Making cruises cheaper and more fun for the younger travellers

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Cruise vacations are as popular as they’ve ever been, and a surprising reason why there is rising interest from a fickle group that’s historically shunned the geriatric-focused industry: Young travellers.

Look at Royal Caribbean Cruise, where half of the company’s passengers are Millennials and Gen Zs, according to chief executive officer Jason Liberty, and the fastest growing portion of its customer base. Other cruise lines are seeing similar youthful growth, with the average age of cruise passengers falling for two straight years after being largely stagnant since at least 2016, according to the Cruise Lines International Association.

“Even honeymooners have been asking about cruises,” said Eric Hrubant, head of CIRE Travel, a New York City-based travel agency whose cruise business has quadrupled in the last two years. “If you said that 10 years ago, I would’ve said you’re on crack.”

The biggest beneficiary has been Royal Caribbean, which emerged from the pandemic quicker than its peers and launched two of the largest cruise ships ever built. Its stock price has soared almost 600% since hitting a Covid-19 low in March 2020, while Carnival is up 88% and Norwegian Cruise Line has gained 142% over the same stretch, which is more in line with the S&P 500’s 129% rise.

It’s also the best performer in the S&P Composite 1500 Hotels, Resorts and Cruise Lines index this year.

Those new Royal Caribbean ships, decked out with upscale dining options and adults-only areas, along with the cruise line’s private Caribbean islands, have helped the company appeal to a wider audience, Patrick Scholes, managing director at Truist Securities, said in an interview. Its 2024 earnings are projected to be 50% more than their 2019 pre-pandemic level, while its peers will see profits drop by about the same level, based on data compiled by Bloomberg.

Still, cruise lines are getting back on track and catching up with the travel industry at large. Last year, ocean cruises set sail with 31.7 million people, 7% more than in 2019, according to CLIA. Meanwhile, international tourism fell 12% over that same period.

This year, 7.2% of US travel expenses have been allocated to cruises, up from 5.8% in 2019, Bank of America Institute senior economist David Tinsley wrote in a report in May.

“It may not be consumers literally swapping hotels for cruises,” he wrote in an email. “But its fair to say that the growth in the cruise sector is meaning demand for hotels/resorts is not as strong as otherwise.”

Data show that more young travellers are now attracted to cruises.

Cost-conscious

The main appeal of a cruise for 20- and 30-somethings is the all-inclusive expense that’s typically cheaper than other vacation options.

“There’s no more cost-effective way to really see the world than cruising,” Melissa Newman, university professor and cruise blogger, said. Newman has managed to visit 30 countries aboard more than 20 cruises in the past nine years.

The price of booking a cruise was 40% below a comparable land-based vacation in 2023, according to Norwegian Cruise Line. Industry analysts put that figure around 20% now, which is still above historical averages.

New-to-cruise passengers, whose number increased 12% in 2022 and 2023 compared with the prior two-year period, are often learning about it through their social media feeds. According to Deloitte’s 2024 travel outlook, 42% of Gen Z and 26% of Millennial travellers use short video content to plan their trips, compared with just 12% of Gen Xers.

“Social media has put cruising more on people’s radar as something that’s not just for old people,” Newman said.

Preston Sheshu started posting cruise videos to TikTok during the pandemic as a way to remind himself of vacations while locked down at home. His content quickly gained traction, and cruise companies began inviting him on board, along with as many as 15 other influencers, to show off their prized assets.

“All my followers are engaged in the cruising experience,” said Sheshu, 17, who hopes to become a ship captain. “They’re not looking for the resorts, they’re not looking for anything else.”

Everything included

Virgin Voyages, the Richard Branson brainchild and the newest entrant to the cruise market, relies heavily on content creators to market its adult-only cruises, said Virgin Voyages CEO Nirmal Saverimuttu. The company, which started sailing in 2021, includes food and entertainment, as well as WiFi and basic beverages in its ticket price.

“Millennial is a word people have used a lot about us and we tend to dominate that part of the market,” Saverimuttu said. Virgin Voyages sales are up 45% this year and, based on current demand projections, should achieve profitability within 18 months, he said.

Adding to the appeal is the spiralling cost of travel. Since January 2023, vacation expenses are 13% higher than pre-pandemic levels on average, according to NerdWallet’s Travel Price Index.

The cost of dining out or renting a car is up more than 20% from 2019. And while airfares have been relatively stable, the tickets are less likely to include carry-on bags and other amenities that are excluded in “basic economy”.

The youthful interest couldn’t come at a better time for the three public cruise companies, which saw their debt double in 2020 as they coped with what turned into a two-year industry shut down. By the end of this year the their interest payments will likely total US$18bil (RM81.1bil) since 2020, double what they paid to service their debt in the prior decade.

“I don’t think this is a fad or a trend. I think this is very much how this group of customers now, Millennials who are ageing, this is how they want to consume experiences,” Saverimuttu said. “The trends that we’re on I believe are very much fundamental shifts in consumer behaviour.” – Bloomberg

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Making cruises cheaper and more fun for the younger travellers

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