Execs: Cruise Demand Means Fares Could Rise

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Jens Norgaard Larsen, AFP / Getty Images

The good news for the cruise industry may be bad news for consumers – the price to take a cruise is likely to go up.

Top cruise line executives, speaking on a panel at Cruise Shipping Miami, presented the profile of a healthy industry, which has managed to survive a recession, natural disasters including earthquakes and the oil crisis, to still produce record numbers of North American passengers – 15 million in 2010 and an anticipated 16 million in 2011.

"Cruise ships continue at 100% capacity even during challenging years," said Jan Swartz, chair of the Cruise Lines International Association marketing committee and executive vice president of Princess Cruises.

With only eight new ships being introduced in 2011, down from previous years, there will be less new capacity to fill, and that is good for the cruise lines, officials said. Last year's newbies included the world's largest cruise ship, the 5,400-passenger Allure of the Seas.

"I think the fact capacity is slowing down only bodes well for us," said Dan Hanrahan, president of Celebrity Cruises. "I think the industry will benefit through pricing."

But Kevin Sheehan, CEO of Norwegian Cruise Line, said new ships also have a role in terms of of fares and are a "Wild West opportunity" in terms of expanding brands.

"New supply brings a lot of attention to the cruise industry and is followed by years of pretty healthy pricing," Sheehan said.

Gerry Cahill, president and CEO of Carnival Cruise Lines, which has a new ship, Carnival Magic, debuting in May, said passengers still want value, but showed during the recent economic slowdown that they are "willing to splurge in certain areas of their life" including when it comes to cruise vacations.

A continuation of high fuel prices could impact the industry especially in terms of ship deployment, said Stein Kruse, president and CEO of Holland America Line.

"High fuel pries will of course drive itinerary development, how we optimize the ships and the speeds we will use between ports," Kruse said. "It's inevitable that farther away destinations will see decreased calls."

Cahill said fuel prices, if they keep rising, will also influence decisions on homeports going forward.

At the same time, the cruise lines said they are looking for fuel efficiency in many ways.

None of the executives mentioned any potential for fuel surcharges on fares, however.

Adam Goldstein, president and CEO of Royal Caribbean International said one thing that has emerged from the recession is the cruise industry as a whole has become "much more global," as North American lines spend around the world."

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