On Tuesday night CNBC aired a one-hour piece ambitiously titled "Cruise Inc.: Big Money on the High Seas." As a piece of financial journalism, it was a bit weak -- while they did mention that it's a fixed cost business, talk about increasing capacity, and toss in a few juicy stats (see below), they didn't discuss the industry's margins, bond ratings, dividend history, etc. They also didn't distinguish between Carnival and Royal Caribbean the brands and Carnival and Royal Caribbean the holding companies -- instead, they gave the impression that there were just three brands in the cruise world.

Rather, it was mostly a video journal about Peter Greenberg's week-long Caribbean jaunt on NCL's lovely Norwegian Pearl. (Which we had occasion to visit last year: photos of Norwegian Pearl.)

I shouldn't be too hard on Greenberg or CNBC -- it was good fun to watch! Also good PR for the brand, so kudos to the NCL team.

Plus, I do appreciate having a public source I can point to for industry certain stats. Here are the highlights...

• 92% occupancy on this sailing -- ouch! (They never stated the date of the sailing, presumably sometime in January, February or March of this year.)
• $3.50 head tax in Roatan, Honduras. In contrast with up to $50 up in Alaska
• Roatan got 350k cruise passengers in 2008, expects 500k in 2009
• Pearl's shore excursion manager estimates that 75% of guests book at least one shore excursion on this Exotic Western Caribbean itinerary. (Based on my recollection of a similar cruise, these three ports, Roatan, Belize and Great Stirrup Cay, are definitely very, um, shore ex friendly!)
• 30% of shore excursions are booked online, prior to the cruise. This was a CNBC voice-over, and not explicitly connected to this sailing, NCL, or anything specific. Argh.
• 40-50% of shore excursion revenue goes to the tour operator, 50-60% to the cruise line. CNBC self-cited, but does not seem out of line.
• Bar revenue plan = $7.25 per passenger, per day. Interesting - even though they didn't explicitly say if this is based on lower berth passengers or all passengers, available or actual. (Hmm ... that's what? One glass of wine? Seems light to me. Does that mean I'm a total lush??)
• Norwegian Spirit's $16M refit in 2008 was conducted in Mobile, Alabama. Among other things, they added 11 cabins.
• There are over 1100 security cameras on Pearl, and a full time surveillance team.
• NCL America venture lost $100M until they pulled two of the three ships out, according to NCL CEO Kevin Sheehan.

Anyway, while this production was no Drydock: A Cruise Ship Reborn (Mike Rowe's coverage of the Sovereign of the Seas refit, my all time favorite documentary), it was nice to see a somewhat serious treatment of the industry in the popular media.

Okay, after several posts about the current economic times and their impact on the cruise industry, it's time for something a little more cheerful.

One of the happier tidbits to come out of the State of the Industry address is the factoid that Carnival's Towel Animal Theatre has gotten over 18 million views.

If you're not familiar with Towel Animal Theatre, click on the embedded video on the left for an example. It's a set of short videos documenting the secret lives of stateroom towel animals, and it's an adorable example of the use of viral marketing, as these videos are only available on Carnival's website and YouTube.

And if you do need to think of this in economic terms, Gerry Cahill noted, "As a former CFO, I'm pleased to say the cost of the performers is very low."

One of the question the moderators asked at today's panel on the Upscale Cruise Market was "Are rich people different?" I.e., Are they still happily cruising luxury lines despite the current difficult economic times?
The panelists, CEOs of Crystal, Seabourn, Silversea, Pearl Seas/American Cruise Line, and Sea Cloud, were presumably in a good position to comment.

Pam Conover of Seabourn suggested that there is actually a lot of similarity across all economic strata. She pointed out that while they are filling ships, lower prices have been necessary to do so: "There is caution in consumption markets. What the upscale customer is looking for is value, just like everybody else."
Charles Robertson of ACL/Pearl Seas argued that the caution is mostly psychological, not economic: "Our customers aren't concerned about losing their job, losing their house. They may be in a bad mood about [the economy], but they can afford it."

