The first of the capacity reductions in Alaska are set to begin this summer, with further reductions in 2010. Last week, as we reported, Carnival brands Holland America and Princess announced even further reductions for 2011. From the coverage in Alaska, it seems that some people are beginning to understand that tough times are ahead for state's economy, especially that portion of the population which is directly dependent on the tourism industry. Everyone else, however, seems caught up in debating one issue or another. Is the $50 tax on cruise passengers hurting the market? Is the tax really legal? Do the cruise lines really pollute?
Guess what. None of these issues themselves are important to the situation. None of them.
What is important is a very basic business principle that no one in the state seems to remember.
Here it is: Alaska has a product to sell: Alaska. The cruise lines are the customers. If the cruise lines don't want to buy the product - for whatever reason - they can simply take their business elsewhere and buy someone else's product.
In this case, the cruise lines feel the price they are being charged by the merchant is too high, so they are buying less of the product from Alaska and more of it elsewhere. That high cost is a result of several things directly in the control of Alaskans.
They don't want to debate it with the state. They've been expressing their opinion to "the management" for several years, and their "complaints" have not been responded to.
Think of it like a restaurant. If you keep increasing and increasing your prices, well past your competitors' prices, eventually customers are going to begin to come less frequently. If they take the trouble to tell you why they aren't coming as often anymore, you don't argue with them about it.
To stay in business, the restaurateur has to take a hard look at his operation, figure out exactly what the customers don't like, and then change what is necessary to entice them back.
That's what Alaska needs to be doing.
Alaska also needs to realize that what they do at this point probably isn't going to bring ships back to the market. Success will need to be seen in terms of just keeping more ships from leaving.
In the last decade, while Alaska has been developing new ways to extract money from the cruise industry, they seem to have been totally unaware that the cruise industry was changing. It's no longer a seller's market for them. Alaska is now in a very competitive market with other ports around the world for cruise ship calls.
The American companies Alaskans are dealing with are no longer selling primarily to Americans. With the expansion of the industry, Americans will soon be the minority of those buying cruises, and cruise lines want to position their ships where those new customers (and generally higher-paying customers) live. Europe is experiencing rapid growth. South America and Australia are exploding, and while the Asian market is in its infancy, that market is vast. As it is, cruise lines don't have enough capacity to move into all the markets they would like to. A couple at a time, the entire Alaskan fleet can easily be absorbed elsewhere.
Alaskans need to stop debating the issues, and do like the restaurateur. They need to figure out what's wrong with their product, and make changes to please their customers - if they want to keep them.
Showing posts with label sample article. Show all posts
Showing posts with label sample article. Show all posts
Wednesday, December 16, 2009
Sunday, September 20, 2009
Cruise Lines Take Action in Alaska
There's a new suit in Alaska today, and it's not a parka. The nine cruise lines forming the Alaska Cruise Association filed suit in US District Court in Alaska seeking relief from the $46 head tax that the state imposed as part of the Citizens' Initiative in 2006.
While there's much more to the issue that's causing the ships to leave Alaska, this suit deals only with the one. In the last couple of days that led up to the actual filing, the Alaskan media has run several stories, and the quotes they choose to use tell a lot about how things have gotten this far.
The ACA suit has several points on which it says the $46 head tax is not legal. (Even though it is commonly referred to as a $50 head tax, by the way, the ACA is not disputing $4 of it which pays for the Ocean Ranger program to monitor cruise ship discharges.) First the suit says that the fee is essentially a fee for entering Alaska, something that is not allowed under federal law because it discriminates against interstate trade. The suit says the fee also raises much more money than it costs the state to provide services to cruise ships, and in setting it, it doesn't take into consideration any specific services to cruise ships. Another point of illegality, according to the suit, is that it is distributed to cities that aren't even on the ship's itinerary. And finally, it is being used to fund projects that have no direct benefit to the passengers who paid the fee.
The bottom line, in the cruise lines' view, is that it is illegal according to federal law to charge admission to the state, and any taxes charged are to go directly to costs incurred by the state to handle the cruise ships or to fund specific projects directly related to the cruise passengers, and they should not be excessive of those costs.
