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As the cruise industry recovers from Covid-19, it moves from one crisis to another as the Russian invasion of Ukraine, the cost of living increases and high energy prices hit consumers where it hurts – their disposable income and travel budget .
To find out how current market forces are affecting the luxury sector of the cruise industry, we spoke to James Cole, founder and managing director of Panache Cruises, which specializes in selling luxury cruises.
Cole launched luxury cruise agency Panache Cruises in 2020, almost two years after leaving mass-market cruise retail company Cruise 118, which he founded in 2008. A fast-growing business, the 40-employee team works with ocean, river, expedition, and yacht-style cruise lines.
The luxury cruise market was projected to double in size between 2018 and 2027, and Cole created Panache Cruises because he anticipated growth in the luxury cruise market. But has the impact of the global events of the last few years enhanced or hindered its development?
Frances Marcellin: How is the luxury cruise market doing?
James Cole: Despite the pandemic, the luxury cruise sector has grown by 120% in annual passenger capacity from approximately 325,000 in 2012 to 720,000 passengers in 2022.
With more new small ships under construction or on order, the luxury cruise sector is expected to continue to grow to reach nearly 1.2 million passengers by 2027. To meet this demand, the industry must find and engages with new customers, people who have not tried a luxury cruise before.
My team has a proven track record of doing just that. Our mission is quite simple – to be the UK’s leading retailer of luxury and ultra-luxury cruise ships.
You work through the ocean, river, expedition and yacht style categories. How do they compare in terms of performance?
Each of these categories is very different in terms of scale and capacity. If you look at the number of cabins available in each sector – ocean or elite ocean – as we call it, it will always dominate in terms of capacity. This will be followed by luxury river cruises. A typical luxury ocean liner can accommodate 700 to 1,000 passengers, while most luxury river ships can only carry 150 passengers.
Yacht or mega yacht style expeditions and cruises will always offer much less capacity in the market due to their smaller size. The same is true for expedition cruise ships, which are generally limited by environmental operating parameters. For example, vessels operating in the Galapagos can carry a maximum of 100 passengers. Expedition ships operating in Antarctica can carry a maximum of 500 passengers.
All categories perform very well. The main constraint is capacity in the shipping sector, but as new ships roll into the slipways, this situation will change in the next year or two. This is good news for people who have been saving up all their lives to take a series of bucket list trips. That’s what an expedition cruise is all about.
How has the pandemic affected the luxury cruise market and why did you choose to launch then?
We are seeing a shift in traveler priorities across the wider travel sector as people become more crowd-conscious and move away from mass-style holidays.
Translated into the cruise industry, this leads to more interest in small ship cruises due to the smaller number of passengers and the fact that small ships often offer 50% more personal space per person compared to the largest cruise ships. We see that people are trying to make up for lost time and are willing to spend more to get to the destinations they really want to visit.
Coming out of the pandemic, cruise lines needed as much help as possible to fill their ships while the sector recovered. We are now back to where we were before the pandemic and the industry is booming again.
“Now we’re back to where we were before the pandemic and the industry is booming again.”
Is the luxury cruise market coming back now after the pandemic?
Yes, very much so. The pandemic has boosted interest in small ship cruises due to fewer passengers and this is attracting more and more people to the luxury sector than ever before. This is because most luxury and ultra vessels are much smaller than the megaliners currently in service with much less passenger cargo.
Most luxury cruise ships operating at sea hold well under 1,000 people at full capacity. For comparison, the largest liners can carry nearly 7,000 passengers.
Is the cost of living crisis affecting the luxury cruise market?
All of these canceled vacations during the pandemic have given many people more spending power in the post-pandemic world, and as a result we are seeing more and more people moving to higher class cabins and longer itineraries.
Travel has become a major part of modern life and an opportunity to create lasting memories on once-in-a-lifetime itineraries – if anything, I’d argue that travel has become more important in the post-pandemic world.
Who is your target market and is the cost of living crisis affecting their ability to purchase luxury cruises?
Our customers are certainly not the ‘mega rich’, but they are people who value impeccable customer service, the finest cuisine, the most luxurious interiors and completely unique travel experiences.
These are people who actively seek out once-in-a-lifetime experiences for themselves and their families. As a general guideline, our travelers are over 50, retired or semi-retired and ex-professionals from a wide variety of sectors.
However, the age profile is changing. More and more young people are attracted to the luxury cruise industry for the first time and we expect this trend to continue. People in their 40s are now actively seeking new travel experiences focused on luxury, and this will allow the sector to grow.
“More and more young people are being attracted to the luxury cruise sector for the first time.”
What will be the most popular category in 2023?
Given that the majority of capacity is in the Elite Ocean category, this will continue to be the most popular category in the luxury cruise sector in terms of sheer numbers.
However, we have to look at the newbuild order book and it is clear that more and more ships are being built (as a percentage of the total) in the river cruise, expedition and yachting sectors.
Interestingly, many of these new ships will be powered by new technologies such as LNG, biofuel, hydrogen and clean electricity.
How is the energy crisis affecting the luxury cruise market?
Despite the recent reprieve in fuel prices, the reality is that fossil fuel prices are likely to continue to rise. Therefore, if people want to take a cruise in 2023, 2024 or 2025, the sooner they book, the better. The price of the holiday will therefore be largely fixed from the date of booking.
Many cruise lines are already booking through 2025, so people should start thinking about booking as early as possible to take advantage of the lowest possible price points. In the longer term, I foresee the luxury river sector being less affected by the price of fossil fuels.
We are already seeing an increasing number of river cruise ships with hybrid and electric propulsion, and many more are scheduled to enter service in the next year or two. I was very encouraged to read that the first hydrogen-powered ship will begin operating in March 2023 in the Gulf of California. This development is great news for the wider cruise sector.
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