Is too much capacity coming on at the top end?
According to Regent's Jason Montague, president and chief operating officer, luxury berths comprised just a 2.3% sliver of the cruise market in 2013 and, by 2020, that will actually shrink to 1.78% because of the volume of larger ships on order.
Regent, which is making a big splash with the newly introduced Seven Seas Explorer—its first newbuild in 13 years—isn't set to add more capacity until 2020.
That four-year gap is 'prudent,' Montague said. As long as competitors stay rational, he doesn't see cause for concern about growth.
Montague's boss, Frank Del Rio, president and ceo of Norwegian Cruise Line Holdings, noted that expansion in the luxury sector tends to be 'lumpy,' not a steady slope as in the mainstream business. 'It's a little bit of keeping up with the Joneses,' he said.
Del Rio noted the world is getting richer. Premium and contemporary ships are the 'farm team' for the luxury sector as some travelers graduate up the scale. And the Chinese are the world's greatest luxury consumers; if they take to cruising, that will be prodigious.
Meanwhile, Del Rio said Regent is performing well and 'without question, per diems are the highest in the industry.' Regent bundles more into its pricing than other brands, from airfare and transfers to drinks and excursions to gratuities and Wi-Fi.
Prior to Seven Seas Explorer's introduction, the fleet's oldest ship—the 1999-built Seven Seas Navigator—was commanding the highest fares, last summer, $1,000 per passenger day in Alaska.
'She's turned into a cash cow,' Del Rio said.
The company just spent $41m sprucing up Seven Seas Navigator, part of a $125m refurbishment program that continues with Seven Seas Voyager in October and Seven Seas Mariner in the spring.
Navigator, Montague said, 'looks fantastic, better than when she came [new] out of the shipyard.'
Keeping the fleet consistent is vital.
Del Rio opined that cruise operators too often focus on their latest ship.
'They're building ships as opposed to building brands. Consumers buy brands,' he said. 'No one's buying iPhone 5 or iPhone 6. They're buying iPhone. You can't have a brand if there's a dichotomy of product.'
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