Cruising business surges on the Yangtze, Nile and Amazon

The growth potential of the river cruise market isn't restricted to Europe. River and tour operators are expanding their programs to the Nile in Egypt, the Amazon in South America and especially to the Yangtze in China.

"The growth on the Yangtze has been tremendous over the last decade," said Larry Greenman, manager of public relations and customer services at Victoria Cruises. By year's end, Victoria will have offered 490 sailings, carrying 53,000 passengers along the Yangtze River.

Founded in 1993, Victoria Cruises has seven ships in its fleet, all of which sail exclusively on the Yangtze. In April 2009, an eighth ship, the Victoria Jenna, will be unveiled with a passenger capacity of 408. As of now, Victoria's smallest ship, the Victoria Rose, carries 130 passengers, while its largest is the 308-passenger Victoria Anna.

In international river markets outside of Europe, few American operators own their own ships. Ninety percent of Victoria Cruises' business, for example, comes from American operators such as Tauck World Discovery, Travcoa, Pacific Delight World Tours and Avalon Waterways, which either book blocks of passengers or charter entire ships.

The strategy of not investing in one's own ships may stem in part from market volatility. Business on the Yangtze, for example, hasn't always been smooth sailing.

"Our best year was 2002," said Greenman. The reason? That year, a surge in the Yangtze's water levels touched off erroneous rumors that the Three Gorges area would soon be completely submerged.

"Then our business dropped off and disappeared completely in 2003 because of SARS," Greenman said. "It then slowly came back, and 2007 has been our best year since 2002. Next year, with the Olympics, business will drop off a little bit because [would-be cruise passengers] won't be able to get space on airlines."

The Three Gorges Dam, which when completed in 2009 will be the world's largest hydroelectric generator, has helped widen and deepen the Yangtze. But the river is also experiencing crowding as industry explodes along its banks and river cruising becomes more popular. Nevertheless, Greenman anticipates a resurgence in river business in 2009, especially since it remains a highly competitive market.

"Our prices have not risen very much," he said. "In fact, some of our prices are lower now than they were in the 1990s. Competition has something to do with it. And we have more ships and more passengers. China is really still a bargain."

Run-off from Europe has also steered river cruisers toward the burgeoning Amazon and Nile markets. While not as developed as the Yangtze market, the Nile and Amazon are seeing increased interest from operators who are expanding their itineraries and departures along both rivers.

Upscale operator Abercrombie & Kent has been in the Nile market since the mid-1990s, when it began building its own fleet of four Nile river ships. The A&K-owned Nile Adventurer and Nile Intrepid are now used mainly by European tour operators. For its own expanding roster of Nile itineraries, which will reach five in 2008, A&K uses its 36-passenger Sun Boat III, built in 1993 and refurbished in 2005, and its 80-passenger Sun Boat IV, built in 1996 and refurbished last year.

"Our business in Egypt is up 23% this year with many sold-out dates, particularly over the holiday season," said Pamela Lassers, a spokeswoman for Abercrombie & Kent. The operator has 103 Nile-inclusive Egypt departures scheduled in 2008, compared with just 84 in 2007.

Also on the Nile, Oberoi Hotels and Resorts operates the Oberoi Philae Nile Cruiser, which has 54 cabins and four suites, and the Oberoi Zahra Luxury Nile Cruiser, a 27-suite luxury vessel that debuted this fall. Big Five Tours & Expeditions and General Tours World Traveler are among the operators expanding their 2008 Egypt offerings to incorporate four- to seven-night cruises along the Nile with Oberoi.

Others are putting more passengers on the Amazon. In 2005, Iberostar launched the 150-passenger luxury Grand Amazon, which sails from Manaus, Brazil, and ventures deep into the rain forest on the Negro and Solimoes rivers.

In the meantime, International Expeditions announced it would expand its Amazon program for 2008 to 34 departures of its Amazon Voyage itinerary, which includes a seven-night riverboat cruise along Peru's Upper Amazon.-- M.B.

River cruising has a long and colorful history that can be traced to ancient times, but in the last decade the market has attracted so much attention, investment and excitement that a newcomer might think it had been invented yesterday.

In fact, the European market has grown so fast in recent years, with new players and new ships increasingly crowding Europe's waterways, that skeptics have begun to wonder how long it will be before the bubble bursts.

Richard De Sousa, sales and marketing manager at Peter Deilmann Cruises, scoffs at such concerns.

"We aren't even close to saturation point," he insisted. "I don't see that there's a limit there. We're not becoming a mature market at all yet."

This is not the view of a wide-eyed upstart. Deilmann has been plying Europe's rivers for more than 30 years and has witnessed the flood of recent newcomers. Like Deilmann, the new entrants are capitalizing on a market that has been growing in capacity, on average, 10% to 15% for each of the last five years, according to river cruise operators.

There are about a half-dozen hard-core European river cruise players in the U.S., companies that own and operate their own ships and whose primary business is river cruising. But countless others are introducing ships or growing their business by chartering other operators' ships.

Consider these developments in just the past year:

" Tauck World Discovery announced it was building its second Tauck-branded river ship, scheduled to begin sailing in spring 2008.

" A Canadian company, Scenic Tours, said last month that it was investing $100 million to create its own fleet of four river vessels by 2009. The inaugural sailing of its first two ships, the Scenic Sapphire and the Scenic Emerald, will take place in June 2008.

And those are just ships. The number of itineraries are multiplying even faster. For next year, Uniworld has added two itineraries in Western Europe and a third in the Ukraine and the Black Sea.

Trafalgar Tours, a European heavyweight in motorcoach touring, is offering 22 European river cruise itineraries for 2008 in conjunction with Uniworld, a sister company.

