Is Cruising In Trouble?

[babs135]

NCL have raised their service charge and are now laying off staff, obvious cutbacks on other lines all sound rather alarming. Are people not returning to cruising or will we suddenly find that ships are being 'retired' and not replaced plus more cost cutting?

[cruisemom42]

I would say cruising IS in trouble; however, it's a bit unclear as to how much trouble. Most of the lines have massive debt to repay following COVID and despite a lot of hearty statements from the CEOs, it seems as though the restart wasn't quite as robust as they would've wished. Plenty of cruisers were holding credits to be used, and even once restrictions were removed there are quite a few ships and itineraries that are not sailing at full capacity.  

 

Some new ships on order will be built -- too late to cancel. Some others, that were on the drawing board, have been halted. It's also been already said that a few more ships are being retired. On the whole, though, ships are big assets and I would assume that if the lines can get something approximately capacity it is better to keep sailing them and figure out ways to make them profitable (hence the cuts).  Remember, quite a few of the less efficient, older ships were already peeled off during the COVID break.

 

[wcook]

The finance boys and girls at the cruise lines did an amazing job of keeping their companies solvent despite massive overhead and almost two years of limited to no revenue. Now they are transitioning from “keep the company afloat” to “make bucketloads of profit to keep the shareholders happy.” Expect more cost cutting.  

[chengkp75]

18 minutes ago, wcook said:

“make bucketloads of profit to keep the shareholders happy.” Expect more cost cutting.  

I think all the lines are quite a ways away from making "bucketloads of profit".  The cost cutting is to offset the massive debt service they incurred.

[CruiserBruce]

1 hour ago, wcook said:

The finance boys and girls at the cruise lines did an amazing job of keeping their companies solvent despite massive overhead and almost two years of limited to no revenue. Now they are transitioning from “keep the company afloat” to “make bucketloads of profit to keep the shareholders happy.” Expect more cost cutting.  

You realize the cruise lines borrowed bucket loads of money to stay afloat during Covid? And that debt now needs to be paid back before they are "making bucketloads of profit"? And having full, or near full ships for even one year, if even that has occurred, doesn't mean they are profitable yet?

[chengkp75]

Anyone who expected cruising to return at pre-Covid prices, or nearly so, and with pre-Covid service levels is smoking some real good stuff.

[babs135]

7 minutes ago, chengkp75 said:

Anyone who expected cruising to return at pre-Covid prices, or nearly so, and with pre-Covid service levels is smoking some real good stuff.

An interesting comment. I'm in the UK and last May looked for a week's holiday in Spain.  We always go half-board and have two favourite hotels in the Costa del Sol but when I checked the price I was taken aback at how expensive they were. In the meantime a flyer for a week's cruise to the Norwegian fjords with P&O in June dropped into my inbox and it was much cheaper than Spain so we cruised! However, as suspected, staff were short in numbers with a variety of speciality restaurants closed and the little touches that define cruising were missing. 

[Hlitner]

I do not think cruising is in trouble, but do think that some major cruise corporations are in big trouble.  Cruising will survive the current financial mess, but there are going to be obvious changes.  The mass market lines will continue their move to a class system, continue to increase prices, accelerate their campaign to maximize onboard revenue, and cut-back various services.  The luxury lines will increase prices but maintain quality because that is what they are all about!  

 

I do not think we can over emphasize the trend towards classes.  NCL (with their Haven Suites) and MSC (with their Yacht Club) have demonstrated that folks are willing to pay big bucks for luxury and amenities.  Those that want to cruise on a tight budget will still be able to satisfy their cruise cravings, but will see numerous cut-backs (in service and cuisine) along with a lot more add-ons.   The era of single class cruising, among the mass market lines, is over....dead....gone!

 

Hank

[George C]

1 hour ago, Hlitner said:

I do not think cruising is in trouble, but do think that some major cruise corporations are in big trouble.  Cruising will survive the current financial mess, but there are going to be obvious changes.  The mass market lines will continue their move to a class system, continue to increase prices, accelerate their campaign to maximize onboard revenue, and cut-back various services.  The luxury lines will increase prices but maintain quality because that is what they are all about!  

 

I do not think we can over emphasize the trend towards classes.  NCL (with their Haven Suites) and MSC (with their Yacht Club) have demonstrated that folks are willing to pay big bucks for luxury and amenities.  Those that want to cruise on a tight budget will still be able to satisfy their cruise cravings, but will see numerous cut-backs (in service and cuisine) along with a lot more add-ons.   The era of single class cruising, among the mass market lines, is over....dead....gone!

