Alaska Is Bracing for This Year’s Supersize Cruise Season
Cruise operators go where they see demand, and Alaska has been a hot market for a while now. Will the introduction of more and bigger ships change that dynamic?
Kirby Day remembers the last time cruise passenger growth was exploding in Juneau, Alaska, more than two decades ago: Annual increases approached 14 percent, and locals were worried that the new total of 600,000 visitors was way too much.
“It’s interesting at the time that people were thinking that was too many,” said Day, Holland America Group’s manager of port operations for regions including Alaska and director of Tourism Best Management Practices in Juneau. “We were behind the eight ball, the city was behind the eight ball, people weren’t prepared for it.”
The refrain sounds familiar this year, with record numbers on tap when the parade of seasonal ships begins Sunday as operators send newer, bigger vessels to a market that has consistently delivered high prices. More than 1.3 million passengers are expected this summer, a 16 percent increase from last year; a single-digit bump on top of this year’s gains is on the horizon for 2020. Juneau, where the vast majority of Alaska cruises include a stop, can only accommodate five large ships at once, adding some built-in brakes on the increases.
“It’s a significant increase,” said Day. He said he expects the additional numbers to be absorbed over the course of the cruise season without too much disruption, but that doesn’t mean there won’t be challenges on the ground.
“I think right now the key is to address those challenges and put our best foot forward and challenge those tour operators to find a way to operate their businesses even more so in a community-friendly manner,” he said.
Last week, the Juneau Empire newspaper ran a story asking “How many tourists is too many?” It was tied to a local meeting about sustainability and cruise visits.
“Right now is when we’re just starting to have these discussions in the community again about growth,” Day said.
Anchorage writer Scott McMurren, who puts out the online travel newsletter Alaska Travelgram, called the cruise growth “sort of a mixed bag.”
“We’re thrilled that it is a robust and healthy business,” said McMurren, who is also co-publisher of the Alaska TourSaver, a travel coupon book that many cruise passengers buy. “But we want to make sure that Alaska remains a stable and sustainable partner in this enterprise. Because otherwise you get diminishing returns and it doesn’t become a good place to live and raise your family, and it also does not become the type of destination that has that mysterious allure that has drawn people here for generations.”
CRUISE ON THE RISE
The numbers are climbing because there are more ships coming, but there are also bigger ships — the biggest ever to visit Alaska. An expanded Panama Canal is making it easier for cruise lines to reposition their large vessels to the West Coast. And the destination is rewarding for operators, typically commanding high prices even as previously promising markets such as China have cooled for some.
Last year, Norwegian Cruise Line announced its tailored-for-China ship, Norwegian Joy, would be changing course and instead head to North America in 2019 — Alaska in summer — after a $50 million renovation.
“China’s a good market,” Norwegian Cruise Line President and CEO Andy Stuart told Skift in July. “But it’s not as good as Alaska.”
The operator deployed a giant new ship, the 4,004-passenger Norwegian Bliss, to Alaska in 2018. Stuart described its performance as “a knock-it-out-of-the-park success,” so Norwegian is looking for an even more profitable summer this year with both Bliss and Joy, from the same class, in the market.
“We saw that when Norwegian Bliss was introduced, she had a fantastic reception, and I think that’s in part due to the fact that Alaska has not seen that much new capacity,” Stuart said earlier this month. “Putting a new ship in was a huge boost to the destination. Having essentially two brand-new ships in the market is a very big win.”
Royal Caribbean International’s Ovation of the Seas, a 4,180-passenger ship that launched in 2016, and Princess Cruises’ Royal Princess, which carries 3,600 passengers at double occupancy, are also joining the crowd this year, making a popular market more competitive than ever. All of that has added some pressure to pricing.
During a panel at the Seatrade Cruise Global conference earlier this month, Infinity Research analyst Assia Georgieva said that her pricing checks have shown reductions as a result of the competitive pressure that Norwegian has put on itself and Princess Cruises.
“Still, for ships that are operating in Alaska, the average per diem is so much higher than being in China or the Caribbean that it still helps the overall corporate average,” she said. “In Alaska this year, I think it’s more the additional capacity that’s affecting the market, but I certainly believe over a three-year adjustment period, we’re going to get back to normal.”
On the same panel, Sanford C. Bernstein analyst David Beckel said he thinks Alaska still has room to grow.
“I think Alaska is a market where adding supply can add demand,” he said. “I’m certainly not concerned about what we’re seeing [in] pricing.”
But during an earnings call last month, Carnival Corp. executives said prices in Alaska are shaping up lower than last year’s record levels. Chief Financial Officer David Bernstein said the company has 17 ships there, representing an 8 percent capacity increase.
Cunard, a Carnival Corp. line, has a ship in the market for the first time in 20 years. Josh Leibowitz, senior vice president for Cunard North America, said the destination’s appeal to first-time cruisers is part of the reason it’s become so popular for operators.
“People wanted to go,” he said. “We want to build up the North American market for Cunard. People wanted to go, and so we’re here.”
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