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Pain Points in the US Cruise Industry

The US Cruise industry has at least five major issues with which it is currently struggling. They include the challenge to their fleets of the newer ships, the demographics of their current customer base and the need to attract the next generation with technology, crime on cruise ships, the perception of being trapped onboard as contagious disease spreads among passengers and crew and finally, the huge negative environmental impact of cruise ships.

1. Challenge of Newer Ships

  • There are currently 314 cruise ships worldwide.
  • According to the site Cruisewatch “A total of 13 new ships with passenger capacity of 33,379 will be added in 2018. From 2018 to 2020, 37 more new cruise ships will come online adding 99,895 to worldwide passenger capacity. These ships from 2018 to 2020 alone will cumulatively add $11.7 billion in annual revenue to the ocean cruise industry by 2020.”
  • The trend of developing these new ships leaves the cruise ship industry with a challenge. With each new supership, the existing inventory seems a little less attractive. This leaves the industry with a marketing dilemma.
  • The struggle is how to attract new customers or keep loyal customers on the older ships. Also, of concern is deciding when to take a ship out of commission to renovate and how much space to remove from revenue generating rooms to make bigger more luxurious public spaces.

2. Attracting the Next Generation

  • According to the Cruise Lines International Association, in 2018, 51% of cruise passengers were over 50 years of age.
  • To this point, cruise lines have been “reluctant to invest too heavily in digital, making certain assumption about how digital fits into the physical experience of a cruise ship.”
  • In order to attract a younger audience and continue to build its base, cruise lines must able to attract digital nomads — i.e. travelers who are opting to work remotely while they travel. Free and robust Wi-Fi, along with appropriate work space is becoming a requirement among cruisers.
  • A listing of 11 cruise lines shows that the cruise industry is slow in moving to providing this service. Only 5 of the 11 offer free WiFi and only one of them is considered fast.

3. Crime on Cruise Ships

  • According to the DOT, sexual assault is the most common crime on cruise ships.
  • In 2018, cruise ships reported 120 alleged crimes, with 82 of them being sexual assault.
  • A search of crime on cruise ships showed 9 articles in the last 7 months on crime on cruise ships departing from the US. The Miami News, the Miami Herald, the NY Times, the Washington Post, Cruise Law News and Business Insider all published articles on the topic.
  • On July 25th, 2019 the federal Eleventh Circuit Court of Appeals reversed a decision by the lower court and found Royal Caribbean responsible for the gang rape of a 15-year-old minor.

4. Public Perception of Contagious Illnesses

  • In January 2019, ten articles were published concerning contagious gastrointestinal outbreaks on Cruise ships.
  • In January 11th, Royal Caribbean’s Oasis of the Seas returned home a day early with 592 passengers and staff afflicted with what the cruise line assumed was norovirus.
  • While there were only 10 outbreaks on a cruise line reported to the CDC in 2018, there is still a perception that cruise ships are incubators for serious contagious illnesses.
  • Cruise Ships are required to report outbreaks to the CDC if more than 3% of their passengers fall ill. That means there could have been more outbreaks that were not reported, especially if the outbreak started at the last port of call and the passengers were on their way home when they took ill.
  • The outbreak brought the issue of contagious illness on board ship back into the public consciousness.

5. Environmental impact

  • Recent articles in US, English, European, Australian and Brazilian newspapers, dozens of recent academic research articles and a press release from the UN on World Environment Day 2019 and news alerts from the EU’s Environment Policy division have all been extremely critical of the pollution caused by cruise ships.
  • The concern has become so widespread that it led to the creation of a website by Ross Klein, a Canadian academic, called Cruiseship Junkie. It is advertised as the resource for the other information about the industry.
  • A quick search of their link to their environmental tracking page showed hundreds of violations for which cruise ships have been fined. The latest was in June 2019 and the list goes back to 1992.
  • The latest entry about a fine stated the following “Carnival Corporation was fined $20 million for violating its probation for environmental offenses that led to a $30 million fine in 2017. The company logged 800 offenses of its conditions of probation in the first year — many of these (such as discharging plastics) is even worse than the original offenses leading to the $30 million fine. Looking at it from Carnival’s perspective, the $50 million total in fines is about 0.7% of their total profit on which they pay no corporate income tax. The fine is similar to a person earning $100,000 being fined $700. Kind of tickles your feet, rather than a slap on the wrist.”

