Why Holland America was right to shed 29% of its fleet — and may need to cut more
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The news last week for Holland America fans was grim.
Specifically, the line said four of its 14 ships — 29% of the total — would leave its fleet by the fall. A huge number of cruises would be cancelled. Some itineraries would disappear.
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My initial thought? It’s a good start. But they may need to do more.
Holland America is one of a handful of brands in the cruise world that I see as essentially broken in this new era of coronavirus — at least until there’s a COVID-19 vaccine, a surefire treatment for the illness or a significant drop in case counts around the world.
Why Holland America will struggle
Holland America is a line that is all about exploring the world. Its ships are known for traversing the globe on long, multi-port, multi-country trips that appeal to people who want to wander. At last count, its itineraries included 473 different ports from Europe to Asia to Australia.
“We were born to voyage”, is how the company puts it on its website. “For nearly 145 years, we’ve been introducing guests to new places and new cultures, and we’ve witnessed firsthand the transformative power of travel”.
I love that line above. As someone who lives for experiencing new places and cultures — my country count is approaching 100 — I find Holland America’s type of cruising enticing.
But it’s a type of cruising that is going to be tough for cruise lines to pull off for some time — definitely for the next few months, but maybe for much longer.
As of right now, U.S. travellers — the core of Holland America’s customer base — are banned from visiting most of Europe and many other places in the world, too, due to worries about the high level of coronavirus transmission in the United States. In addition, many countries, regions and cities around the globe specifically have said that cruise ships carrying people from any outside country aren’t welcome for now.
Such travel restrictions pose a real challenge for cruise lines such as Holland America that send their ships to far-flung places, and they could remain in place far longer than some people think.
There’s a lot of optimism right now that a vaccine will arrive by early 2021, or even earlier, and case counts in North America will start coming down. But that isn’t guaranteed. It could be a long process to get to the point where enough countries and ports around the world are welcoming Americans that Holland America can get back to its old ways.
There was a hint in Holland America’s announcement on Wednesday that it understands this. The line announced that an epic, around-the-world voyage scheduled to begin in Fort Lauderdale on 4 January 2021 would be postponed until 2022. The 128-day itinerary, which includes stops at 54 ports in two dozen countries, is classic Holland America.
The around-the-world trip was scheduled to take place on the 1,380-passenger Amsterdam, one of the four ships that Holland America is removing from its fleet. That’s an obvious initial hurdle to operating the trip in 2021. But if the line had confidence that the itinerary would have worked, it could have swapped another ship onto the route. That’s what it’s planning to do in 2022 when it says the trip will be operated by the 1,432-passenger Zaandam.
Also cancelled was a series of South Pacific, Australia and Asia itineraries scheduled to be operated by the 1,258-passenger Maasdam. Maasdam is another one of the four ships leaving the Holland America fleet.
Europe, Panama Canal, South America and Hawaii sailings on the 1,404-passenger Rotterdam also were cancelled as were Europe itineraries on the 1,350-passenger Veendam. They are the other two vessels that won’t return to service at Holland America.
The cruises that will come back first
A small amount of cruising already is starting to come back in Europe, where coronavirus case counts have dropped markedly in recent months. But it’s cruising aimed at a local crowd.
The very first cruise to resume in Europe, a river trip in early June, was operated by a German line (Nicko Cruises) on a German river for Germans only.
Several more Germany-based lines, including Aida Cruises and TUI Cruises, are preparing to start short ocean sailings out of Germany aimed at Germans. And there have been a few ocean sailings already by other brands aimed at locals along the coasts of Norway and France.
This is exactly the sort of cruising that will come back first everywhere in the world, cruise executives have been saying in recent weeks. It’ll be relatively short, close-to-home cruises that cater to locals who can reach ships by car or train, without crossing borders.
Cruise executives specifically cite the likelihood of ongoing travel restrictions for what they say could be a slower resumption of further-from-home cruising.
“As nations reintroduce social gathering, including cruise, they are most likely initially to restrict reactivations to their own residents”, Carnival Corporation CEO Arnold Donald said last week in a conference call with Wall Street analysts.
