Industry Challenges for World Cruise Market

The worldwide cruise industry is already battening down the hatches in the wake of the terrorist attacks on the USA. Ships are being redeployed and itineraries changed as many Americans react by cancelling their travel plans. As a new report on the World Cruise Market from Mintel's Travel & Tourism Intelligence underlines, the industry has never been more vulnerable to a downturn in business.

According to report author Tony Peisley, "The cruise industry is in the middle of a period of unprecedented expansion with nearly $19bn committed to the building of 49 ships over the next five years. This represents a 52% increase in worldwide capacity and there were already concerns about the impact of this - and of a feared US recession - on profitability before the terrorist attacks. With 70% of cruise passengers historically sourced from North America and one line - Renaissance - already forced into Chapter XI administration following the terrorist attacks, the industry now faces its biggest ever challenge."

Planned expansion is based on the increasing age and wealth of the populations in the major source markets. The number of cruise passengers doubled during the past decade reaching 10.1m in 2000, making the industry worth about US$14.3bn.

Industry growth will be fuelled by the populations ageing across all the major cruise markets (except Asia as the 45-60 age bracket currently generates about half of all passengers. In the major source market, North America, 10,000 US citizens will turn 50 every day over the next 10 years. By 2010, 41 million will be in the key cruise
passenger age bracket - 50-59 - double the number of two decades ago.

The UK market's performance has been encouraging in recent years and operators believe there to be a potential market of 1.4 million cruisers - an extra 500,000 ocean and river cruise passengers. The UK's demographics are also promising, with the over-60 population set to grow 23% in the next ten years, while the 40s-60s will grow by 20%.

Despite the current redeployments closer to North America, Continental Europe remains the main medium to long-term focus for the major cruise companies through the customising of their own ships or the purchase of existing European lines.

South America is attracting similar interest as companies deploy and customise ships for that market, too, but Asia, the main growth area in the 1990s, remains in limbo after the difficulties of the economic downturn in the region.

Until the last couple of years, the doubling of passengers was bringing ever-increasing profits to the major cruise lines but in 2000 yields began to fall sharply just as the lines took on massive and increasingly expensive capacity investments. In 2002, as staff and fuel costs are set to rise, this situation is set to continue.

Industry-wide capacity increases have bred ever fiercer competition amongst operators and even given rise to a completely new "Contemporary" sector. This is a US term for the new, high quality ships which, because of their size and amenities, provide high quality cruises but at three-star budget prices for the
mass-market.

Also, whilst some established destinations such as the Caribbean islands guarantee long-term fixed port charges in return for specified passenger quotas, Panama has set a new trend by paying cruise lines to bring passengers. More are likely to follow this lead as the cruise industry spends more on producing studies to show the huge benefits cruise ships bring to local and regional economies. These studies are also being used to counter allegations of environmental damage by cruise line ships and passengers.

All articles 2006-22 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.

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