Land-Based Vacation Market

Figures specific to the travel and cruise industries in the United States suggest that the land-based vacation market (i.e., non-boat travel or vacation market) in the country is growing at a compound annual growth rate (CAGR) of 4.62%. When it comes to trips they wish to take in the future, families in the country prefer land-based vacation trips such as theme park visits, beach vacations, and road trips over cruise trips. Hotels are the typical accommodation families avail of while on land-based vacation.

LAND-BASED VACATION TRIPS

  • The land-based vacation trips that families in the United States wish to take in the future are visits to theme parks, beach vacations, road trips, visits to cultural attractions or museums, city vacations, visits to national parks, camping trips, lakeside vacations, and hiking trips.
  • The percentage of families in the United States that wish to take these land-based vacation trips in the future is as follows: visits to theme parks (49%), beach vacations (52%), road trips (48%), visits to cultural attractions or museums (32%), city vacations (30%), visits to national parks (33%), and camping trips (33%).
  • In contrast, only 29% of families in the country wish to take cruise trips in the future with their children.
  • The land-based vacation trips that families in the United States wish to take for the first time are trips to all-inclusive resorts, wildlife or safari viewing trips, recreational vehicle (RV) trips, ski or snowboard trips, mission or volunteer trips, trips to dude ranches, and cycling trips.
  • Of families in the United States, only 17% have taken trips to all-inclusive resorts in the past, but 26% wish to take trips to all-inclusive resorts in the future. For the other land-based vacation trips, the percentages are as follows: wildlife or safari viewing trips (14% vs. 18%), RV trips (10% vs. 16%), ski or snowboard trips (9% vs. 15%), mission or volunteer trips (7% vs. 12%), trips to dude ranches (5% vs. 10%), and cycling trips (5% vs. 10%).

LAND-BASED TRAVEL SERVICES

  • Families in the United States have used a variety of land-based travel services. Among these services are hotel services, car rental services, airline services, and vacation rental services.
  • Eighty-three percent of families in the United States have “stayed in a hotel with children.”
  • Forty-eight percent of families in the United States have “rented a car on a family vacation.”
  • Forty-eight percent of families in the United States have “taken a flight with children.”
  • Forty-four percent of families in the United States have “stayed in a vacation rental with children.”
  • Families in the United States have gone to hotel websites (21%), theme park websites (15%), airline websites (13%), car rental websites (8%), home sharing websites (6%) to book travel services.
  • Families in the United States rate hotels, vacation rentals, and car rentals more favorably than airlines. As far as satisfying their needs are concerned, families give hotels, vacation rentals, and car rentals a grade of B. They give airlines a grade of B- only.

LAND-BASED VACATION ACCOMMODATIONS

  • The land-based accommodations that families in the United States often avail of are hotels, with 61% of families in the United States typically staying in hotels on family vacations.
  • Resorts are a far second, with only 22% of families in the country staying at resorts on family vacations.
  • Hotels and resorts are followed by motels (21%), vacation rentals such as Airbnb properties (16%), campsites (15%), bed and breakfast or small inns (9%), RVs or trailers (8%), timeshares (7%), and home exchanges (4%).

LAND-BASED TRAVEL LOYALTY PROGRAMS

  • In the United States, land-based travel loyalty programs are more popular among boomers than among millennials and Gen Xers.
  • Sixty-five percent of millennials, 70% of Gen Xers, and 79% of boomers are members of flight-related loyalty programs.
  • Sixty-three percent of millennials, 70% of Gen Xers, and 77% of boomers are members of accommodation-related loyalty programs.
  • Thirty-six percent of millennials, 36% of Gen Xers, and 44% of boomers are members of car rental-related loyalty programs.

LAND-BASED VACATION MARKET GROWTH

  • The land-based vacation market in the United States appears to be growing at a CAGR of 4.62%. This is because the travel industry in the country had grown from $556 billion in 2009 to $799 billion in 2017, while the cruise industry in the country had grown from $12 billion in 2009 to $18 billion in 2017 at a CAGR of 5.2%.
  • The hotel industry in the country had grown faster than other land-based travel sub-industries during the period 2009-2017. During said period, the hotel industry in the country had grown at a CAGR of 6.0%.
  • The airline, car rental, and restaurant industries in the country, on the other hand, had grown at CAGRs of 4.6%, 4.6%, and 4.4%, respectively.

