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The Honolulu Advertiser
Posted on: Friday, February 23, 2007

Cruise industry leader sees hard work ahead

By Adrian Sainz
Associated Press

Carnival Corp. CEO Micky Arison, speaking on his company's 35th anniversary, says cruising continues to be a growth industry.

DAVID ADAME | Associated Press

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MIAMI — Carnival Corp. Chief Executive Micky Arison said yesterday that improving infrastructure at ports of call, conserving fuel and knocking down perceptions that cruises are more dangerous than other vacations are some of the challenges facing the cruise industry.

Carnival Corp. owns 12 brands as the world's largest cruise operator, with more than 7 million passengers taking trips on Carnival Cruise Lines, Princess Cruises, Costa Cruises and other lines in the Caribbean, Europe and Asia. The company will soon have 11 brands after announcing yesterday a deal to sell Windstar Cruises to Ambassadors International Inc. for $100 million, with closing expected this year.

Arison, speaking to The Associated Press for Carnival Cruise Lines' 35th anniversary, pointed out that cruising continues to be a growth industry. The Cruise Lines International Association predicts that 12.6 million passengers will take cruises this year, an increase of 500,000 guests from 2006.

Carnival has 20 ships on order through 2011 and, according to its annual report filed in November, expects market growth of about 5 percent in North America and 9.5 percent in Europe for the next three years. The company was working hard to make Europe more of a year-round destination, Arison said.

"We have the right ships coming to the right brands at the right time," he said.

Arison noted that pricing is down in the Caribbean — where the industry has seen a general softness in demand — and that was negatively affecting net revenue yields. Yields are a key profitability gauge that measure net income earned from passengers per day from cruise tickets and on-board sales.

But he said that while Wall Street analysts may not like that yields and prices are down, the consumer is benefiting from lower prices. Arison said the key Caribbean market would be fine in the long run, but that the company's marketing arm is working on sparking demand for Caribbean cruises in the short term.

"I'm sure we're going to carry a record number of guests to the Caribbean this year ... because the industry is growing," he said.

Another issue affecting the industry is what Arison considers overblown media coverage of stomach illnesses on cruise ships. Media outlets should not make such a big deal about outbreaks of norovirus on cruise ships because they happen less frequently there than they do in everyday life, he said.

According to the Centers for Disease Control and Prevention, Carnival's brands had 15 reported norovirus outbreaks in 2006. But CDC estimates that 23 million people, or 8 percent of the U.S. population, develop symptoms of norovirus each year, while less than 1 percent of cruise passengers are affected by norovirus.

"It is something that is a struggle for us," Arison said. "There's no question that there's a perception out there by X number of people that there's a higher risk of getting sick on a cruise ship than another form of vacation, which is terrible. It's unfortunate and we just have to continue to do what we do and try to minimize the impact."

Carnival also has put together a team to develop strategies for keeping fuel costs down. Among those are finding more efficient ways to operate lighting, water and air conditioning, and maximize itineraries to reduce fuel consumption.

"Captains in the past may not have been sensitive to the issue of fuel and just go from one port to another and not use their engines the most efficient ways," Arison said.

Another issue is improving infrastructure at ports of call to accommodate more passengers, and ease the strain on heavily traveled destinations.

"As we're adding ships of such big size, we're putting a lot of strain on that and we have to work with destinations and invest in destination to develop that infrastructure," Arison said.