SYDNEY (Reuters) - The cruise ship season in Sydney is in full swing and it's booming, with ships forced to anchor in the middle of Sydney Harbour due to a lack of dock space.
But despite the onboard party atmosphere and the postcard image of luxury liner passengers waving to ferry commuters from ship rails, the world's cruise industry is sailing through rough financial seas as the global downturn bites into tourism.
Cruise operators are desperately trying to attract passengers for 2009, slashing prices, offering last-minute deals, two-for-one pricing, shorter cruises, family packages in which children sail free, and home port cruising which avoids the cost of an airfare to reach an exotic departure port.
Norwegian Cruise Line last month announced "BookSafe" which will give passengers a full cash reimbursement if they cancel their cruise because of job loss. U.S. cruise retailers CruiseOne and Cruises Inc have introduced "CruiseAssurance" to cover passengers in the event of them being sacked.
"What's changed is that cruise lines have offered ferociously discounted fares," Carolyn Spencer-Brown, editor-in-chief of UK online Cruise Critic, told Reuters.
"2009 is looking like the biggest buyer's market ever with absolute cheapest fares seen in a long, long time," she said.
So far bookings for 2009 are holding, but Cruise Critic warns some cruise operators may gain 90 percent occupancy rates this year but still lose money due to cheaper pricing and conservative spending by passengers.
"There's been no significant downturn for big ship cruise lines. They're dropping prices as low as necessary to fill ships and then are hoping that passengers, in the holiday spirit, will feel moved to spend on onboard extras," said Spencer-Brown.
Royal Caribbean Cruises Ltd, the world's second largest cruise operator, has already reported a profit collapse in the fourth quarter of 2008 and expects 2009 revenue to be weak as it offers discounts to lure passengers.
Royal Caribbean in January reported fourth quarter profit of $1.5 million, down sharply from $70.8 million in the same quarter the year before .
The Miami-based company stopped paying its dividend last November as it looked to save cash, following a similar move by its main rival Carnival Corp & Plc.
Carnival Corp, the world's largest cruise ship operator, managed to beat expectations in posting a 3.6 percent rise in net income in the fourth quarter 2008, based on higher room rates, cost cutting and offsetting fuel costs.
The company said its net income in the quarter was $371 million compared with $358 million a year earlier. But the fourth quarter profit included $31 million on the sale of the Queen Elizabeth 2 and a rapid decline in fuel costs.
Carnival says 2009 is going to be a tough year. It will report its first quarter results this month.
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