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 IAME 2012 Conference Taipei, September 6-8 2012 TIMEFRAME: 25 minutes

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

Global Cruise Passengers Carried, 1990-2011 Cruise industry emerged in the late 1960s Mass market using large vessels and adding more revenue-generating services onboard. Symbol of the globalization of the tourism industry (e.g. Weaver, 2005; Wood, 2000). Recession Source: adapted from Cruise Market Watch.

Cruise shipping in literature Seasonality of the world cruise market (Charlier and McCalla, 2006) Industrial organization of cruise shipping (Papatheodorou, 2006) Demand for cruise tourism (Petrick and Li, 2006), Supply of cruise shipping (see e.g. Wilkinson, 2006 and Wood, 2000) Economic significance of cruise tourism (Dwyer and Forsyth, 1996; 1998 and Dwyer, Douglas, and Livaic, 2004) Cruise ship passenger spending patterns (Douglas and Douglas, 2004) Operational studies: Optimal routing of cruise ships (see e.g. Hersh and Ladany, 1989) Cruise ship port selection process (Marti, 1990) Optimal cruise-liner passenger cabin pricing policy (Ladany and Arbel, 1991). The service offerings and locational qualities of cruise ports: McCalla (1998): site and situation requirements of cruise ports Vagellas and Pallis (2010): different services provided by 20 European passenger ports Gui and Russo (2011): structure of cruise value chains and the regional articulation of land-based cruise services. Geography of cruise shipping remains an under-researched academic field in maritime and tourism studies.

Focus of paper This paper focuses on capacity deployment and itineraries in two major cruise markets: the Caribbean and the Mediterranean. We argue that: the cruise industry sells itineraries, not destinations, implying a level of flexibility in the selection of ports of call The two cruise markets are interconnected in an operational manner Cruise ports can be classified based on the role they serve within their regions.

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

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.

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

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

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

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

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

Cruise Passengers Visits, Mediterranean, 2011

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.

The impact of shoreside power/coldironing Large differences in CO2 emissions: From 93 to 615 kg of CO2 per passenger-day From 199 to 1,314 g CO2 per passenger–km Juneau in Alaska was the first (2001) Obstacles: Challenges a city’s power grid Investment costs (also for retro-fitting ships) the cost of shore power the absence of international standards for shore power systems. Environmental regulations in urban areas => move to less urban areas

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

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..

Revenue and Expenses per Average Cruiser, 2011 On-board services: 20-30% of revenues Source: Cruise Market Watch. Note: Excursions only cover those organized by the cruise line. Looking for Fuel-Efficient Routes: 17 knots x 14 hours= 200 nm is ideal

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

Ship repositioning by Royal Caribbean Cruises Northern hemisphere Winter of 2011 Summer of 2011 Caribbean 23 8 Mediterranean 3 21 South America 9 Asia/Australia 4 1 Alaska 5 Baltic Bermuda/New England Mexico (Pacific) Middle East Hawaii/Californ. Total 42 ships

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

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

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

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. Very tight schedules => schedule reliability! Stability in the sailing schedule of ships: not only linked to vessel size, but also to the strategies of the cruise operators and cost and technical considerations

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).

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