SEAS WILL REMAIN ROUGH FOR THE AILING CRUISE INDUSTRY

SEAS WILL REMAIN ROUGH FOR THE AILING CRUISE INDUSTRY

The cruise industry, despite record January bookings by two major companies, acknowledges that it faces a difficult year in 1992.

"The industry had a tough quarter, and a tough year, and I think 1992 will be another tough year," said Micky Arison, chairman of industry leader Carnival Cruise Lines, as the company reported its fourth quarter results."Clearly, the economy is still soft."

Massive Fare Discounting

Last year, the soft economy and the Persian Gulf war combined to cut demand for cruises, even as new ships ordered years ago continued to come on line. This led to massive fare discounting that has not abated so far this year, even in strong seasons that were once largely discount-free.

One result is likely to be continued industry consolidation. As in the airline industry, the big, strong carriers tend to solidify their positions in tough times. The weaker ones suffer.

"There are 36 cruise lines. By the end of this year, there may be only 30 survivors," said Robert Dickinson, Carnival's senior vice president and president of the Cruise Lines International Association.

The four strongest lines, Mr. Dickinson said, are Carnival, Carnival's Holland America, Princess and Royal Caribbean.

Both Carnival and Royal Caribbean, the two largest cruise companies, reported huge increases in January bookings.

Carnival said it booked about 261,400 passengers in January, far ahead of its previous record of 160,000 passengers in March 1991.

Royal Caribbean Cruises Ltd. said it booked 266,149 passengers in January, including bookings for its two-ship Admiral Cruises. Its best previous month was July 1991, when it booked 181,567 passengers.

Rich Steck, spokesman for Royal Caribbean, said bookings were up 46.5 percent. One reason, he cited, is that Royal Caribbean added the world's largest cruise ship, the Monarch of the Seas, to its fleet in mid-November. That increased capacity by 17 percent.

Intensive Marketing

Royal Caribbean will add a sistership, the Majesty of the Seas, in April. It took bookings for both ships this month.

"Besides increasing capacity, we are doing more intensive marketing, including some discount programs," Mr. Steck said. "In addition, there is a better awareness by the traveling public that cruising offers value for your

dollar, and during a recession you want your dollars to count for more."

On the whole, the cruise industry added 6,500 berths to its capacity of about 93,000 berths in 1991. Twelve more ships with a total of 11,000 berths are scheduled to come on line this year, according to the association. No ships are scheduled to be retired. The added capacity increases supply in a time of weakened demand, a sure formula for discounting.

But Mr. Dickinson noted that "a certain amount of discounting has become institutionalized, because that is what a segment of the market responds to. It doesn't translate dollar for dollar to reduced income, because a lot of the discounting out there is off a higher base price."

Michael Mueller, cruise line analyst for Montgomery Securities in San Francisco, said he expects the first half of the year to be difficult for the cruise industry, but conditions should ease in the second half.

"Since the gulf war, discounting has become more of a fact of life than the industry wants it to be," Mr. Mueller said. "As long as consumer confidence remains weak, it will be hard for the industry to show a lot of pricing leverage in 1992.

Big Get Bigger

"But the larger operators, those who have extensive travel agent networks and consistent products, are in a better position to do well," he said. "At the end of January, as bookings improved, Carnival was able to reduce discounts so they weren't as severe as they were at the beginning of the year.

"My estimate calls for Carnival pricing to be up 1 percent or 2 percent, which is incredibly good in this environment of growing capacity, a weak economy and weak consumer confidence," Mr. Mueller said.

Carnival does have one problem: Its Crystal Palace Resort and Casino is an acknowledged lemon.

The company announced in January that it would take a $135 million loss on the sprawling, 1,550-room Nassau facility, and try to sell it.

Mr. Arison conceded that so far no buyers for the facility have surfaced but said: "The company's decision to sell the Crystal Palace will allow us to direct all our time and efforts to our successful cruise businesses."

Although the Crystal Palace operating losses and write-down depressed Carnival's year-end profit, the company earned a record $254 million in cruise operation income on a record $1.4 billion in revenue for the fiscal year ended Nov. 30, l991.

Most Carnival competitors are privately held companies that do not routinely report results.

However, Richard Glasier, senior vice president and chief financial officer of Royal Caribbean, said the company weathered a tough year in 1991, suffering a double-digit decline in profit.

Recession-Resistant

"We've never said the cruise industry was recession-proof, but we see clearly that it is recession-resistant," Mr. Glasier said. "The best- operated of the large cruise operators have had to dip into profits. I don't think any company in the industry will have record profits in 1991 and 1992. But late 1992 and 1993 should be very good."