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"Maritime Logistics Professional" featured Lubin Professor Andrew Coggins in "The Cruise Industry Business Model Evolves"

03/28/2018

"Maritime Logistics Professional" featured Lubin Professor Andrew Coggins in "The Cruise Industry Business Model Evolves"

Cruise Economics

The cruise companies’ efforts to squeeze out the most dollars result in logistical contortions. In early 2016, NCL shifted its Norwegian Star (then sailing out of Tampa) to Australia, substituting it with Norwegian Jade (pulled out of Houston). Norwegian Cruise Line Holdings’ President and CEO, Frank del Rio, described the move in a 2015 investor call, saying: “Norwegian Star’s seasonal deployment will satisfy both contingents and mark the brand’s return to the region after a 15-year absence.” He added, in an oblique reference to Houston, “This new deployment also coincides with the ramping up of our sales and marketing operations in Australia … and replaces our lowest yielding seven-day product.” 

Around the same time, Princess Cruises pulled its Houston based Caribbean Princess out, moving it into the Australia trades. Unlike cargo, the cruise business requires sensitivity to consumer views which, in turn, drive the yield calculations of utmost importance to executives such as Mr. Donald and Mr. del Rio. On Cruisecritic.com, an online community for the sector, one commentator offered that: “The Port of Houston terminal is located in a dump. The Galveston terminal is beside the Strand. ‘Nuff said.” Ultimately, though, part of Galveston’s advantage proved to be its closeness to the open water, with Cruisecritic.com noting: “Galveston is also just 30 minutes from the open sea, so shops and the casino open fairly quickly after sail away.” Professor Andrew Coggins, Professor in the Lubin School of Business at Pace University, told MLPro, “Where cruising and cargo operations are in the same port, it can be tricky especially if they are not geographically separated. In Houston, for example, there were instances of disruptions and delays when the Ship Channel was closed after accidents and oil spills. Even on normal days, attention to scheduling of vessels coming inbound and outward is critical.”

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