Author: Dr. Athanasios Pallis
The global cruise industry offers a combination of local destinations accessible through the cruise port and onboard amenities offered by the cruise ship.
1. Evolution of Cruise Shipping
Cruise shipping was first established to transport pleasure-seeking upper-class travelers on seagoing vessels, offering one or more ports of call in the United States and the Caribbean. From the mid-19th century, liner services supported long-distance passenger transportation between continents, particularly between Europe and North America. The need to accommodate a large number of passengers of different socioeconomic status for at least a week led to the emergence of specific ship designs radically different from cargo ships where speed and comfort (at least for the elite) were paramount. The idea of cruising came forward in the early 20th century when a few custom-designed ships or converted cargo ships began offering luxury cruises to any individual willing to pay the fare. To keep the ships used, seasonal itineraries were designed, covering Norway and the Baltic in the summer and the Mediterranean and the Caribbean in the winter.
The emergence of the modern cruise industry can be traced to the demise of the ocean liner in the 1960s as it was replaced by fast jet services for which it could not compete. The last liners became the first cruise ships, following the complete demise of liner passenger services as it was realized that long-distance travel was to be assumed by air transport. The availability of a fleet of liners, which utility was no longer commercially justifiable, incited their reconversion to form the first fleet of cruise ships. For example, one of the last purposely designed liners, the SS France, served as a cruise ship (SS Norway) between 1980 and 2003. However, liners were not particularly suitable for the requirements of the emerging cruise industry. Since they were designed to operate on the North Atlantic throughout the year for scheduled passenger services, their outdoor amenities such as boardwalks and swimming pools were limited. Additionally, they were built for speed (which was their trademark) with the related high levels of fuel consumption.
The beginning of the modern cruise industry was also to a certain extent invented in Greece by the pioneer Epirotiki Lines and the aggressive expansion strategy that identified the demand limits of the East Mediterranean market and decided to plan itineraries on the other side of the Atlantic. The founding of Norwegian Cruise Line (1966), Royal Caribbean International (1968), and Carnival Cruise Lines (1972), which have remained the largest cruise lines, and the presence of a major passenger source market, led rapidly to a focus on the United States and the Caribbean, that provided the basis for the remarkable growth and expansion of the idea of cruising. While less celebrated, during the same period, refurbished liners were offering cruises in Eastern Europe as well such as cruises during the Soviet era were offered in the Black Sea and the Baltic Sea.
In the 21st century, following an uninterrupted growth and modernization, cruise shipping offers itineraries in a global network of local destinations accessible through the cruise port, with the features of cruise ports and associated transportation and tourist services being as important as the onboard amenities. The cruise industry is a mixture of maritime transport, travel, and tourism services, facilitating the leisure activity of passengers paying for an itinerary and, potentially, other services on board.
A cruise includes at least one night on board on a seagoing vessel having a capacity of at least 100 passengers. Transportation (the cruise ship) is the core element of the experience instead of a simple conveyance.
Since the late 1970s, cruise shipping has experienced unprecedented growth. The global growth rate of the cruise industry has been enduring despite economic cycles of growth and recession. In 2000, 7.2 million people took a cruise. Only 3.8 million people had done so in 1990. In 2004, this number exceeded the 10 million passengers threshold. Fifteen years later, in 2019, almost 30 million passengers cruised worldwide.
The globalization of the cruise industry that calls in a growing number of ports around the globe appeared to be unstoppable, with the COVID-19 pandemic the first major setback in almost a half-century. Cruise growth was halted for the first time by the COVID-19 pandemic, a sanitary crisis resulting in restrictions on social/human contacts rather than purely economic reasons. Before that, cruise growth had recorded a remarkable resilience in the face of economic, social, political, or any other crises that regularly challenge both the shipping and tourism sectors. While the global financial crisis of 2008-2009 had a major impact on ocean-going cargo shipping, cruise shipping and ports continued experiencing steadily rising passenger numbers. Stagnation did not occur even when, in 2012, the Costa Concordia grounding generated negative public relations or through minor incidents on cruise ships operated by leading firms. Environmental and social challenges (i.e., emissions) were seemingly unable to undermine the operating context and growth prospects. However, since the financial crisis of 2008-09, growth rates were relatively lower than in the 1990s and first half of the 2000s.
