The first warning signal may have come in January, when the cruise
lines were oddly silent on how many booking records they were
breaking during the traditionally heavy "Wave Week." Not many
records were broken, as it turned out.
The second came in February, when Travel Services International,
the nation's largest cruise retailer, reported disappointing
earnings for 1999. The company's cruise sales grew only 3% during
the year, and, worse, it actually lost money selling cruises in the
fourth quarter because sales were "below certain contract targets
for commission volume incentives."
The third came in March, when Carnival Corp., the biggest cruise
company in the industry, predicted that its earnings for the
quarter ending May 31, the second of its fiscal year, may show no
increase over the comparable period of 1999. Although Carnival set
a record in its first fiscal quarter, it said rising costs and
"slower booking patterns" could produce a short-term dip.
Last week, Royal Caribbean also reported a record first quarter,
but said results for the full year may end up "less than earlier
hoped," partly because of all the new tonnage and some
"competitive" pricing.
We're going to stick our necks out here and postulate that the
cruise market has gone a little soft.
But we're also going to postulate that the soft market is
temporary. We expect the cruise lines will ride out this little
low-pressure area. The business will bounce back. The industry will
end the year on a positive note. The cruise market will continue to
expand. There will be more ships, more cruises, more people
cruising. We're pretty sure of that.
The big question is whether this little lull has strategic
implications for the distribution system.
A downturn can give the agency community the opportunity to show
what it can do, but it can also offer the same opportunity to
shopping mall kiosks and Internet auctioneers.