As a consequence of the Sept. 11 attacks, there will be less cruise capacity in the North American market than previously estimated for 2002 through 2006, easing the competitive market situation which was already suffering from the softening of the economy.
The bankruptcy of Renaissance Cruises, lay-ups of ships, and delayed deliveries of new buildings have taken beds out of the market while future new capacity is expected to come on at a slower rate and to be offset by even more withdrawals.
The introduction of new cruise capacity this year was already softened by last year's bankruptcies of Premier Cruises, Crown Cruise Line and Commodore Cruises.
In addition, Carnival Cruise Lines transferred the Tropicale to Costa Crociere, thus effectively taking her out of the North American market, while Renaissance's demise took 10 more ships out of the market.
Furthermore, Delta Queen Coastal Voyages did not take delivery of its second coastal vessel, postponing that to next year, while Royal Olympic Cruises did not yet take delivery of its second newbuilding.
Thus, the number of ships will stay at 130 in 2001 according to estimates by Cruise Industry News, while the berths will increase from 142,873 in 2000 to 155,031 in 2001, for an annual passenger capacity of 8,022,465 by year's end, up 6.4 percent from 2000.
Next year will benefit from Holland America Line, Princess Cruises, and Royal Caribbean International transferring ships to Europe - to Costa Crociere, Seetours, P&O Cruises, and Island, respectively.
In addition are the lay-ups of the Silver Cloud, Song of Flower (partial lay-up), and the Pacific Princess (partial lay-up), which has also been sold and is expected to leave the North American market after the 2002 Bermuda season.
Further lay-ups and withdrawals are expected among the weaker operators as well as among the larger lines, which may choose to phase their older, less efficient ships out of service.
However, at this point, the North American cruise fleet is set to grow to 137 ships in 2002, with 170,065 berths, and an annual passenger capacity of 8,665,555, up 8.0 percent from 2001. The actual growth is expected to be less.
Until further capacity adjustments are announced, 2003 will see the fleet grow to 149 ships, with 193,863 berths, and annual passenger capacity of 9,676,440, up 11.7 percent from 2002.
It is expected that the Norway will leave this market in 2003 and that more withdrawals will be announced unless market demand picks up dramatically. The withdrawals will offset the growth rate, bringing it down into single digits.
As of now, seven new ships are scheduled to enter the North American market in 2004, while the Regal Princess goes to Seetours. Thus, the fleet is set to grow to 155 ships with 208,367 berths, with an annual passenger capacity of 10,313,640 passengers by year's end 2004, up 6.6 percent from 2003.
2005 and 2006
At this point, only options exist for ship deliveries in 2005 and 2006 and cruise lines are presently in discussions with yards to delay deliveries on contracts not yet started.
Thus, 2005 and 2005 may see deliveries of ships previously slated to enter service in 2003 and 2004 as the cruise lines seek to slow down the rate of new capacity.
For now, the most optimistic projection forecasts a North American fleet of 159 ships, with 216,337 berths and an annual passenger capacity of 10,658,640 by year's end 2006.
The upside is that this is an average annual capacity expansion growth rate of less than seven percent, compared to the industry's average annual historical passenger growth rate of eight percent.
Thus, by year's end 2006, passengers should be standing in line to cruise, which will also allow the cruise lines to raise prices.
Many analysts believe that the U.S. economy had already slipped into a recession before September 11. A pick-up is not expected until spring 2002, with renewed expansion in the second half of 2002 and early 2003. But the outlook is too uncertain to be more specific, according to many analysts.
The travel industry, including the cruise lines, is impacted not only by the economy but also by people's concerns about traveling in light of the attacks and the subsequent threats on American citizens around the world.
When the economy rebounds and when the American confidence in travel, especially international travel, returns, the cruise market will also be back on track.
After the 1991 Gulf War, it took two years before American passengers returned to Mediterranean cruises, said one cruise line executive.
Given the combination of a soft economy and the history of terrorism and war's impact on travel, it may thus be 2003 or even 2004 before it is (cruise) "business as usual."