NEW YORK -- Cruising's luxury segment will grow 72% in the next
three years, the greatest rate of capacity growth in its history,
prompting a cycle of "stealth-speed" decreases in luxury-cruise
fares, said Larry Pimentel, president and chief executive officer
of Cunard Line Ltd.
Luxury cruise suppliers will add more than 6,000 new berths
between 2000 and 2003, raising total deluxe-market capacity from
about 8,477 berths to about 14,515, said Pimentel in a
"state-of-our-segment" statement to reporters.
The luxury market's rate of growth exceeds that of cruising's
mass-market segment, said Pimentel, and will force operators to
lower rates sharply to attract passengers.
Indeed, the luxury market is unusually active in terms of
shipbuilding. Radisson Seven Seas Cruises, Silversea Cruises and
Renaissance Cruises all are in the midst of the biggest building
programs in their histories.
Cunard recently contracted with France's Chantiers de
l'Atlantique shipyard to build Queen Mary 2, a transatlantic luxury
liner. The luxury market "has never grown at anything close to this
rate," said Pimentel.
"Luxury cruise fares will decline at stealth speed," said
Pimentel, leading operators to "employ new strategic and tactical
efforts to fill those berths and capture market share."
Luxury market fares also will suffer due to "upward pressure
from the lower-priced deluxe segment of the market," Pimentel said,
"which is now producing ships that have whole decks of suites and
enhanced amenities rivaling those in the luxury segment."
Finally, the Cunard chief said, increased capacity and
competition in the luxury cruise market will lead to "more
consolidation as brands that cannot benefit from economies of scale
succumb to the requirements of ownership for greater profits.
Brands may disappear or they may be acquired outright by owners,"
said Pimentel.
Other top executives at cruise luxury operators agreed with some
of Pimentel's comments but disagreed that the luxury segment is
poised for a radical rate decrease.
"I don't think the luxury market would survive if we did that,"
said Bill Smith, president of Silversea Cruises. "It's based on
value and exclusivity."
Smith said Silversea is selling cruises at the highest price
levels in company history
"There is a mass affluent market, but the main issue for the
consumer is the price-value relationship," he said. "I don't think
there's that much capacity coming on in the luxury segment," said
Mark Conroy, president of Radisson Seven Seas Cruises. "Our growth
is relatively moderate vs. the contemporary category."
Citing at least three mainstream luxury brands as well as other
cruise suppliers that market to luxury-minded clients, Conroy did
agree, however, that "there is a potential for additional
consolidation."
Overall, Pimentel predicted "explosive growth" for luxury
cruising, albeit at sharply lower prices.
"As rates decline, luxury cruises will emerge as the best luxury
vacation value on a global basis," he said. "Travel agents who
understand the affluent consumer types and how to ... articulate
this value for them will have the greatest success."