French orders to foreign shipyards

22
Artist impression
of the 975-cabin
cruiseship
Millenium,
to be built by
Chantiers de
lÕAtlantique for
Royal Caribbean
Cruise Line
on behalf of
Celebrity Cruises
on shore. The variety of attractions is also increasing, including
shows based on the Las Vegas model. These improvements
have resulted in major increases in the size of vessels.
These changes have opened broader perspectives in terms
of passenger profiles, increasing growth prospects, especially
through the participation of younger cruisers, whose average
age in the US is now 45, compared to 60 ten years ago.
The sector is currently generating its own demand through
a permanent increase in the supply of cruise products.
Furthermore, the market is developing simultaneously in
several zones including the US, Asia and Europe, making
it less dependent on a single market.
For those who detract from this sector, let's remember
that in 1970 Las Vegas hosted 6.7 million visitors, roughly
the same number of people that went on cruises in
1999. By 1980, there were 12 million visitors, in 1990, 21
million and in 1998, 30 million people went to Las
Vegas. The products of both industries share growing
similarities.
Las Vegas prospered because gambling was allowed there,
almost the only place in the US. This is no longer true as many
other states have since legalised it. Las Vegas' dynamism
stems not from gambling, but rather from the effort promoters
constantly place in developing new attractions.
This instils in people the desire to discover or to revisit the
city ; gambling has become a secondary consideration.
Although we remain optimistic about growth in the cruise
sector, the overall picture is nevertheless not always rosy
for all players in the industry. The sector has its share of ups
and downs.
The Kosovo crisis and the earthquakes in Turkey affected
cruises in the Mediterranean, forcing owners to scramble
to change itineraries, which is always a delicate and costly
undertaking. Some companies that are wholly dependent
on the Mediterranean market - such as Royal Olympic Cruisessuffered
because of these unforeseen events. Still, most
companies operating in the area surmounted the difficulties,
but all experienced seasonal performance problems.
The orderbooks situation should not mask the intense
competition currently underway among European shipyards
to attract major sector players. This competition has
a sharp downward effect on newbuilding prices, a factor
that led to heavy losses in two shipyards this year, Kvaerner
Masa in Finland and Fincantieri in Italy. The Kvaerner group,
already having difficulties, expects to sell its shipbuilding
business.
The following shipyards made their entry for the first
time this year in the cruiseship construction business:
- Fosen in Norway
- Ingalls in the US
- Aker MTW in Germany
- Mitsubishi in Japan
All have built passenger ships in the past, but no cruiseship
over the last twenty years, excluding Mitsubishi. Many
shipyards, attracted by high added value on cruise vessels,
would certainly like to get a share of the market.
However, building this type of ship requires wide participation
from specialised subcontractors and suppliers.
Therefore, the best-prepared shipyards for building
these units, are those with an infrastructure environment
and a qualified subcontractor base that is operational.
Far Eastern shipyards, especially in Korea, will therefore
have difficulties succeeding in this market without
making some deliberate and very costly strategic choices.
European shipbuilding capacity should be able to cover
the growing demand in the sector through annual productivity
gains and with additional shipyards becoming
active in the cruiseship market. However, it is probable that
owners will have to pay a little more for these ships - the
more so with vanishing subsidies - if they don't want to
lose sector expertise that they helped to develop.
One industry problem recorded this year was with the failure
of Lowline, which was forced to sell "Edinburgh Castle"
(32,000 grt, 1,100 passengers, built in 1966). This case
illustrates that it is impossible to speculate on this market
as a shipowner without having a good grip on sales and
marketing.
It cannot be stressed enough; power and longevity in this
business depend on companies' ability to fill their ships
with passengers. This means having an efficient sales
and marketing network.
The overall consolidation occurring in the industry over
the last few years, which has considerably reduced the
number of operators, continued this year with mitigated