THE CRUISE REVIEW · the cruise review published march 2014. contents executive summary . 3 more growth for uk market

THE CRUISE REVIEWPUBLISHED MARCH 2014

CONTENTS

EXECUTIVE SUMMARY 3MORE GROWTH FOR UK MARKET 4BRITS CHANGE THEIR CRUISE HABITS 6MILLION CRUISE FROM UK PORTS IN 2013 8CRUISE CONTINUES TO PROVIDE GREAT VALUE 10CRUISE DEVOTEES REMAIN LOYAL 12PASSENGERS LEAVE IT LATE 13DESTINATIONS AND VALUE STILL THE GREAT CRUISE PERSUADERS 14CRUISING POPULARITY GOES SOUTH 15BUMPER YEAR FOR EUROPEAN RIVERS 16

EXECUTIVE SUMMARY2013 UK CRUISE MARKET

UK cruise market still growing and retains its position as No.1 in Europe

The Mediterranean remains the go-to destination although Northern Europe looks set to become the top choice for cruising Brits

European river cruising reinvents itself as passenger numbers soar 22%

Cruises from UK ports set to overtake fly-cruises

Overseas cruise passengers flock to UK in record numbers

Air Passenger Duty continues to dampen Caribbean fly-cruise holidays but this may change following the reform of APD

Destinations and value still the keys to higher cruise sales

2 3

MORE GROWTH FOR UK MARKET

The UK cruise market is on the march again. After a decade of growth came to a virtual standstill in 2012, there was a significant increase of 25,000 passengers in 2013.

This ensured that the UK held off the challenge of Germany to remain the largest cruise market in Europe and the second largest in the world (after North America).

This was achieved despite another tough trading year with consumer confidence and discretionary spending still not back to pre-recession levels. As a result, little extra cruise capacity was put on sale in the UK.

YearPassengers (000s) % change

2004 1,029 6.7

2005 1,071 4.1

2006 1,204 12.4

2007 1,335 10.9

2008 1,477 10.5

2009 1,533 3.8

2010 1,622 5.8

2011 1,700 4.8

2012 1,701 0.1

2013 1,726 1.5

Source: IRN Research for CLIA UK & Ireland

1 UK Ocean Cruise MarketThis is a situation that continues into 2014 but 2015 will be a completely different story with the arrival of the new P&O Cruises’ ship, Britannia, and Royal Caribbean International’s new Anthem of the Seas, both sailing out of Southampton.

Britannia launches in March and Anthem of the Seas, one of the company’s new Quantum-class ships, will arrive in May for the summer and autumn. Princess Cruises’ Royal Princess also makes a return to Southampton after its naming ceremony there last year, offering cruises in the spring and summer.

These deployments are a reflection of the industry’s renewed confidence in the UK and should ensure the sector increases its share of the UK holiday market. This appeared to have dropped in 2013 as although passenger numbers grew 1.5%, early estimates were for a 4% increase in foreign holidays and 6% in package holidays.

However, cruising has still trebled its share of the package holiday sector and more than doubled that of the whole foreign holidays market since 2001.

2 Ocean Cruising’s Share of Foreign Holidays Market From The UK

YearForeign Holidays (000s)

Foreign Inclusive Holidays/tours (000s)

Ocean Cruise Holidays**(000s)

Ocean Cruises’ share of inclusive foreign holidays

Ocean cruises’ share of all foreign holidays

2001 38,670 20,631 776 3.8% 2.0%2009 38,492 14,507 1,533 10.6% 4.0%2010 36,442 14,257 1,622 11.2% 4.5%2011 36,819 14,740 1,700 11.5% 4.6%2012 36,173 14,470 1,701 11.8% 4.7%2013 37,607* 15,331* 1,726 11.3* 4.6** Estimated ** Includes Republic of IrelandSource: IRN Research; International Passenger Survey Crown Copyright 2014

4 5

BRITS CHANGE THEIR CRUISE HABITS

As the UK cruise market has continued to grow, there have also been some major changes not just in where the British choose to cruise but also in how they cruise.

Just 13 years ago in 2001, fewer than one in eight UK passengers were cruising within Northern Europe. That meant less than 100,000 people, a number that increased more than fivefold by 2013 when nearly one in every three passengers was cruising to Norway, the Baltic, around Britain or along the North and Western coasts of Continental Europe.

For Norway alone, the number of cruise passengers joining their ship at a UK port has increased from 37,000 to 218,000 in

3 Destinations Booked by UK Passengers (000s)

ten years. And this means it has overtaken the Mediterranean for the first time as the favourite destination for those passengers beginning their cruise from a British port.

