Cruise line industry market analysis: Carnival and Royal Caribbean

Cruise Stats

Market Analysis: Cruise Line Industry

The cruise line industry has remained quite strong in many sectors despite the global recession and the diminished level of luxury spending that has resulted form this global economic downturn. Cruises remain popular with tourists and vacationers as they provide accommodation, entertainment, and travel destinations all in single packages, simplifying and easing a full vacation package. In order to understand the potential opportunities as well as the risk that are inherent in this industry, however, a more detailed and comprehensive view of the current cruise line market is necessary. This report examines the capacity and revenues of the cruise line industry through an examination of two of the largest cruise line carriers, Carnival and Royal Caribbean, and also examines figures calculated by the Florida Caribbean Cruise Association as a means of gauging industry-wide trends.

Carnival

The world's largest cruise operators, with many well-known lines and brands encompassed by this corporation's holdings, Carnival operates just over under 100 ships and carried over nine million passengers in that past year (Carnival 2010). The average revenue earned for each of these passengers was approximately $1,582, which translated to a net income for the company of just under two billion dollars (Carnival 2010). The total passenger capacity for Carnival's 98 ships at any given time, assuming two passengers per cabin, is 191,464; this means the company has quite successfully monetized its resources (Carnival 2010).

Industry Overview

According to the Florida Caribbean Cruise Association, an estimated fifteen million passengers took cruises in 2010, which is a record-breaking figure (FCCA 2011). Over forty-percent of all cruise passengers booked itineraries that included Caribbean destinations, making it far and away the most popular region for cruises and cruise destinations (FCCA 2011). The FCCA also notes that increasing numbers of ships will likely increase cruise takers dramatically (FCCA 2011).

The numbers projected by the Florida Caribbean Cruise Association is fairly well in keeping with numbers projected by both Carnival and Royal Caribbean. Royal Caribbean actually estimates that more than eighteen million passengers were carried on cruise lines during 2010, though its estimate for the number of additional passengers that will (or can) be carried due to the addition of several ships is more directly in line with the FCCA's numbers; Carnival does not publish the same direct figures, but by both it and Royal Caribbean's estimates this company carried half or significantly more than half of all cruise passengers the world over in 2010 (Royal Caribbean 2010; Carnival 2010). Revenues for both major companies and most industry players increased significantly in 2010 compared to 2009, with per-passenger revenue as well as pure passenger numbers increasing significantly (FCCA 2011; Carnival 2010; Royal Caribbean 2010). This trend seems to be resuming where it left off in 2008 at the start of the global financial crisis, as both companies examined have posted record revenues that are in line with increases that began in the 1970s or 80s and have continued largely uninterrupted until two years ago (Carnival 2010; Royal Caribbean 2010).

Conclusion

The cruise industry is in strong shape and getting stronger. Major players in the market have a commanding share of passengers and revenues, however, making it difficult for new entrants. An investment in an existing and strong company in the industry, however, would likely yield solid returns.