Konstantin Bissias of Sea Cloud, which has per diems of roughly $750, said that as of the past few months, while they have not changed their prices, "we try not to use the word 'luxury' too much" for fear of eliciting guilt feelings in potential customers.

So what do we think of all this? Sure, we'll believe that rich people aren't all that different.

But consider that we're emerging from perhaps the biggest asset bubble of all time. Albeit with some likely hyperbole, Blackstone's Stephen Schwarzman has argued that global wealth has lost some 40 to 45% of its value. Lucrative jobs in finance, insurance and real estate that once fuelled the market for Park Avenue penthouses (and luxury cruises?) have evaporated. And meanwhile the current U.S. administration has made it clear that they intend to do more to tax the wealthy who remain. Even Switzerland has agreed to make its banks more transparent to the IRS.

So perhaps the question is not whether the rich are different ... but how many rich people are really left?

The State of the Industry panel brought together the CEOs of RCI, NCL, HAL, Carnival and MSC for the annual discussion of where we are, and where we're going.

Yes, there are good reasons to be optimistic about cruising as an industry, as the panelists reiterated:

• The value proposition of a cruise is outstanding. (MSC's Rick Sasso even quipped that he "was mentioning value for the third time in three minutes." Yes, we get it. International crew, a bundled product, and a low tax base are a beautiful thing.)
• Costs have eased, both of fuel and Euro-based costs
• Cruise ships can alter deployments to seek out more popular areas, more affluent economies, in ways that hotels can only dream of. Indeed, Australia has become so popular as both a domestic and international destination that Sydney has become a very tight port - Adam Goldstein noted that for the first time in RCI history, at Sydney recently they actually had to turn around a ship while at anchor!
• Land based operators are in disarray, as a result of the US government's dislike for conference

Then again, there are also reasons for concern:

• Global economic recession. Obviously.
• Expanding capacity. CLIA may be delighted about 14 new ships coming online in 2009, in addition to seven in 2008, but while this will raise volumes, we at CruiseSavvy believe it is almost certain to depress yields. The industry has always taken it as gospel that growth is good, and of course ships coming online now were ordered in much better times. However, basic economics tells us that price is set where supply meets demand. With demand slipping and supply expanding, we at CruiseSavvy expect lower prices for some time to come.

The CEOs talked about measures each had taken to address the current market:

• Discounting, of course. "We are filling our ships, albeit at historic low prices," was the refrain of more than one CEO. Celebrity's Dan Hanrahan tried to argue that they "won't take business if the price is so low that it'll hurt us" but both Carnival and HAL disagreed. As Stein put it bluntly: "Our business model is simple, we fill our ships."
• Redeployment and international sales. Carnival just this summer pulled out of Europe and back to US home ports, which are far easier for consumers who may be wary to spend on flights in addition to cruise fare. RCI noted that as an international organization they are able to source from far afield, though Adam Goldstein also noted that "there is no country that is immune to the market conditions."
• Marketing. Carnival, NCL and RCI all spoke about the importance of marketing even - perhaps especially - in a down economy.

Overall, the group was positive about the industry in the long run, while recognizing the challenges in the near term.

We at CruiseSavvy certainly agree in the long term, but are naturally sympathetic to those companies already burdened with heavy debts, and who perhaps may be less well-equipped to handle extended lean times. MSC is sitting smug -- "we have plenty of money" - said Sasso. Carnival Corp brands Carnival and HAL are still sitting on an excellent credit rating as well as a modest amount of debt and newbuild debt-to-be.

Perhaps our favorite roundup was from Stein Kruse, whose closing comments channeled the film Apollo 13: The ground crew were anxious and fretting as the distressed space ship spent far too long in atmosphere upon re-entry. Anxiety built upon anxiety, and despite extensive training and exceptional equipment the ground crew began to panic. Then Ed Harris stood up, straightened his tie, and reminded the room: "Ladies and gentlemen, this will be our finest hour." Calmed, the crew are able to bring the ship safely home.