They also cite several precedents, and to the amateur, it would seem that the cruise lines have a good case. The state's lawyers, no doubt, have arguments to counter the cruise lines', but of course, they have yet to be heard from.
The proponents of the Citizens' Initiative and legislative leaders interviewed by the local media in Alaska have used phrases like "We welcome the suit" and "We've been waiting for this," and questioning why the cruise lines don't work with the legislature to resolve their issues.
That last point was answered by Carnival chairman Micky Arison several months ago, when during an earnings call, he said they have been unable to find any legislator who wants to sit down with them to seriously discuss the issues. It seems that Alaska's elected leaders and most of the citizens are simply dug in and don't want to work with the cruise lines.
As CND has reported before, the head tax is only a small part of the full issue. With the enactment of the Citizens' Initiative in 2006, along with the $50 in taxes paid by the cruise passengers came a bunch of taxes imposed on the cruise lines themselves and some very stringent regulations which are very expensive for the cruise lines to comply with. The issue in total is that the State of Alaska has made it become vastly more expensive for the cruise lines to operate in Alaska at the same time as the economy has made consumers unwilling to pay higher prices for cruises (to offset the lines' increased costs).
The cruise lines are now in the process of setting the 2011 deployments for their fleets. As more profitable markets are identified and developed, more ships will be redeployed elsewhere. Every year, Alaska does nothing to decrease the cruise lines' costs, it's likely more ships will be withdrawn from Alaska.
The sad part is that Alaska's tourism industry, which is such a major part of the state's economy, is about to crumble. The state's leaders and most citizens don't understand they have a product to sell, and the cruise lines are their customers. If they don't do something to make their product more competitively priced with their competition (other destinations), they won't have any customers left.
While there's much more to the issue that's causing the ships to leave Alaska, this suit deals only with the one. In the last couple of days that led up to the actual filing, the Alaskan media has run several stories, and the quotes they choose to use tell a lot about how things have gotten this far.
The ACA suit has several points on which it says the $46 head tax is not legal. (Even though it is commonly referred to as a $50 head tax, by the way, the ACA is not disputing $4 of it which pays for the Ocean Ranger program to monitor cruise ship discharges.) First the suit says that the fee is essentially a fee for entering Alaska, something that is not allowed under federal law because it discriminates against interstate trade. The suit says the fee also raises much more money than it costs the state to provide services to cruise ships, and in setting it, it doesn't take into consideration any specific services to cruise ships. Another point of illegality, according to the suit, is that it is distributed to cities that aren't even on the ship's itinerary. And finally, it is being used to fund projects that have no direct benefit to the passengers who paid the fee.
The bottom line, in the cruise lines' view, is that it is illegal according to federal law to charge admission to the state, and any taxes charged are to go directly to costs incurred by the state to handle the cruise ships or to fund specific projects directly related to the cruise passengers, and they should not be excessive of those costs.
They also cite several precedents, and to the amateur, it would seem that the cruise lines have a good case. The state's lawyers, no doubt, have arguments to counter the cruise lines', but of course, they have yet to be heard from.
The proponents of the Citizens' Initiative and legislative leaders interviewed by the local media in Alaska have used phrases like "We welcome the suit" and "We've been waiting for this," and questioning why the cruise lines don't work with the legislature to resolve their issues.
That last point was answered by Carnival chairman Micky Arison several months ago, when during an earnings call, he said they have been unable to find any legislator who wants to sit down with them to seriously discuss the issues. It seems that Alaska's elected leaders and most of the citizens are simply dug in and don't want to work with the cruise lines.
As CND has reported before, the head tax is only a small part of the full issue. With the enactment of the Citizens' Initiative in 2006, along with the $50 in taxes paid by the cruise passengers came a bunch of taxes imposed on the cruise lines themselves and some very stringent regulations which are very expensive for the cruise lines to comply with. The issue in total is that the State of Alaska has made it become vastly more expensive for the cruise lines to operate in Alaska at the same time as the economy has made consumers unwilling to pay higher prices for cruises (to offset the lines' increased costs).
The cruise lines are now in the process of setting the 2011 deployments for their fleets. As more profitable markets are identified and developed, more ships will be redeployed elsewhere. Every year, Alaska does nothing to decrease the cruise lines' costs, it's likely more ships will be withdrawn from Alaska.
