Tom Stieghorst
The Alaska cruise season is about to start, and there’s every indication it will be a good one. For the first time in awhile, cruise operators expect to carry more than 1 million passengers in Alaska this summer.
The effects of Alaska’s 2006 head tax on cruise passengers, which prompted a mini-exodus of cruise berths from the state, have mostly dissipated.
Yet the Alaska trade faces another issue that, according to one cruise destination expert, has evolved out of a more sophisticated way of looking at ship profits.
A decade ago, Alaska was regarded as cruise-ship gold. The 16-week summer season meant there was a natural limit to the supply. There were expensive excursions and land tours that could be tacked onto the beginning or end of the voyage. Looked at strictly for those 16 weeks, Alaska was one of the most profitable places in the world to operate a ship.
But as financial analysis got more detailed, some lines began to look at the weekly profitability of each ship in their fleet. Then they began to look at longer periods, such as a 52-week view of a ship's profits.
Seen at in that light, Alaska’s fabulous profits started to diminish.
“If you just looked at summer business, we said ‘Oh my God, we ought to put more ships in Alaska,’” said John Tercek, vice president of commercial development at Royal Caribbean International. “But what happens to those ships after Sept 15? Well, then they went to Hawaii, or they went to Australia. Or they went down ... to Los Angeles [for cruises that partially transited the Panama Canal], then they operated someplace else for the winter.”
The transition cruises to and from Alaska lowered the ship’s overall profits. Dramatically.
“When you looked at the ships on a 52-week basis, they weren’t the most profitable ships," Terceck said. "Looking at it on a 52-week cumulative basis, it changed a lot of our perceptions of where and how those ships should operate."
The result is that Royal has just two ships in Alaska this summer, down from as many as a half dozen a few years ago.