There was a 20% increase in cruise passengers to Northern Europe in 2013 while numbers for the Mediterranean fell 8%. A similar result in 2014 would see Northern Europe overtake the Mediterranean as the top cruise destination for UK passengers for the first time since the Brits invented cruising two centuries ago. And that is despite the number of passengers to the Mediterranean doubling since 2001.

The Caribbean has not fared quite so well with a 3% decline in 2013 meaning that passenger numbers, having peaked in the

late 2000s, have now only grown 25% since 2001 despite the corresponding 123% increase in the UK market.

While the Northern European boom can be attributed, in part, to the cruise lines’ need to reduce sailing distances and speeds to conserve fuel and minimise costs, the tailing off in Caribbean cruise numbers is down to a big shift towards cruising from UK ports at the expense of fly-cruise sales.

Only a third of UK passengers began their cruise holiday at a British port in 2007, by 2013 it was just short of half and either this year or in 2015, they are expected to be in the majority. This has been driven by the deployment of more ships to existing and emerging cruise homeports around the UK coastline.

From the cruise consumer point of view, there is no doubt that the Air Passenger Duty (APD) and the impact of higher fuel costs on the rest of the flight fare has put Caribbean fly-cruise prices out of the reach of some. There were nearly 100,000 fewer Caribbean fly-cruises taken in 2013 compared with 2009.

However, the Government announcement that APD is being reformed may change this, as from April 2015 all long haul flights will carry the same APD cost. This means that passengers flying to the Caribbean will pay the same APD as if they were flying to the US.

Destination 2001 2009 2010 2011 2012 2013% change13/12

Mediterranean 334 592 697 767 698 643 (8)

Northern Europe 98 296 303 342 443 531 20

Caribbean 146 275 272 238 189 183 (3)

Atlantic Islands 77 102 98 116 145 161 11

Other Areas 121 268 252 237 226 208 8

Total 776 1,533 1,622 1,700 1,701 1,726 1


4 UK Port Cruises Vs Fly Cruises

YearPassengers(000s)

%growth

UK Port Passengers (000s)

%share

Fly Cruise Passengers (000s)

% share

2007 1,335,000 11.3 467,000 35.0 867,000 65

2008 1,477,000 10.2 557,000 37.7 920,000 62.3

2009 1,533,000 3.8 594,000 38.8 939,000 61.2

2010 1,622,000 5.8 653,000 40.3 968,000 59.7

2011 1,700,000 4.8 729,000 42.9 971,000 57.1

2012 1,701,000 0.3 807,000 47.4 894,000 52.6

2013 1,726,000 1.5 844,000 49.0 882,000 51.0


6 7

MILLION CRUISE FROM UK PORTS IN 2013

The fast-growing popularity of cruising close to the UK has not been confined to British passengers.

In 2013, a bumper 41% increase in overseas passengers flying in to embark on cruises from the UK meant that their number had almost doubled in six years. It also meant that - for the first time in a single year – more than a million passengers (UK and overseas) embarked on cruises from UK ports.

Year 2007 2008 2009 2010 2011 2012 2013

Total Embarkations 591 714 733 833 878 962 1062

% Increase 3 21 3 14 5 10 10

UK Passengers 460 557 594 653 729 807 844

Overseas passengers 124 157 139 180 149 155 218

% share of overseas 21 22 19 22 17 16 21


5 Embarkations at UK Ports (000s)

Year 2007 2008 2009 2010 2011 2012 2013

Passengers 365 420 448 563 651 723 866% change (4) 15 7 26 16 11 20Ports Visited 46 38 43 47 50 52 51


6 Port of Call Passengers at UK Ports (000s)

8 9

Also, passengers calling at UK ports during a cruise grew 20% in 2013 so that their number had more than doubled over the same six-year period. This total is also on course to reach a million within a couple of years.

The number of different British ports benefiting from cruise calls also topped 50 for the second year running.

CRUISING CONTINUES TO PROVIDE GREAT VALUE

With average cruise durations varying year-on-year, the most accurate price comparison for cruise holidays are the daily rates and these show that cruises cost an average £134 per day in 2013, £6 more than in 2012.

However, in 2013 the average price paid for a cruise dropped by £12 and that for a summer cruise by £26 to £1,287 with an increase in shorter cruises contributing to the fall in prices. Even better news for consumers was that one in every two cruises sold in 2013 cost less than £1,000.

There was strong demand for longer winter cruises and the ultra-luxury cruise companies had another good year attracting more than 27,000 guests.