 

Hank

Agree but the yacht club and celebrity retreat are just a small fraction of the cruising passengers due to cost . We are lucky enough to cruise a couple times a year and always book suites. 

[Hlitner]

19 minutes ago, George C said:

Agree but the yacht club and celebrity retreat are just a small fraction of the cruising passengers due to cost . We are lucky enough to cruise a couple times a year and always book suites. 

But we are only talking the tip of spear when it comes to the growing class system.  Consider that Princess has Club Suites (which are simply some mini suites with additional amenities), HAL has Club Orange (additional amenities), Celebrity has long had Aqua Class, etc.  Go back about 10 years and most cruise lines treated everyone alike be they in a suite or an inside cabin.  

 

Even with suites, you have different classes.  So, for example, on MSC you can have a suite in the Yacht Club (with its separate venues) or a suite outside the YC. On HAL you have suites that come with Neptune Lounge access (and special dining venues) and you have suites with no Neptune Suite or special dining access.  This is actually taking us back to the past when Ocean Liners had various classes with their own venues, decks, etc.   And why not?  Consider that one can cruise on some lines for under $100 per person day or cruise on that same ship for $1000 per person day.  Why should folks in the low cost inside cabins get the same food and service as folks paying 10 times more.

 

You are correct that the upper classes are a relatively small percentage, but MSC has taken it to a different level with their various "experiences."  On that line one has many levels which each higher level coming with additional amenities and dining venues.  And you might want to consider that MSC is the fastest growing cruise line which has now spun off another line, Explora Journeys, which is a new luxury line.  

 

Hank

 

 

[mnocket]

I bought some cruise line stocks near the Covid lows.  I really expected a sharp rebound as Covid waned.  Initially I thought the rebound was underway and strong - maybe it was or maybe I was just seeing what I wanted to see.  However I'm now seeing many (most?) trip reports mentioning that they are sailing far below full capacity.  I'm also seeing growing outrage about cutbacks and price increases.  Typically there are some complainers and many who simply accept the changes as necessary.  This feels different to me.  This time I'm feeling like the threats to forego cruising until/unless the price/service ration rebalances are serious. I believe more people are switching to land vacations.  I'm no longer bullish on a cruising rebound and I've recently sold half of my stock. I'll be selling the rest in the next few months.  I'm also doubting my belief that, much to my surprise, all of the major cruise lines got through Covid without declaring bankruptcy.   I now once again believe that we will see one or more major bankruptcies in the next year or two. So yes, I think cruising is in trouble.

Edited January 14, 2023 by mnocket

[Mary229]

If the cruise lines cannot find a way to raise prices and continue to  deteriorate their product then they will certainly be in trouble.  I never we questioned their need to take on massive debt, I do question their unwillingness to tackle tricky political situations and their lackluster goals.  Their only goal now seems to be fill the ships regardless.  They will need to be a bit more discerning. 

[navybankerteacher]

12 hours ago, babs135 said:

NCL have raised their service charge and are now laying off staff, obvious cutbacks on other lines all sound rather alarming. Are people not returning to cruising or will we suddenly find that ships are being 'retired' and not replaced plus more cost cutting?

Cruising certainly is "In Trouble"....  in more ways than one. 

 

a)The experience itself has been steadily downgraded over the past couple of decades, so the product no longer offers the attractions of the past.

 

 b)The lines have expanded overly capacity in the apparent belief that they would profit from unlimited growth in demand- and are already retrenching by cancelling orders for new ships.

 

c) Not originally their fault, but they have taken on unsupportable debt during the pandemic, which is virtually going to drive some providers into reorganization.

 

d) A key factor which made things work was the disparity in incomes between those countries which provided cruisers and those countries which provided the workers which made cruising so attractive --  that gap is continuing to narrow as global incomes level.  How many US cruisers would want to work on ships catering to Filipinos and Indonesians?

[Honolulu Blue]

20 hours ago, chengkp75 said:

Anyone who expected cruising to return at pre-Covid prices, or nearly so, and with pre-Covid service levels is smoking some real good stuff.

I thought the prices on my first two cruises back in '21 were pretty good with excellent service.  A little less so last year, but still more than acceptable.  And the prices for the cruises I booked so far this year are nice; we'll have to see about the service.  And I'm a lifelong nonsmoker.

