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The Cruise Market - Market Assessment 2005
Key Note Publications Ltd, Oct 2005, Pages: 152
In the early 2000s, the number of cruise passengers worldwide grew by between 8% and 9% a year. Growth in 2005 is expected to be lower due to a shortage of capacity and the beginnings of a squeeze on personal incomes, especially in the UK and Germany. In the longer term, South East Asia has enormous potential for the development of cruise holidays. Cruise trends in the UK include a rise in the popularity of mass-market cruise holidays lasting a week or more, a fall in demand for premium-cost cruises and an increase in budget cruising.
Cruises account for around 6% of UK households' spending on package holidays. Generally, only households in the highest income decile can afford a cruise costing more than around £1,500 per person from their income.
The cruise sector should benefit from the ageing population in the UK, provided that sufficient pensioners have high enough incomes to afford cruise holidays. This should be the case in the short and medium terms, but the long-term prospects for pensioners' incomes are not so rosy.
The international cruise liner fleet numbers around 340 in 2005. The cruise industry is controlled from the US, primarily the state of Florida. The leading operators are Carnival Corporation and Royal Caribbean, with Star Cruises of Malaysia a somewhat distant third. The major lines are going for economies of scale and building super liners, some of which carry more than 3,000 passengers. Huge liners have a limited choice of destinations because of their size and are primarily floating resorts, but lines with large ships can cope much better than lines running small ships with the discounting needed to fill unsold berths before departure. Scope for new entrants to cruising is limited, except in specialist niches, such as golf or garden cruises.
Pollution from large cruise ships is a growing problem. Most cruise ships are registered under flags of convenience, enabling operators to reduce their costs by bypassing the strict regulation applying to UK-registered shipping, for example. More than 40% of liners carrying 1,000 or more passengers are registered in the Bahamas and another 17% are registered in Panama.
Cruise lines are beginning to consider how to reduce the environmental impact of their ships. Gas and steam turbines to replace diesel engines are a promising step.
Rising oil prices will put pressure on margins, especially in Europe, where there is little scope to put up ticket prices. Mass-market lines will not be able to raise ticket prices appreciably, although at the top end, the charter and small-ship cruises catering for wealthy travellers should prosper, particularly if they can cut promotion costs by relying on repeat custom. Commodification of the cruise experience is a potential problem for the lines reliant on very large ships.
The South East Asian market should grow massively in the long term but, in the years to 2010, the US market will become even more dominant than it is in 2005. Constraints on future growth include capacity rising by less than 5% a year, weather problems, security threats and oil prices.
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