News and Insights
The Cruise Industry – What it will take to survive
April 22, 2020
A View from North America
The coronavirus pandemic has cut a deep and devastating swath through the travel industry – with negative impact on all sectors – but none greater than cruising.
The cruise industry is an estimated $75 billion business, highly attractive to 40 million people who take one or multiple ocean or river cruises around the world per year. Since the emergence of COVID-19, the industry has suffered from harrowing headlines and an almost total shutdown of business.
No stranger to incidents stimulating negative press, the cruise industry is always under the media microscope. Images of distressed passengers and large vessels at sea play a major role in the frequency and ferocity of coverage.
There’s probably no other sector of travel that generates such strong emotion – people are either faithful fans or those who can’t imagine ever stepping on a cruise ship. There’s not much of a middle ground on cruising.
On the business side, ships are expensive propositions. The largest ones with glamorous shopping promenades, scores of restaurants, theaters, water attractions, ice rinks and even a planetarium (e.g. Royal Caribbean, Cunard and Carnival) can cost well over $1 billion to build. Then there’s the cost of maintenance and crew, which can number in the thousands. There are few businesses that are willing or able to take on that level of financial and operational obligation, especially in the absence of a bailout.
Today’s cruise industry has become a global industry with ports and destinations around the world vying for cruise industry business; each offering up new terminals and technology to make passenger processing efficient and a pleasant part of a highly anticipated journey, rather than the tedious experience of air travel. Exciting shore excursions that enhance local economies are also in the mix with opportunities for passengers to easily experience remote locations, such as Greenland, Antarctica, Falkland Islands and even a bucket list African safari, courtesy of lines like Celebrity, Silversea, Norwegian and Crystal.
In short, the cruise industry is big business for shipyards, industry suppliers, employment (about 421,000 American jobs according to Cruise Lines International Association), cruise destinations, direct and indirect spending and consumer enjoyment.
In the face of dramatic and devastating financial impact and a tarnished reputation, many wonder if the cruise industry can stay afloat and what cruising might look like post COVID-19. Here are some thoughts on cruise industry survival.
- Staying Power. The cruise industry has always been resilient. It’s had more comebacks than Brittany Spears. It has also found a global voice with greater collaboration between lines and governing authorities. After Costa Concordia, the cruise industry instituted new safety initiatives and has demonstrated a greater willingness to shine a light and do something about sensitive subjects.
- Loyalty. Cruise passengers are very loyal customers and cruise bookings for 2021 are already higher than 2019 with some reports saying a 40% increase. The cruise industry understands loyalty, rewards customers with early booking incentives, and in the case of COVID-19 related cruise interruption, has given passengers the option to postpone cruise vacations without incurring fees.
- Huge Sales Force. For decades, the cruise industry has cultivated hundreds of thousands of cruise-selling travel advisors, investing heavily in training, first-hand shipboard experiences, and rewarding compensation for high-volume producers. Advisors specializing in cruise planning do well in their niche and enjoy the satisfaction of helping customers navigate the complexity of choosing the right cruise, thereby making them loyal cruisegoers for life.
- Value. People like deals and there will be bargains galore when ships start sailing again. The cruise industry, however, has moved away from price as the motivation to cruise. There are many other value markers on the benefits of taking a cruise and the industry will lean in on inspiration and education more than cost as it rebounds with existing and new customers.
- Global Market Value. Ships are commodities as they can be quickly moved to areas of recovery to build new markets and they are attractive for acquisition to countries and companies that want to easily move into the cruise industry without having years-long shipbuilding delays.
- Size Matters. Cruise lines will merge, they will sell off ships, brands will shrink or disappear. These are natural outcomes of a major economic crisis in any industry and assuredly the type of changes the cruise industry can quickly adopt for economic survival.
- Innovation. This is where cruise lines are the MVP of the travel industry. The list is endless from Swarovski crystal staircases on MSC ships, flow riders and robotic bartenders on Royal Caribbean, Norwegian’s Free Style, Show Kitchens on Oceania and “ships within ships” that offer havens of exclusivity, such as the Concierge Lounges on Princess Cruises and Disney Cruise Lines.
- Improvement. A hallmark of the cruise industry is ongoing improvement. Ships today have become iconic symbols of ground-breaking ways to entertain, feed and pamper customers through unrivaled amenities. The industry has also made strides in sustainability, safety, security and technology. The captains of sea will overperform to ensure onboard health and safety protocols are met including sanitization, air filters, passenger screening and fewer passengers per ship to accommodate social spacing.
The road to recession recovery is long and complicated. The cruise industry has every reason to be concerned about its future but for many reasons and to many people, it will remain a viable business proposition that the smart people running this global industry are already figuring out.