Luxury Cruise Industry

Part
01
of three
Part
01

Luxury Cruise Line SWOT

The luxury cruise industry is projected to rapidly expand within the next decade. However, the industry as a whole is sensitive to bad publicity. Below, we will discuss our SWOT analysis of the luxury cruise industry in more detail.

Strengths

The luxury cruise industry is a rapidly expanding segment of the cruise industry. Between 2018 and 2027, the luxury cruise industry is expected to double in size from 544,900 guests in 2018 to about 1,095,286 guests in 2027. According to U.S. News, the top seven luxury cruise lines in terms of quality are Seabourn, Viking, Crystal, Azamara, Regent, Oceania, and Silverseas respectively. In terms of the market, Viking owns 26% of the market. While Viking owns about a fourth of the market, the market is considered healthy due to its expected growth. Both of these statistics are global data points as luxury cruise brands are international entities. Contrary to popular belief, cruises, both in terms of luxury cruises as well as mid-market cruises, is a market that is almost recession-proof. In 2012, cruises as a whole contributed $42 billion to the U.S. economy.

Weaknesses

The primary weakness of the luxury cruise market is its aging market. Luxury cruises skew older. While the market is expected to expand as noted above, the luxury cruise industry has to reach newer customers in terms of age as well as other demographic features. Luxury cruises need to expand to and cater to new countries.

Opportunities

Luxury cruises are expanding to new markets in Asia. Currently, the United States and Europe are the primary market for both luxury cruises and mid-market cruises. About 11.5 million customers were Americans according to 2016 data, the latest available. Chinese customers numbered at 2.1 million. American customers number about as much as the next nine highest countries combined.

Luxury cruises must attract younger and multigenerational customers. Attracting younger customers who desire luxury cruises will require a pivot. Sustainability is a desired quality for younger customers as well as some older customers. Some customers of luxury cruises desire "transformational" cruises that offer new experiences rather than simple relaxation.

Threats

The luxury cruise industry as well as the cruise industry as a whole is very sensitive to bad publicity. Crimes or accidents weigh heavily on the mind of consumers when they occur. Commissioning new ships or upgrading old ships is an extremely expensive procedure. One threat to the industry is if a potentially rocky economic era affects the market. Companies expect the industry to expand according to projections and thus have commissioned new ships. The rapid and high spending may not pay off if the market contracts which leaves these companies with expensive assets.
Part
02
of three
Part
02

Luxury Cruise Industry Market Size

In 2017, the estimated market size of the luxury cruise industry was $25.8 million. Some of the major players within this industry include Viking Ocean with a 35.7% market share, Silversea with 13% market share, MSC with a 9.2% market share, Crystal with 7.8% market share and Seaburn and Regent both with a 7.6% market share.

THE MARKET SIZE OF THE LUXURY CRUISE INDUSTRY AND THE MAJOR PLAYERS

In 2016, the market size of the luxury cruise industry was estimated at $24.7 million, increasing to $25.8 million in 2017. Over the last five years, demand for cruising has increased by 20.5% with the demand exceeding supply and the growth facilitated by sustained consumer interest in cruising. @1

According to the Cruise Industry News, there has also been an increase in the number of ships, increasing from 45 ships in 2018 to 84 ships in 2027, representing an increased capacity of 139%. Across the world, the US has the highest number of cruise ship passengers, at 11.9 million.

Some of the companies that offer this service include: Regent Seven Seas Cruises, Pullmantur Cruises, TUI Cruises, Norwegian Cruise Line, MSC Cruises (USA) Inc., Holland America Line, Cunard Line, Celebrity Cruises, Azamara Club Cruises, AIDA Cruises, Costa Cruise Lines, P&O Cruises, Oceania Cruises and Princess Cruises. The major players include:
  • Paul Gauguin-1%
Part
03
of three
Part
03

Luxury Cruise Industry Growth Factors

The luxury cruise industry in the United States is growing at 5.42% yearly. Of the 11.5 cruise passengers in the United States in 2017, we've estimated that about 2% of them are luxury cruise passengers as compared to 5% share globally. In 2017, about 234,000 Americans boarded the luxury cruise liners, and this figure is expected to reach 396,500 annual luxury cruisers by 2027. Luxury cruise lines headquartered in the United States are Crystal, Seabourn, Regent, Windstar, Ritz-Carlton, Paul Gauguin, and SeaDream. From recent records, there was an increased number of bookings made which led the cruise industry to create more ultra-luxury cruise ships. The affluent travelers are driving the growth due to their increased interest in spending their holidays and vacations on-board ultra-luxury cruise liners.

RESEARCH METHODOLOGY

To determine the growth rate and growth factors of the luxury cruise market in the United States, we thoroughly searched industry-related articles, research papers, reports, and publications. From our search, we were not able to obtain specific market research studies that directly address the growth rate of the luxury cruise market, specifically for the United States.

We, therefore, calculated the growth rate using available statistics. For this research, the growth rate provided was based on the analysis of the estimated number of luxury passengers in the country. We utilized a top-down analysis and methodology. For example, we first determine the global market figure and determine the US market share. We've explained below our detailed calculations, assumptions, and estimations.

