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Industry Optimism High as Seatrade Cruise Global 2019 Kicks Off

Credit: PortMiami
Credit: PortMiami

By Allan E. Jordan 04-07-2019 07:15:46

Having just completed another record year, optimism remains high in the cruise industry as the business leaders, port and government officials, suppliers and other vendors all gather for one of the industry’s largest business conferences – Seatrade Cruise Global 2019 in Miami, Florida.  

The year just concluded, 2018, was a record for the cruise industry showing not only strong growth in passenger bookings and fares, but also importantly in onboard revenues, which continues to be one of the key revenue drivers for the leading cruise companies. The industry trade group, Cruise Lines International Association (CLIA), reported nearly six percent growth of better than 1.5 million passengers in 2018 driven in part by the addition of eleven new ships with over 30,000 berths.

Record Year

The cruise industry’s three leading public companies – Carnival Corporation, Norwegian Cruise Line Holdings and Royal Caribbean Cruises – each reported strong results in 2018. Frank Del Rio, President and Chief Executive Officer of Norwegian, for example, described 2018 as “a breakout year,” telling investors on Norwegian’s recent conference call, “We started 2018 in a record book position,” and going on to describe “stronger than anticipated demand and robust onboard spend,” propelled the company’s results past expectations. Royal Caribbean’s Chairman and CEO Richard Fain also provided a similar positive report to investors calling 2018, “an unusually busy and successful year,” helping the company to achieve record financial results.  

The tone for Seatrade 2019 is expected to reflect a similarly positive outlook for the industry with attention focused on the new construction and ship renovation efforts along with new initiatives to improve efficiency in operations and use technology to enhance the passenger experience. With competition fierce in the industry, and new sectors such as the expedition market expected to take off in 2019, the cruise lines continue to look for elements to differentiate their products.

Many Contributing Factors

“Strong secular growth trends for experiences, multi-generational and family travel continue to drive industry growth,” financial analyst Timothy Conder of Wells Fargo Securities told investors in a March equity research report. Indeed, CLIA is forecasting consistent growth of better than six percent in 2019 to 30 million passengers worldwide.

New construction will continue to be one key factor with more than 20 new ships scheduled for delivered with 40,000 berths in 2019. Most of the new ships in this year will be continuations of existing classes, with the biggest new trend being smaller ships focused on expedition cruises and exotic destinations such as the Galapagos and the Antarctic. These ships are seen as the industry’s next attempt to hone in on consumers’ strong desires for experiences.  

CLIA identified a newer trend it calls achievement travel, where a consumer can have cultural experiences or check off “bucket list” experiences ranging from visiting Machu Picchu or completing a culinary workshop.

The strong competition in the industry is also driving significant investments in existing ships. The lines are spending hundreds of millions of dollars on fleet-wide renovations. Some ships are receiving $100 million or $200 million revitalizations and even being renamed to add greater consumer appeal.  In addition to new amusements ranging from waterslides, laser tag and other attractions, the lines are also investing heavily in technologies that let passengers better personalize their cruise experience. Princess Cruises, for example, will be expanding the deployment of the revolutionary Ocean Medallion to three additional ships in 2019 while Royal Caribbean will continue the rollout and adding features to its Excalibur platform. The lines are expanding the functionality of their technology so that passengers can do more such as order drinks, book shore excursions and reserve extra-tariff onboard dining, which will all contribute to the lines’ all-important onboard revenue.

This year will also continue to see the lines working to reduce their environmental impact with an increased focus on sustainability. Most of the ships have completed their updates to meet the 2020 emissions regulations with more of the discussions now focusing on further increasing fuel efficiency.  The end of 2018 saw the introduction of the first cruise ship to run both at sea and in port on LNG, with more LNG-powered ships due in 2019 and beyond, while the industry also looks at new technologies such as fuel cells.  

Focus on Destinations

Finally, another key area of discussion for Seatrade will focus on the destinations. The cruise industry is increasingly working with the destinations seeking to ensure that passengers can have unique experiences. They are also supporting efforts to expand port infrastructure to meet the needs of more and larger cruise ships.

The ever-present concerns ranging from the economy to consumer confidence, weather, fuel costs, the potential impact from trade disputes, Brexit, and stock market volatility, have done little to slow the cruise industry’s optimism. Royal Caribbean started 2019 with two record breaking weeks in the WAVE booking season, while Carnival Corporation also reported bookings ahead of last year, with higher prices in North America and Australia but a softer pricing environment mostly in Europe. Markets ranging from the Caribbean to Alaska and Europe are all showing strength and even the Chinese market, which has been adjusting, will receive new ships in 2019 including from Genting’s Dream Cruises and Costa Cruises’ newly launched Costa Venezia.