For cruise operators, 2009 was a challenging year, although they fared better than most by keeping ships full, costs low, and finding new market niches. Ship and passenger numbers grew, albeit with operators forced to lower fares to attract cash-strapped consumers.

As Terry Dale, president and chief executive officer of the Cruise Lines Industry Association (CLIA) notes, cruise customers are starting to book earlier than ever, which should allow operators to hold firm on 2010 prices, while reaping the benefits of cost savings put in place last year. “2009 provided us with the shortest booking window ever,” he says. “A year ago, 39% of passengers were booking less than four months out.”

North America accounts for roughly three quarters of the global shipping industry. Here, the cruise industry more than held its own during the worst of the downturn. Indeed, 11% of travel agents polled by CLIA expect this year to be the best ever for the global cruise business, as cruising continues to rank number one on many counts, including perceived value for money.

A more representative 75% of respondents to CLIA’s annual agent survey expect cruise sales to increase this year, typically by 15%.The cruise industry can look forward to growth in the overseas markets, initially in Europe. The UK market in particular will see considerable developments in 2010. In October, Cunard Line will accept the 90,400t Queen Elizabeth into its fleet, while MSC Cruises will base the 60,000t MSC Opera in Southampton, the first time MSC Cruises has
operated in the UK.

The total number of cruise passengers is forecast to grow by 6.4% to 14.3 million people in 2010. However, growth in passengers coming from locations other than the US or Canada should be more than double what CLIA expects in North America, at 14.3% versus 7%. International passengers will form one third of the global cruise business, up from one quarter last year, and less than one tenth in 2000.

“In October, Cunard Line will accept the 90,400t Queen Elizabeth into its fleet, while MSC Cruises will base the 60,000t MSC Opera in Southampton, the first time MSC Cruises has operated in the UK.”

Dale believes a key factor in the likelihood of people taking a cruise is how close they live to a port to sail from. More than half of US residents are within driving distance of a cruise port and Europe is fast catching up. “Asia, South America and the emerging markets are taking a little longer to develop infrastructure such as ports and sales agents, but once everything is in place they will be huge,” he explains.

According to CLIA’s agent survey, the Mediterranean tops travel agents’ list of anticipated cruising ‘hot spots’ this year. This means that the Mediterranean leads areas of future interest to consumers, although the Caribbean, followed by Alaska, continues to dominate current bookings.

Another element favouring Europe is the newfound popularity of riverboats. For Dale, one of the most dramatic findings from the survey was that 34% of agents identified consumers as highly interested in river cruising.

“We have three riverboat members within the last year and a half: AMA [Waterways of Chatsworth, California], Uniworld [Boutique River Cruises of Los Angeles] and Avalon Waterways [of Littleton, Colorado],” he says. He also expects sea cruises to get a boost from river cruisers branching out. “It’ll be interesting to watch whether the audiences are separate or cross the line.”

Theme/affinity cruises are growing in popularity, while existing tendencies towards spa culture, multi-generational family trips, and younger customers will continue. “Some lines are getting more than 40% of their business from affinity groups,” he says. “Historically it was 20%.” Music, food, and wine-themed cruises are particularly popular, and there is a broad range on offer. “I was on a knitting cruise recently,” Dale says, “I felt really safe!”

Couples are the dominant demographic while baby boomers and repeat customers are the biggest growth segment, but Dale believes that the increasingly younger profile of cruise customers is not due simply to more children on board. The latest CLIA age research shows that the typical passenger in 2008 was 46, down from a median age of 49 in 2006.

Supply and location

“Maybe we’re not recession proof, but we’re certainly not in a recession,” says Richard Sasso, president and CEO of MSC Cruises, US, and chairman of CLIA’s marketing committee, forecasting that cruise operators will thrive this year because of the industry’s diversity and ability to reinvent itself. “There will be 26 new ships coming into service between 2010 and 2012, and they’re going to be full,” Sasso says. Indeed, occupancy has not been an issue although pricing is, with yields down 10% to 15%.

“The good news is that prices are creeping back up and people are booking further out,” he explains.

According to Sasso, 14 ships added at a cost of $4.7 billion in 2009 produced a net 2.8% in supply, accounting for others taken out of service. But the increase in supply created 3.3% more capacity, which is consistent with the trend that has seen the space allotted each passenger double, and features, such as balconies, which were once rarities, become semi-standard.

Sasso believes cruise operators have an advantage over others in the travel industry. “We can move our ships to where the markets are,” he says. Carnival Corporation is a case in point, having recently stated that it would continue focusing on Europe in 2010 with “four of six new ships” scheduled for its European brands. Carnival’s European revenue fell just 6% last year, versus a 13% drop in North America.

However, Carnival forecasted yield improvements in the second half of 2010, observing late last year that pricing was already running ahead of earlier lows.