At the beginning of 2021, the cruise fleet numbered 412 vessels with an annual capacity of 22.3 million passengers and an estimated sales revenue, based on the average revenue generated by each passenger for the major cruise companies over 2019, standing at approximately 1,675 US dollars per cruise passenger. The worldwide market share of the North American market was 53%, and that of the European market was 32,4%. Asia was the third biggest market with a 14,7% share.
Since then, the COVID-19 pandemic triggered unprecedented global health and economic crisis with structural consequences for the cruise industry. In early 2020 the whole industry voluntarily suspended operations worldwide, with the timing and return conditions remaining questionable. Later in 2020, a second wave of the pandemic resulted in a further postponement of cruise calls in most world ports, implying that 2020 was a lost year for the industry. As the pandemic unfolds, making a precise assessment of the longer-term implications remains uncertain.
Traditionally, cruise statistics counted the number of onboard guests, measuring the size of the market by the number of persons who decide to take a cruise each year. This can be misleading, as it underestimates both the size of operations and the importance of the market for the port industry and the respective destinations. Each passenger embarking on a cruise visits between 4.6 and 5.2 cruise ports. As a result, the total number of cruise passenger movements hosted is remarkably higher than that of single passengers. Driven by industry trends, a ship with a capacity of 4,000 passengers on annualized 50 weeks deployment in a standard seven-day itinerary of six ports (one homeport, five transit ports) in the West Mediterranean market, and excluding any effect of inter-porting, generates 1.4 million passenger movements per year. In total, the 30 million cruisers of 2019 generated more than 150 million passenger movements in cruise ports around the world. Thus, cruise passenger movements stand as a unit that matters most for the ports and is increasingly used in related industry reports.
2. Growth Drivers
Six trends shape the modern cruise market as drivers of growth:
- Expansion and capturing of cruise lines revenue streams via regular fleet renewal and the offering of expanded onboard amenities as well as shore-based excursions (shorex). The cruise ship has become an essential part of the cruise experience since it also represents a destination in itself.
- Upscale of cruise ship size. The principle of economies of scale and the development of a broader customer base has incited the deployment of larger cruise ships. While in the 1990s, cruise ships rarely exceeded 2,000 passengers, by the 2010s, ships of 6,000 passengers were being deployed. Also, larger ships are able to support a wider range of amenities.
- Market segmentation with different types of vessels, associated with different amenities offered onboard and ashore, with the variance of the types of cruises offered, targeting different (social and age) groups of potential cruisers.
- Globalization of deployment patterns, along with sophisticated itinerary planning through the deployment of cruise shipping vessels in multiple world markets. First, cruise lines offer itineraries where the whole is essentially greater than the sum of its parts. Specific regional and cultural experiences are being offered through a combination of sailing time and choice of ports of call. Second, they adapt to seasonal and fundamental changes in the demand by repositioning their ships (seasonal) and changing the configuration of their port calls (fundamental). A core strategy of some cruise lines is to not offer fixed itineraries per season but regularly moving their cruise vessels from one region to another for certain periods of a calendar year.
- Internationalization of passenger source markets, with cruise shipping developing strategies leading to an expansion of the sources of their guests. This is also linked with the expansion of the population groups attracted by modern cruises.
- Concentration and multi-brand strategies. The industry has a high level of ownership and market concentration, with each conglomerate operating a number of different brands in order to expand the targeted passenger groups. Carnival and Royal Caribbean, the two leading cruise conglomerations, account for 73% of the market.
These six trends underline a unique foundation of the cruise industry. The supply push strategy of cruise operators aims to create demand simply by providing new capacity (ships) and finding customers, called guests, to fill them through itinerary planning, marketing, and discounting strategies. The possibility of cruise ship operators successfully following a supply push strategy makes the cruise industry quite different from other shipping markets, such as container shipping. This contradicts the tourism sector in general, which is highly demand-derived and sensitive to the general economic context. Hence, in most shipping markets, the shipping activity is a clear derived trade activity, and demand is rather inelastic price-wise.
Demand in the cruise business is created through pricing, branding, and marketing. Cruise operators are challenged to develop competitive cruise packages that involve a high-quality stay onboard, an array of shore-based activities offering access to a variety of cultures and sites, and easy transfers from the vessel. Most cruise lines have a logistics office responsible for supplying ships, particularly food, which is a core amenity. Variation in preferences is observed depending on the itinerary, the composition of passengers, including factors such as origin and age.
