial or seasonal markets • Mostly between the Caribbean and the Mediterranean Ship repositioning by Royal Caribbean Cruises Northern hemisphere Winter of 2011 Northern hemisphere Summer of 2011 23 8 Mediterranean 3 21 South America 9 0 Asia/Australia 4 1 Alaska 0 5 Baltic 0 4 Bermuda/New England 0 3 Mexico (Pacific) 1 0 Middle East 1 0 Hawaii/Californ. 1 0 42 ships 42 ships Caribbean Total Seven is the Magic Number: Duration of North American Cruises (in nights), 2011 2000 Sweet Spot (47% of all cruises) 1800 Number of Cruises 1600 1400 1200 Bahamas & Western Caribbean from Florida 1000 800 600 400 South Pacific 200 0 2 or less 3 4 5 6 7 8 9 10 Number of Nights 11 12 13 14 15 and more Selected Cruise Itineraries, Caribbean 3-5 nights / 2-3 port calls Geography History / Culture Market proximity 7 nights / 3-5 port calls Selected Cruise Itineraries, Mediterranean World class cultural amenities Market proximity Diversified sub-regions A complex vessel deployment strategy Silver Wind (Silversea Cruises), LOA = 157m, beam = 21.5m 296 guests in very luxurious conditions Silver Wind - Silversea Cruises = West Med = Adriatic = East Med = Middle East = Southern Africa = Atlantic Bar = Barcelona, CT = Capetown, Dub = Dubai, Ist = Istanbul, Lis = Lisbon, LP = Las Palmas, Mau = Mauritius, Mon = Monte Carlo, Pir = Piraeus, Rom = Rome (Civitavecchia), Saf = Safaga (Red Sea), Ven = Venice 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 April 2012 West-Italy, Adriatic / 6 June Pir Ven August November December Ven Adriatic, Aegean, Turkey / 7 Aegean, West-Italy / 7 Aegean, Adriatic / 8 Pir Ven Ist Adriatic, Aegean, Turkey / 7 Turkey, Black Sea / 9 Mon Turkey, Aegean / 9 Pir Pir Saf Aegean, Red Sea / 6 January 2013 CT Southern Africa / 6 February CT Southern Africa, West Africa, Canary Islands / 7 April Aegean, Near East, Turkey / 11 May Canary Islands, West-Atlantic / 9 West Italy, Adr. / 7 Number of cruises = Averate number of nights = Average number of port calls = Ist Turkey, Aegean, Near East / 9 Ven Turkey, Aegean / 7 Standard deviation = Standard deviation = Source: own compilation based on schedules 2.5 1.8 Ist Rom Dub Southern Africa / 8 Southern Africa / 6 Canary Islands / 7 West Italy, Aegean / 9 Aegean, West Italy / 8 Ven 37 9.5 7.6 Aegean, Adriatic / 6 CT LP Pir Adriatic, Aegean / 9 Red Sea, Gulf / 3 Southern Africa / 6 Spain, South France, West Italy / 8 Turkey, Aegean / 8 Pir Pir Aegean, Turkey, Near East / 11 Mau CT Lis Ist Turkey, Aegean / 9 Spain, West-Italy / 7 West-Italy, Adriatic / 7 Ist Middle East, India, Southern Africa / 8 LP Ist Turkey, Black Sea / 7 Dub Ist Bar Ist Aegean, Turkey, Near East / 11 March no service no service Ven Adriatic, West Italy, South-France / 8 Aegean, Turkey / 7 Middle East / 4 Ist Rom Adriatic, Aegean, Turkey / 8 September October 31 Rom May July 30 No. of port calls Pir Rom Simple vessel deployment strategies Freedom of the Seas - Royal Caribbean Cruises - LOA of 339m, beam of 39m - maximum capacity of 4,370 passengers Period Apr 29 to May 6, 2012 May 6-13 May 13-20 May 20-27 Nights Ports of call and order of calls 7 7 7 7 Port Canaveral Port Canaveral Port Canaveral Port Canaveral - Labadee - Cococay - Labadee - Cococay - Falmouth - Grand Cayman - Cozumel - Port Canaveral - Saint Thomas - Saint Maarten (Phillipsburg) - Port Canaveral - Falmouth - Grand Cayman - Cozumel - Port Canaveral - Saint Thomas - Saint Maarten (Phillipsburg) - Port Canaveral Region Caribbean Caribbean Caribbean Caribbean ………………… same two cruises repeated all year round Apr 7-14, 2013 Apr 28 to May 5, 2013 7 7 Port Canaveral - Cococay - Saint Thomas - Saint Maarten (Phillipsburg) - Port Canaveral Port Canaveral - Labadee - Falmouth - Grand Cayman - Cozumel - Port Canaveral Caribbean Caribbean Allure of the Seas - Royal Caribbean Cruises - LOA of 360m, beam of 65m - maximum capacity of 6,360 passengers Period Apr 29 to May 6 May 6-13 May 13-20 May 20-27 Nights Ports of call and order of calls 7 7 7 7 Fort Lauderdale Fort Lauderdale Fort Lauderdale Fort Lauderdale - Nassau - Saint Thomas - Saint Maarten (Phillipsburg) - Fort Lauderdale - Labadee - Falmouth - Cozumel - Fort Lauderdale - Nassau - Saint Thomas - Saint Maarten (Phillipsburg) - Fort Lauderdale - Labadee - Falmouth - Cozumel - Fort Lauderdale Region Caribbean Caribbean Caribbean Caribbean ………………… same two cruises repeated all year round Apr 7-14, 2013 Apr 14-21, 2013 7 7 Fort Lauderdale - Labadee - Falmouth - Cozumel - Fort Lauderdale Fort Lauderdale - Nassau - Saint Thomas - Saint Maarten (Phillipsburg) - Fort Lauderdale Caribbean Caribbean • Very tight schedules => schedule reliability! • Stability in the sailing schedule of ships: not only linked to vessel size, but also to the strategies of the cruise operators and cost and technical considerations Conclusion: Live by the Supply, Perish by the Supply? • Unique characteristics of the cruise industry: - Supply push strategy of cruise operators; ‘creating’ demand by providing new capacity (ships). - Itineraries, not destinations. Specific regional and cultural experiences offered through a combination of sailing time and choice of ports of call. - Expand and capture revenue streams by offering on board goods and services as well as shore-based excursions. - Adapt to seasonal and fundamental changes in the demand; repositioning ships (seasonal) and changing the configuration of port calls (fundamental). Thank you for your attention