Disney ship line on cruise control
Disney Cruise Line's Magic luxury ship is spending the summer on the West Coast
By Jerry W. Jackson
Sentinel Staff Writer
June 13, 2005
Disney Cruise Line recently moved some of its magic -- 83,000 tons, to be precise -- to the Port of Los Angeles for a summer of West Coast cruises.
It's paying off.
The trip of the Disney Magic luxury ship from its Port Canaveral home base through the Panama Canal to California sold out fast. And the number of first-time Disney cruise customers lining up to sail with Mickey from California has surprised even optimistic Disney executives.
"What's nice is we're getting new people -- a whole new audience," Disney Cruise Line President Tom McAlpin said during an interview in his Celebration office near Walt Disney World. About 80 percent of bookings for Disney's West Coast trips are first-time Disney cruisers, up from 60 percent or 65 percent for Disney's seven-night cruises from Port Canaveral.
The Magic, with a crew of about 960, recently added a new stage show, Twice Charmed: An Original Twist on the Cinderella Story, and a new pirate-theme party, with fireworks, to keep things fresh.
If the move to Los Angeles is partly a test run for Disney to expand its cruise business beyond Florida, as some have speculated, the experiment is off to a good start.
"There is incremental demand in California," McAlpin said. "Our hypothesis is proving to be correct." A finance whiz, McAlpin knows the importance of incremental demand -- which means tapping new business, not just cannibalizing or matching numbers by moving deck chairs around.
Officially, the June-August shift of the Magic to L.A. is part of the company's 50th anniversary celebration of Disneyland. McAlpin squelches any talk of permanently moving the Magic, or its sister ship the Wonder, to California.
"I don't think we move one of these ships," he said. But he concedes the time is also not right to add a third ship to the fleet, even though top Disney executives have said they would like to do so, once it's practical.
The strength of the euro means the cost to build one of the big, 2,700-passenger ships would be at least a third greater than in the mid-1990s, when the Magic and Wonder were built overseas, said Abe Pizam, dean of the Rosen College of Hospitality Management at the University of Central Florida.
The exchange-rate problem is in addition to ordinary inflationary increases during the past decade. Moreover, the park-and-resort division to which the Cruise Line reports is trying to hold the line on capital spending to boost its operating profit margin.
"It's a very profitable business for them, and I'm certain they wish they had more ships on order right from the first," Pizam said. "Today, the cost has gone up significantly."
Port Canaveral Executive Director Stan Payne said the Brevard County port has long-range plans to expand, partly because it expects a larger Disney fleet.
"We'll do what it takes to accommodate them," Payne said, though he noted that other companies, such as Royal Caribbean, might beat Disney to the punch by adding another ship sooner. Royal Caribbean has two ships based at Canaveral and Carnival Cruise Line has two.
Disney's 10-year contract with Port Canaveral expires in 2008, but informal talks have already begun. Payne said he had lunch recently with McAlpin and came away feeling good. "This is Disney's home port. We have a good relationship, and it will get better."
But Payne said he knows Disney will be a tough negotiator and has plenty of suitors. Ports from Tampa to Los Angeles have been trying to attract the entertainment giant, and that gives Disney leverage here at home.
Port Canaveral is in a far stronger negotiating position as well, compared with the 1990s. Since 1998, the port's passenger traffic has more than doubled to more than 2.4 million, thanks in large part to Disney. But those numbers don't count the growing number of passengers who sail on two gambling cruise ships operating out of the port. Nor do they count people who sail into and out of the port on liners based elsewhere that stop at the port for day excursions, just as they stop at island resorts.
With those additional passengers, the total cruise-visitation count for the port is more than 4.5 million a year, Payne said. "The port-of-call business is really booming," he said, noting that many of the port's day-excursion passengers shop locally, go to the beach or even spend part of the day at Orlando attractions. That gives the port and local businesses another revenue stream other than Disney.
Disney does not break out revenue or profit for its cruise business, but industry analysts have said they think it might contribute as much as $100 million a year to the resort division's operating profit. Based on what Disney Cruise Line has reported -- about 390,000 passengers a year and an average of $200 in revenue a day per passenger -- the business likely grosses more than $312 million a year, or $156 million per ship.
By contrast, Carnival Cruise line grosses about $126 million per ship and Royal Caribbean grosses about $160 million per ship, according to regulatory filings.
If anyone can squeeze profit from the business, industry veterans say, McAlpin is the guy. A former certified public accountant, he knows numbers and honed his skills as operating head of the cruise line before being tapped for the top job last year.
As a fifth-generation Floridian, McAlpin also knows a thing or two about water. He figures he has been on at least 50 cruises through the years -- for fun and as part of this job. "That's a lot of calories, and a lot of laps around the jogging track," the muscular Miami native joked.
In his spare time he water skis on Lake Han**** in west Orange County where he lives, just west of Windermere.
A former football player at a tough public high school in Miami, he keeps the competitive juices flowing by competing in slalom ski competitions.
McAlpin, 45, is only the fourth executive to run Disney Cruise Line since its inception -- and arguably the best prepared, with his finance and cruise-line background and the fact that he has been with the business from the beginning.
McAlpin would not speculate on whether he will surpass the average term at the helm of about two years. But he notes that his recent predecessors -- Matt Ouimet, who was promoted to run Disneyland, and Karl Holz, who was appointed president and chief operating officer of Euro Disney -- had theme-park experience, while he is a cruise-line specialist.
"I want to be here a long time," he said.
Jerry W. Jackson can be reachedat email@example.com 407-420-5721.
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