3. Upgraded Vessels and Onboard Amenities
The construction of cruise ships tends to occur in cycles where several ships are ordered and enter the market within a short time frame. Since the cruise industry is a relatively small segment of the tourism sector, it has so far been very successful at finding customers to fill a greater number of ever-larger ships. The cruise product has become diversified to attract new customers and respond to the preferences of a wide array of customer groups. In view of fulfilling the expectations of its guests, the cruise industry has innovated through the development of new destinations, unique ship designs, new and diverse onboard amenities, facilities, and services, plus wide-ranging shoreside activities. Most cruise ship operators work around specific cruise themes, and voyage lengths can vary to meet the changing vacation patterns of customers, thus contributing to cruise market concentration.
The new, more innovative cruise ships make the companies even more profitable as passengers are usually willing to pay more for cruising on-board the newest vessel, which tends to offer more spending opportunities onboard while being more efficient to operate. Innovative cruise ships enable major improvement of services. For instance, they allow easy-to-use systems that expand guest choices and simplify schedules, as well as advanced technology that speeds up processes (i.e. boarding, luggage tracking, etc.) and improves experiences. The average ship of the late 20th century period had eight guest decks, while modern vessels of 13, 14, or even 18, guest decks providing opportunities to explore, cabins with more room, and private verandas. Subsequently, the “one-class cruising” system inaugurated in the late 1980s, where all passengers received the same quality berthing and facilities, is today endorsed by almost all. Ships also changed their sailing technology by adding stabilizers, which are underwater wings attached to the hull, reducing the motion of the ocean.
The market drivers of the cruise industry are similar to those that have fostered the growth of tourism after World War II, particularly the rising affluence of the global population and the growing popularity of exotic and resort destinations. The general aging of the population is also a factor in favor of cruise shipping, as the primary market remains older adults, albeit cruise guests are getting significantly younger. While in 1995 the average age of a cruiser was about 65 years, this figure dropped to 45 years by 2006.
What is novel with cruising is that the ship represents in itself a destination, essentially acting as a floating hotel (or a theme park) with all the related facilities (bars, restaurants, theaters, casinos, swimming pools). This permitted cruise lines to develop a captive market within their ships as well as for shore-based activities, particularly for excursions or facilities entirely owned by subsidiaries of the cruise line.
Some cruise operators go very far in developing new entertainment concepts onboard their vessels, including surf pools, planetariums, on-deck LED movie screens, golf simulators, go-karts racing, water parks, demonstration kitchens, multi-room villas with private pools, and in-suite Jacuzzis, ice-skating rinks, rock-climbing walls, and bungee trampolines. All these lead to increased economic returns via strong performance in both onboard and ashore revenues. Onboard services account for between 20 and 30% of the total cruise line revenues. The average customer spends about $1,900 for their cruise, including ship and off-ship expenses for goods and services. The majority of these expenses are captured within the cruise ship as passengers spend on average $100 per port of call.
4. Scale and Market
All leading cruise conglomerates such as Carnival, Royal Caribbean Cruises Lines (RCCL), MSC Cruises, and Norwegian Cruise Line (NCL), have invested in the ordering and operation of bigger capacity cruise ships. The pursuit of economies of scale in cruise has been very successful, earning record profits for the cruise lines. The capacity of each of the 50 largest vessels in operation exceeds 3,000 passengers, with the largest (the Royal Caribbean Oasis Class vessels) having a capacity of just over 6,600 passengers and 228,000 Gross Tons (GT). By the mid-2000s, the average ship size exceeded 82,000 GT with a capacity of 2,000 passengers. The average dimensions of a cruise ship are 200 meters in length and 26 meters in width. The standard deviation of ship dimensions is large, and average numbers need to be treated with caution. Nevertheless, these dimensions have little to do with the situation observed in the early 2000s, when cruise ships with a capacity above 2,000 passengers were rare. As the capital, operating, and voyage costs associated with the construction and operation of the largest cruise vessels suggest, the potential of further upscaling of cruise vessel size is not evident.
Each cruise line classifies its vessels in classes of cruise ships of similar size and experiences offered to its guests, such as the cruise ship classification used by Royal Caribbean International. All cruise ships in a particular class share a handful of amenities and stylings, a reasonably similar experience. Still, newer ships within a class will likely have newer amenities and technologies.
The construction of higher capacity cruise ships is the outcome of three drivers:
- The link between vessel size increases with the creation of new passenger demand, as bigger vessels enable to add a variety of onboard activities and services and expand the targeted social and age groups.