RESEARCH STRATEGY

Providing insights about the land-based vacation market in the United States was tricky, as we could not locate any source that focuses on this market. Our strategy of searching for reports or articles directly covering this topic did not yield helpful results, as available sources only tackle either the entire vacation/travel industry or its component industries. As a workaround, we looked for credible reports or articles that cover the various travel or vacation modes (e.g., air travel, boat travel, and road travel). This change in tactic led us to the reports of NYU and Family Travel Association, Deloitte, and AARP. From these reports, we were able to gather reliable insights about the land-based vacation market (as opposed to the cruise vacation market).
The growth of the land-based vacation market as a whole does not appear to have been studied in the past. The closest information we were able to gather was Deloitte’s report on the country’s travel and hospitality industry. We referred to this report to triangulate how the land-based vacation market is growing, as this report provides the sizes and CAGRs of the United States’s travel industry and cruise industry. According to this report, the whole travel industry in the United States had grown from $556 billion in 2009 to $799 billion in 2017, while the cruise industry, which is a part of the country’s broader travel industry, had grown from $12 billion in 2009 to $18 billion in 2017. As can be seen in the following calculations, we estimated using these figures that the non-boat travel market in the country had grown from $544 billion in 2009 to $781 billion in 2017 and is growing at a CAGR of 4.62%.
2009: $556 billion – $12 billion = $544 billion 2017: $799 billion – $18 billion = $781 billionCAGR (2009-2017): (($781 billion/$544 billion)^(1/8))-1 = 4.62%

Vacation Decision-Making Process

The decision-making process that consumers follow when choosing between a cruise or land-based vacation is influenced by several aspects such as high-quality entertainment, easy planning, fun, reliability, high-quality entertainment, and hassle-free. Other factors involved in the decision-making process include excellent activities for children, a good vacation that suits the needs of the entire family, and a chance to visit numerous destinations.

Vacation Decision-Making Process

  • A report by the Florida-Caribbean Cruise Association indicates that loyalty to cruising is a key factor in the decision-making process among cruisers. The report further establishes that 92% of cruisers say that they will book a cruise for their next vacation.
  • Around 65% of cruisers rate cruises as the best type of vacation compared to land-based vacations, all-inclusive of tours, resorts, camping, or vacation house rentals.
  • Families prefer cruises as a vacation choice, especially families that have children under the age of eighteen. On the other hand, children are more involved in the decision process for cruises compared to land-based vacations.
  • A report published by the Florida-Caribbean Cruise Association indicates that people who prefer cruises are younger and more diverse compared to people who prefer land-based vacations. The report further showed that a broad range of priorities influences different cruisers decision-making processes.
  • Baby boomer’s vacation decision-making process is influenced by more trips, destinations, and ports, alongside sight seeing options and itineraries that cruise vacations offer compared to land-based vacations.
  • On the other hand, the programs for families and children that cruises offer compared to land-based vacations influence the traditionalists’ decision-making process for vacation choice.
  • The Millennial decision-making process for vacation is influenced by aspects such as onboard entertainment, cost and convenience.
  • According to data from Booking.com, around 55% of consumers looking to vacation are focused on finding a sustainable travel choice. Another 73% want to go somewhere eco-friendly or with green accommodations, and 70% will base their travel bookings based on whether something is eco-friendly or not.
  • The primary benefit of cruses vs. land-based vacation is the opportunity to do and see new things; vast majorities prefer cruising because it offers an opportunity to sample destinations even for later trips.
  • Around 68% of cruisers sampled identified destination of their respective vacation as one of the key factors that influence their decision-making on their vacation choice.
  • Gen Xers and Millennial decision-making process is also influenced by the pre-post cruises stays in port cities.
  • Although cruisers also take land-based vacations, an average adult cruiser has taken more than five cruises, an aspect that indicates consumers’ preference for cruise vacation over land-based vacation.
  • According to the Cruise Lines International Association (CLIA) 2019 Cruise Trends & Industry Outlook report, approximately 30 million passengers are expected to go on a cruise in 2019, a growth from 28.2 million in 2018 and 26.7 million in 2017.
  • Additionally, more than 80% of CLIA-Certified travel agents are expecting to see an increase in cruise sales in 2019, which coincides with the 18 new CLIA-member ocean ships that will debut in 2019, with the already-existing 272 ships on the sea.

Research Strategy

To establish the decision process that consumers follow when choosing between a cruise or land-based vacation, the research team consulted experts in the tourism industry through their respective websites. The research team defined land-based vacation as all-inclusive of tours, resorts, and camping or vacation house rentals. With the help of the experts in the tourism industry, the research team was able to establish that a broad range of priorities influences decision-making process and this depends on several aspects including the age of the consumers.

TDM

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