APRIL 2016, CRUISE TOURISM: A CHARACTERIZATION OF THE GROWTH CYCLE

INTRODUCTION

Who hasn’t dreamt of vacationing  in the Caribbean or the Mediterranean? Navigating gently on the waves of summer, tasting the salt air or discovering new cultures. Cruises will take us there. From the easy comfort of our cabin, we can explore the world.

The cruise industry is growing. For years the seas were accessible to few, but today, cruises have democratized the access to eater and nature.

The cruise industry cycle will last for several decades. According to the International Association of cruise lines (CLIA), a record number of passengers, 26 million  will take a cruise in 2016, a growth of 4% compared to the previous year, still above the GDP. According to a report released by ‘Business Research and Economic Advisers’, globally, the cruise industry generates expenses amounting  to 117 billion US$, employs 900,000 worldwide and attributes 38 billion US$ in wages.

DESCRIPTION OF THE GROWTH CYCLE

What are the main factors that explain the success of the cruise industry ? The sectorial cycle analysis provides the answer. Historical information, economic fluctuation, technological innovation, differentiated labour regulations and the opening of markets all play a rôle.

These factors affect the competitiveness of the industries. High costs of labour or other types of costs, will as an exemple, result in down cycle. Sometimes competitiveness is related to a new product, to productivity gains or a major  innovation. This will cause the rise of the cycle.

In the case of the cruise industry, the cycle is long, i.e. several decades. The analysis shows that there were four major phases since the post-war period. The first relates at the bottom of the cycle by the 1970s. The second phase, that took place between the years 1970-1980, relates to the definition of a new concept. The third, refers to the beginning of  a long period of growth. The fourth phase is related to specialization,  to the development of new segments and to the dissemination of the industry around the world.

GROWTH CYCLE OF THE CRUISE INDUSTRY

cycke of growth cruises

  1970               1980          1990            2000           2010          2020
Source: du Nouveau Monde Maritime, April 2016

1 – The first segment:-1970

The low cycle and the post-war

The 1920s and 1930s were the golden age of maritime industry. Cruises were mainly used to transport people, soldiers or migrants towards  different continents. Liners such as the Normandie (1935) and Queen Mary (1936)), were available but few could effort them.  Subsequently, major wars imposed a full stop on transoceanic crossings. Cruise liners were used to transport troops.

In the aftermath of the war, transatlantic maritime passenger traffic resumed but subsequently reached a low cycle because of  the rise of air transport: it is estimated that the number of passengers dropped from  a million, in 1956, to 132 000 in 1973. As it is often the case, the fluctuation of industrial cycles are related to major innovations. Thus,  multiplication  of destinations offered by  commercial aviation made it  unnecessary for the carriage of passengers over long distances (this very unfavourable situation for liner France commissioned in 1962).

2 – the second segment 1970-1980

 The new impetus

The second phase of the cycle (1970-1980) announced the beginning of a new momentum and a new era of growth in the industry. It is at this stage that the industry focused on redefining a new product. The outbreak of growth, as we know it today, was conceived in the United States for voyages to the Caribbean.
Major cruises redefined a concept of boating, focussing on leisure tourism rather than the transportation  of people. The ship is a floating island in which the main destination is the cruise ship itself. The concept of the ‘fun cruise’ provides entertainment, gastronomy, and recreational activities.
Large American cruise lines and commercial ships (Norwegian Caribbean Lines, Princess Cruise and Royal Caribbean Cruise Line) were built for this purpose. The domination of the North American market can be explained by the first organized cruises to the Caribbean.

The following chart explains this trend.  Cruises have become a market niche resulting from the convergence of three major industry segments which are;  transportation, recreation and travel. The intersection of these three segments defines the outline of the maritime transport of tourism, especially cruise tourism.

Structure and relations of the cruise tourism market

Cross markets-tourism
Source: Laws and al. (2004: 93), Theoros, Journal of research in tourism
3-the third segment: the rise of the cycle (1980-2000)

The cruise industry is becoming more democratic

From this new concept, the cruise industry is also democratized, according to  the model of the pyramid of Mr. Boyer. With the increased purchasing power of the middle class and affordable prices, cruises became more accessible. We are now in the growth part of the cycle.

