Cruise Market

Market Assessment 2008

Publication Date	April 2008
Publisher	Key Note
Product Type	Report
Pages	240
ISBN Number	not applicable
Product Code	KEY00013

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Summary

Two corporations dominate the cruise business: Carnival Corporation and Royal Caribbean. The third most significant line internationally, Star Cruises, includes NCL Holdings, in which the private-equity firm Apollo Management bought a 50% stake in 2007. The ten largest cruise brands represent the three dominating companies - Carnival, Royal Caribbean and Star - as well as the fast-growing privately owned Mediterranean Shipping Company, and Louis Public Company. The US is the largest national market for cruise holidays, followed by the UK.

The popularity of cruises does not vary widely between socio-economic groups, except for a much lower level among social grade E (who are likely to be the least affluent group). The flattish socio-economic profile indicates that lines have suitable products for most levels of income.

With regard to age, cruise-taking has a significant peak between ages 55 and 64. Over the years from 2008 to 2013, the numbers in the prime age group for cruising are not expected to expand. However, there is an opportunity for cruise operators that attract customers aged 65 and over, because the numbers aged 65 to 79 are expected to increase by 13.1% between 2008 and 2013. The holiday industry in general, and cruise operators in particular, are likely to have to make policy adjustments to benefit from the ageing population profile. The adventure and eco cruise market, popular at the younger end of the 50 to 79 spectrum, should benefit from a rising number of customers until approximately 2020, but a tailing off is likely after that.

Cruise ships are becoming huge. Cruise lines want passengers to spend their money on the liners, rather than on shore - and on the new generations of massive ships, opportunities for shore visits will be restricted because few ports can accommodate them. Cruise lines, such as Royal Caribbean, that have faith in a strategy of gigantism risk commodifying the cruise experience. A 220,000-tonner with 5,400 passengers may cut the operating cost per passenger, but is too large for most ports, and arguably too sizeable to provide a personal experience, or to offer either a tranquil or an adventurous holiday.

Most cruise liners fly a 'flag of convenience', to reduce regulations and lower their operating costs. Pollution from large cruise ships is an increasing problem, however, and their emissions are believed to contribute to climate change.

Cruise liners are of crucial importance to the future of a handful of shipyards in Europe, and to the economies of the regions in which the yards are located. In 2007, the long-term future of European yards building cruise liners began to look less secure, as Korean yards sought to compete for future business.

2 ? Key Note Ltd 2008 Executive Summary Cruise Market There is a trend away from commodified package holidays, but associating a cruise brand with this trend towards independence, while still creating a high and consistent revenue stream, is challenging. The anti-package trend favours freighters and mail lines, which are adding and improving cabins to attract independent holidaymakers.

There is growth in cruises lasting a week or less, especially in the US, but also a trend towards longer cruises in the expanding markets of the UK and continental Europe. The budget and ultra-premium cruise segments should prove more dynamic than the mega-ship mass market, although all segments are expanding. Nevertheless, the scale of cruise-liner orders for delivery between 2008 and 2012, adding around 33% to ocean-cruising capacity, may be too great for even a strong market. In the early 2000s, when the world's cruise lines began to order the new generation of ships, their research suggested that lack of capacity was holding back demand. Unfortunately, by the time many of these new superliners come into service, consumers' disposable incomes are likely to be under increasing pressure. The scale of discounting in 2007 and 2008 was already a worry for the industry.

A slide in global economic confidence began in 2007 with defaults on sub-prime mortgages in the US, but there are other dangerous factors, including the declining availability of easily extracted, light, fossil-fuel oil, and the substitution of fossil energy with energy from biomass, pushing food prices upwards. The increasing financial pressures on many households since 2004 are reflected in the fact that almost half a million homebuyers in the UK missed at least one monthly mortgage repayment in the second half of 2007.