Year £

2005 £132

2006 £130

2007 £137

2008 £135

2009 £120

2010 £130

2011 £132

2012 £128

2013 £134


9 UK Market Cruise Per Diems

Year Summer Winter Year

2007 1270 1480 1334

2008 1313 1647 1409

2009 1238 1532 1330

2010 1323 1629 1421

2011 1331 1729 1434

2012 1313 1573 1388

2013 1287 1602 1376


8 Average Revenue (£) per UK Passenger

Year%500

%501-1,000

%1,001 - 1,500

%1,501 - 2,500

%2,501 - 5,000

%5,000+

2004 15 25 24 24 9 3

2005 15 27 26 23 6 1

2006 13 21 22 29 12 2

2007 12 26 25 27 8 2

2008 11 24 23 28 11 2

2009 12 24 21 26 13 2

2010 14 26 21 27 12 2

2011 15 27 22 24 11 2

2012 13 34 24 21 6 2

2013 16 33 22 21 7 2


7 Price (£) Trends In UK Cruise Market

10 11

10 Ultra-Luxury Cruise Passengers

Year Summer Winter Total % of all cruises

2007 13816 7552 21368 1.6

2008 13238 6427 19665 1.3

2009 14710 7960 22670 1.5

2010 16125 7899 24024 1.5

2011 15371 10498 25869 1.5

2012 20057 8393 28450 1.7

2013 18780 8260 27040 1.6

Source: IRN Research for CLIA UK & IrelandIncluded Crystal, Compagnie du Ponant, Hapag-Lloyd, Hebridean, Regent, Seabourn, Seadream, Silversea

CRUISE DEVOTEES REMAIN LOYAL

Cruising has maintained one of the highest satisfaction levels in leisure travel and this continues to drive an equally high level of repeat business – and not just from year to year. In 2013, for the second consecutive year, more passengers took multiple cruises than took just the one cruise.

The ratio of first-timers fell by four percentage points and as they are generally younger than the average repeat cruise passenger, this also contributed to the increase in the average age.

12 13

This trend in repeat customers means that the majority of passengers at sea at any one time have cruised before and this has been reflected in the average age of passengers being 57 years in 2013.

The percentage of first-time cruisers has been volatile in the recent recessionary years as cruise companies have marketed even more strongly to their past-passengers.

Year %

2007 38

2008 32

2009 29

2010 33

2011 40

2012 36

2013 32


12 First Time Cruisers as % of UK Market

% passengers

Year Up to 26 26-34 35-44 45-54 55-64 65+ Average Age

2004 9 5 10 19 26 32 54.2

2005 10 5 9 18 25 33 53.5

2006 8 5 11 21 27 27 52.5

2007 8 4 9 19 27 31 53.2

2008 8 4 8 18 27 33 53.7

2009 7 4 8 18 28 35 55.6

2010 9 4 9 19 27 33 54.8

2011 9 4 9 19 26 35 55.6

2012 8 4 7 18 27 37 56.1

2013 7 4 7 17 26 40 57.0


11 UK Cruise Market Age Analysis

Cruises taken in last year (%)

Year 1 2 3 4 5 6+

2009 38 35 15 5 2 4

2010 43 33 12 5 3 6

2011 58 27 9 2 1 1

2012 46 30 14 4 2 2

2013 45 33 12 4 2 1


13 UK Passengers Booking Multiple Cruises Annually

PASSENGERS LEAVE IT LATE

The percentage of 2013 cruises booked within three months of departure was the highest for 10 years but this reflected, to some extent, the market situation in 2012 when economic indicators had not yet started to improve.

This affected the early booking market for 2013 cruises to the extent that the ratio of cruises booked more than nine months in advance (23%) was the lowest for 10 years. This led to more late sales in 2013 despite the slow economic improvement in the UK economy as the year progressed.

14UK Cruise Market - Trends in Booking Lead Times

% of bookings (no. of months)

Year 12+ 9 - 12 6 - 9 3 - 6 0 - 3

2002 7 13 17 22 36

2003 8 12 14 24 41

2004 11 15 18 23 33

2005 17 17 18 22 22

2006 15 18 18 24 27

2007 18 17 18 23 24

2008 18 17 18 22 26

2009 25 19 17 22 17

2010 16 16 18 22 28

2011 15 15 17 20 34

2012 13 12 17 23 36

2013 11 12 16 21 40


DESTINATIONS AND VALUE STILL THE GREAT CRUISE PERSUADERS

Destination remains the number one reason given when choosing a cruise holiday. Price and perceived value for money follow as the reasons most choose when deciding on their last cruise holiday.

