Q&A with Neil Palomba

MSC Cruises' COO discusses the cruise line's strategy
Q&A with Neil Palomba

By Rebecca Gibson |

How is MSC building the European cruise market?

The numbers of our spectacular growth speak for themselves: today we count 15,500 employees (of which 3,500 are EU citizens), 11 ships (soon to be 12) and 45 offices. In 2013 we expect to carry over 1.4m guests. Ten years ago we counted four ships and 127,000 passengers.

We have always believed that the European cruise industry has a brilliant future just ahead. This is due mainly to the quite distinctive characteristics of European cruising, such as:
• A market distribution that follows a special door-to-door pattern with a very large number of independent travel agencies
• A multinational and multilingual audience (MSC Cruises carried over 180 different nationalities on board this year)
• The practice of interporting, giving passengers the choice of embarking at various ports of call along the cruise itinerary.
Let me also add something that is dear to our company: while fostering the growth of the European cruise market, MSC also helps sustain the broader European tourism market. When MSC Cruises finds the appropriate conditions in European ports and destinations, we do our best to pool with and promote the destination on every level.

As a leading member of CLIA Europe, MSC Cruises has always helped to promote a sustainable European cruise industry. It ensures that the European cruise industry speaks as one voice and is included in all dialogue surrounding regional regulations and policies which could affect the industry.

What percentage of the European market does MSC have and how is this growing year on year?

The total cruise activity in European waters, both north and south, is 47.5m lower berth days. Of that MSC has a 14 per cent share. In 2012 we saw considerable growth in France, Austria, Switzerland, Germany and the Netherlands, when compared to 2011. This year doesn’t look like being an easy year. We are starting with an economic situation which is not much better than in 2012. Italy, Spain and others are still affected by a deep economic crisis and it doesn’t look as though it will get any better. We have taken measures to counteract this issue, to adapt to market requirements. For example we have seen how Northern Europe is growing and so we have, for example, replaced MSC Lirica with the larger MSC Magnifica in Hamburg this year. We are also trying to source more passengers from Northern European markets.

How is MSC contributing to the shipbuilding industry, in particular STX France?

Each of MSC’s newbuilds has been built at the STX shipyard in St Nazaire, France, and with the arrival of MSC Preziosa in March 2013, we will have built 10 new ships in just under 10 years at a total investment of €6bn. The majority of this investment has directly benefited the French economy and its unique shipbuilding tradition.

After a decade, the STX team is fully integrated with the technical team of MSC Cruises and they work incredibly effectively together. We remain a loyal supporter but MSC will not be placing any new orders with the shipyard until the economy revives, as recently announced by Mr Aponte, the president of the group. Though some plans for a new prototype are in the very early stages of conception here at MSC, it now seems unlikely that any new ship will be built before 2015.

How are geopolitical developments affecting MSC’s itineraries?

Today, cruise lines need to accept that geopolitical situations can happen on a regular basis and that it is essential to remain flexible in terms of itineraries in order to offer our guests the safest holiday possible.

However, rerouting itineraries at short notice is not without difficulties. As our preferred option is to replace a cancelled port, we need to identify an alternative port that can be reached by the ship in the timeframe, without affecting the rest of the itinerary. Berth allocation and availability and port congestion then also come into play and can pose additional problems. Making sure that guests are satisfied with new schedules is obviously another important challenge.

To give a recent example, in March 2011 MSC Cruises withdrew four ships from the port of La Goulette, Tunisia, as a consequence of political developments in the country, offering guests an additional day at sea in place of the scheduled call.

After closely monitoring the situation (collaborating with local government and the port authority) MSC returned to the port in July. As MSC Cruises’ number one priority is the safety and security of its guests, the swift return of MSC ships to the region was a great way of showing the world that the area was once again safe and tourist friendly. Our travellers reacted incredibly positively to the news that we would once again be calling in Tunis.

What role do port facilities play in the itinerary mix and what would you like to see improved in which regions?

Port facilities play a direct and important role in the itinerary mix. We want to ensure that MSC travellers experience the same levels of service ashore as on board.

Apart from a few rare exceptions – such as Cruise Baltic and Cruise Norway – ports and most of the ports associations are not actively engaged with cruise lines on how to improve services. Ports tend in fact to forget that the guests who disembark daily from our ships represent a large part of their inbound tourism.
In the majority of cases, ports let cruise lines stand alone to defend the cruise business, while taking for granted the benefits that come from it.

As chairman of the ECC Port and Infrastructure Sub-Committee I’ve asked several times for a serious dialogue that could set up a clear roadmap of activities and initiatives to concretely and substantially improve the operational routine of cruise lines (and I am here thinking, for instance, about environmental issues such as waste management, port costs and port efficiency). However my efforts yield little result.

How does MSC ensure a secure supply of fuel despite price volatility?

As MSC is the second largest shipping group in the world with more than 400 cargo ships, its strategy includes the centralisation of all buying operations at group level including that of bunkers. We rely on that buying power to obtain the best position for our cruise vessels.

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