Viking River Cruises has added three Western Europe itineraries, one Russian river cruise and one China itinerary for 2008.

And the land operators are equally bullish. Abercrombie & Kent added four itineraries to its chartered, upscale European barge program next year.

Along with this rapid expansion, river cruise operators are presenting a confident front and a room-enough-for-everyone attitude. With no end in sight for growth, operators clearly are determined to push river cruising as far as it can go.

"This is the end of October, and we are over 70% sold out in 2008," said Ted Sykes, senior vice president of Viking River Cruises. "We're running into pinch points in capacity. We can't keep up."

Bigger pie, smaller pieces

While both veterans and rookies tout the seemingly limitless potential of European river cruising, there are already signs of maturation. While river cruising is attracting a swelling number of passengers, as more players join the game, everyone is getting smaller pieces of a bigger pie.

"The margins [in the past] were much better than they were in the tour business," said Patrick Clark, managing director of Avalon Waterways, explaining why Globus decided to launch its own river cruise brand in 2003. "As [river cruising] is growing and there are more competitors, the margins are shrinking."

Even so, Clark said, the margins are still good, still higher than tour margins.

"Tour operators that never had a river cruise business are getting into it because they have to," he said.

Avalon has been growing its capacity at least 20% to 30% per year and has been launching at least one new river ship every year since its birth, Clark said.

In 2008, Avalon will debut its sixth ship, the Avalon Scenery, and the company has plans to unveil two more in 2009.

Deilmann's De Sousa remains similarly bullish.

"The margins are good and continue to be good in this product," he said. "You'll find occupancies are very high. And market forces have not required us to drop pricing. That's just simply from the fact that there's a lot more demand. If anything, with the higher demand and the general scarcity of beds operating on the rivers, the pricing has gone up about 3% to 5% over the last three years."

One reason for the robust margins is that river cruising tends to be an upscale model for touring Europe. Prices can range from $220 to $450 per person, per day, excluding air.

Since both the size of the ships and the traffic capacity of rivers impose limits, river cruising is not a high-volume business. Standard river ships -- not counting the boutique barges that house as few as four cabins -- range anywhere from 60 to 75 cabins, with a capacity for 120 to 154 passengers. So growth requires creative strategies, inventing new itineraries and acquiring new ships.

Moreover, Europe's rivers pose some congestion issues, as they are also used for commercial shipping, though most operators say they are far from capacity yet. The more immediate challenge is the unpredictability of rivers.

"You are open to acts of nature, lack of rain, too much water," said De Sousa. "Thankfully, generally over the course of the season, out of 280 departures about eight departures might have reroutes because of too much or too little water. We have to go through the locks and under the bridges. That's always an operational challenge. And there's more and more river cruises, so you see a little bit more traffic than you used to."

Standing out in a crowd

Flip through any European river cruise brochure and you'll see a pattern. There's probably a Paris-to-Prague itinerary, definitely Rhine and Danube excursions, and most certainly something along the Rhone and Saone rivers in Burgundy and Provence, France.

"If you look at Europe, they're not creating new rivers," said Avalon's Clark. "It's trying to make sure that we provide enough of an experience that we can continue to attract clients. You have to come up with different itineraries. You mix different experiences on the rivers. We're doing more in the area of specialization, stretching the season, introducing special-interest itineraries."

With so many companies traveling so many of the same rivers and courting the same type of traveler, river operators are searching for ways to differentiate.

You can't talk about river cruising without addressing the potential of the baby boomer market. Most river cruisers are in their 60s, but in recent years many companies have started to see an expanded interest from passengers in their 50s.

To court a wider range of passengers with varying interests, some companies are introducing themes. Deilmann, for example, offers bicycle-themed cruises for active travelers and cruises themed around wine tastings, gardens, hiking, music and golf.

Uniworld is skewing younger with the introduction this year of the Grand River Family Program. The two itineraries, geared toward multigenerational family groups, are the nine-day Castles Along the Rhine excursion and a nine-day Paris and Normandy river cruise. The itineraries were chosen for their high sightseeing appeal. Uniworld has integrated kid-friendly amenities such as a game room and has begun offering more activities.

Others are simply sticking with and bolstering their core market. Just last month, Amadeus Waterways signed a preferred-provider agreement with AARP that will provide AARP members with discounts on Amadeus river cruises.

"Almost every third senior [in America] is an AARP member," said Kristin Karst, vice president of sales at Amadeus Waterways. "So it's a huge opportunity to really capture such a big market."

Viking River Cruises took a different stance on differentiating its brand. In June, Viking introduced Viking Tours, a comprehensive land-based program. "Yes, we've come at it at the other end of the funnel," said Sykes.

For the same reason that land operators see their business translating very well into river cruises, which are essentially built as land packages with the addition of a floating hotel, Viking sees its competency in river cruising translating directly to the land market.

Whatever niche river operators are trying to own, or however they plot their growth, more consumers means more discerning tastes as well. And as river operators jockey for market share, they are forced to constantly reevaluate what they offer and how they can make it better. Whether it's the amenities on the ships, the services or the pre- and post-cruise options, competition is fierce.

Uniworld, for example, introduced onboard Internet access this year for the River Royale, and now other operators are following suit. Several operators are offering guests headsets to enhance the land excursions. From cabin size to the question of whether wine is included with dinner, the race for a subtle advantage is in full swing.

"If you're successful, other people are going to do it. If somebody builds a rock-climbing wall, others are going to do it, too," said Clark, referring to an example from big-ship cruising. But he added that despite what seems like a highly competitive marketplace, there's still room enough for everyone to grow. For such a booming trend, "the market size is still small enough."

To contact reporter Michelle Baran, send e-mail to [email protected].


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