Cruise ship incidents drive down demand, prices

Recent negative incidents involving cruise ships — including a capsizing in Italy, passengers being robbed on a shore excursion in Mexico and a disabled ship being towed to port in the Indian Ocean — have conspired to drive down demand as well as prices in the industry, experts say.

Mild winter also keeping customers at home

The Costa Concordia ran aground off the coast of Italy in January. (Associated Press)

Recent negative incidents involving cruise ships — including a capsizing in Italy, passengers being robbed on a shore excursion in Mexico and a disabled ship being towed to port in the Indian Ocean — have conspired to drive down demand as well as prices in the industry, experts say.

Demand for cruises dropped 15 to 20 per cent in the weeks after the Costa Concordia ran aground off the coast of Isola del Giglio, Italy, on Jan. 13, said Bob Levinstein, president of based in Des Moines, Iowa.

"It’s not evenly distributed. We’re seeing more of the slowdown in shorter, inexpensive cruises that usually attract [people new to cruising] who are going to be turned off, whereas the outliers know how many sailings there are and how few the problems are," he said.

"The mild winter in most of North America also tends to suppress demand. It seems to be a perfect storm going on in this business right now. It’s just been one thing after another. It’s ridiculous."

His website allows customers to get competitive bids on cruises, including those offered by the two biggest companies — Carnival Corp., parent company of more than a half-dozen lines, such as Princess and Costa Cruises, and Royal Caribbean — from 350 travel agencies worldwide.

The Costa accident, in which 25 people died and seven more are missing and presumed dead, occurred in "wave season," a term the industry uses to refer to the first three months of the year when a third of all cruises are booked.

Shares of Carnival Corp., the world's largest cruise ship operator with 101 ships and 85,000 employees, fell 14 per cent in the two days after the accident. Even rival Royal Caribbean's stock fell seven per cent.

In the aftermath, Carnival temporarily suspended its advertising campaigns and focused instead on reassuring customers about safety.

The Costa Allegra is being towed to land after a fire knocked out its power. (Associated Press)

"Not to sound crass, but you don’t want to see dead bodies coming out of their ship next to an ad for their cruises. So during the high season for selling cruises, promotion was cut down," said Levinstein.

It doesn’t help that images of the partially submerged Costa Concordia off the coast of Tuscany are still in the news and other incidents keep piling up, said Levinstein.

Most recently, the Costa Allegra with 1,049 passengers and crew is being towed to the Seychelles after a fire Monday in its generator room, which knocked out power to the ship's engines as well as to its lights and air-conditioning.

On Sunday, 22 passengers of  the Carnival Splendor were robbed by hooded gunmen as they travelled on a bus from a nature hike in the jungle to the Mexican city of Puerto Vallarta.

And in February, several hundred passengers on a trio of cruise ships were sickened by a stomach virus.

Cruises are typically sold a year to 18 months in advance, but there hasn’t been a rash of cancellations because of the high-profile incidents, experts said.

"It’s still a very safe industry. You’re going to have more problems driving your car to work than taking a cruise," said Kathryn Bachhofer, a cruise specialist who owns Journeys by Kathryn travel agency outside of Toronto.

While people newer to cruising "are doing a little double-take" because of the recent incidents, old-time cruisers are already booking into 2013, she added.

With failing demand, cabin prices are expected to drop as sailing dates get closer, but cruise lines make 40 to 60 per cent of their revenue from on-board spending on drinks, casino gambling and shore excursions, Levinstein said.

"In the later half of March and into the summer and fall, we’re going to see a lot of bargains," said Levinstein.

He’s not worried about the long-term prospects because he believes the public has a short memory.

"The customers always come back. Cruising is a very resilient part of the travel industry. It’s the only travel sector that wasn’t affected after 9/11."