Spending in U.S. cruise sector tops $20 billion

By Tom Stieghorst
For the first time, the money spent in the U.S. cruise sector exceeded $20 billion last year, according to a CLIA study of the cruise industry’s economic impact.

That includes direct spending by passengers, crew and the cruise lines on items such as provisions, excursions, meals on shore and pre-and post-cruise hotel stays.

The $20.1 billion in direct spending mushrooms to a $44 billion economic impact when the effects of indirect spending and tertiary-level multipliers are factored in, the study says. In a separate study done for CLIA for the first time, researchers estimated the global cruise industry’s economic impact at $117 billion.

CLIA has commissioned an annual study of the cruise industry’s economic impact for at least a decade. This year’s 106-page report has in-depth data on spending, as well as state-by-state breakdowns for each economic category. As in the past, 10 states account for 80% of the economic activity in the cruise business, with Florida, California and Texas leading the way.

The number of passengers who traveled globally last year on North America-based lines rose 3.9%, to 17.6 million, CLIA said. The industry’s fleet, net of retirements, increased by 1 ship to 178 ships with a combined capacity of 338,505 lower berths,

An estimated 10.7 million U.S. residents took cruise vacations throughout the world, accounting for 61% of global passengers. Departures from U.S. ports totaled 9.96 million, a 1.3% decline, as more ships in the U.S. fleet operated outside U.S. waters, particularly in Asia, Australia and the Pacific islands.

Another significant finding in this year’s report is that employment generated by North American cruise lines has exceeded the level it reached before the 2008-09 economic downturn.

Jobs in the U.S. attributed to CLIA member lines (excluding river cruise lines) reached 363,393 last year, compared to 357,710 in 2008. The total plunged to 313,998 in 2009 and had only recovered to 356,393 by 2012.

When it comes to jobs directly held by cruise line employees, that total reached 147,898 last year, the study said. Cruise line employment peaked in 2007 at 158,376.

Lines ponder retirement plans for old ships

By Tom Stieghorst

*InsightHow and when to dispose of older ships is one question quietly being studied by the management teams of North American cruise lines.
There is a wide gap in revenue potential between the newest, most modern ships now being delivered and the industry’s oldest vessels, which in some cases date to the early 1990s.
Those ships are typically deployed on short cruise itineraries out of South Florida or southern California, where the guest expectations of the hardware aren’t that high but neither is the cost of the cruise.*TomStieghorst
A decade ago when ships were past their prime, they were sent overseas to sail for brands in the U.K. and southern Europe, but that strategy faltered after the 2008 economic downturn. Until very recently, demand for cruises in some European countries was moribund and new capacity wasn’t needed.

 

The recent decision to deploy Quantum of the Seas to Shanghai, China full time signals that Asia isn’t likely to be a region where older tonnage goes to find new life either.

 

Lines have tried to retrofit some of their newest features onto older ships during drydock. This has been partially successful, and marketing slogans such as Royal Caribbean International’s “Every Ship Is Our Best Ship” have helped to position those ships as improved, if not new.
But the pace of innovation, particularly at lines such as Royal Caribbean, has been gaining speed. And as fleets get bigger, it takes longer and longer to bring a new feature to every ship.
Charters are another solution for older ships. Norwegian Pearl has sailed the Caribbean for much of the winter on charter, Norwegian Cruise Line officials have said. So Norwegian didn’t have to push agents to sell Pearl against the more attractive Norwegian Breakaway or Getaway, which carry double-digit fare premiums to Norwegian’s older ships.

 

But Norwegian has more new builds in the pipeline. Where are its older ships going to go? And if they don’t exit the fleet, will the gap between fares on newer and older ships continue to widen?
Older tonnage can be a good solution for some cruise lines. Windstar Cruises has acquired three ships from Seabourn, a more luxurious line, and is adapting them to Windstar’s casually elegant style. The ships are close to 30 years old, their useful lifespan for accounting purposes. But they are still in pretty good shape.
Windstar guests sailing last week on the Star Pride, the first of the three ships to be converted, didn’t spend much time talking about the age of the ships.
My guess, though, is that the Windstar-Seabourn deal is more a one-off transaction than a model for other lines. It should be very interesting to see what other creative solutions cruise lines come up with for their older tonnage in the years to come.