The luxury cruise market should be well positioned coming out of the pandemic based on pent-up demand from affluent consumers combined with the best space-to-guest ratios in the cruise industry, according to the 2022 Luxury Market Report by Cruise Industry News.
Add in a modern fleet, global deployment, a variety of brands and a differentiated product mix, the luxury market fleet is well poised for a quick recovery and bounce back.
Absorbing Capacity
The market has rocketed upwards in growth, with 51 ships sailing in 2019, to an expected 69 this year and 89 – and most likely more that have yet to be ordered – by 2027.
Helping absorb this capacity will be an affluent and aging American consumer, combined with emerging source markets in Europe, Asia and Australia.
The expedition players that offer a combined luxury/adventure experience have kept guests in the same brand, while offering new deployment options to regions such as Antarctica or the Arctic. Ponant has led the way, as has Silversea, with small-ship five-star luxury expedition programs.
Barriers to Entry
There will be no shortage of investment eyes and other hotel groups watching the start up of The Ritz-Carlton Yacht Collection carefully this year. Despite a multi-year delay for Ritz-Carlton, the fear of missing out may drive more hotel chains and investors into the business in hopes of keeping land-based guests that want to cruise in the brand, so to speak.
Potential new players will be met by shipyards looking for business and willing to cut appealing shipbuilding deals backed up by export financing agreements.
A rushed start up could take place in as little as three years, but still will require a new player to come up with tens of millions of dollars, an operating coming for sales and marketing, and much more.
A secondhand acquisition of ships is even less likely. Cruise lines will be careful to help any competitors get off the ground – hoping to hang onto hardware instead. The pandemic saw only a handful of moves as the Silver Origin took the place of the 100-guest Silver Galapagos and Genting sold the Crystal Esprit to Lindblad.
The Recovery
Where do we go from here? Pent up demand will fill luxury ships in a staggered restart that started in 2020, continued into 2021 and looks set to see all ships sailing sometime this spring.
The biggest challenges will come from a smaller world – with certain countries still closed there are less places to deploy ships – thus concentrating supply which could in-turn impact pricing. That should hopefully be a short and temporary problem as the world opens back up.
Crew recruitment and finding qualified and competent officers will continue to be a challenge for the cruise industry as a whole, as will finding new-to-cruise guests coming out of the pandemic.
