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As well as the fun side of cruising – actually going one, for example – I’m also interested in how the industry operates, both technically and financially. I’ve been reading a few documents and other content on-line that add up to an interesting snapshot of where cruising is, financially, in late 2014. Drawing on these I’ve written three paragraphs below covering the present, the near-future, and a speculative look into the medium/long-term future.

First was the 3rd quarter results announcement from Carnival Corp and plc – that is, the owning corporation behind Carnival Cruise Line, Princess, HAL, P&O, Cunard, Costa and a few others. Essentially the news is all good. Not only were gross and net revenue figures better than the same quarter a year ago, they were better than had been expected earlier this year. All markets did well; the announcement particularly mentions a good result in Europe with the recovery of the Costa brand, significant growth (double-digit) in China, and a successful Caribbean summer season. The whole year’s results are expected to be good, and Carnival amended its 4th quarter revenue guidance upwards. And it’s not just Carnival – the nearest equivalent results for Royal Caribbean International, whose operating lines include Royal Caribbean Cruise Line, Celebrity, Azamara and others, posted better-than-forecast results for their 2nd quarter ending in June, and again the guidance for the next quarter was enhanced. So the cruise market seems to be growing, work-wide.

Next was a very interesting announcement from Carnival Corporation. Their COO (Chief Operating Officer) Alan Buckelewe is relocating to China to take a very hands-on management stance to grow their operations in China. The Carnival Corp  statement describes China as “a market of great strategic importance for our company“. Before becoming Carnival Corp COO, Mr Buckelewe was previously CEO of Princess Cruises, and at some point before that held senior post with Cunard; he has a total of 37 years experience in the cruise industry. Currently Carnival have three ships home-ported in China: Costa Atlantica, Costa Victoria and Sapphire Princess, and they will be joined by Costa Serena in 2015.  Mr Buckelewe’s responsibilities following the move are described as follows: “he will lead all of the company’s initiatives in China, while also continuing to provide oversight of all maritime and port operations around the world and a number of related functions as part of his COO role“. Why is this interesting? – well, given the continuing increases in capacity coming on-stream the cruise lines need to tap new markets as well as increase penetration into existing ones, and China has to be one of the biggest undeveloped market. Yes, the proportion of the Chinese population who are able to take a cruise is not large, but as an actual raw number it’s probably huge. In the long term I have no doubt that China and other emerging markets will develop their own brands, but whoever can get in there early with a significant presence has the best chance of remaining a player in that market into the future.

Thirdly there was an announcement by Seatrade Insider about the publication of a new report, “End of the Beginning for Cruising“, written by Tony Peisley. Unfortunately all I have is the website précis, as the full report would cost a whopping £680/€830/$1115. However, here’s an extract from the advertising blurb:

Major individual and structural management changes at the market-leading global cruise companies suggest that the industry is entering a new phase in its 45-year history, one that will see its original entrepreneurial-style drive for demand growth replaced by more conservative, analytics-based decision-making designed to bring improved – and sustainable – profitability.

These changes will have a significant impact on the industry’s other stakeholders: ports, destinations, and – in particular – shipbuilders.

The report takes a 20-year view. It suggests that 30 million passengers a year is achievable within 10 years (currently the figure is about 22 million or so); then, as the emerging cruise markets such as China start to mature and create their own brands, he suggests that 40 million a year is achievable by 2030. Doubtless Carnival Corp have reached similar conclusions, hence the Mr Buckelewe’s move to Shanghai.

All of this tells us two things:- first, that cruising is successful and is not going to disappear; and secondly that it is now a mature business which will be based first and foremost on returns for investors. Facilities on ships and interesting itineraries will need to show that they can bring in sufficient returns before they will be implemented.

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