In times of economic stress, it is no surprise to see that the biggest changes over the last three years are the way that more

14 15

Reasons2011%

2012%

2013%

Price/value for money 67 62 66

Special Offer 17 24 21

Service on-board 29 24 23

On-board atmosphere/service 26 24 22

Dining 26 23 24

Facilities on board 25 21 23

Special Occasion 20 18 16

Loyalty membership benefits 13 18 15

All-inclusive nature of package 19 17 19

Entertainment 16 15 15

Cabins and public rooms 15 13 17

All-inclusive drinks package 11 7 11

Cruise themes 5 5 5

Pre-post land stays 3 4 5

Maiden Voyage 1 1 1

* Asked to select three principal reasonsSource: UK Cruise Survey 2013 (IRN Research)

16 UK Passengers - Reasons* For Choosing Their Last Cruise

CRUISING POPULARITY GOES SOUTH

South East England has become the clear leading region for the sourcing of cruise passengers but – if London is included – its 27% share is actually the same as its 27% cut of the UK population, leaving the South West as the real stand-out performer with a passenger ratio significantly ahead of its population share.

17Cruise Passengers as % by Region of Residence

Region 2006 2013UK pop %

South East 14 23 14

North West 16 13 11

South West 10 12 8

Scotland 11 6 9

Yorkshire & Humberside 8 8 8

West Midlands 8 8 9

East Midlands 7 8 7

East of England 5 6 9

North East 6 5 4

London 7 4 13

Wales 5 4 5

Northern Ireland 3 1 3


Reasons2011%

2012%

2013%

Itinerary/Destinations 69 70 71

Cruised with this line before 64 55 56

Departure Date 31 38 38

Duration 22 24 23

Flights from local airport 22 13 12

No flight 21 25 25

To try another cruise line 9 17 16

To try another ship 10 9 10

Personal recommendation 9 6 8

Travel agent recommendation 4 5 3

Recommendation on web review/blog 4 2 3

* Asked to select three principal reasons.Source: UK Cruise Survey 2013 (IRN Research)

15 UK Passengers - Reasons* For Choosing To Take A Cruise Holiday

all-inclusive pricing and other special offers have taken on even greater importance.

The other significant development mirrors that sea-change in favour of cruising from a British port and away from fly-cruises in that flight availability from local airports is considered increasingly less important.

European Destinations 2010 2011 2012 2013% change2012/13

Rhine/Moselle/tributaries 23.6 20.0 26.9 35.5 32

Danube 12.5 12.9 15.0 17.3 15

Rhine/Danube 4.1 8.3 4.6 5.1 11

Rhone/Seine 8.0 10.1 10.2 14.1 38

Russian 4.4 4.9 5.2 6.4 23

Italian (Po) 2.0 2.9 3.0 3.1 3

Elbe 2.5 2.2 2.4 3.6 50

Douro 8.7 9.4 9.3 10.7 15

Other European 9.1 9.6 13.4 14.2 6

Total European 74.9 80.3 90.0 109.9 22

Non European Destinations 2010 2011 2012 2013 % change

Nile 58.0 25.2 28.3 12.2 (57)

Far East/China 4.7 5.0 6.9 4.3 (38)

Other non-European 4.6 3.3 4.6 5.2 13

Total non-European 67.3 33.5 39.8 21.7 (45)

18 UK River Cruise Market (000s)The continued investment in new river cruise ships has led to a 22% increase in the number of UK passengers taking a European river holiday in 2013, a rise of nearly 50% since 2010.

European river cruising is in the process of a major product re-invention and this is reflected by UK travel agents reporting a surge in demand for river cruises. In just the last two years (2012-13), 27 new ships have been introduced on Europe’s rivers and 24 more are due during 2014. The previous generation of river cruise ships were small with few if any cabins with balconies. Dining was limited to one venue and fixed times while entertainment options were limited. This has changed radically with the new generation of ships.

A third of European river cruise ships have been built within the last ten years - a quarter within the last five. These are larger than their predecessors with some having a new-style twin-deck design. They also offer the kind of multiple dining venues, spa facilities and range of cabins with balconies which have already combined to transform the ocean cruising.

Another key change is that most river cruise brands have now moved towards a more comprehensive and easier-to-understand all-inclusive pricing model.

The overall size of the UK river cruising market is still being masked by Egypt’s ongoing political problems which have had a devastating impact on the country’s tourism and Nile river holidays. This has resulted in the number of UK passengers taking Nile cruises dropping 50% in 2013 and by 80% since 2010.

BUMPER YEAR FOR EUROPEAN RIVERS

16 17

CLIA UK & IrelandFirst Floor | 41/42 Eastcastle Street | London | W1W 8DU | Telephone: 020 7436 2449 | www.cruiseexperts.org

Cruise Lines International Association (CLIA) is the world’s largest cruise industry trade association with representation in North and South America, Europe, Asia and Australasia.

CLIA represents the interests of cruise lines, travel agents, port authorities and destinations, and various industry business partners before regulatory and legislatory policy makers.

THE CRUISE REVIEW · the cruise review published march 2014. contents executive summary . 3 more growth for uk market

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