Cruise vacations are more popular than ever, and the surprising reason is growing interest from a wayward group that has traditionally steered clear of an industry geared toward older travelers: younger travelers.
From honeymoons to TikTok: Cruises capture the imagination of millennial and Gen Z travelers (Photographer: Angel Garcia/Bloomberg) {{^userSubscribed}} {{/userSubscribed}} {{^userSubscribed}} {{/userSubscribed}}
Take Royal Caribbean Cruises: Half of the company’s passengers are millennials or Gen Z, making it the fastest-growing part of its customer base, according to CEO Jason Liberty. Other cruise lines are seeing similar growth in younger demographics, with the average age of cruise passengers dropping for two straight years after remaining roughly flat since at least 2016, according to the Cruise Lines International Association.
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“Even honeymooners are asking about cruises,” says Eric Hrubant, president of New York City-based CIRE Travel, a travel agency that has quadrupled its cruise business in the past two years. “If you said that 10 years ago, people would have thought you were on drugs.”
The biggest beneficiary has been Royal Caribbean, which emerged from the pandemic faster than its peers and launched two of the largest cruise ships in history. The company’s shares have soared nearly 600% since hitting pandemic lows in March 2020. Meanwhile, Carnival Corp. is up 88%, and Norwegian Cruise Line Holdings Inc. is up 142% over the same period, roughly matching the S&P 500’s 129% gain. It’s also the best-performing stock in the S&P 1500 Hotel, Resorts and Cruise Lines Index this year.
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Royal Caribbean’s new ships, with upscale restaurants and adults-only areas, and its own Caribbean islands are helping the company appeal to a broader demographic, Patrick Scholes, managing director at Truist Securities, said in an interview.The company expects its 2024 profits to be 50% higher than in 2019, before the pandemic, while peers are expected to see roughly the same declines in profits, according to data compiled by Bloomberg.
Still, cruise lines are getting back on track and catching up with the rest of the travel industry. Last year, 31.7 million ocean cruise passengers rode, up 7% from 2019, according to CLIA, while international tourism fell 12% over the same period. David Tinsley, senior economist at the Bank of America Institute, wrote in a May report that 7.2% of U.S. travel spending went to cruises this year, up from 5.8% in 2019.
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“Consumers may not be literally swapping hotels for cruises,” he said in an email to Bloomberg News, “but it’s fair to say that the growth of the cruise sector means demand for hotels and resorts is not just as strong.”
Cost Consciousness
The biggest draw of a cruise trip for people in their 20s and 30s is the all-inclusive cost, which is typically cheaper than other vacation options.
“There’s no more cost-effective way to really see the world than a cruise,” says Melissa Newman, a professor and cruise blogger who has visited 30 countries on more than 20 cruises over the past nine years.
Norwegian Cruise Line says the price of booking a cruise in 2023 will be 40% cheaper than a comparable land vacation. Industry analysts estimate that figure is currently around 20%, but still above the historical average.
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First-time cruise passengers are set to increase by 12% in 2022 and 2023 compared to the previous two years, and they are likely to learn about cruise travel through their social media feeds. According to Deloitte’s 2024 travel outlook, 42% of Gen Z and 26% of millennials will use short-form video content to plan their trip, compared to just 12% of Gen Xers.
“Social media has really brought to people’s attention that cruising isn’t just for older people,” Newman said.
Preston Shesh began posting cruise videos on TikTok during the pandemic as a way to reminisce about vacations while in quarantine. His content quickly gained traction, and the cruise line began inviting him on board its ships, along with as many as 15 other influencers, to show off their prized assets.
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“All my followers are crazy about the cruising experience,” says Shesh, a 17-year-old who dreams of becoming a captain. “They’re not looking for a resort, they’re not looking for anything else.”
Everything is included
Virgin Voyages, the latest entrant into the cruise market and the brainchild of Richard Branson, is relying heavily on content creators to promote its adults-only cruises, Virgin Voyages CEO Nirmal Saverimuttu said in an interview. The company, which began sailing in 2021, includes meals and entertainment as well as Wi-Fi and basic beverages in the ticket price.
“Millennial is a term that’s used a lot about us, and we tend to dominate that market,” said Mr. Saverimuttu. Virgin Voyages’ sales are up 45% this year, and based on current demand projections, it should be profitable within 18 months, he said.
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Rising travel costs also add to the allure: Since January 2023, vacation costs have averaged 13% higher than pre-pandemic levels, according to the NerdWallet Travel Price Index.
The costs of dining out and car rentals are up more than 20% from 2019. Airfares have remained relatively stable, but tickets are less likely to include carry-on bags or other amenities that aren’t included in “basic economy” class.
The youthful interest couldn’t come at a better time for the three publicly traded cruise lines, which have dealt with a two-year industry shutdown and seen their debt load double in 2020. By the end of this year, interest payments since 2020 are expected to total $18 billion, double what they’ve paid to service debt in the past decade.
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“I don’t think this is a passing fad or a trend. I think this is exactly how our current customer base of aging millennials wants to consume experiences,” Virgin Voyages’ Savelimuttu said. “I believe the trend we’re facing is a very fundamental shift in consumer behavior.”
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