The sad part is that Alaska's tourism industry, which is such a major part of the state's economy, is about to crumble. The state's leaders and most citizens don't understand they have a product to sell, and the cruise lines are their customers. If they don't do something to make their product more competitively priced with their competition (other destinations), they won't have any customers left.
Friday, August 21, 2009
Alaskans Are Starting to Get It - But Not Completely and Way Too Late
This week, Alaskans held another "tourism summit," and it shows they are now recognizing their tourism industry is heading into deep trouble, but from the media reports coming from the summit, they still haven't figured out why, but they are jumping ahead to the step of trying to figure out what to do about the declining numbers, especially of cruise ship passengers.
They know that the cruise lines, which are the biggest player in their tourism industry, are going to reduce their capacity there by 140,000 berths next year, so they can expect at least 140,000 fewer visitors. The first big thing they're missing, is that they are trying to figure out how to get more visitors to come to Alaska next year. The cruise lines will adjust their pricing as they always do to make sure they operate completely filled, so no matter how many more visitors they interest in coming to Alaska, the cruise lines aren't going to be able to bring any more. Instead they should be asking the cruise lines why they keep taking ships out of Alaska, and what they can do to keep from losing more. (The cruise lines have been trying to tell them all along, but no one seems to want to listen.)
That brings us to the next big thing that Alaskans are missing. Alaskans have a product/service they want to sell (Alaska), and the cruise lines are the potential customers. They can't set the price (the taxes and fees the cruise lines pay) so high for their product that they aren't competitive with their competition (ports in other areas of the world). Just as a restaurant would market to consumers and offer incentives (to keep regular customers), Alaska needs to be doing things to make their destination as attractive or more attractive to do business with than the port "down the street."
Rather than putting several million dollars into a consumer marketing campaign, as is being proposed, Alaska would probably get much more bang for their bucks if they put that money into incentives for the cruise lines (to keep ships there) to defray the higher fees and taxes imposed on them in Alaska.
A subpoint the folks in Alaska don't understand because the cruise industry changed in the last decade (while Alaska's attention was on figuring out new fees they could charge and restrictions on operations) is that there is a worldwide competition for ships, not only among ports within an area, but also among regions of the world. There are many new emerging source markets, and they all want ships sailing close to their home. Alaska is no longer competing just for Americans to choose to take a cruise there instead of the Caribbean or Mexico. They now have to compete just to keep that ship in the American-sourced market rather than sending it off to the Mediterranean for Europeans, Central America for South Americans, Asia for the Chinese or the South Pacific for Australians.
The next big thing Alaskans are still missing is it's not the downturn in the global economy that's causing their main problem. Certainly that plays a role in people spending less once they get there, and it is also causing the cruise pricing to be reduced to fill the ships, but each ship that comes is operating at or near capacity. Those rates the cruise lines can charge have fallen but at the same time, the costs to cruise lines of doing business in Alaska have also risen dramatically. Ticket prices have fallen all over the globe, and cruise lines are dealing with that. The issue really isn't the price or the cost alone; the big thing to the cruise lines is the profit margin, which in Alaska has shrunk to much less than in other parts of the world. There's not too much Alaskans can do to increase what consumers are willing to spend for a cruise, but there's a lot they can do to reduce the costs of the cruise lines in Alaska.
The last big thing that Alaskans seem to be missing, at least according to the tone of the coverage of this week's summit, is that this is not temporary. When the economy improves, the ships that have left Alaska aren't on rubber bands, so they won't snap back. Removing them from the market has been a slow process as other markets have grown, and the cruise lines have taken time integrating them into other markets globally. When the economy improves, they aren't about to jerk them out of a then-successful market to increase Alaskan capacity, which would depress pricing. Instead, the cruise lines will be thrilled there is more demand for the existing capacity they have in Alaska so that will drive ticket prices up. So Alaska's focus needs to be on keeping the ships they have, rather than letting them sail away, because once they leave, it will be tough to get them back.
Alaska has some smart people living and working there, so it's hard to understand why they aren't seeing the real situation and what needs to be done. Perhaps they've been in a seller's market so long, they just can't think in terms of having to compete. Now is the time they must change their thinking, however, or they are going to be faced with even further shrinkage of the fleet of ships in 2011.
