There are no guns on their decks, and no torpedoes are skimming through the water toward their fat white hulls. About the only firearms involved are the weapons used to blast clay pigeons off the stern. But there is a big battle being waged on the oceans of the world. With reduced prices, free air fare and special promotions, the billion-dollar "love boat" business is at war with itself.
The statistics are surprising, and the stakes are high. The cruise business is the fastest-growing segment of the travel industry. In 1983, passenger growth was 15 percent ahead of 1982 -- yet only 1.6 million people cruised last year. (By comparison, 4.1 million Americans toured Europe.) While the cruise passenger figure may top the 2-million mark this year, the significant fact is that only 5 percent of the total U.S. population has ever traveled on a cruise ship.
"That really gives us something to shoot for," says Scott Hannah, vice president of marketing for Sitmar. "We're convinced the market can only continue to grow." Sitmar, like many other cruise lines, is expecting some of the remaining 95 percent of America to discover cruising soon.
This year, the line emphasized its convictions by spending about $150 million to launch the Fairsky, a 1,200-passenger giant. Later this year Princess Cruises, the West Coast's oldest established cruise line, will introduce the 45,000-ton Royal Princess. By 1986 there should be 19 new cruise ships, as well as a host of refurbished older ships, crowding the high seas.
What this means is a 20 percent increase in the number of cruise-ship berths available to prospective passengers. And, given the normally unforgiving law of supply and demand, a long run of low, discounted fares. There are some in the cruise business who even predict some cruise-line failures in the wake of too many empty cabins.
"We've seen a tremendous explosion in capacity," says Sitmar's Hannah, "but the market has a very good way of sorting out value." Still, Hannah remains confident that most cruise lines will survive the excess capacity storms. For the past seven years, and before the introduction of the Fairsky, Sitmar enjoyed a 96 percent load factor on most of its cruises, but the over-capacity problems in the Alaska and Mexico markets may dramatically affect that percentage. "Some of the lines we compete with are literally giving away their product," Hannah says. "After all, a cruise ship berth is one of the most precious commodities. Once it goes out empty, it disappears. You've lost it for that trip."
To be sure, there are a lot of disappearing commodities in the cruise business these days. As a result, almost every cruise line is discounting fares to fill as many cabins as possible. Under Sitmar's SuperSaver program, couples can save as much as $800. (And, as a further enticement, the line will pay travel agents an additional $100 over their regular commission for each cabin they sell.) Princess Cruises has indefinitely extended its "Love-a-Fare" discount program. Under the plan, passengers will save between $500 and $800 on Mexico, Caribbean and trans-canal sailings.
Cunard, for example, which based its Cunard Princess on the West Coast this summer, is selling one of its seven-day Mexico cruises for $799. Then passengers can cruise an additional seven days for only $299. "It's an unbelievable fare," says Cunard spokeswoman Alice Marshall. "Mexico is our weak spot. But look at it this way: Our fares will never be cheaper. They're almost irresistible. If anyone is on the edge about cruising because of cost, they can almost do it risk-free now."
Nowhere is the cruise business more competitive than on the West Coast. In the past few months, no fewer than 11 ships have been positioned to be home-ported out of either Los Angeles or San Francisco. Five years ago, slightly more than 94,000 people cruised out of Los Angeles -- this year that number is expected to top 400,000. There are currently nine ships offering regular runs down to the Mexican Riviera; a few years ago there were only two. Alaska cruising almost requires sea traffic controllers to handle the number of cruise ships heading north from San Francisco and Vancouver.