This growth is also fed by high rates of satisfaction. The product becomes very competitive compared to traditional tourism. It is estimated that 62% of tourists are repeat passengers. They enjoy the quality of the services, activities on board, and visiting different sites. This ‘all inclusive’ formula is successful and 69% of the passengers believe that this type of holiday offers a better deal that trips ashore.

This democratization has also been accompanied by a modernization of the industry and is able respond to this new concept. Infrastructures have been adapted to this new tourism. Air links have become complementary and non-competitive to the cruise industry. The tourism industry on land is also adapting. Major hotel infrastructures have been built surrounding ports to accomodate passengers.
There is a trend towards Gigantism. The largest liners in the world have a capacity of 6 300 passengers. However, it is estimated that in the future attention will focus less on the size than on a design and unique amenities.

American dominance

Towards the end of the period of this cycle, the cruise industry remains dominated by the United States. From 2003 to 2013, the global number of cruise passengers increased by 77%, from 12 million to 21.3 million passengers. These were mostly (55%) of North America (11.8 million), including 10.9 million from  United States and 770 000 from  Canada. In addition to being the largest market, North America is also the point of embarkation with 4000 cruise departures in 2013. The Caribbean is still the most popular destination.

MAP SHOWING THE LEVEL OF DEVELOPMENT AND THE GROWTH OF THE WORLDWIDE CRUISE INDUSTRY (2011)

nod U.S. cruise market

Cruise tourism in the world, (2011) permanences and reconstruction studies Caribbean, https://etudescaribeennes.revues.org/5629

4 – the fourth segment: the current situation (+ 2000)
Growth fed by the spread of industry in other regions of the world

Despite American dominance, the potential for dissemination of the industry is worldwide. In the fourth segment of the cycle, different services disseminate around the world boosted by growth of economies and the purchasing power of the middle class. Cruise lines attract travellers over 1 000 new exotic stops, notably in the Asian market.
According to the information of the latest report on the State of industry in 2016, prepared by the CLIA, 34% of travel would be destined to the Caribbean, 19% in the Mediterranean, 9% in Asia, 6% in Australia and 4% in Alaska. Moreover, today, about 47% of cruise passengers are aged 25 to 39 years.
The rate of growth in cruises in the rest of the world is now more sustained than for the North American market (the last annual increases are 4.5% on the North American market compared to 10.4% for the rest of the world). The Mediterranean continues to grow as a destination, as well as other regions such as Asia and the Australia. By 2015, 52 vessels operate 1 065 Asian cruises for a capacity of 2.17 million passengers. Asia is expected to be the second largest market in the world by 2020.

Services that specialize

This growth is caracterized by the specialization of products and services in order to respond to new market segments.  These services meet demand for luxury goods, adventure, observation of nature and exotism.
According to CLIA, certain specific segments such as  luxury yachts or river cruises are growing at double digit in number of passengers. Thus, specialised cruises have increased by 21% per year between 2009 and 2014. The industry tends to also evolve in the form of themes such as gourmet, family, religious, gay, artistic, cruises for pensioners. Other shipping lines (Celebrity Cruises), try to stand out by offering the luxury and design. CLIA Member companies are using  to date 170 riverboats. 18 new boats were in construction for 2016, an increase of more than 10%.

STRATEGIC ELEMENTS AND PUBLIC POLICY

In the light of the information and the previous analysis of the different segments of the cruise industry growth cycle, several development opportunities arise.
Although the growth in the industry conceived in the United States for trips in the Caribbean, the industry offers more and more tours for  the fluvial and thematic tourism. These two types of segments offer  opportunities for short trips as well as long.

The intervention of the public authorities consisted, until now, in developing and improving port capacity in order to accomodate and take advantage of the economic impact of cruise ships. But the analysis of the trend of the last segment of the cycle shows that the diffusion of the industry throughout the world will encourage cruise lines to  develop new ports of embarkation for cruises international and to offer new more varied and targets. Air transport and maritime transport are complementary and offer a multitude of new destinations.
Although in North America, the east coast ports in the U.S. have been used to serve the American market, those of Montréal or Québec could also be used as ports of embarkation. In combination with air links, the ports would  serve the population of the eastern and western Canada and the American Midwest.

Louis Bellemare

Economist

New World Maritime

http://nm-maritime.com

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