Content

Executive Summary
1. Introduction
- THE TOPIC
- OBJECTIVES
- METHODOLOGY
- Company Information
- Original Research
- Problems in the Research Process
- DEFINITION
2. Strategic Overview
- MARKET DYNAMICS AND SEGMENTATION
- Market Issues
- Scale, Discounts and Onboard Spending
- Environmental Issues
- Economic Issues
- Market Status
- Passengers
  - Table 1: Estimated Number of Cruise-Holiday Passenger Bookings Worldwide by Region (million and %), 2003-2007
- Ships
  - Table 2: Cruise Ships Due for Delivery in 2008 (Ranked by Cost Per Berth) - Gross Tonnage, Number of Lower Berths, Price Agreed and Cost per Berth
- (tonnage, number, $m and $)
- Soaring Construction Costs
- National Origins
- Market Values
- DISTRIBUTION
- COMPETITIVE STRUCTURE
- Leading Companies
  - Table 3: The World's Ten Largest Cruise Lines by Approximate Number of Berths, June 2005 and January 2008
- ADVERTISING
- THE CONSUMER
- Contents Cruise Market
- Key Note Ltd 2008
- MARKET FORECASTS
- KEY POINTS
3. Demographics and the UK's Cruise Business
- SOCIO-ECONOMIC FACTORS
  - Table 4: The UK Government's Former and Current Occupational Classifications Matched to Socio-Economic Grades
  - Table 5: Socio-Economic Classification of Adults in the UK (million and %), 2008
- POTENTIAL AND PROBLEMS
  - Table 6: Projected Number of UK Adults Aged 55 or Over (000), Mid-Years 2008-2013
  - Figure 1: Projected Number of UK Adults Aged 55 or Over (000), Mid-Years 2008-2013
  - Table 7: Projected Total UK Population by Age Band (000), Mid-Years 2008,
- 2018 and 2028
  - Figure 2: Projected Total UK Population by Age Band (000), Mid-Years 2008, 2018 and 2028
  - KEY POINTS
4. Economics, Incomes and UK Demand
- INTRODUCTION
- HOUSEHOLD INCOME
  - Table 8: Gross Household Income Deciles in the UK (), 2004/2005 and 2005/2006
  - Figure 3: Gross Household Income Deciles in the UK ( per week - mid-point of each decile), 2004/2005 and 2005/2006
- CONSUMER PRICE INDEX
- 'APRES MOI, LA DELUGE'
- CONSTRAINTS ON MOST INCOMES
  - Table 9: Gross and Disposable Weekly Household Income in the UK by Age of Household Reference Person (), 2002/2003, 2003/2004, 2004/2005 and 2005/2006
  - Figure 4: Disposable Weekly Household Income in the UK by Age of Household Reference Person (), 2002/2003, 2003/2004, 2004/2005 and 2005/2006
  - Table 10: Number of Taxpayers in the UK by Sex and Range of Total Income Before Tax (000 and ), 2005/2006
  - Figure 5: Number of Taxpayers in the UK by Sex and Range of Total Income Before Tax (000 and ), 2005/2006
  - Table 11: Net Wealth of the Household Sector in the UK (bn at 2005 prices), 1991 and 2001-2005
  - Table 12: Households in the UK by Amount of Savings and Total Weekly Household Income (% of households in each band), 2003/2004
  - Table 13: UK Households by Income Decile - Total Average Weekly Expenditure Compared With Lower Boundary of Weekly Income Range (), 2005/2006
  - Table 14: Composition of Household Income in the UK (% and bn at constant 2005 prices), 1987, 1991, 1996, 2001, 2004 and 2005
- Cruise Market Contents
- Key Note Ltd 2008
- HOLIDAY SPENDING
  - Table 15: Average Weekly Spending on Package Holidays per Household in the UK by Income Decile - UK and Foreign Holidays (), 2003/2004 and 2005/2006
  - Table 16: Average Weekly Spending on Package Holidays per Household in the UK by Age Band - UK and Foreign Holidays (), 2003/2004 and 2005/2006
  - Table 17: Average Weekly Spending on Package Holidays per Household in the UK by Region of Residence - UK and Foreign Holidays (), 2003/2004 and 2005/2006
- KEY POINTS
5. Cruising and the Environment
- THE LURE OF 'FLAGS OF CONVENIENCE'
- ENVIRONMENT RISES UP THE AGENDA
- PEAK OIL PRICES AND CLIMATE ISSUES
- EFFORTS TO BE CLEAN
- OUTBREAKS OF ILLNESS
- KEY POINTS
6. Promotion in the UK
- INTRODUCTION
- CARNIVAL STILL LEADS ADVERTISING
  - Table 18: Leading Advertisers of Cruise Holidays to UK Customers - Main Media Advertising Expenditure (000), Year Ending June 2005
  - Table 19: Leading Advertisers of Cruise Holidays to UK Customers - Main Media Advertising Expenditure (000), Year Ending September 2007
  - Table 20: Leading Advertisers of Cruise Holidays to UK Customers - Main Media Advertising Expenditure (000), Year Ending December 2007
- KEY POINTS
7. An International Perspective
- THE US: THE CRUISE LEADER
- AGEING EUROPE GOOD FOR CRUISING