If you'd like to read more about the tourism summit to better understand the thinking in Alaska, there are three articles which should prove interesting. They point out some of the losses Alaskans realize they are facing, and some of the costs which, at the same time they impose.
From the Anchorage Daily News:
http://www.adn.com/money/industries/tourism/story/906010.html
An AP article via the Fairbanks News Miner:
http://newsminer.com/news/2009/aug/20/alaska-tourism-experts-industry-downward-slide/
From the NBC affiliate in Anchorage:
http://www.ktuu.com/Global/story.asp?S=10967488
This article originally appeared in the August 21 (2009) edition of Cruise News Daily.
They know that the cruise lines, which are the biggest player in their tourism industry, are going to reduce their capacity there by 140,000 berths next year, so they can expect at least 140,000 fewer visitors. The first big thing they're missing, is that they are trying to figure out how to get more visitors to come to Alaska next year. The cruise lines will adjust their pricing as they always do to make sure they operate completely filled, so no matter how many more visitors they interest in coming to Alaska, the cruise lines aren't going to be able to bring any more. Instead they should be asking the cruise lines why they keep taking ships out of Alaska, and what they can do to keep from losing more. (The cruise lines have been trying to tell them all along, but no one seems to want to listen.)
That brings us to the next big thing that Alaskans are missing. Alaskans have a product/service they want to sell (Alaska), and the cruise lines are the potential customers. They can't set the price (the taxes and fees the cruise lines pay) so high for their product that they aren't competitive with their competition (ports in other areas of the world). Just as a restaurant would market to consumers and offer incentives (to keep regular customers), Alaska needs to be doing things to make their destination as attractive or more attractive to do business with than the port "down the street."
Rather than putting several million dollars into a consumer marketing campaign, as is being proposed, Alaska would probably get much more bang for their bucks if they put that money into incentives for the cruise lines (to keep ships there) to defray the higher fees and taxes imposed on them in Alaska.
A subpoint the folks in Alaska don't understand because the cruise industry changed in the last decade (while Alaska's attention was on figuring out new fees they could charge and restrictions on operations) is that there is a worldwide competition for ships, not only among ports within an area, but also among regions of the world. There are many new emerging source markets, and they all want ships sailing close to their home. Alaska is no longer competing just for Americans to choose to take a cruise there instead of the Caribbean or Mexico. They now have to compete just to keep that ship in the American-sourced market rather than sending it off to the Mediterranean for Europeans, Central America for South Americans, Asia for the Chinese or the South Pacific for Australians.
The next big thing Alaskans are still missing is it's not the downturn in the global economy that's causing their main problem. Certainly that plays a role in people spending less once they get there, and it is also causing the cruise pricing to be reduced to fill the ships, but each ship that comes is operating at or near capacity. Those rates the cruise lines can charge have fallen but at the same time, the costs to cruise lines of doing business in Alaska have also risen dramatically. Ticket prices have fallen all over the globe, and cruise lines are dealing with that. The issue really isn't the price or the cost alone; the big thing to the cruise lines is the profit margin, which in Alaska has shrunk to much less than in other parts of the world. There's not too much Alaskans can do to increase what consumers are willing to spend for a cruise, but there's a lot they can do to reduce the costs of the cruise lines in Alaska.
The last big thing that Alaskans seem to be missing, at least according to the tone of the coverage of this week's summit, is that this is not temporary. When the economy improves, the ships that have left Alaska aren't on rubber bands, so they won't snap back. Removing them from the market has been a slow process as other markets have grown, and the cruise lines have taken time integrating them into other markets globally. When the economy improves, they aren't about to jerk them out of a then-successful market to increase Alaskan capacity, which would depress pricing. Instead, the cruise lines will be thrilled there is more demand for the existing capacity they have in Alaska so that will drive ticket prices up. So Alaska's focus needs to be on keeping the ships they have, rather than letting them sail away, because once they leave, it will be tough to get them back.
Alaska has some smart people living and working there, so it's hard to understand why they aren't seeing the real situation and what needs to be done. Perhaps they've been in a seller's market so long, they just can't think in terms of having to compete. Now is the time they must change their thinking, however, or they are going to be faced with even further shrinkage of the fleet of ships in 2011.
