Research Briefing | Feb 21, 2023

Cruise Outlook: Can rebounding demand keep up with increases in supply?

Cruise Outlook: Can rebounding demand keep up with increases in supply?

Cruise operating capacity is on pace to exceed its 2019 level by 16% in 2024. The cruise industry entered the global shutdown in March 2020 with a new vessel orderbook near record levels. Even with pandemic-related delays, many of these ships will be completed and deployed in 2023 and 2024. New capacity growth will be only partly offset by cruise ship retirements. Supply growth is anticipated to slow in 2025 but capacity should grow by roughly one-quarter into the medium-term.

What you will learn:

  • Recent bookings activity has eased near term concerns, showing a strong trajectory for demand recovery. As cruise lines have resumed operations a record pace of new bookings has been reported early in the 2023 wave season, which is a key step towards filling planned sailings.
  • Economic deceleration is underway, with many advanced economies in a mild recession in 2023 which risks slowing the demand recovery. However, travel demand currently remains resilient as pent-up demand and savings continue to support activity.
  • Supply may outpace demand, placing pressure on occupancy rates and pricing. The supply growth cycle means that the cruise sector faces not only the challenge of re-igniting cruise demand post-pandemic among experienced cruisers but must also attract substantial numbers of new cruisers to absorb new capacity.
  • Cruise lines face key choices in regional capacity deployment, with risks of over-supply in some markets. The Caribbean, Mediterranean and Alaska are anticipated to experience the largest capacity increases in 2023.
  • New mega-ships have limited options for turnaround calls, pointing to a need for close coordination by ports and cruise lines to diversify activity. 49% of mega-ship turnaround activity this year is anticipated to occur at just five ports.
  • New ships on the orderbook will further change the mix of operating vessels and itineraries.
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