In July 2000, Joe Watters, President, Crystal Cruises, talked about:

The State of Luxury Cruising

More than at any time in the history of cruising, we see exciting times ahead. For this reason, and, because Crystal Cruises' views seem to differ from those expressed recently by another line, we wanted to share our thoughts as to why we expect luxury cruising to grow and prosper.

The Affluent market seeks the very best: Demand for luxury cruising will continue to increase. Over the past ten years, we have seen a sharp increase in upper level incomes as well as greater expendable incomes available to those seeking comfort and tranquility in their lives. As luxury is never a necessity, it is important that upscale cruise lines realize that consumers will only buy up if they distinguish a difference. Look at the success of luxury cars, hotels and restaurants. Consumers will buy luxury cruises if they are assured that the difference in price is justified -- that there is a great value. In most cases, this happens by giving the guest superior service.

Personalized Service distinguishes luxury cruising: If you understand the luxury market, then you know that the primary measurement tool isn't the size of the staterooms or other hardware; it's the quality of service and the overall product that you give your guests. Quality must be embodied in all aspects of the cruise experience.

With increased luxury competition, the winning lines will be the ones that focus on delivering the best product – not the lowest price: There is no question that capacity increases will have a major impact on this market segment. In looking at luxury expansion, it can only be concluded that cruise lines decided to increase tonnage for one very positive reason: they expect the luxury market to grow dramatically. That's certainly why we recently announced that we would be expanding the Crystal fleet. The affluent market controls 53% of all discretionary income an most of the wealth is in the hands of the middle-aged and older. These are people that want to get away from the hassle and stress in their daily life. They are savvy, demanding and value-oriented buyers. They have a strong desire to buy the best quality products that they can afford. It is up to the luxury
cruise lines to deliver a superior cruise experience.

Luxury lines should raise the bar, not lower the standard: For some lines in this competitive environment, there may be pressure to cut corners, to improve the bottom line. Doing so in the luxury segment is a big mistake. Luxury cruisers will see it. Cruise lines must prudently control costs, but not at the guests' expense. Don't try to fool upscale cruisers by giving them less. They're way too smart for that. Rather, look for ways to provide greater value; they know when they get it.

We believe in market pricing: Over the past twenty years, the cruise industry has debated the issue of discounting. Some keep waiting for it to go away. Others are sure that it never will. In reality, what we're dealing with in this industry, as is the case in every other industry, is that the consumer will ultimately determine what a product or service is worth. The consumer will pay more for a better product, but there are times that market demand is lower than at other times. When that's the case, the consumer is in a position to buy at a very special price. We believe that there will continue to be the need for market pricing, but we do not believe that luxury pricing will decline dramatically. You must charge more to be able to deliver the kind of quality product that the luxury market expects.

Accolades and a strong bottom line go hand in hand: We've won many awards as the top large luxury cruise line, but these are only an affirmation of our position at a point in time. How does a luxury leader maintain its position? By retaining the core elements that make it a leader and then constantly striving to bring innovation that is meaningful to its customer base. Our Computer University @ Sea concept is an example of a breakthrough idea that caught the imagination of our guests. Cruise lines must anticipate the future interest of their guests and surprise them with exciting innovation in all aspects of the cruise experience.

Striving for perfection: The luxury cruiser is looking for a variety of choices, unique experiences and exceptional service. The money is there and people like quality. More people want to trade up to the best if value is there. Product innovation and evolution take on many forms. Cruisers want fitness, enrichment, unique dining, new entertainment and e-mail. They are looking for the flawless experience. People will pay for it. Operators must be close to perfection and well connected to the customer.

Today, Luxury has a contemporary definition: The upscale cruiser, for the most part, is not looking for an antiquated definition of luxury that conjures up an image of stuffy people and Jeeves, the butler. There is a contemporary definition of luxury that matches the wants and needs of upscale cruisers. It's alive, bright, cheerful and upbeat. It combines attentive service, genuine warmth, stimulating and diverse activities, wonderful ports-of-call, unique land programs and the world's most stress-free environment.

Over the past decade, luxury consumers have never been a homogenous group. Today, the luxury cruiser is even more difficult to define. Yet, as varied as luxury consumers may be in age and lifestyle, it remains very clear that they must be understood as individuals and not as a group. And, what appeals to all of them is a high degree of warm, personalized service.

Demand for Crystal has resulted in record earnings for our company: This year, I am pleased to report will be a record year for Crystal Cruises. Our focus is on maintaining and even improving the overall product that we deliver; it is not on cutting quality and reducing price.

Luxury cruising is alive and well. And, accolades and bottom line do, indeed, go hand in hand.

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