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 5th Asian Logistics Round Table & Conference Vancouver, Canada, June 14-15 2012 TIMEFRAME: 25 minutes

Ship Happens… Costa Cruises: -25% bookings (May 2011/12) Costa Concordia: A lesson that hubris can derail the safest structures. Costa Cruises: -25% bookings (May 2011/12)

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

THE ORIGINS AND GROWTH OF CRUISE SHIPPING

Once Upon a Time… SS France, 1969

Powered Transatlantic Passenger Modes and the Demise of the Liner Steamship 1830s to 1960s (About 6 days; 4 days by the 1930s) Dirigible 1931-1937 (About 80 hours) Sea Plane 1934-1946 (About 15 hours) Propeller Plane 1934-1960 (11 hours) Jet Plane 1958- (7-8 hours); Supersonic jet (1976-2003: 3.5 hours)

Liners and Jet Planes: Basic Economics SS France (1962-1974) 4 days 2,000 passengers (one way) Boeing 747-100 (1970-) 8 hours 3,200 passengers (1 roundtrip per day)

MARKET DYNAMICS IN CRUISE SHIPPING

Global Cruise Passengers Carried, 1990-2011 Recession Source: adapted from Cruise Market Watch.

Cruise Source Markets, 2010 Source: adapted from Cruise Lines International Association (CLIA), http://www.cruising.org

Revenue and Expenses per Average Cruiser, 2011 Source: Cruise Market Watch. Note: Excursions only cover those organized by the cruise line. On-board services: 20-30% of revenues

The Global Cruise Port System Source: data adapted from Cruise Market Watch. Source: adapted from Cruise Lines International Association (CLIA), http://www.cruising.org 70% A Supply-Based Industry

Full House: Occupancy Level of North American Cruises, 2004-2011

Seven is the Magic Number: Duration of North American Cruises (in nights), 2011 Sweet Spot (47% of all cruises) Bahamas & Western Caribbean from Florida South Pacific

Share of Monthly Cruise Passengers by Region of Embarkation, 2012 Source: Cruise Market Watch.

Share of Monthly Cruise Passengers by Region of Destination, 2012 Source: Cruise Market Watch.

Number of Monthly North American Cruise Passengers by Destination, 2011

Carnival Cruise Lines (49.2%) Royal Caribbean Lines (23.8%) Market Share of Main Cruise Lines, 2011: Horizontal Integration and the Illusion of Diversity Carnival Cruise Lines (49.2%) Carnival (21.1%) Costa Cruises (7.2%) Princess (6.4%) AIDA (4.4%) Holland America (3.7%) Other (6.4%) Royal Caribbean Lines (23.8%) Royal Caribbean (17.0%) Celebrity (4.7%) Other (2.1%) Others (27.0%) Norwegian (7.1%) MSC Cruises (5.8%) Disney (2.9%) Star Cruises (1.8%) Other (9.4%) Source: adapted from Cruise Market Watch.

NETWORK CONFIGURATION AND PORTS OF CALL IN THE CRUISE SHIPPING INDUSTRY

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..

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

A complex vessel deployment strategy Silver Wind (Silversea Cruises), LOA = 157m, beam = 21.5m 296 guests in very luxurious conditions Source: data adapted from Cruise Market Watch. No. of port calls Source: own compilation based on schedules

Simple vessel deployment strategies Source: data adapted from Cruise Market Watch.

Cruise Passengers Visits, Caribbean, 2011 Source: data adapted from Cruise Market Watch.

Selected Cruise Itineraries, Caribbean 3-5 nights / 2-3 port calls Geography History / Culture Market proximity 7 nights / 3-5 port calls

Cruise Passengers Visits, Mediterranean, 2011

Selected Cruise Itineraries, Mediterranean World class cultural amenities Market proximity Diversified sub-regions

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 Source: typology expanded from Gui, L. and A.P. Russo (2011) “Cruise ports: a strategic nexus between regions and global lines—evidence from the Mediterranean”, Maritime Policy & Management, Vol. 38, No. 2, pp. 129-150.

Most Active Cruise Ports by Passenger Visits, 2011 Source: data adapted from Cruise Market Watch.

Is the Future Co-Location? Ensenada Cruiseport Village (HPH)

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