A shift to private destinations for cruise lines could affect
both operators and guests by 2030. Our Europe Leisure &
Travel analyst Jamie Rollo explains.
----- Transcript -----
Welcome to Thoughts on the Market. I’m Jamie Rollo, Morgan
Stanley’s Europe Leisure & Travel Analyst. And today I’ll
talk about an intriguing trend – the cruise lines’ accelerating
expansion into private islands.
It’s Tuesday, February the 25th, at 2 PM in London.
Now the lure of a private island cruise is simple. You get almost
exclusive access to a tropical retreat. You can lounge or snorkel
on a pristine beach, you can enjoy a meal in a private cabana,
you can even book a massage or a yoga class. The only other
people around are fellow passengers on your vacation. So
this isn't just the stuff of popular TV shows. It’s potentially
the future of cruising.
Cruise lines have actually been offering private islands for more
than a decade. So it’s hardly a new phenomenon. In fact, in
2019, we estimate the majority of Caribbean cruise passengers
visited a private island.
As it happens, the Caribbean is the world's largest cruise
destination. About saw 36 million cruise calls were there last
year; that’s about 40 percent of global passenger capacity. And
that’s surpassing the second largest region, the Mediterranean,
at about 17 percent. Of course, the Caribbean’s proximity to
North America and its year-round tropical climate make it a prime
location for cruising. But despite these advantages, historically
the Caribbean’s been seen as more of a lower-yielding market
compared to regions like Europe or Alaska, which arguably have
even more amazing scenery or historic sites.
Interestingly, recent trends suggest that reputation might be
changing. And new private islands over the last few years have
reinvigorated the Caribbean cruise market.
So what’s a private destinations or islands offer? For your
guests, they get a seamless integration with the cruise
experience. There’s no transfer required to a destination.
There’s no external visitors coming into the resort. No-hassle,
no-traffic, and very low crime.
And for the cruise lines, well, they get greater control over the
customer experience. They create superior customer satisfaction,
which generates more repeat business. In addition, they can get
that on-island spend that the guest would have spent with
external vendors. And they can charge premium rates for exclusive
areas.
On top of that, many of these islands are quote close to the U.S.
mainland, so you’re saving on fuel because the ship doesn’t have
to steam so far; and on port fees. And then finally, proximity to
the U.S. also can increase the short cruise duration market,
which widens the addressable market for new-to-cruise passengers.
And also can limit anti-tourism or anti-cruise sentiment because
it moves guests out of congested areas and prevents unwanted
visitors.
All in all, the private island model offers a very high return on
invested capital and may well be the future of the cruise line
industry. In fact, if we add up the expansion plans of the
biggest listed cruise lines, we think their private island guest
count will double over the next few years. And that could add
over 10 per cent to top line sales and 30 per cent
earnings-per-share for the fastest growing cruise lines.
So very considerable financials, but also it’s a private paradise
within reach … and an idea we can all set sail to.
Thanks for listening. If you enjoy the show, please leave us a
review wherever you listen and share Thoughts on the Market with
a friend or colleague today.
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