Industry Growth Forecast: 10.6 Percent

The worldwide cruise industry is expected to grow its capacity by I 0.6 percent in 2004, according to estimates by Cruise Industry News (CIN). The fleet will grow to 248 ships, with more than 288,800 berths, capable of carrying nearly 13.5 million passengers, compared to 245 ships with 271,000 berths, with a 12.1 million passenger capacity in 2003.

North America

In North America, the cruise fleet will see a net increase of six ships, growing from 128 ships in 2003 to 134 ships in 2004, boosting the passenger capacity by 8.9 percent, from about 9.0 million in 2003 to 9.8 million in 2004.

The growth rate is moderated somewhat by the Jubilee and the Noordam being repositioned to Australia and Europe, respectively; by the QE2 being re-targeted to the British market; by the Royal Voyager and the Royal Explorer taken out of the market, at least temporarily; by First European Cruises ships also being temporarily out of the market; by Costa Crociere focusing more of its tonnage on European source markets; and by the delayed delivery of the Pride of America, which will only be partially offset by the seasonal deployment of the somewhat smaller Superstar Leo.

Europe

The European fleet will actually see a drop in ships from 105 to 103, but an increase in berths as newer and bigger ships enter service, and an 18.4 percent boost in passenger capacity, to 3.1 million in 2004 from 2.6 million in 2003.

The fleet reduction can partially be attributed to a number of ships from Royal Olympic Cruises and Festival Cruises being in limbo.

Last year, Europe saw a 16.2 percent growth in capacity from the previous year, with its fleet increasing to 105 ships from 90 ships in 2002.

The European market capacity will continue to grow at a rate of 2.7 percent in 2005 and 4.7 percent in 2006, largely due to Cunard Line and Costa.

No further new ship orders or ship transfers from the North American market have been announced.

Asia/Pacific

According to CIN, the Asian source market has been retreating since 2000, when the combined fleet counted 22 ships, able to carry nearly 1.6 million passengers.

In 2004, there are 11 ships catering to Asia/Pacific source markets, with 10,240 berths and a passenger capacity of approximately 519,000.

The big retreat can be attributed to cut-backs in Star Cruises fleet, as the company seems to have overestimated the rate of the passenger growth potential in the region; the shutdownn of Hyundai"s cruise  services; and retrenchment among the Japanese operators as well.

The only growth on the Asia/Pacific front has been at P&O Cruises Australia, which has been growing its passenger capacity from 44,400 in 2002 to 53,520 in 2003 and 127,820 in 2004.

The biggest potential in Asia/Pacific is obviously China, but it is a big unknown when that travel market  is ready to be tapped for ocean cruise passengers.

15 Million Passengers Annually

The passenger capacity on a worldwide basis will continue to grow at a rate of 3.9 percent in 2005, 5.0 percent in 2006 and 1.2 percent in 2007, when the world fleet will be able to carry nearly 15 million passengers -- based on existing ship orders and known withdrawals. There is one option for 2007 (Ultra Vovager) and no ship orders beyond 2007.

Most of the growth will continue in the North American marketplace, which will add capacity for one more million passengers between 2004 and 2007, while the European capacity will grow by 230,000 over the same time period.

According to CIN estimates, the North American passenger capacity will grow by 3.5 percent in 2005, 5.4 percent in 2006 and 1. 7 percent in 2007.

This estimate is based on existing newbuilding orders and options, as well as announced deployment changes and ship movements.

But this growth rate is expected to be moderated by some ships being moved out of the North American market. Carnival has stated that it is "possible that some or more of our older ships may be sold or retired during the next three to four years, thus reducing the size of our fleet over this period."

Star Cruises has also said that it intends to move mid-sized ships out of Norwegian Cruise Line (NCL) and to its Asia/Pacific fleet as new ships are added to CL.

Tapering Off? 

Thus, the future growth rate seems quite manageable, which should enable cruise lines to raise prices and boost earnings in the short term. But in order to continue to develop the market, they have to act soon. If not, 2007 would be the first year in 25 years without one or more new cruise ships being introduced.

 

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