Editorial: Cruise-Ship Building at a Crossroads?

The Allure of the Seas under construction in TurkuIs cruise-ship building at a crossroads? In many ways it is. The economic downturn, which has led to a slowdown in newbuilding orders, has come at the same time that new rules and regulations are being phased in, allowing more innovative designs, and also making for safer and greener ships. 

In addition, the shipowners are asking for lower building and lifecycle costs, and more energy efficient ships with greater onboard revenue potential.

Put together, these requirements will make up the platforms for the next generation of ships.

The next question is when the orderbook will pick up again. European builders have the capacity to build 10 to 12 cruise ships a year, but the most optimistic forecasts now call for six to eight ships per year. In addition, at last one Asian shipyard is looking to get into the cruise industry. So there is little doubt that there will be excess building capacity.

 Meanwhile, there is a cruise ship building infrastructure with a network of suppliers and subcontractors that has been built up in Europe over the past 20 years that is at risk if companies start to abandon the industry for lack of business. As shipyard executives told us: They need the shipowners and the owners need them. Cruise ships are very complex and experience and know-how are key to the building process.

The cruise industry has been on a steady growth course in North America for some 40 years. While the expansion there is expected to continue, albeit at a slower pace, Europe has proven to be the next growth market, and will require another 100 ships to reach the same market penetration level, according to the Cruise Industry News Annual 2010 report.

In addition, aging ships will sooner or later have to be replaced.

Other markets are also being developed in South America and in Asia, which, pending the pace of development, will also require more ships.

So the bottom line, as we see it, is a question of timing. Not if more ships will be built, but when and at what pace. There is no doubt among cruise line executives, financial analysts, travel agents and shipyard executives interviewed by Cruise Industry News that when the economy picks up, the lines will pick up the growth pace. And when that happens, expect a new generation of ships.

Bon Voyage!

Angela Reale Mathisen & Oivind Mathisen

Excerpt from Cruise Industry News Quarterly Magazine: Fall 2010

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