- Revenue capture by both additional ticket purchases and the expansion and variation of the services and activities offered on vessels.
- Economies of scale, such as the lower average total costs by spreading fixed costs over several additional passengers.
The order book suggests that, by 2026, a total of 23 cruise ships of over 5,000 passengers will be in operation. However, new builds do not aim to reach a new size standard. As the capital, operating, and voyage costs associated with the construction and operation of the largest cruise vessels suggest, the potential of further upscaling of cruise vessel size is not evident.
The growth of cruising is associated with market segmentation. Different types of vessels, each associated with distinctive amenities onboard and ashore, define a variance of the types of cruises offered, targeting different (social and age) groups. In an attempt at further market penetration, cruise lines or specific brands of the larger conglomerates are present in several market segments, with two aims. The first is to expand the social and age groups of potential cruisers. The second is to generate repeater cruisers by providing incentives to past guests to return to a new experience by cruising on another type of vessel or itinerary.
The four cruise market segments are:
- Contemporary cruises are popular amenity-packed cruises for people looking for many activities and great value. These mainstream cruises rival land-based vacations by offering a comprehensive and amenity-filled package, including accommodations, meals, and entertainment, in a casual environment, with newer (or extensively renovated) ships offering modern design and comforts. The biggest market segment (with a market share of approximately 74%), and features the largest cruise vessels, has an average cruise length of seven days or shorter, and appeals to all age and income cruisers. It also included budget cruises with older vessels but lower prices; a type of cruises that are active in Europe and North America.
- Premium cruises are more upscale cruises offering many amenities, with an increased focus on refined service and more space. Priced inclusive of accommodations, meals, and entertainment, the value of premium cruising exceeds or rivals the best packages offered by upscale hotels and resorts. The second biggest cruise market (with a share of approximately 20%), attracts more experienced cruisers.
- Luxury cruises are defined by the highest quality and personalized service offered on luxury cruise ships and ashore to exotic as well as more exclusive ports. Expensive compared to the rest of the industry, luxury lines deliver value by offering more inclusive pricing than other cruise lines and opportunities to travel to exotic and less common destinations on medium-sized or small spacious vessels. Its market share stands at approximately 2-4% of the cruise market.
- Specialty cruises focus on a destination niche or a unique cruising style, including expedition-style cruises, sailing ships, and a growing number of river cruises. They offer long itineraries and visit some of the world’s most remote and unspoiled places (such as Antarctica and the Arctic) to offer a unique experience that guests find educational and adventurous. The market share of this market share is approximately 3%.
5. Globalisation of Deployment Patterns
The deployment of cruise vessels per cruise region reflects a combination of the existing demand and the willingness of cruise lines to develop new markets. Differences among the markets and regions exist, the most obvious being the variance of profitability. Each market also has its own characteristics. As such, the cruise industry must address multiple considerations related to onboard amenities, itineraries, ports of call, and shore excursions.
The Caribbean has been the dominant deployment market of the cruise industry since its inception, but the Mediterranean cruise market has grown substantially in recent years. The Caribbean and the Mediterranean are complementary markets because the Caribbean is dominantly serviced during the winter while the Mediterranean experiences a summer peak season. An important factor behind the popularity of both the Caribbean and Mediterranean is that the distances between port calls are relatively short and involve a wide variety of cultural experiences. Both markets offer a variety of cultures in close proximity and are thus ideally suited. Furthermore, strong niche markets have developed, focusing on history (Hanseatic cities in northern Europe) or natural amenities (Alaska). Asia is the rising cruise market of the 20th century, with China standing the epicenter of the growth. In the early 2020s, there are signs that cruise shipping started exploring the potential of Middle East destinations.
In 2019, the Caribbean, including the Bahamas, hosted over 38% of the global cruise capacity, with Alaska standing as the second biggest one. West Coast (Mexico), Bermuda, Canada-New England, and Panama Canal were comparatively smaller markets. An additional element contributing to the growth of cruising in the region are the new destinations in the form of private islands or private parts of islands, leased and developed by cruise lines. Cuba and the further opening of the island economy to American and international cruisers and entrepreneurs is the final milestone in the globalization process. While cruises to Cuba have been popular among international travelers for decades, Americans have missed out. Regulatory changes mean more cruise lines are willing to offer visits to Cuba. The demand for cruising to the island is now coupled with the decisions of European cruise lines (i.e., MSC and Celectyal) to deploy vessels in Cuba and of US-based cruise lines (i.e., RCCL and Norwegian Cruise Line) to include Cuba in their itineraries.