"The West Coast is what's happening," says John Cox, senior vice president and general manager of Los Angeles-based Western Cruise Lines. "The market is expanding rapidly and changing at the same time," he says. "We're seeing a shift to shorter cruises." In Los Angeles, Western Cruise Lines' Azure Seas makes inexpensive three- and four-day cruises to Mexico. In San Diego, Crown Cruises' Viking Princess offers a one-day, $75 cruise south of the border. Costa Cruise Lines has announced it hopes to base the Daphne in San Diego by 1986, and Princess Cruises will start service from San Diego Jan. 12. And, for the first time since 14 years ago -- when the Matson Line's Lurline last plied the route -- there will be round-trip passenger cruise service from the mainland to Hawaii when the SS Constitution sails from San Francisco Dec. 15 on a seven-day trip across the Pacific.
"The short cruise is booming," Cox says, "because it allows the first-time cruiser to sample the market. These people haven't felt comfortable before now." Cox also notes the changing demographics of cruise passengers. "We're getting younger, more affluent cruisers now. The older crowd is disappearing and being replaced by a high number of young professionals who demand short cruises."
"It is a dramatic shift," says Edwin Stephan, president and chief executive officer of Miami-based Royal Caribbean Cruise Lines. "In the last few years our median cruise age has dropped eight years (from 53 to 45 years)." Royal Caribbean also boasts some other interesting statistics. For the past seven years, their ships have been booked nearly 100 percent nine months in advance. "But supply has caught up with us," says Stephan. "Still, over-capacity is an intriguing concept. I don't believe that any cruise line has more capacity than they can use. This is not a commodity market. We think somebody else has too many ships, but it's not us. Supply may be ahead of demand, but we don't feel it's out of balance."
There are some, however, who point out that some cruise-line statistics are misleading. When cruise prices become pressured -- and ultimately discounted -- a ship leaving 100 percent full may not be yielding much of a profit, if most of the fares are reduced.
Then there's the small problem of the power of the U.S. dollar. It has climbed 18.5 percent against the British pound, 10.3 percent against the German mark. Americans are flying to Europe in record numbers. "Ten years ago, we could compete with Europe for that dollar," says Stephan. "Now, it's more difficult." What this means is that cruise lines are constantly reassessing their ships' positioning and trying to counterbalance their losses. Royal Caribbean is shifting one of its ships, the Nordic Prince, to cruise from New York to Bermuda early next year, and the 1,056-passenger ship will be marketed with a nationwide "fly free" program.
Cunard may be weak in Mexico (and many observers don't expect them to stay in that market), but they're bullish on the European market for the QE2. This summer the company contracted with British Airways to charter more than 168 separate Concorde flights. On transatlantic crossings, Cunard offered passengers the option of sailing one way on the QE2 and flying the other on the Concorde for an add-on fare of only $499 (compared to the regular XXXX one-way fare). (On the Oct. 27 and Nov. 9 sailings this year, Cunard offers the one-way Concorde flight free to all first-class passengers.) The program has been so successful that Cunard has extended the Concorde program on the QE2's 1985 world cruise, and its Sagafjord Circle Pacific and Orient cruises. The Concorde will now ferry passengers to and from the ships in Hong Kong, Rio, Singapore, Sydney and Capetown.
Still, the cruise line is faced with more than a comfortable share of available berths. As a result, for the first time in 144 years of transatlantic service, Cunard has begun to market a standby fare on the QE2 to sell last-minute available space. Commencing immediately, Cunard is offering a flat standby fare of $699 (per person, double occupancy). The line also says it will, in many cases, be able to confirm standby reservations two to three weeks before sailing.
One of the ways the cruise industry is trying to fill berths is in marketing specialized cruises. These range from 1,000-mile expeditions up the Amazon on the Sun Lines' Stella Solaris (650 passengers, 310 crew members), to no-frills Caribbean voyages on smaller ships, like the Welsh Falcon (32 passengers, 12 crew), which cruises from St. Lucia to Antigua, to ultra-deluxe Mediterranean cruises on the new 120-passenger Sea Goddess, where fares average a hefty $500 a day.
