Queen of the Sea

ILLUSTRATION COURTESY OF CUNARD LINE
No steerage here, Leonardo, but plenty of luxuries

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Ship owners have learned to protect profits even with soft demand. Ships have become bigger, and "economies of scale really work" on cruises, says John Maxwell, a leisure-industry analyst at Merrill Lynch in New York City. Ways of extracting extra money from passengers have become more sophisticated, like TV sets that allow gambling from one's stateroom and premium restaurants that charge a supplement. Driscoll estimates that Carnival makes 20% of its revenues from onboard charges.

Also, in a time when fear of terrorism is widespread, ships unlike hotels can take advantage of their mobility, shifting routes away from geopolitical hot spots. Since Sept. 11, cruises through the Suez Canal or to countries like Indonesia have been replaced by trips to Alaska, the Caribbean and South America. There is also an increase in "home porting," which means cruise ships stop at smaller U.S. ports to pick up passengers who can drive there instead of taking a flight. Some 30 U.S. cities now operate as cruise-ship gateways, including Baltimore, Md.; Galveston, Texas; and Mobile, Ala.--roughly double the number in 2000. This year the falling dollar is expected to discourage Americans from taking European vacations and to prod Europeans to consider U.S.-based cruises. And with 85% of Americans and 90% of Europeans yet to try a cruise, it is no surprise that analysts have been upgrading their estimates of Carnival's stock price and of the industry's prospects generally.

The wave of publicity the QM2 is generating can only help. But Cunard's latest icon will require delicate navigation. In November, when a gangplank collapsed at QM2's French shipyard, killing 15 people, headlines proclaimed a "jinxed" ship. A shipboard virus on the high-profile QM2 or a fine for polluting the sea would be certain to be heard around the world. Not to mention the ultimate nightmare a terrorist attack. But as police boats patrolled in Southampton last week and Gurkhas formerly from the British army provided security on board, private boats charged to take gawkers as near the QM2 as security would allow, and families were stopping their cars at a nearby point just to gaze at her. If public affection is any measure, the world's largest cruise liner looks well set for a long and happy life.