Cruise industry's summer business looks to be ship-shape

For months, Trudi and Philip Borhaug were dreaming about a weeklong summer vacation with their two teen-agers in Hawaii. But cost, airport hassles and a nagging feeling that the island was too far from home eventually convinced the Sylmar, Calif., couple to take a different route: They booked a four-night cruise to Mexico instead, for less than $2,000.

"We wanted to do something special, because all of us are feeling a little restless this year," Trudi Borhaug said, noting that last summer's vacation was a short stay in Monterey, Calif., while their children were at camp. "Yet we wanted it to be family-friendly, reasonably priced and close enough to feel safe. We think a cruise has all of that."

After experiencing steep drops in bookings after last fall's terrorist attacks and slashing rates to 20-year lows to fill ships, the cruise industry is shaping up to be a summer bright spot -- even as prices creep back up to within 7 percent of last year's fares.

"It's safe to say that the cruise industry has bounced back in a very big way," said Mike Driscoll, editor of Wilmington, N.C.-based Cruise Week, a trade publication for travel agents. "And it's places like Texas and Southern California that have helped it along, because the drive market has become so critical right now."

Cruise bookings dropped by at least half immediately following Sept. 11, and in November, the No. 2 and No. 3 biggest cruise ship operators -- Royal Caribbean Cruises Ltd. and P&O Princess Cruises -- announced they would merge in an effort to counter the post-attack travel slump with cost savings and higher volume.

But the industry has rebounded more quickly than initially expected, and advance bookings for the third and fourth quarters are running above last year's pace, according to Fitch Ratings.