Two distinctive markets exist in Europe, as vessels are deployed either at the Mediterranean and its adjoining seas or at the North European market. The Mediterranean and its adjoining seas stand as the biggest region of the two, being the region hosts 16% of the deployed cruise fleet. Within the on-going globalization of the cruise industry, this is the region of the world that has grown faster of all during the first fifteen years of the 21st century, which emerged as the second most popular cruise destination worldwide. Yet, this is also the region where growth trends in several countries evaporated in recent years, affected by the geopolitical turmoil and tensions. The Mediterranean and its adjoining seas are operationally divided into four regional cruise markets. These are (i) West Med; (ii) Adriatic Sea; (iii) East Med; and (iv) the Black Sea. The North European market ranks as the third biggest cruise market globally, hosting approximately 11% of the globally deployed cruise vessel capacity. It is also divided into four different sub-markets: (i) Atlantic Europe; (ii) The UK and Ireland; (iii) Iceland, Norway, and Feroes; and (d) Baltic Sea.
The Asian market, in particular China, has experienced the most growth in recent years. Within the 2010s, the number of ships deployed in Asia grew, operating days expanded, and passenger capacity almost tripled, reaching in 2019 a double-digit share for the first time (10%). Increased capacity deployment, combined with the opening of sales offices by many cruise lines in China, Hong Kong, Korea, Singapore, and Taiwan, resulted in a growth of cruise activities from 1.3 million in 2012 to almost four million in 2019. Beyond China, the destinations with the most significant growth in total port calls were Japan, and Thailand with port calls also growing in Hong Kong, Taiwan, and the Philippines. The increase is mainly based on the number of Chinese cruise passengers, which surpasses all Asian markets combined. Asia is quickly progressed to a region that almost equals the Med in passenger capacity deployment.
The type of vessels deployed and the length of the offered hint at the peculiarities of the Asian cruise market. Large and mega-ships offering cruises in Asia are seasonally operated. Middle-size and small-size ships are most common, as short cruises dominate. The peculiarities result from the geographical features and the cultural differences of this market comparing to the ones that cruise developed in recent times. First, the very short, or short, distances between calling ports and destinations available in the Caribbean, the Mediterranean, and the rest of the European market are not present. To combine destinations of interest, or broader geographical parts distances are longer and a full day, or more, at sea might be an essential itinerary feature. Also, shorter vacations are most common, as people have limited vacation entitlement. Concerning the cultural dimension, cruises in Asia tend to offer different onboard amenities. For example, casinos and more extended luxury shopping are high in the agendas of people taking a cruise in the region. Still, they might not be prioritized by those opting for a cruise in other parts of the world.
Long-term, China remains a bullish market. However, this is not an unchallenged process. The expansion requires port infrastructure development, which is associated with several financial and non-financial tests. The former ones have been faced with success, as the state and private investors in several destinations in China (i.e., Shanghai), Hong-Kong, and not least the broader region (Singapore, Busan, etc.), have developed modern terminals serving the needs of cruise lines. Issues such as terminal locations and development choices have been subject to social and political controversies in the absence of relevant culture. In contrast, some of the newly built cruise terminals are remarkably big in size and capacity, raising concerns that they stand as prestige investments with rather limited potential utilization. Supply concerns, a lack of destinations to sail short cruises to, price wars, and geopolitical tensions, such as issues involving North Korea and Taiwan, are undermining growth potential. That said, Singapore, Taiwan, Malaysia, and the Philippines, are where more cruise capacity has found its way, counterbalancing any downtrends.
Other regions of the world continue to provide smaller yet important markets for cruise shipping. The overall changes in these smaller markets are in response to market capacity and geopolitical events. South America, meaning mainly Brazil, has been a smaller market, which is recovering from stagnation, yet hampered by poor infrastructure and high port costs. The Australian market is included in the most traditional market, given its presence in the earlier days of modern cruising. The willingness of Australians to cruise is not irrelevant to this presence. Australia hosts more than one million cruise passengers in a country with a total population of 24 million. This has already given Australia the highest market penetration in the world. Africa is slowly coming into the picture, with cruise lines exploring options in several parts of the continent and ports and destinations expressing an interest in developing effective strategies to accommodate cruise calls.
