COVID-19 Impressions on the Global Cruise Demand
Release date: 09-2020Author: Market Statsville
Market Statsville Group (MSG) estimates how the cruise industry managing the COVID-19 pandemic is?
Past pandemic, cruises were amongst the demanding sector of the overall global travel industry. Considering the past few years, the demand for widely influenced by 20.5%. In 2017, there are over 26.7 million individuals chosen cruise, followed by 28.5 million people in 2018, and an estimated 32 million folks in 20201. It was estimated that the global cruise industry is valued at around USD 150 billion in 2018.2
Considering statistics in the global cruise marketplace, there are more than 50 cruise lines and over 270 ships. However, it is witness that the market is controlled and lead by three leading players. These companies communally generate a revenue of USD 34.2 billion in 2018 and oversee an empire of subsidiary cruise lines.3
In response to COVID-19, many countries worldwide are chosen to shut their border activities, which leads thousands of passengers at sea, while vessels sought a port to dock. For instance, Canada expelled all ships' movement with almost 500 people from docking in their ports. The US, Australia, and New Zealand dismissed all vessels arriving from foreign ports and directed all alien flagged ships to leave the country amidst the pandemic.
As an impact of the virus, passengers were forced to quarantined on board for almost a month before being deported. There were numerous other instances. While nearly all of these cruise travelers are now disembarked, many crew passengers are still on vessels across the globe, either quarantining or crewing the ship until the industry resumes operations post-pandemic. Many cruise liners have and are making an effort to deport shipboard employees. Still, due to the strict regulations imposed by the Centers for Disease Control and Prevention (CDC), deportation is delayed to minimize the problematic effect of the virus.
The current COVID-19 virus has imposed a high degree of concern amongst the nominal public surrounding the maintenance of safety and health on board cruise ships and related vessels. Ships will now require to follow robust screening and monitoring protocols, complete sanitation practices with regular reviews, better medical staff, and improvise onboard medical facilities. Also, cruise liners are expected to operate more carefully with CLIA (Cruise Lines International Association) and public health authorities worldwide to enforce health requirements and their ground implementation of sanitization rules.
In the global cruise marketplace, there are primarily two main revenue streams for cruise ships/vessels: ticket sales, which account for 62% of total revenue, and onboard purchases, including art auctions, alcoholic drinks, spa treatments, shore excursions, and casino gambling, which make up the remaining 38%.5 In the first quarter of the year 2019, the largest three cruise organizations reported total revenue of USD 4.7 billion, USD 2.4 billion, and USD 1.4 billion with net income of USD 336 million, USD 257 million, and USD 118 million in the same quarter.6
There will high financial impact on the revenue stream for all cruise operators/fleet management companies in the wake of the COVID-19, which could make it difficult for many cruise liners to attract customers and result in closures of their business, post-COVID-19.
As of February 2020, the largest outbreak of COVID-19 outside mainland China was on a cruise ship industry, which has resulted in reputational destruction to the cruise industry and falling the revenue of operators. Besides, the cruise lines have also paid a considerable amount of money in reimbursements for cancellations, incurred costs related to docking ships at ports where vessels are isolated/quarantined. Most cruise ships worldwide are provisionally withdrawn from service, but using their engines to provide power to maintain air conditioning, propulsion, desalination, and onboard services. This will keep the vessels in operating condition, which further expected to add the upkeeping cost even when not ships are not in operation. These costs will increase the overall operational prices for the operators and thus rise in their losses.
Considering the global market, numerous small island countries heavily depend on cruise lines to grow the states' GDP and revenue. MSG evaluated that the cruise passengers are willing to spend more on various mainstream activities such as off-road/scenic tours and beach tours on many island countries. Moreover, these operators create an ecosystem for the food suppliers that makes food suppliers dependent on cruise operators to supply food such as seafood, meat, and vegetables. Therefore, the cruise industry's disbalance may directly impact the entire supply chain and those who widely rely on tourism for their livelihood.
To keep the future business unbroken, many cruise lines or cruise operators offer bonus credits (110-125% of the overall booking amount) instead of cash refunds as an option to passengers whose trips have been impacted by the pandemic flow. These credits can be directly used for the future bookings of the consumers with flexibility.
According to the UBS bank report 2020, almost 76% of the passengers whose cruises were canceled due to the virus and picked for a future trip credit instead of a full refund. Based on a recent survey from the CLIA association, over 82% of total cruisers are likely to register a cruise for their next vacation. Regardless of the COVID-19 virus's multiple outbursts and uncertainty over when sailing resumes, various reports and interviews are stated that there has been rapid growth in the booking for the year 2021 compared to 2019. Furthermore, this reveals how people are still aiming for their future travel on cruises, but it might be harder to attract first-time cruisers to create an awareness program in the market. As per the CruiseCritic.com polls, 75% of the 4,600 cruise travelers are attentive in cruising post-COVID-19 crisis.
Global countries are continually addressing the COVID-19 challenges and providing aid to the companies to survive in this pandemic and start operations for their foreseeable future. There is expected no direct timeline for retrieval of the global cruise industry and restart of the cruise operations across the globe. Moreover, fuel is the highest fixed cost for cruise lines and will be impacted by oil demand during this downturn. It is estimated that the cruise operators will gain customer support after the travel industry restrictions will be lifted. The companies will likely invest in advertising campaigns and reduce their service prices to compete and attract the average consumers' demand in the industry post-COVID-19. Cruise operators have already initiated the advertisement related to huge discounts on the packages for 2021 on their official websites. Additionally, the travel industry and cruise industry will commit to new and updated safety protocols that can intensely reduce the risk of spreading the COVID-19 virus in the global market.
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Number of ocean cruise passengers worldwide from 2009 to 2020 (in millions)
CLIA Releases 2020 State of the Cruise Industry Outlook Report