Can things get any worse for the cruise ship industry?

The cruise ship industry is squarely in one of its stormiest periods in its history, and it’s hard to tell if it can reach calmer waters anytime soon.  Over the past month, cruise line operators have faced an onslaught of debacles.  First, the tragic capsizing of Carnival’s Costa Concordia off the coast of Italy in January, then public uproar over the cruise company’s initial remedy of offering a 30 percent discount off a future cruise to select survivors rather than a full refund to all; escalating unrest in the Middle East forcing cruise operators to cancel stops, and a stomach flu virus affecting hundreds of passengers on three ships that docked in Florida and Louisiana in February.  Also in February, multiple lawsuits were filed against Carnival, the parent company of Costa Cruises, the Italian cruise line operating the ship.

The industry’s struggles are reflected in bookings data for Carnival and Royal Caribbean, which make up nearly 75 percent of industry revenue.  Both cruise lines reported double digit declines in bookings so far in 2012, which will impact occupancy for the rest of the year, since the bulk of bookings occur between January and March.  Carnival expects to lose between $155 and $175 million in 2012, but can mitigate its losses by offering steep discounts, particularly to new customers.  The market segment most impacted will be first-time cruise travelers, as opposed to seasoned cruisers, who are more familiar with ship safety.  First timers make up 10 percent of all passengers, according to Cruise Lines International Association.

The good news for cruise liners:  in a recent poll by CruiseCritic.com, more than two thirds of respondents said they are not concerned about taking a cruise again despite the Costa Concordia accident.  Cruise operators will be waiting for them with open arms.

Nikki Sein

Nikki’s research focuses on the financial services and construction sectors. She started out as a Data Analyst in 2006 at Hanley Wood Market Intelligence, gathering competitive benchmark data in the homebuilding industry. During this time, she authored several comprehensive reports on various housing markets across the nation. Nikki holds bachelor's degrees from the University of California at San Diego, and an MBA from the McCombs School of Business at the University of Texas at Austin.

Read more articles by Nikki Sein.

Comments

  1. Catherine Colbert Catherine Colbert says:

    There are risks with any type of travel. I agree, Nikki, that the world’s largest cruise company Carnival will take a hit. It’s inevitable. During the past few weeks, I’ve received emails from Royal Caribbean as a past customer assuring me that cruise travel is still safe. They’re being proactive.

  2. Thanks for sharing your perspective as a Royal Caribbean customer, Catherine. I checked out the sorts of deals cruise lines are offering, and they’re not as great as I would have thought. Maybe the convenience of cruising is keeping demand steady enough to warrant normal pricing.

  3. Catherine Colbert Catherine Colbert says:

    I think so…Consumers don’t have to spend big bucks on a cruise ship to have fun.

Leave a Comment