The cruise industry is also expanding to provide more options for passengers, particularly for niche markets commanding higher prices. The Caribbean and the Mediterranean remain competitive mass markets. Cruises are set up for the Antarctic, the Canadian Arctic, and the South Pacific. In some cases, destinations may have more impacts than itineraries, inciting cruise lines to offer longer shore stay options where the cruise ship can become a temporary hotel near central areas. This is particularly when a major event occurs, such as the Rio Carnival, the Monaco Grand Prix, or the British Open. Cruise ships can also be used for the evacuation of stranded people after natural disasters. For instance, in 2017, cruise ships were used after a major hurricane struck Puerto Rico to evacuate people from the island and nearby islands. For short trips of less than 24 hours, a cruise ship can carry two to five times its design capacity.
Cruise port regions have their own internal dynamics, such as for the Mediterranean. The volatility of the sub-market shares, particularly the West Med, the East Med, and the Adriatic, has characterized the growth of cruising in the region. Short-term volatility in traffic and shifting of shares generate concerns for the cruise lines. On the one hand, both these trends might be justified because cruise lines continuously renew their itineraries. On the other hand, these trends might happen because some of the ports might have reached the stage to adjust facilities and services offered to new types of vessels deployed before gaining more calls.
Beyond the presence of a port capable of hosting efficiently and effectively a cruise call, factors affecting deployment patterns include:
- The geographical distribution of passenger source markets.
- The need to match brands and ships to source market demographics.
- The links with airlift and landside transportation to/from the potential homeports.
- The opportunity to balance marquee destinations with lesser-known gems or develop new routes and generate itineraries for new markets.
- The potential for shore expedition revenues comparing to onboard spending.
- Fuel sourcing.
- Availability and cost considerations.
All these are examined by cruise lines in parallel with cruise time, speed and distance in order to decide where and how to deploy cruise ships.
6. Internationalization of Source Markets
With the cruise industry offering amenities that more people are interested in experiencing, a major expansion and internationalization of passenger source markets are in progress, adding to the growth potential of the industry. Its highest market penetration level is in North America, with about 3% of the population taking a cruise each year. This includes people who may take more than one cruise in a year. North America continues to be the primary source market in size as it continues to experience growth, with more than half of the total cruise passengers per year coming from this region. Growth has slowed in recent years, but the low cruise penetration levels in many local markets underline opportunities for expanding cruises in the region. Other markets are also emerging. Between 2000 and 2015, the number of European passengers doubled, providing incentives for cruise lines to build more itineraries throughout the region, and foremost in the Mediterranean Sea. Almost one out of four European cruisers live in the UK and Ireland.
Cruise lines are expanding their target population, attracting young adults and families with children. While it used to be a “65 years and above” type of market, in 2018, the average age of cruisers was 46.7 years. Just 13% was over 70 years old, and the above 65 years old group was standing at 32% of all cruisers that year. The demographic profile of the average cruiser has rapidly changed.
Countries with a maritime tradition tend to have a higher share of the population taking cruises. Penetration levels in Asia remain low (0.1 to 0.2%) as a cruise is generally not perceived as an accepted form of vacationing, but the situation changes rapidly. Since the mid-2010s, the passenger source markets for cruise tourism is experiencing another transformation. The absolute volume of cruise travelers sourced from Asia quadrupled to over three million passengers, corresponding to about 15% of the global passenger volume. China accounts for two-thirds of the regional passengers, with other leading source markets including Taiwan, Japan, and Singapore. India and Hong Kong are the other two markets with over 100,000 passengers per year. Demand for cruises outside conventional source markets grew remarkably, yet the aggregate of cruise passengers in these regions remained small.
7. Market Concentration and Multi-brand Strategies
The cruise industry has a very high level of ownership concentration since the four largest cruise shipping companies account for 83% of the market (Carnival Lines, Royal Caribbean, MSC Cruises, and Norwegian Cruise Line). High levels of horizontal integration are also observed since most cruise companies have acquired parent companies but kept their individual names for product differentiation. Carnival Corporation, with its ten different brands, controls 39% of the global cruise market. In comparison, Royal Caribbean Cruises accounts for 24% of the global market serviced under six different brands, such as Celebrity Cruises, which caters to higher-end customers. Azamara Club Cruises has smaller ships servicing more exotic destinations with shore stay options. The MSC-owned vessels represent an 8% market share, while Norwegian Cruise Line (NCL) Holdings is the owner of three different brands representing 9.4% of the market. Approximately 35 additional cruise lines are currently in operation. The entry of Virgin Cruises, which promised to offer an entirely new product, may further increase differentiation. A continuous consolidation is being observed, with the acquisition of Silversea by Royal Caribbean being the latest chapter of this trend.
