When the Ruby Princess docked in Sydney Harbour, it left mass infection, coronavirus deaths and a parliamentary inquiry in its wake. As new allegations emerge of those in charge trying to social-distance themselves from the facts, US Studies Centre Non-resident Fellow, Justin Wastnage, points out the cruise industry is remarkably resilient.
“If we look at the two driving forces: illness on board and economic downturns, the cruise industry has weathered these before,” Wastnage explained. “What’s different now is the severity and scope.”
In his new research brief, Wastnage breaks down the facts about cruiselines, the current trajectory of the industry and how this is likely to play out. Industry leaders, Carnival, Royal Caribbean and Norwegian Cruise Lines lost 35 per cent of their peak value in a single week in March.
These three major companies control 95 per cent of the cruising market. Carnival Corporation alone accounts for around 40 per cent of all cruising with record 2018 profits of US$3.2 billion on a turnover of US$18.9 billion.
“If anything, the cruise industry is more prepared than most. It has strong cash reserves and knows how to price its way out of disaster. The cruise industry can weather the current storm and then turn its sights to attracting bargain hunters.”
Wastnage noted the particular benefits of the high-volume model will make cruises an irresistibly cheap option. He concluded, “If they get this right, I think the prospect of a cheap holiday will have strong appeal for those feeling the economic pinch long after the virus abates.”
- The Ruby Princess has now departed from Port Kembla and caused the outbreak that has claimed 21 lives and more than 600 infections.
- The industry has taken a significant immediate hit – with Carnival, Royal Caribbean and Norwegian Cruise Lines losing around 35 per cent of their peak value in a single week in March.
- Cruiselines have a track record of yield management and solid finances to tide them over until things normalise.
- Despite major cruiselines having headquarters in Florida, they are incorporated elsewhere, having truly taken advantage of globalisation. As such they won’t be able to take advantage of government bailouts.
- Cruises as a cheap holiday are likely to bounce back more quickly than most industries in an economic downturn.
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