[Markanddonna]

Another factor is the creep back to COVID restrictions. A few days ago, my fellow roll call members on an upcoming Celebrity TA mentioned that new COVID rules were posted for selected sailings. I always loved the TAs and TPs as a wonderful way to get back and forth from North America but now wonder if it is less stressful to just fly to my target destinations. 

[K32682]

The lines catering to the volume, discount cruisers are on shaky grounds. Increasingly the larger ships are not welcomed in ports or by environmentalists. Cost-cutting will continue to meet tight margins but that is treading water for the volume lines. 

 

The more exclusive lines, sailing smaller vessels have a more encouraging outlook. During economic downturns people who have less income will spend less on travel and other luxuries. The well-heeled however will be less affected and continue to cruise. 

 

 

[mnocket]

3 hours ago, K32682 said:

The lines catering to the volume, discount cruisers are on shaky grounds. Increasingly the larger ships are not welcomed in ports or by environmentalists.

There are a few restricted ports for larger ships (Venice, Key West, et.al.),  but I don't know that this is really a major threat to the viability of large ships. I could be wrong.

 

As I've thought about cruise line troubles I've come to wonder if the so-called premium lines (Celebrity, Princess, HAL) are really the most at risk. I think the luxury lines will do fine as they have more pricing power and an affluent customer base.  They will also benefit as refuges from the premium lines move upscale.

 

The family-friendly mainstream lines will also probably do fine as I think this demographic still sees cruising as a good value proposition.

 

It's the premium lines that I worry about.  Those customers are more sensitive to the value they get for their vacation dollar.  They tend to be experienced cruisers and yearn for cruising "the way it used to be".  Judging from recent trip reports, these ships seem to still be sailing at far from full capacity.

 

Predictions:

1. The distinction between premium and mass market cruise lines will shrink to the point where there is little to no difference.  I wouldn't be surprise if parent companies decide that the premium category is no longer sustainable and they fold these ships into their mass market brands. Either this or one or more of the premium branded companies will declare bankruptcy (I don't know enough about how  the parent companies are organized to know if say Celebrity can declare bankruptcy separate from the other RCCL companies).
2. Virgin Voyages will be no more in 12-24 months.  Their target customer base failed to show up in the anticipated numbers causing the company to shift directions.  The result is they are stuck in no-man's land.  I just don't see a path to viability - Virgin does eventually cut loose unprofitable brands.

[Honolulu Blue]

3 hours ago, mnocket said:

There are a few restricted ports for larger ships (Venice, Key West, et.al.),  but I don't know that this is really a major threat to the viability of large ships. I could be wrong.

 

As I've thought about cruise line troubles I've come to wonder if the so-called premium lines (Celebrity, Princess, HAL) are really the most at risk. I think the luxury lines will do fine as they have more pricing power and an affluent customer base.  They will also benefit as refuges from the premium lines move upscale.

 

The family-friendly mainstream lines will also probably do fine as I think this demographic still sees cruising as a good value proposition.

 

It's the premium lines that I worry about.  Those customers are more sensitive to the value they get for their vacation dollar.  They tend to be experienced cruisers and yearn for cruising "the way it used to be".  Judging from recent trip reports, these ships seem to still be sailing at far from full capacity.

 

Predictions:

1. The distinction between premium and mass market cruise lines will shrink to the point where there is little to no difference.  I wouldn't be surprise if parent companies decide that the premium category is no longer sustainable and they fold these ships into their mass market brands. Either this or one or more of the premium branded companies will declare bankruptcy (I don't know enough about how  the parent companies are organized to know if say Celebrity can declare bankruptcy separate from the other RCCL companies).
2. Virgin Voyages will be no more in 12-24 months.  Their target customer base failed to show up in the anticipated numbers causing the company to shift directions.  The result is they are stuck in no-man's land.  I just don't see a path to viability - Virgin does eventually cut loose unprofitable brands.

You make some interesting points.  First, I agree with you that Celebrity, Princess, and HAL have been millstones to their respective corporations since the restart.  I don't see an easy way out for any of them.  

 

And second, if VV were to go belly up, what would happen to its ships?  Could Sir Richard sell the brand to someone else?  Who'd want to run it the way it's being run now?  And who'd want the ships in their current form?  To be clear, I think Virgin is NOT in imminent danger of bankruptcy, but it's obviously possible.  It's more a matter of how long Branson wants to keep propping it up.

[navybankerteacher]

4 hours ago, mnocket said:

...I wouldn't be surprise if parent companies decide that the premium category is no longer sustainable and they fold these ships into their mass market brands. ...

Which is pretty much what General Motors did with Oldsmobile and Chrysler with De Soto.