The four largest players are active in every cruising area, aiming at capturing market shares. The top two corporations consolidate different brands seeking to cover a variety of market segments. Beyond different and potentially more effective corporate entities, this allows for differentiated services to be offered and the marketing of each brand as unique, attracting a larger share of the demand. At the same time, cruise lines act as pioneers. Carnival Corporation was the first cruise company ever to order a cruise ship built in China, dedicated to the Chinese market. Carnival was also the first company to deploy a cruise ship in Asia, aiming to exploit the potentials of the Asian market, especially the Chinese market. Like its cargo shipping counterparts, the cruise industry relies on the flag of convenience to gain financial advantages but mostly to secure more lax labor regulations since it is an industry relying extensively on labor. For instance, Carnival Cruises and Princess Cruises have all the ships registered in foreign countries (Panama, Bahamas, and Bermuda). Both Carnival and Royal Caribbean have endorsed a multi-brand strategy. Each of them operates a number of brands, each associated with a specific image, the type of vessels that it operates, and the amenities and types of cruise itineraries.
The four largest players are active in every cruising area, aiming at capturing market shares. The top two corporations consolidate different brands seeking to cover a variety of market segments. Beyond different and potentially more effective corporate entities, this allows for differentiated services to be offered and the marketing of each brand as unique, attracting a larger share of the demand. At the same time, cruise lines act as pioneers. Carnival Corporation was the first cruise company ever to order a cruise ship built in China, dedicated to the Chinese market. Carnival was also the first company to deploy a cruise ship in Asia, aiming to exploit the potentials of the Asian market, especially the Chinese market. Like its cargo shipping counterparts, the cruise industry relies on the flag of convenience to gain financial advantages but mostly to secure more lax labor regulations since it is an industry relying extensively on labor. For instance, Carnival Cruises and Princess Cruises have all the ships registered in foreign countries (Panama, Bahamas, and Bermuda). Both Carnival and Royal Caribbean have endorsed a multi-brand strategy. Each of them operates a number of brands, each associated with a specific image, the type of vessels it operates, and the amenities and types of cruise itineraries.
The largest cruise lines, which are also publicly traded (Carnival, Royal Caribbean, and NCL), have achieved solid earnings for many years. Carnival and Royal Caribbean have posted net earnings every single year since the companies went public in 1987 and 1993, respectively. NCL went public in 2008 and has posted net earnings since 2009. MSC, which is privately held, has released financial reports to its bondholders showing earnings in the range of publicly traded companies. Also publicly traded is the Asian-controlled Genting, which has also largely been profitable. The cruise line has three brands, Star Cruises, Dream Cruises that mainly operate in Asia-Pacific, and Crystal Cruises that operate in the luxury market. It has recently emerged as the fifth player with a significant share of the world cruise fleet (3,6% in 2020).
In the 2010s, the top-20 cruise brands, measured in terms of the total berth capacity, have continued to upgrade their fleets. The number of berths relates to the number of people who can sleep on board. Comparing the evolution of berth capacity since 2014 underlines that the largest cruise brands continue to expand faster than the smaller lines. Thus, the market concentration in the supply of cruises will endure and may increase during the forthcoming years.
Simultaneously, and despite the high levels of market concentration, new entrants are expected. The expected startups, including Virgin Voyages, Ritz Carlton, Scenic, Swan Hellenic, and Tradewind Voyages, target the premium, luxury, and expedition markets rather than the contemporary segment, with some of them (i.e. Virgin) advocating new cruise practices and packages. The search for new practices is also present in incumbents such as Royal Caribbean and Norwegian, who continue to add novel onboard amenities to expand the appeal of their cruises.
- Chapter 3.1 Terminals and Terminal Operators
- Chapter 3.6 Cruise Terminal Design and Equipment
- Chapter 8.1 Cruise Ports
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- UN World Tourism Organisation (UNWTO) (2020a). 100% of global destinations now have COVID-19 travel restrictions, UNWTO Reports. 28 April 2020.
- UNWTO (2020b). International tourist numbers could fall 60-80% in 2020, UNWTO Reports, 7 May 2020.