Key takeaways
- While Baby Boomers once formed the core consumer base for the cruise industry, an increasing number of younger travelers and first-time passengers are now coming on board.
- Cruise operators are investing in new hardware, including mega-ships and private destinations, to acquire new customers.
- Against a tighter consumer spending backdrop, cruise voyages — which often work out cheaper than land-based vacations — are growing in popularity.
- Looking ahead, J.P.Morgan Research estimates the cruise industry will capture ~3.8% of the $1.9T global vacation market by 2028.
The cruise industry has markedly picked up speed after taking a major hit during the COVID-19 pandemic. According to the Cruise Lines International Association (CLIA), about 35.7 million passengers are expected to set sail in 2024, 6% more than in 2019.Indeed, major cruise lines have enjoyed a successful 2024 wave season — the period from January to March, when operators offer their best deals.
“An important point underscoring our more constructive view of the cruise industry post-pandemic is market share gains from the larger $1.9T global vacation market and accelerated new-to-cruise customer acquisition,” said Matt Boss, Head of Leisure and Retailing (Department Stores & Specialty Softlines) at J.P.Morgan. “Demand remains robust, with not a single historical lead indicator in the business, notably booking curve and on-board spend, signaling any softening.”
Ahead of the summer travel season, what is the outlook for the cruise industry, and what’s driving its rebound?
The number of cruise passengers is growing
The annual number of cruise passengers from 2023 to 2027 is expected to exceed pre-COVID levels.
Positive demographic shifts
In the past, Baby Boomers formed the core consumer base for the cruise industry. Today however, an increasing number of younger travelers are coming on board. According to the CLIA, 73% of Millennials and Gen X travelers say they would consider a cruise vacation. And during its first-quarter earnings call, Royal Caribbean International noted that half of its cruise customers are Millennials or younger.
This is in part due to rising affluence. “Importantly, the spending capacity of the Millennial customer has grown ~49% since 2019, with the average net worth today for an individual aged 40 or under now standing at ~$259K,” Boss observed.
Cruises are also attracting more first-time passengers. During its first-quarter earnings call, Carnival Cruise Line noted there was a healthy mix of “new-to-cruise” in its 2025 bookings to date, with the customer group increasing by over 30% versus a year ago.
Elevated product and destination offerings
Cruise operators are overhauling their offerings in order to appeal to consumers. “Key operators are investing in new hardware, notably mega-ships and private destinations. This is driving more eyeballs to the industry, accelerating new-to-cruise acquisition,” Boss said.
In April 2024, Norwegian Cruise Line placed the largest ship order in its history to meet rising demand for cruise travel. The company will receive eight new vessels between 2026 and 2036.
Investments in land-based offerings are burgeoning, too. For instance, Royal Caribbean’s private island in the Bahamas, Perfect Day at CocoCay, is expected to draw over 3 million visitors in 2024. In the same vein, Carnival Cruise Line is developing a private beach destination, Celebration Key, on Grand Bahama. Opening in 2025, it will feature five areas, each with its own distinct amenities. “Investments in such attractions provide the cruise industry with the improved ability to give customers an experience that is better able to compete with land-based alternatives,” Boss added.
“Key operators are investing in new hardware, notably mega-ships and private destinations. This is driving more eyeballs to the industry, accelerating new-to-cruise acquisition.”
Matt Boss
Head of Leisure and Retailing (Department Stores & Specialty Softlines), J.P.Morgan
Consumers favor cruises over land-based activities
According to J.P.Morgan Research’s recent Cost of Living survey conducted in April, only 29% of respondents still have excess savings, and 45% expect to spend less in discretionary categories over the next 12 months. This illustrates an increasingly cautious spending environment even in the face of moderating inflation.
This puts cruise voyages, which often work out cheaper than land-based vacations, in good stead. “We see the consumer increasingly focused on value within discretionary categories, with the value spread between cruises and land-based alternatives standing at 25–30% today versus 10–15% pre-pandemic,” Boss noted. “Cruise lines have focused on improved experiences with no step down in quality or service despite inflation, further amplifying their value.”
Despite the tighter consumer spending environment however, both ticket and onboard prices have increased in recent months. Royal Caribbean International cited that in addition to record ticket pricing, consumer spending onboard and pre-cruise purchases continue to exceed prior years. In the same vein, Carnival Cruise Line’s onboard revenue in the first quarter of 2024 was +17.6% versus the first quarter of 2019.
Overall, the demand backdrop remains robust for the cruise industry. “We estimate that 85%+ of tickets have been booked for 2024, and the focus is turning to 2025, with bookings to date already ahead of historical levels,” Boss said. “Looking ahead, we see the industry growing revenues by high-single digits over the next five years, capturing ~3.8% of the global vacation market by 2028.”