All would agree that great challenges are now upon our industry. We have no doubt that there will be changes, and some practices and parties may not endure. But with strong execution and wise leadership, the industry overall has a bright future ahead.

"Marketing in Difficult Times" was surprisingly good post-lunch session. Terry Thornton of Carnival did a great job moderating and synthesizing the input of a group that included various ministries of tourism from the Caribbean, as well as port and shore excursion company reps.

The highlights:

• Some simply emphasized making it through: "Survive to sell another day. That's where we are as a company, where we are as an industry" - John Byles, Chukka (shore excursions)
• Others see the current situation as an opportunity for aggressive advertising: "We cannot crawl under a rock and hide. Because when this recession is over, we'll have to play catch-up" -Donald Dawson, Jamaican Marketing & Sales, who recently blitzed his core markets with television and display advertising, including taking over the NYC Port Authority for all of January and February
• "Test, measure, and learn. ... You'll find six or seven things that work, but probably not what you think." - Terry Thornton, Carnival
• And while some always make an effort to put a positive spin on things, others were more blunt: "It's realism time now. Before, the market was growing. Now it's only the people who deliver the best product at the best price that will survive." - Hon. Allen Castanet, Minister of Tourism from St. Lucia

Terry also pointed out the classic adage, "don't be afraid to ask for the business." And Bill Tollbert, of the Miami Tourism Bureau carried through, reminding the group, on behalf "Please spend money here."

OK. Off to dinner...

Ah, Monday morning straight off the redeye. Always a fun way to start a conference. If I walked past you in a daze and didn't say hi, my apologies. I was a little loopy this morning.

At least as far as I can tell, though, there aren't that many people here yet.

I did run into Paul G, one of my favorite cruise line ops people, dashing between meetings. And of course Terry T did a great job moderating an afternoon forum. But so far, not much of the press corps seems to be here ... at least not the fun ones.

Oh, and apparently "Seatrade Miami" is now "Cruise Shipping Miami." In their 25th year they decided to do a rebranding. From something well known (to the relevant market, anyway) and unique to something that sounds (a) generic, and (b) implies that it's about the shipping of cruises. Hmmm.

...spare a thought for poor Windstar, or more accurately, their parent company Ambassador's International (AMIE on the Nasdaq).

While CCL might be down 50% over the past year, and RCL down 79%, Ambassadors is down a whopping 97% -- sitting at just 37 cents a share as of March 11, 2009 (vs. a close at $11 in 2008). (Link to chart on Google Finance)

What makes this even worse, is that just two years ago, those 37 cent shares were trading at around 45 DOLLARS.

In February, Ambassador's announced a series of major changes: they're shedding all their non-Windstar assets, replacing the senior management team, and consolidating operations in Seattle. So far, this hasn't really helped.

Yesterday, NCL announced the appointment of Roberto Martinoli to the role of President and COO. We think he is the perfect person for the job, but we do not envy him the task ahead.

The timing makes a world of sense - he was most recently working as an "advisor" to Apollo Management, NCL's controlling shareholder. The Cruise News trade newsletter described this as a holding pattern until the conclusion this month of Martinoli's non-compete agreement with previous employer Carnival Cruise Lines. At Carnival, Martinoli was EVP of Operations, a promotion from the role of SVP in charge of technical operations. Prior to that, he was an SVP at Costa.

Martinoli's time and success within the Carnival and Costa brands (both owned by Carnival Corp, of course) speaks to an ability to run a lean, high-quality operation. After all, nobody in the business makes the return on capital that Carnival Corp does.

Martinoli steps into a cruise line with a number of significant challenges: even in good times, NCL has struggled to make a profit. Additionally, the line has enormous capital costs, both from the pricey Meyer Werft ships they have bought in the past few years, and the two F3 newbuilds on the way.

