Comment: Cruise growth puts yields under pressure

Comment: Cruise growth puts yields under pressure
By admin


A little over 12 months ago, I wrote an opinion piece for Travel Today questioning the future growth of  cruising, suggesting the industry’s goal of one million Australian cruisers by 2020 would not be easy.

Under the headline: ‘Are the cruise boom years over?’, the piece argued that while growth will continue, it will plateau “quicker than expected” after a marked slowdown in 2012.

I was right on the money. It won’t be easy hitting that one million milestone. It will be an absolute stroll.

Yesterday, Cruise Lines International Association Australasia (CLIA) released its Source Market Report, the annual statistical analysis of the trends and size of the local market.

Far from further leveling of – as some commentators would have you believe – passenger numbers soared more than 20% to 833,000 while market penetration increased from 3% to 3.6%.

These figures make Australia the world leader in terms of annual growth and penetration, and make my prediction last year, well, let’s say a fraction wide of the mark and leave it at that.

One million passengers by 2020, a target regarded as highly ambitious when it was first set by Carnival Australia chief executive Ann Sherry, is now likely to be achieved by 2016, with suggestions that passenger numbers could rise to 1.5 million, and even as much as two million, by 2020.

Market penetration, meanwhile, could hit 30% by 2030, Sherry said, although that is surely a lofty and unachievable target.

But – isn’t there always a but ? – top line figures such as these, however good they are, do not necessarily translate into the one true measurement of success that matters to cruise line executives and shareholders; profitability.

There is no arguing that the continuing growth is nothing short of astounding, and if local and international cruise lines were losing their shirt in Australia they would not, you would think, continue to pile on capacity at the rate they have.

Demand is clearly being created, and the focus on cruising by travel agents, and the exposure given to cruising in the mainstream media, is putting the option of an ocean voyage in front of consumers.

Yet I wonder how much of that demand is being driven by price?

With so much existing capacity in the market, and with more arriving over the next two years, pressure will mount on matching that capacity with demand at a price that is sustainable. In short, yield pressure will grow as more cabins need filling.

International cruise lines in particular – Royal Caribbean, Holland America – will not hesitate to withdraw ships from Australia if they believe a better return on investment can be found by deploying their vessels elsewhere.

For the moment, the cruise industry is rightly basking in the success of the 2013 stats, and slapping itself on the back.

But a degree of caution may be needed over the next two or three years. Passenger growth is fantastic, and the industry should be congratulated, but it’s profitability that matters.

Email the Travel Weekly team at traveldesk@travelweekly.com.au

clia cruising

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