THE UNITED STATES LUXURY CRUISE INDUSTRY GROWTH RATE

According to a report released by the Cruise Industry News in 2019, there are 13 cruise lines operating in the luxury segment globally. The report also noted that the global luxury cruise ship would grow 139% (about 9% annual growth rate) from 2017 to 2027. Of the 13 global luxury cruise lines, 7 of these are US-based. Globally, the luxury segment is expected to record 1.3 million passengers by 2027. From the report, we extracted the US-based companies' projected market shares and calculated their number of passengers.

US-based luxury cruise % share and number of passengers by 2027:

Crystal (7.8%) = 1.3 million * 7.8% = 101,400
Seabourn (7.6%) = 1.3 million * 7.6% = 98,800
Regent (7.6%) =1.3 million * 7.6% = 98,800
Windstar (3.2%) = 1.3 million * 3.2% = 41,600
Ritz-Carlton (2.7%) = 1.3 million * 2.7% = 35,100
Paul Gauguin (1%) = 1.3 million * 1% = 13,000
SeaDream (0.6%) = 1.3 million * 0.6% = 7,800

Total of the above = 396,500

To determine the current or recent number of luxury passengers of the above luxury cruise lines, we compared the 2017 statistics provided by Cruise Market Watch. In 2017, the overall cruise market recorded 26 million passengers. We multiplied the percentage share of the above luxury cruise lines to get the total luxury passengers in the United States.
US-based luxury cruise % share and number of passengers in 2017:

Crystal (0.2%) = 26 million * 0.2% = 52,000
Seabourn (0.2%) = 26 million * 0.2% = 52,000
Regent (0.3%) = 26 million * 0.3% = 78,000
Windstar (0.2%) = 26 million * 0.2% = 52,000
Ritz-Carlton = No record as it will only begin sailing by 2020.
Paul Gauguin (0.0%) = 0 (very small number)
SeaDream(0.0%) = 0 (very small number)

Total of the above = 234,000

We calculated the annual growth rate by using the CAGR formula:

Annual growth rate, CAGR = ((2027 value/2017value)^(1/10 years) -1 ) * 100
= ((396,500/234,000)^(1/10 years)-1) * 100
= 5.42%

GROWTH DRIVERS



  • Other factors driving the growth include the increased interest on "pristine, unfrequented, and unique destinations" which is offered by these ultra-luxe cruise liners. From a report, the top factors and motivations for choosing luxury travels are: 1) exploring new destinations, 2) crossing off bucket-list items, 3) seeking authentic experiences, 4) rest and relaxation, and 5) personal enrichment.
Sources
Sources

From Part 02
Quotes
  • "Another record was broken in 2017, with 25.8 million global ocean cruise passengers—a 4.5 percent increase over 2016’s previous high of 24.7 million. Coupled with an annual occupancy percentage again exceeding 100 percent, this passenger growth shows sustained consumer interest in cruising and an industry where demand continues to outpace supply. In fact, the demand for cruising has increased by 20.5 percent in the last five years. To support this demand, FCCA and CLIA member cruise lines lines added nearly 22,000 lower berths through six new ocean-going vessels in 2017, while continuing to grow demand through innovative, exciting features and a more personalized guest experience complete with wearable, customizable onboard technologies, as well as media initiatives including even TV shows and movies to display what cruising offers."
Quotes
  • "With new ship orders coming in, the luxury cruise market is set for a boom – going from 45 ships in 2018 to 84 by 2027, and representing a capacity increase of 139 percent, according to Cruise Industry News estimates. Berths in the luxury market will more than double, with over 40,000 in service by 2027, and led by Viking Ocean, which will have an estimated 35.7 percent market share and capacity for just under half a million guests."
Quotes
  • "2019 PASSENGER CAPACITY SNAPSHOT: 2019 = 30 Million Passengers Expected to Cruise "
Quotes
  • "The 2018 total worldwide ocean cruise industry is estimated at $45.6 billion (a 4.6% increase over 2017) with 26.0 million annualized passengers carried (a 3.3% increase over 2017). Brand diversification of all operations is summarized below. "
From Part 03
Quotes
  • "In 2017, the Ritz-Carlton Hotel revealed plans for a luxury cruise line, with three cruise ships set to begin sailing in 2020. As of August 2018, reservations were finally open for its inaugural season."
Quotes
  • "The major drivers in the market are both seasoned cruise passengers and affluent travellers who are yet to experience an ultra-luxury cruise, however, still expect to receive the very best service. This recent increase in bookings has led to a surge in the number of ultra-luxury cruise ships being created."
  • "Virtuoso’s 2018 Luxe Report found that seeking authentic experiences is the third highest travel motivation for luxury travellers.3 Supporting this trend, Chris Austin, SVP of Global Marketing & Sales for ultra-luxury cruise line, Seabourn, told ILTM that “today’s affluent consumer is placing an even greater emphasis on seeking truly authentic, memorable experiences whereas in years past they would spend more on luxury goods. They are seeking new, bolder places to discover that are perceived for only a few to access. They are travellers – not tourists.”"
  • "Cruise travel is booming with luxury travellers increasingly choosing to spend their holiday on-board ultra-luxury cruise liners."