Posted on April 2, 2006 - by Ralph Grizzle

Wave Sends Mixed Signals

Will the 2006 Wave Season be recorded as a good sales period for cruises or a disappointing one? The answer depends.

“There are big Wave Seasons and there are disappointing Wave Seasons, but the Wave Season of 2006 might just go down as the least clear cut,” reads the industry trade Cruise Week. The Miami Herald took a more decisive stand in an article titled “Cruise Sales Off To Slow Start,” which painted a gloomy picture of cruise sales during the first quarter.Not all segments of the industry suffered from sagging sales, however. If there was a soft spot in this year’s winter Wave Season, it was the Caribbean. Reports from cruise sellers around North America indicated lackluster Caribbean sales, with reports ranging from “flat” to “just so-so” sales.

“Wave consists of two things,” says Ove Nordquist, of South Beach Cruises in Miami Beach, Florida. “It’s people buying summer cruises to Alaska and Europe, plus it’s people buying last-minute Caribbean. And the Caribbean wave just wasn’t there this year.”

Nordquist, whose high-rise condominium is just a few blocks away from Miami Beach’s famed Ocean Drive, adds that Florida hotels, by contrast, are as busy as ever. Indeed, the art deco hotels lining Ocean drive were commanding rates as high as $700 per night when we walked the crowded streets there in mid-March.

During the same time period, Nordqvist said he still had access to significant inventory for Caribbean sailings during March, even with only two weeks of the month left. “I haven’t seen last-minute Caribbean this weak for many years,” he says.

Three factors possibly affected Caribbean sales: The weather. “There was no winter,” Nordqvist says. The price point. “Prices were too high leading into Wave season,” he adds. And hurricanes.

“People don’t know there are no hurricanes in the winter,” he says. Travel agents fear that if Caribbean sales are lagging now, just wait until hurricane season blows in again this coming fall.

Prices may be the biggest factor. The Miami Herald article quoted a cruise seller who said that the average price of a cruise was up 9 percent over last year. Although that number could be disputed, what is clear is that Caribbean prices were holding strong through the first quarter of the year.

And for people looking for deals, high prices were a deterrent. “It’s important to get an extra $100 off air or cruise for those who have the impression that a cruise is expensive,” Nordquist says.

Soft sales were limited to the Caribbean, Nordquist says. Other warm-weather destinations sold well. “Hawaii was just incredible, Panama Canal sold out, and Mexican Riviera was fine,” he says.

And while mass-market Caribbean cruises lagged, demand for higher-priced Caribbean and demand for Alaska and Europe cruises exceeded expectations. Overall, the response to Wave was positive. When New York-based Cruise Lines International Association surveyed agents about how would they rated the 2006 Wave season, 70.3 percent responded that this season’s Wave was “good to excellent.”

Moreover, premium and luxury lines appear to be doing well. During Seatrade’s annual Cruise Shipping Convention in Miami this past March, cruise executives from the big public companies were tight-lipped about Wave season, citing disclosure regulations that prohibit them from discussing forward bookings. Smaller, non-public companies, however, were able to discuss forward booking. And those present at the Seatrade convention reported that call volumes, bookings and yields were up.

Oceania Cruises, for example, noted that nearly all of its 2006 inventory was sold prior to the March meeting in Miami. The company’s President and CEO Frank Del Rio said 2006 will be “a fabulous year for anybody who owns a rowboat” and 2007 will be “even better.”

Crystal Cruises and Regent Seven Seas Cruises reported bookings were up on a capacity-adjusted basis. Regent’s 2007 world cruise was already 80 percent booked in March. Likewise, Seadream Yacht Club reported that 85 percent of its 2006 inventory is sold. Even tiny Cruise West is expecting a record year, with more than $100 million in projected revenues.

Even so, there are soft spots among the small ship and luxury sector. Regent Seven Seas reported in early March that third quarter sales were “a bit slow, particularly in the Baltic,” usually a best seller for the line.

Wave is important, because it is estimated that up to 35 percent of all cruises in a year are booked during January, February and March. In late March, too late for inclusion here, the big public companies will release their earnings’ reports, providing a better picture on how this year’s Wave shaped up. We’ll have a better picture then of how Wave performed, but even then the picture will not be entirely clear.

“What happened during this year’s Wave,” Nordquist says, “depends on what segment you looked at.”