  - Table 21: Direct Economic Impact of the Cruise Industry in France (number of jobs and €m), 2005
- ASIAN HOPES
- KEY POINTS
8. PEST Analysis - the UK
- POLITICAL FACTORS
- Premium Market Safe With Labour and Conservatives
- ECONOMIC FACTORS
- Fuel Issues
- Contents Cruise Market
- Key Note Ltd 2008
- Cruise Ships Drink Oil
- SOCIAL FACTORS
- Tired Families
- TECHNOLOGICAL FACTORS
- Going Green
- KEY POINTS
9. Consumer Dynamics
- OVERVIEW
  - Table 22: Summary of Responses Regarding Holiday Spending and Cruises (% of respondents), January 2008
- QUESTIONS OVER HOLIDAY SPENDING IN 2008 - SLOWDOWN SEEMS LIKELY Majority Do Not Intend to Spend More on Holidays in 2008
  - Table 23: Those Not Intending to Spend More on Holidays During the Coming Year (% of respondents), January 2008
- A Quarter Plan to Cut Holiday Spending in 2008
  - Table 24: Those Intending to Spend Less on Holidays in the Next Year (% of respondents), January 2008
- Cruise Companies Have to Attract More Big Spenders
  - Table 25: Those Intending to Spend More on Holidays During the Coming Year (% of respondents), January 2008
- TRENDS IN CRUISE TAKING
- Proportion of Cruisers Doubles in Less Than 3 Years
  - Table 26: Those Who Had Taken at Least One Cruise in the Past Year (% of respondents), January 2008
- Big Draw for the 55 to 64 Age Band
  - Table 27: Those Who Had Ta0ken at Least One Cruise During the Past 5 Years (% of respondents), January 2008
- More Cruisers, If Not Higher Spending
  - Table 28: Those Intending to Take at Least One Cruise in the Next Year (% of respondents), January 2008
  - Figure 6: Those Who Had Taken at Least One Cruise in the Past Year and
- Those Intending to Take at Least One Cruise in the Next Year (% of respondents), January 2008
- Success in Impressing Younger Cruisers
  - Table 29: Those Agreeing That Cruise Ships Are 'Floating Hotels' with Interesting Activities on Offer (% of respondents), January 2008
- Young Holidaymakers Seek New Friends
  - Table 30: Those Agreeing That Cruise Holidays Are Good For Meeting New Friends(% of respondents), January 2008
- Two-Thirds of Passengers Value Cruises For Sightseeing
  - Table 31: Those Agreeing That Cruise Holidays Are Good For Sightseeing (% of respondents), January 2008
- Cruises Better For Relaxing Than For Sightseeing
  - Table 32: Those Agreeing That Cruise Holidays Are Good For Relaxing (% of respondents), January 2008
- Cruise Market Contents
- Key Note Ltd 2008
- Reluctance to Cruise With Children
  - Table 33: Those Agreeing That Cruise Holidays Are Suitable For Families With Children Under 12 (% of respondents), January 2008
- Consumers Seem Content With the Level of Excitement Offered by Cruises
  - Table 34: Those Agreeing That Cruise Holidays Lack Excitement (% of respondents), January 2008
- Size Will Matter
  - Table 35: Those Agreeing That Modern Cruise Ships Are Too Large to Visit Many Interesting Ports of Call (% of respondents), January 2008
- Uncertainty About the Level of Environmental Damage Caused by Cruise Ships
  - Table 36: Those Agreeing That Cruise Ships Do Less Environmental Damage Than Aircraft (% of respondents), January 2008
- Growing Need to Unwrap Packages
  - Table 37: Those Agreeing That They Enjoy Package Holidays (% of respondents), January 2008
- Doubts Over Value For Money
  - Table 38: Those Agreeing That Cruise Holidays Offer Good Value For Money (% of respondents), January 2008
- KEY POINTS
10. Company Profiles
- CRUISE COMPANIES: THREE GLOBAL LEADERS
- Carnival Corporation
- Corporate Strategy
- Carnival Cruise Lines
- AIDA
- Costa Cruises
- Cunard Line
- Holland America Line
- IberoCruceros
- P&O Cruises
- Princess Cruises
- The Yachts of Seabourn
- Advertising and Distribution
- Profitability
- Future Company Developments
- Royal Caribbean Cruises
- Corporate Strategy
- Advertising and Distribution
- Profitability
- Future Company Developments
- Star Cruises
- Corporate Strategy
- Advertising and Distribution
- Profitability
- Future Company Developments
- Contents Cruise Market
- Key Note Ltd 2008
- CRUISE COMPANIES: SMALLER LINES AND NICHE LINES
- All Leisure Group
- Corporate Strategy
- Advertising and Distribution
- Profitability
  - Table 39: Financial Results for All Leisure Group PLC (000, number, %, ratio and ), Years Ending 31st October 2005-2007