If you'd like to read more about the tourism summit to better understand the thinking in Alaska, there are three articles which should prove interesting. They point out some of the losses Alaskans realize they are facing, and some of the costs which, at the same time they impose.
From the Anchorage Daily News:
http://www.adn.com/money/industries/tourism/story/906010.html
An AP article via the Fairbanks News Miner:
http://newsminer.com/news/2009/aug/20/alaska-tourism-experts-industry-downward-slide/
From the NBC affiliate in Anchorage:
http://www.ktuu.com/Global/story.asp?S=10967488
This article originally appeared in the August 21 (2009) edition of Cruise News Daily.
Friday, May 23, 2008
A United States Kind of Weekend
The following article appeared in the May 23, 2008, edition of Cruise News Daily and is provided as a sample of the types of feature articles we publish. (Please note: Links were valid at time of publication.)
It's the Memorial Day Weekend in the United States. In case your plans get rained out, we came across some interesting reading for you, appropriately about the SS United States, the classic American oceanliner, laid up in Philadelphia still seeming to be just waiting for its chance to sail again.
Over the past several weeks, there have been a couple of articles published about the legendary ship, which is still owned by NCL or some division thereof.
The first is in Popular Mechanics (and yes, they show you how to build your own model of the ship), and it is written by an author whose fascination with the ship began when he sailed on it as a child (classic picture included). He looks briefly at the history, at the ship today, and (probably less accurately) at its future. (More on that in a moment.) The article is available at http://www.popularmechanics.com/technology/transportation/4263478.html
An article, similar in tone, though slightly less pessimistic and also published in the last couple of weeks, appears on the ABC News website at http://abcnews.go.com/Travel/BusinessTravel/Story?id=4751136
And the final entry into the SSUS trifecta is a PBS special called "SS United States: Lady in Waiting." As with most PBS shows, they appear in your area when your local PBS station decides they should, and if PBS is smiling upon you, this production will be running in your area this weekend. If not, you can get a preview at the production company's website at http://www.bigshipfilms.com/ and watch a 3-minute preview. You can also purchase a DVD of the complete show at the same website.
As noted in the stories, Norwegian Cruise Line still owns United States, and they hold the keys to its future. Recently when we talked with NCL CEO Colin Veitch, he told CND that United States "is still there as a viable option for us - or for someone else."
The Popular Mechanics article seems to indicate that the possibility looms for United States being scrapped, and bases some of that on the fact that NCL recently sold Independence and Norway.
Norway was, of course, sold when it was finally determined that it could not be put back into sailing condition after its accident for a reasonable amount of money that could make it profitable. It was later resold for scrap.
United States and Independence were purchased by NCL at the outset of the NCL America operation as an investment in their future. Since the two ships were American-built, it was about the only way the company could ever expand its American-flagged fleet, short of getting another Congressional exemption, which seemed unlikely. Veitch said right from the start that they wouldn't be actively working to rebuild those ships or put them into service until NCLA was operating profitably and there was a need for them. He was also very candid in saying that Independence's future was more cloudy than United States.
Less was known about Independence, since over the years, there had been more engineering studies done on United States. Since the two ships were purchased by NCL, we've spoken with Veitch regularly about them. He's always said that it was rather questionable if Independence could ever meet maritime codes and ever sail for NCLA, but they have maintained it until last February when it was sold. He told CND at that time that "with the retrenchment of our modern-ship fleet in Hawaii, we could see no prospect of using the Independence again."
The purchaser has towed the ship toward the Middle East and insists that it is not being scrapped but has never made any plans for it public.
"[United States' status] is different," Veitch told CND. "We are looking at what to do with United States now. United States has much more of a name than Independence had and is frankly in much better condition than Independence was. The prospects for United States are ... different," he said.
Again, over the years, each time we've talked about United States, he's said that each step that has been done in studying the ship has shown them that bringing the ship to meet current passenger expectations and making it meet current maritime codes is a viable option which can be done at a cost that will allow them to operate it profitably. There are still more studies to be done, however, before they are certain of it. NCL has been taking their time having those done because there's no need for the ship at this point. Once a need can be seen on the horizon, then we can expect to see things move more quickly in determining the overall viability of the project.