Carnival Corporation is the parent company of Holland America as well as Carnival Cruise Line, Princess Cruises, Seabourn and five brands that are based overseas.
Donald suggested the initial resumption of cruising across Carnival Corporation’s brands likely would see a lot of short, close-to-home trips that could be booked by locals.
Donald called out several Carnival Corporation brands that were well positioned for an era of that sort of cruising. He mentioned Aida Cruises, for instance, which already is known for short, close-to-home trips for Germans, and Carnival, which is the king of short, close-to-home cruises for Americans. He also mentioned U.K.-based P&O Cruises, Australia-based P&O Cruises Australia and Europe-focused Costa Cruises.
He didn’t mention Holland America.
“The fact that these brands are characterized with ready access to drive-to markets and a prevalence of shorter duration cruises strengthens the possibility of success in today’s environment”, he said of lines such as Aida and Carnival.
Where Holland America’s ships can go
Holland America doesn’t only offer long-distance trips around the globe, of course. It does “close-to-home” sailings, too.
The line is particularly known for summer sailings to Alaska out of Seattle and Vancouver, B.C., which is a close-to-home trip for some Americans. It also offers Caribbean sailings out of Florida; New England and Canada trips out of Boston; and Mexican Riviera trips out of San Diego.
But even with these sorts of itineraries, Holland America is known for sailings of seven nights or longer. Holland America isn’t a line that does the quickie three-, four- and five-nighters that is a core business for cruise lines such as Royal Caribbean and Carnival.
It is the quickie trips that are likely to be most in demand when cruising resumes as travellers look to test the waters, so to speak.
Holland America could switch to shorter trips, of course. It could start doing three- and four-nighters to the Bahamas out of Fort Lauderdale. But that’s never been Holland America’s thing, and it’s not necessarily what its clientele wants.
Nor are Holland America’s ships particularly well-designed for short, close-to-home sailings. They’re relatively small and lack the wide range of deck-top and interior amusements found on the bigger vessels operated by the likes of Royal Caribbean or Norwegian Cruise Line.
Short, close-to-home sailings often are more about the ship than the destination, and many of the people who gravitate to them are looking for a big, bustling megaresort-type vessel with lots of things to do. On many short itineraries, “the ship is the destination,” as they say.
If the winners in cruising for the next year or two or three are going to be the lines that can do short, close-to-home trips the best, then the lines with the best prospects are likely to be such megaship operators as Royal Caribbean, Carnival, Norwegian and MSC Cruises. They are the lines with the giant, activity-packed vessels built for just that sort of trip.
The age factor
Another factor that could hold Holland America back until the coronavirus crisis comes to end is the older demographic of its customer base. The line typically draws a lot of travellers over the age of 55, with many in their 60s, 70s and 80s.
Travel agent groups that track age spreads say Holland America passengers can be 15 years or more older, on average, than passengers on Royal Caribbean or Carnival ships.
Health officials have said older segments of the population are most at risk of developing complications from coronavirus, something that may keep some older travellers from booking cruises until a vaccine or better treatments are in hand.
That said, some cruise executives dismiss the idea that older travellers might stay away from cruising more than younger travellers when cruising resumes in earnest.
“I don’t believe for a minute that the mature audience is not going to cruise anymore”, Norwegian Cruise Line Holdings CEO Frank Del Rio told TPG in May. “These are the most loyal customers. They’ve got the time to cruise. They’ve got the money to cruise and, quite frankly, they’re pissed off that they can’t cruise right now”.
Norwegian Cruise Line Holdings is the parent company of Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises.
Oceania Cruises and Regent Seven Seas Cruises are two more lines that focus heavily on relatively long, multi-port, multi-country itineraries that could be tough to resume for some time. Others include Crystal Cruises, Silversea and Azamara.
Founded in 1873, Holland America is one of the oldest and most storied lines in the cruise business. It offers wonderfully designed, destination-intensive itineraries that span the globe, from North America and Europe to Asia and Australia. But it is precisely because of this that it may be facing one of the slowest comebacks in the cruise business.
In this context, the line’s announcement on Wednesday that it would significantly shrink in size over the next few months makes sense.
Featured image courtesy of Holland America
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