Another interesting development in specialty cruises comes as a result of a recent IRS ruling that allows up to a $2,000 tax deduction in any calendar year for each passenger attending an educational seminar aboard an American flag ship. (The cruise ship, and the taxpayer's participation in the seminar, must meet certain IRS guidelines.)
In Miami -- a port known as the undisputed king of short cruises -- a whopping 35,000 passengers sail from the city's modern Dodge Island complex every weekend to the Bahamas, West Indies, South America and Mexico. Norwegian Caribbean Lines is even offering standby transatlantic fares for its flagship, the 70,202-ton SS Norway.
"We acknowledge this overcapacity," says Royal Viking Line's chairman Warren Titus. "It will probably continue through 1985, but we're not worried. The healthy will get healthier as long as the economy holds up."
But Royal Viking, an up-scale line with a strong tradition of maintaining up-scale fares and service, started offering substantial discounts about a year ago -- and ever since, red ink has been gushing into its bilges. "We were the last to do it," says Titus. "But when your competition is doing it and there's a 30 percent price differential, you discount."
This summer, Royal Viking discounted $400 off its North Cape cruises. And in the extremely competitive Alaskan market, where Royal Viking's passenger loads have been thin, the line is giving $1,000 bonus certificates, to be applied against the fares of any of its 1985 cruises. In many cases, Royal Viking also is throwing in free air fares.
But these efforts haven't cut the line's losses. Within the last year, Titus started negotiations with the J.H. Whitney Company to sell Royal Viking, and contracts were about to be signed. But if the Whitney deal (to purchase the cruise line for $240 million) had gone through, it would have meant re-flagging the vessels in the United States. Royal Viking's Norwegian owners were uncomfortable with this thought. They thought that the ships should keep their Scandinavian registry, as well as their up-scale reputation -- not to mention the cost differences involved if the line had to employ an American crew.
On Aug. 14, Norwegian Caribbean Lines made a surprise announcement: Royal Viking Line had agreed to be acquired by Norwegian Caribbean for cash, stock in NCL and assumption of Royal Viking's debt -- for the same price, $240 million.
Royal Viking will operate officially as a separate entity, but the combined company will now be the largest cruise operator in the world, with eight ships and a passenger capacity in excess of 7,200. "We think this will be a good thing for both of us," says Royal Viking spokesman George Cruys. Norwegian Caribbean, he points out, gets more first-time cruise passengers than any other line, and Royal Viking has a reputation for attracting the most repeat passengers. "The combination will be one of diversification," Cruys says. "We expect NCL passengers to want to trade up to Royal Viking."
Even some smaller up-scale cruise operations have suffered. Norwegian American Line, long considered one of the best, is no longer afloat. Its two luxury ships, the Vistafjord and the Sagafjord, were bought by Cunard last year.
"Actions of the cruise industry during the last five years have created excessive capacity in relation to cruise demand that will be with the industry for some time to come," admitted Ronald Zeller, president of Norwegian Caribbean Lines, in a speech before a Miami travel trade group. "New ships have been and are being built without reference to measurements of cruise demand growth."
Zeller should know what he's talking about. In 1980, NCL bought the former SS France for $150 million, refitted her and started cruises from Miami. Until then, demand for Miami-Caribbean cruises was strong and roughly equaled the number of berths available. Then came the Norway, and the cruise market had to find an additional 1,800 customers. For two years, it was rough sailing. Now, while NCL's five ships carry more passengers than any other cruise company in North America, there are still empty berths.
Confidence in the cruise business remains high. On July 11, Carnival Cruise Lines launched an unprecedented $10-million advertising campaign. And the new ships keep coming. "Some are so large," jokes one cruise-line official, "that they even have high crime areas." Don't laugh. Despite the purchase of Royal Viking, Norwegian Caribbean Lines is continuing technical and marketing feasibility studies of its plan to build the 5,000-passenger Phoenix.
Until that happens, this is probably the best time to take a cruise. Thanks to the "cruise wars," passengers are assured of victory at sea.