But unlike the tone of the Popular Mechanics article, Veitch doesn't seem to see United States heading off to scrap. "United States is an intriguing enough property that we're still interested in it, and from time to time we get inquiries from others who are interested in it," Veitch said. That hasn't been the case with either of the other two classic ships they have sold. So if United States never sails for NCL America, it will probably end up in someone else's loving possession to restore.
It's the Memorial Day Weekend in the United States. In case your plans get rained out, we came across some interesting reading for you, appropriately about the SS United States, the classic American oceanliner, laid up in Philadelphia still seeming to be just waiting for its chance to sail again.
Over the past several weeks, there have been a couple of articles published about the legendary ship, which is still owned by NCL or some division thereof.
The first is in Popular Mechanics (and yes, they show you how to build your own model of the ship), and it is written by an author whose fascination with the ship began when he sailed on it as a child (classic picture included). He looks briefly at the history, at the ship today, and (probably less accurately) at its future. (More on that in a moment.) The article is available at http://www.popularmechanics.com/technology/transportation/4263478.html
An article, similar in tone, though slightly less pessimistic and also published in the last couple of weeks, appears on the ABC News website at http://abcnews.go.com/Travel/BusinessTravel/Story?id=4751136
And the final entry into the SSUS trifecta is a PBS special called "SS United States: Lady in Waiting." As with most PBS shows, they appear in your area when your local PBS station decides they should, and if PBS is smiling upon you, this production will be running in your area this weekend. If not, you can get a preview at the production company's website at http://www.bigshipfilms.com/ and watch a 3-minute preview. You can also purchase a DVD of the complete show at the same website.
As noted in the stories, Norwegian Cruise Line still owns United States, and they hold the keys to its future. Recently when we talked with NCL CEO Colin Veitch, he told CND that United States "is still there as a viable option for us - or for someone else."
The Popular Mechanics article seems to indicate that the possibility looms for United States being scrapped, and bases some of that on the fact that NCL recently sold Independence and Norway.
Norway was, of course, sold when it was finally determined that it could not be put back into sailing condition after its accident for a reasonable amount of money that could make it profitable. It was later resold for scrap.
United States and Independence were purchased by NCL at the outset of the NCL America operation as an investment in their future. Since the two ships were American-built, it was about the only way the company could ever expand its American-flagged fleet, short of getting another Congressional exemption, which seemed unlikely. Veitch said right from the start that they wouldn't be actively working to rebuild those ships or put them into service until NCLA was operating profitably and there was a need for them. He was also very candid in saying that Independence's future was more cloudy than United States.
Less was known about Independence, since over the years, there had been more engineering studies done on United States. Since the two ships were purchased by NCL, we've spoken with Veitch regularly about them. He's always said that it was rather questionable if Independence could ever meet maritime codes and ever sail for NCLA, but they have maintained it until last February when it was sold. He told CND at that time that "with the retrenchment of our modern-ship fleet in Hawaii, we could see no prospect of using the Independence again."
The purchaser has towed the ship toward the Middle East and insists that it is not being scrapped but has never made any plans for it public.
"[United States' status] is different," Veitch told CND. "We are looking at what to do with United States now. United States has much more of a name than Independence had and is frankly in much better condition than Independence was. The prospects for United States are ... different," he said.
Again, over the years, each time we've talked about United States, he's said that each step that has been done in studying the ship has shown them that bringing the ship to meet current passenger expectations and making it meet current maritime codes is a viable option which can be done at a cost that will allow them to operate it profitably. There are still more studies to be done, however, before they are certain of it. NCL has been taking their time having those done because there's no need for the ship at this point. Once a need can be seen on the horizon, then we can expect to see things move more quickly in determining the overall viability of the project.
But unlike the tone of the Popular Mechanics article, Veitch doesn't seem to see United States heading off to scrap. "United States is an intriguing enough property that we're still interested in it, and from time to time we get inquiries from others who are interested in it," Veitch said. That hasn't been the case with either of the other two classic ships they have sold. So if United States never sails for NCL America, it will probably end up in someone else's loving possession to restore.
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