That said, NCL has a number of important assets Martinoli will no doubt be sure to leverage. First, there's those new ships: they may be expensive, but they're gorgeous and perfectly suited to the Freestyle concept. (Where else can you have twelve distinct restaurants at sea, plus a bowling alley?) Furthermore, they have a clearly differentiated position in the market, thanks to a product that is, well, genuinely different (what a concept!) and a consistently clear marketing message.

We wish NCL and Mr. Martinoli all the best. We will be following this story with great interest.

This time last year, all the cruise lines were hot and heavy about the Med -- even Disney sent a ship. Now, it looks like the place is saturated and the party's over. Well, at least for the cruise lines.

Earlier this week Carnival announced they're pulling Carnival Freedom out of the Med for 2009, citing the strength of pricing in ... the Caribbean. Wasn't the Caribbean the place all good itinerary planners wanted to avoid? The land of bargain-basement fares -- erm, "great value"? Well, now the basement is looking pretty darned good, apparently.

There's definitely a lot of discounting in Europe -- we were shocked to get a mailing from Holland America Line touting $99/day fares in Europe. On HAL. In Europe. $99/day. Aaaagh! (If I didn't have a job and a family, I'd so be on a ship right now.)

Worse, it seems that there's even some -- shhhh -- unsold capacity. Now that's truly frightening. We all know that the marginal cost of a cruise passenger is basically nil. If a cruise line has a cabin, they should sell it at any price rather than let it go empty. After all, there's no additional cost to doing so, and at least people will spend money on booze, shore tours and gratuities.

Even so, we're hearing of ships sailing with empty cabins. That's dire. So far we're not hearing this from the big guys like HAL and Celebrity, but one correspondent recently returned from Azamara Quest reported a 92% occupancy. That's pretty dismal in an industry that typically runs at 100%. Scarier still, another correspondent reported that her recent Windstar cruise on Wind Surf was at 59% capacity -- and they were strongly pushing the back-to-back, as the next sailing was just 50% sold. Now that's just wrong.

Ah well, the world runs by supply and demand. And in the current state of over-supply, now's a great time to pick up a Med cruise for cheap.

I live in jeans. They're comfy, they're flattering, they're stylish ... and they are forbidden from cruise ship dining rooms even on the most casual nights. Well, at least that's the case on paper.

I've started a little experiment to see which cruise lines' maitre d's will actually insist that I change. Below is what I've found so far.

Jeans-friendly (at least in practice)...

• Azamara - Technically, Azamara forbids jeans in the dining room. However, with heels and a rather nice top, Armani Exchange seemed to be A-OK.
• Carnival - On casual evenings, even Carnival's dress code says jeans are fine. The new "cruise elegant" attire for formal night explicitly forbids jeans, one member of our Editorial Board reports that a Brooks Brothers shirt and nice shoes meant he had no problem wearing his usual San Francisco uniform even on formal night.
• NCL - They are surprisingly ambiguous about jeans, saying only that "nice jeans ... are welcome in many of our restaurants as well, but not in all." That said, in practice jeans do not seem to be a problem.
• RCI - Jeans are not explicitly forbidden, though the RCI dress code seems to suggest that even casual nights should entail "slacks" or dresses. That said, in practice the rules seem to be much more relaxed. On a 7-night Caribbean, my fabulous Levi's Capital E's, paired with great heels, sailed right past the Maitre d'. Heck, I even saw jeans on a formal night.

"Madam, I'm afraid we have a dress code..."

• Oceania - Busted! I got away with it on the first night (some guests were still waiting for their checked luggage), but later in the cruise the Maitre d' (politely) asked me to change. Oceania's dinnertime dress code explicitly forbids jeans. Fair enough, but that basically means their claim to a relaxed dress code means little for me. If I can't wear jeans, I might as well wear a formal dress. It's not like slacks are any more comfortable or packable.

I have yet to try this experiment on Celebrity and Holland America Line. Both technically ban jeans, but heck, I'm pretty sure they wouldn't keel-haul me for a first offense....