Analyst: Millennials a Challenge for Cruise Industry
by Andrew Sheivachman /New research indicates that the cruise industry faces challenges as demographics shift in favor of the millennial travel market.
A recent Consumer Observer report called “Millennials to Power the Next Generation of Leisure Spending,” issued by the investment firm Morningstar, finds that boomers will continue to drive most travel spending in the near future.
But social and technological shifts will empower millennials sooner than most think.
For the cruise industry and cruise sellers, millennials’ travel tastes, coupled with their growing preference for mobile booking, will have significant consequences, according to Morningstar leisure analyst Jaime Katz, CFA.
Land-based competition
Katz said that consumers’ easy access to online information is increasing the competitive challenge that land-based vacations pose to cruise lines.
“The ability to compare [cruises] with so many other choices is what detracts from cruising,” Katz told Travel Market Report. “As e-commerce and digital have evolved, cruises are competing more and more against land-based vacations.
“When travel shopping goes online, it makes it harder to justify the value proposition of cruising,” especially given optional shipboard expenses, said Katz.
Agents vs. online
Cruise lines also are challenged to reach millennial travelers because of younger travelers’ preference for self-booking via mobile devices.
About a third of millennials book their travel on their smartphones already, according to the report. Around 12% book on tablets.
Yet cruise vacations are “still about 80% booked through travel agents, which means that the consumer has to be going to an agent, or the lines have to build a bigger online presence,” Katz said.
So while the importance of travel agents to cruise sales is good news for agents, it’s not necessarily good news for cruise lines trying to carve out a market among millennials.
The cruise experience
Another looming issue for the cruise industry is the fact that younger travelers like to have more hands-on control of their vacations, which makes them hesitant to commit to cruising.
“Millennials like to take things into their own hands and don’t want to go onto a cruise ship and be told what to do,” said Katz. “That is something inherent to the age group.”
Katz said she sees some cruise lines trying to appeal to a wider swath of cruisers through technological innovations and smart branding.
Adapting the product
“Lines like Norwegian position themselves interestingly, presenting its product as cross-generational Freestyle Cruising, which works a little better than some of the traditional cruise product,” said Katz.
Royal Caribbean is aiming to attract more adventurous travelers with high-tech amenities and unique activities on its new Quantum vessels.
“All these bells and whistles are trying to attract the adventure seekers and make cruising more of a risk-seekers’ adventure than it used to be,” said Katz.
The strategy could prove to be a double-edged sword for the cruise lines though: By attempting to appeal to everyone, they may sacrifice the specialization that millennials crave.
The boomer market
If cruise lines aren’t prepared to tailor their product entirely toward millennials, that’s understandable, given that baby boomers still account for more spending.
“The baby boomer generation now represents approximately 70% of all disposable income in the U.S., which has wide-ranging benefits across several leisure categories,” according to the Morningstar report.
About half of leisure spending in the U.S. is by people over age 55; they have the money, and the spare time, to buy vacations.
