Caribbean destinations must differentiate themselves as global demand for cruising increases
This article was first published in the Spring/Summer 2017 issue of International Cruise & Ferry Review. All information was correct at the time of printing, but may since have changed.
I have good and bad news for Caribbean cruise destinations and stakeholders. The good news is that the cruise industry continues to steam along, with a record-breaking 24.2 million passengers cruising globally in 2016 – 4% more than the 2015 record – and 25.3 million are forecast to cruise in 2017. Global cruise vacations outpaced land-based vacations by a 20% margin from 2004-2014, demand for cruising increased 62% from 2005-2015, and 80% of travel agents certified by Cruise Line International Association expect sales to rise in 2017. The industry’s long-term potential looks even brighter. Currently, cruising represents just 2% of the total leisure travel market, but it has the highest satisfaction rates among global travellers.
The bad news is that this same success is not guaranteed for destinations. Ultimately, this growth means more competition, but it also offers exponentially more opportunities for destinations willing to put in the same kind of work that led to cruise industry growth.
Passenger numbers continue to rise, supported by a constantly increasing capacity that rose by more than 23,000 lower berths when nine new ocean ships representing a total of US$5.5 billion launched in 2016. Collectively, Florida-Caribbean Cruise Association (FCCA) Member Lines have 42 ships on order, amounting to a total of 165,000 lower berths with an investment value of US$36 billion. However, cruise passenger demand continues to surpass 100%, outstripping supply despite the growing capacity of the global fleet.
Where are these passengers coming from? Growing global markets are certainly helping. Asia has experienced meteoric growth, recording a 24% increase from 2014-2015 and welcoming more than two million passengers in 2016. Australia, New Zealand and the Pacific are nipping at Asia’s heels, reporting a 14% growth between 2014 and 2015 and 1.1 million passengers in 2016.
The growth of these passenger source markets has already surpassed ship capacity. As shipbuilding is naturally limited to an annual cap of around 4%, such significant market shifts mean that ships are being relocated to new regions. The Caribbean experienced some of these effects in 2016. Although the region still welcomes the lion’s share of global capacity (33.7%), itinerary deployment share is decreasing more than 5% year-over-year.
Here you might expect some good news for the Caribbean, particularly as the region recently succeeded in driving higher yields and pricing thanks to a strong US economy and proximity to the world’s leading source market of North America. The region supplied 12.01 million of 2015’s 23 million cruisers and expects to be a source of more than 14 million by 2019. Plus, the Caribbean expects a 5% passenger increase in 2017, while Europe deals with geopolitical issues and Asia faces price resistance.
Projected passenger increases will offset 2016 losses and put the Caribbean back on track, right? Many cruise executives would disagree and argue that despite the Caribbean’s short-term health, its long-term options are limited in potential growth because the North American source market is facing saturation point.
Fortunately for Caribbean cruising, this penetrated source market might have some wiggle room. Around 76% of the US population have never cruised, which means there are more than 242 million potential new cruisers and the MMGY Global 2016 Portrait of American Travelers showed there’s reason to be optimistic for converting them. The report found that 12% of active US leisure travellers cruised at least once within the last year and 56% wanted to cruise in the next two years. Millennials, which form the largest generational cohort of active travellers, showed a strong interest with around 18% having cruised in the last year and 66% wanting to cruise in the next two.
New destinations could also help drive demand for Caribbean cruising. The opening up of Cuba has unleashed pent-up demand, while destination developments like Norwegian Cruise Line Holdings’ Harvest Caye in Belize and Carnival Corporation’s Amber Cove in Puerto Plata, Dominican Republic are giving past and potential cruisers new reasons to cruise in the Caribbean. Such destinations open up additional itinerary options, which will potentially attract more or larger ships and create opportunities for higher yields.
How can destinations maximise this potential rising tide in the Caribbean? It will take some work, especially as organisations will have to constantly create new products that wow passengers and encourage them to return. They must build a brand founded on authentic culture and experiences, remain at the forefront of consumer expectations and industry developments, and work with cruise lines to tailor options for certain brands and demographics.
Achieving this is easy with the FCCA. To thrive, the industry needs cruise lines and destination stakeholders to have mutual success, interests and understanding so we collaborate with destinations, ports, tour operators and others to tap into this synergy.
We do this by offering access to key decision makers from our 19 Member Lines via meetings and events, and also by first creating a tailored approach to help our Platinum Members improve their operations. This includes everything from developing new tours and destination developments, to getting products onboard, and achieving triple-digit increases in passenger arrivals.
For instance, our work with Puerto Rico led to an expanded terminal that supports Royal Caribbean International’s Oasis-class ships, an improved shoreside welcome, new destination products and more local purchasing. Meanwhile, we’re working with St Martin to help it attract smaller luxury liners, and Guadeloupe and Martinique to increase the number of German-speaking tour guides who can support additional calls from AIDA Cruises and TUI Cruises.
Differentiation like this is the cruise industry’s hull, and we go the extra nautical mile to ensure our members can benefit from these operational nuances. We look forward to continuing this work because it truly benefits all involved.
Some of these opportunities will be available first-hand at this year’s FCCA Cruise Conference & Trade Show in Merida, Mexico from 23-27 October. Anyone can register to join with more than 1,000 attendees and 100 cruise executives to develop understanding and business through one-on-one meetings, workshops and networking functions.
I look forward to seeing you there and further fulfilling the FCCA’s mission to create beneficial relationships between cruise lines and partner destinations’ private and public sectors.