- Future Company Developments
- Ambassadors International
- Corporate Strategy
- Advertising and Distribution
- Profitability
- Future Company Developments
- Apollo Management
- Corporate Strategy
- Advertising and Distribution
- Profitability
- Future Company Developments
- Crystal Cruises
- Corporate Strategy
- Advertising and Distribution
- Profitability
- Future Company Developments
- Peter Deilmann
- Corporate Strategy
- Advertising and Distribution
- Profitability
  - Table 40: Financial Results for Peter Deilmann River & Ocean Cruises Ltd (000, number, %, ratio and ), Years Ending 31st December 2004-2006
- Future Company Developments
- Disney Cruise Line
- Corporate Strategy
- Advertising and Distribution
- Profitability
- Future Company Developments
- easyCruise
- Corporate Strategy
- Advertising and Distribution
- Profitability
- Future Company Developments
- Hebridean Cruises
- Corporate Strategy
- Advertising and Distribution
- Profitability
  - Table 41: Financial Results for Hebridean Cruises PLC (000, number, %, ratio and ), Years Ending 30th November 2004-2006
- Cruise Market Contents
- Key Note Ltd 2008
- Future Company Developments
- Louis Cruise Lines
- Corporate Strategy
- Advertising and Distribution
- Profitability
- Future Company Developments
- MSC Cruises
- Corporate Strategy
- Advertising and Distribution
- Profitability
- Future Company Developments
- Fred. Olsen
- Corporate Strategy
- Advertising and Distribution
- Profitability
- Future Company Developments
- Regent Seven Seas Cruises
- Corporate Strategy
- Advertising and Distribution
- Profitability
  - Table 42: Financial Results for Regent Seven Seas Cruises UK Ltd (000, number, %, ratio and ), Years Ending 31st December 2004-2006
- Future Company Developments
- Silversea Cruises
- Corporate Strategy
- Advertising and Distribution
- Profitability
  - Table 43: Financial Results for Silversea Cruises (Europe) Ltd (000, number, %, ratio and ), Years Ending 31st December 2004-2006
- Future Company Developments
- TUI Travel
- Corporate Strategy
- Advertising and Distribution
- Profitability
  - Table 44: Financial Results for TUI UK Ltd (000, number, %, ratio and ), Years Ending 31st December 2004-2006
- Future Developments
- TRAVEL AGENCIES AND HOLIDAY COMPANIES
- Barrhead Travel Service
- Corporate Strategy
- Advertising and Distribution
- Profitability
  - Table 45: Financial Results for Barrhead Travel Service Ltd (000, number, %, ratio and ), Years Ending 31st December 2004-2006
- Future Company Developments
- RE Bath Travel Service
- Corporate Strategy
- Contents Cruise Market
- Key Note Ltd 2008
- Advertising and Distribution
- Profitability
  - Table 46: Financial Results for RE Bath Travel Service Ltd (000, number, %, ratio and ), Years Ending 31st October 2004-2006
- Future Company Developments
- The Cruise Line
- Corporate Strategy
- Advertising and Distribution
- Profitability
  - Table 47: Financial Results for The Cruise Line Ltd (000, number, %, ratio and ), Years Ending 31st October 2004-2006
- Future Company Developments
- Noble Caledonia
- Corporate Strategy
- Advertising and Distribution
- Profitability
  - Table 48: Financial Results for Noble Caledonia Ltd (000, number, %, ratio and ), Years Ending 31st March 2005-2007
- Future Company Developments
- Thomas Cook
- Corporate Strategy
- Advertising and Distribution
- Profitability
  - Table 49: Financial Results for Thomas Cook UK Ltd (000, number, %, ratio and ), Years Ending 31st October 2004-2006
- Future Company Developments
- Totally Travel
- Corporate Strategy
- Advertising and Distribution
- Profitability
  - Table 50: Financial Results for Totally Travel Ltd (000, number, %, ratio and ), 57 Weeks Ending 31st October 2006
- Future Company Developments
KEY POINTS
11. The Future
- BUILDING SHIPS
- Aker Yards, Norway
- Fincantieri, Italy
- Meyer Werft, Germany
- OVERCAPACITY
- IDENTITIES AND TRENDS
- CAUTION
- Cruise Market Contents
- Key Note Ltd 2008
- AROUND THE WORLD
  - Table 51: Forecast Number of Cruise-Holiday Passenger Bookings Worldwide by Region (million and %), 2008-2013
KEY POINTS
12. Glossary
13. Further Sources
- Associations
- Publications
- General Sources
- Government Publications
- Cruise Companies
- Holiday Companies and Travel Agents
- Other Sources
- Bisnode Sources
- Key Note Research
- The Key Note Range of Reports