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Cruise Europe: Growth on reflection

5 March 2012




Jens Skrede of Cruise Europe discusses the success of Europe’s cruise industry – weathering the good and the bad.


Although just three months in, 2012 might well be remembered as one of the most difficult periods in the history of the cruise industry. On 13 January, Costa Concordia ran aground off the coast of Isola del Giglio, Tuscany, Italy, submerging the engines and causing the vessel to list to starboard. Although the majority of passengers were successfully evacuated, at the time of writing, 32 are dead or missing. Concordia is the largest passenger ship to have ever sunk and is, according to industry analysts, a constructive total loss.

The details of what happened that night remain uncertain, although initial blame has been placed at the feet of Captain Francesco Schettino, who is currently under house arrest on charges of alleged manslaughter, causing a shipwreck and abandoning ship. Even more unclear is what the incident means for the cruise industry at large, particularly for a region that has been one of the great recent success stories.

European prospects

According to a study commissioned by the European Cruise Council (ECC), the number of embarkations from Europe's ports grew by 83% between 2005 and 2010. Over the same period, port-of-call passenger visits rose by 92%, reflecting the creation of longer itineraries featuring an increasingly diverse range of destinations. The European cruise industry remained remarkably robust even during the recession, with passenger numbers and total revenues seeing moderate increases in 2009 and 2010.

When asked if the industry can show the same defiance this time around, Jens Skrede, managing director of Cruise Europe, is reluctant to make any predictions.

"I've been in the business for a while and I know that these comments often come back to bite you," he says. "Unforeseen events happen all the time and I don't have a crystal ball. The Costa Concordia sinking has certainly had a short-term effect on some of our members. There have been some cancellations because Costa needs to move some ships that were due to be deployed in northern Europe down to the Mediterranean. The long-term effects, I don't think anyone can say."

"The number of embarkations from Europe's ports grew by 83% between 2005 and 2010."

Although Skrede is unsure about the far-reaching consequences of January's tragedy, he is confident that things are being handled in the right way.

"I think the ECC and the Passenger Shipping Association have addressed this in a very professional manner," he says. "They have not tried to sweep anything under the carpet. Cruising is still a very safe way of travelling, even though the Costa Concordia tragedy was a horrible day for all of us. The safety record of the industry is very good and I think that people will listen to that kind of input."

In the meantime, Cruise Europe will press ahead with its agenda. In 2009, the organisation, which represents more than 100 ports in the Atlantic Europe and Baltic region, drafted an ambitious marketing plan. Its stated goal was that by 2012, Europe would be acknowledged as 'the most attractive cruise area in the world'. This might not exactly be quantifiable, but there is no doubt the region has performed exceptionally well during the recession. The area enjoys a number of natural advantages, although passenger perceptions had to be changed for these to be appreciated.

"We have a politically stable region, generally very good infrastructure and Europe is not just a summer destination," Skrede says. "There has been massive growth in winter cruising to northern Norway, Holland America has deployed ships out of Rotterdam and there has been exceptional growth in the market for Christmas cruises. I think by offering these things, we have made people realise that you do not have to be a certain type to enjoy cruising. It's not only old, rich people who travel this way any more."

Art of networking

The effort to change perceptions has been facilitated by better collaboration between the industry's ports through organisations such as Cruise Europe. In fact, this cooperation now takes place through multiple national and regional networks, meaning that there are now many forums in which new business relationships can be made. Skrede doesn't believe that this detracts from his organisation's effectiveness; ports need to be creative to attract new operators and should take whatever opportunities they can get.

" Cruising is still a very safe way of travelling, even though the Costa Concordia tragedy was a horrible day for all of us."

"Most of our members have their own networks where cooperation might be even stronger than it is with Cruise Europe," he says. "My responsibility is Cruise Europe and I don't worry too much about what others choose to do. We have a number of unique member benefits, but I know that others can do things that we cannot. Members need to work together to come up with creative menus and present them to cruise operators. If they can do it through Cruise Europe, that's even better."

There is a sense of mutual need between different members that generally results in smooth relations, even if priorities differ depending on the size and ambitions of the ports in question. These diverging priorities are most clear when it comes to infrastructure. Although port facilities in northern Europe are modern compared with most other regions, many destinations struggle to, or do not want to, keep up with the increasing size of cruise liners.

"There is no question that our large and small members approach the cruise industry in a different way and we need to try and cater for both," Skrede says. "For example, some ports are slower to adopt infrastructure that can deal with the larger ship sizes, and procedures to get passengers on and off the ships. We try to get the message out, but cruising is not as important a source of income to Barrow in Cumbria as it is to Copenhagen."

Despite these differences, one of Europe's great strengths is the diversity of experiences that can be offered on a single itinerary. The ports, large and small, have to cooperate if the region's cruise industry is to continue to broaden its appeal.

"Big turnaround ports such as Dover and Amsterdam need the small gems like the Norwegian Fjords and the Scottish west coast," Skrede explains. "Being able to combine these different types of port is a big competitive advantage for destinations in northern Europe."

Such smooth relations also predominate between ports and cruise operators, although there are certain issues of contention that are never far from the surface. During the recession most vessels have been running at close to 100% capacity, but this has only been possible through offering heavily discounted fares. Consequently, cruise operators need to boost revenues through additional services and examine ways in which costs can be reduced.

"If the relationship between ports and cruise operators is bad, neither will make any money," Skrede says. "At the same time, there are always discussions about pricing. You have the general issue of high fuel costs, which is a big challenge, and individual concerns to do with pilotage costs, gangway fees, tugboats and the provision of very expensive coach transport on Sundays in some ports. Cruise lines will ask our members for cooperation on these issues."

Moderate outlook

After the success of Cruise Europe's last marketing strategy, the next few years will see the organisation strive for more modest goals. Cruise operators and ports of call are doing surprisingly well in a volatile economic environment. A weaker euro has even had the positive effect of attracting more US tourists. The partial or complete collapse of the eurozone could, however, prove catastrophic for the regional economy. Again, Skrede won't be drawn into making predictions.

" For all the uncertainty, there are many reasons to remain positive about cruising in northern Europe."

"Anything can happen, especially when you consider the euro situation at the moment," he says. "The main change in our strategy is that we will be focusing only on communications between members and cruise lines. We don't have a very big budget and so reaching out directly to tourists in source markets would be very expensive. Our main aim is to bring our members and cruise lines closer together, and that is what we will continue to do."

For all the uncertainty, there are many reasons to remain positive about cruising in northern Europe. It is still one of the most affordable holiday experiences to be had and penetration levels in the market are remarkably low. With such a high growth ceiling and the demographic make-up of passengers becoming increasingly heterogeneous, a sense of cautious optimism is not unreasonable.

European cruise destinations such as the Norwegian fjords have been the industry’s growth market for the past few years.
Jens Skrede is managing director for Cruise Europe.