24 min read
by Aleksandra Gagic
The Covid-19 article series promises to take a deep dive into the complexities of the consequences caused by the global pandemic that marked the year 2020. This in-depth analysis includes a wide variety of business sectors and industries. In our past articles, we have covered Aviation, Hotels, Airbnb, and, continuing in a similar manner, in this piece, we will talk about the Cruise Industry. The outline of the article remains the same, therefore, we will start from the very beginnings of this type of travel, go over the timeline of its development, arriving at the present day, tainted by the Covid-19 pandemic, which will eventually bring us to the number crunching and forecasts of what the Cruise Industry may turn into as a result of the Covid-19.
The very first ocean-going vessels weren’t primarily concerned with passengers, but rather the cargo they could carry. The first shipping company that was offering regularly scheduled service from the US to England was the Black Ball Line from New York. They were also the first company that started being concerned with the comfort of their passengers. Soon after, by the 1830s, steamships were introduced to the transatlantic market and they absolutely dominated it in the area of passenger and mail transport. English companies have also kept their position quite high, led by the British and North American Royal Mail Steam Packet, founded in London in 1839 and later known as the Cunard Line. One year later, on July 4th, 1840, the first ship under the Cunard name, Britannia, left Liverpool carrying a cow on board to supply fresh milk to the passengers that onboarded a 14-day long transatlantic crossing.
The emergence of cruising for pleasure is usually linked to the year 1844, which is typically taken as the year when the new cruise industry began.
Naturally, the following years came along with dramatic improvements in the quality of the voyage for passengers. Therefore, the 1850s and 1860s were the years when ships began to officially cater solely to passengers, rather than to mail or cargo. In addition to that, there were added luxuries such as having electric lights, additional deck space, and entertainment. In 1867, the American writer, Mark Twain was one of the passengers on the first cruise that originated in America. He documented his adventures of this trip that lasted for six months in the book Innocents Abroad.
In the 1880s, the British Medical Journal endorsed sea voyages for curative purposes, which resulted in further encouragement of the public to go on leisure pleasure cruises and transatlantic travel. And, not everyone was enjoying the luxuries of sea travel – there were lower end classes, such as a steerage class. In steerage, passengers were responsible for providing their own food and they could sleep in whatever space they could find available.
In the early 20th century, the concept of superliners has been created and has led the market in the development of these enormous, massive, ornate floating hotels. The purpose behind the design of these liners was an attempt to reduce the discomfort of ocean travel to a bare minimum, masking the fact that the passengers are at the sea for days. They did this by adding the most elegant accommodation and piling up the planned activities to keep passenger’s mind off the risks of this type of travel. In fact, the ships owned by the English Cunard Line, Mauretania and Lusitania, sparked the tradition of dressing up for dinner and the advertisement of the romance of the voyage. Still, aside from the luxury and the romantic side of sea travel, speed was still the deciding factor in the ship design, which meant there had to be some trade-offs. So, there could be no space for large public rooms, and passengers needed to share dining tables.
Let’s take a little detour and see what was going on in Germany during the birth of the cruise for pleasure concept. The KdF or Kraft durch Freude (Strength through Joy) leisure organization, a part of the national German labor organization, was dedicated to instilling and strengthening National Socialist ideals and unity by providing affordable equal leisure and travel opportunities for the German masses.
The idea they had going was rather simple: everyone that was a member of the German Labor Front or the Nazi Party would be given the opportunity of low-priced cruises.
In May 1937, they launched Wilhelm Gustloff, a ship that was state of the art, weighing over 25,000 tonnes and measuring over 200 meters from stem to stern. The Wilhelm Gustloff was usually referred to as a classless ship. She had 616 cabins and was able to accommodate 1,400 passengers. She had seven bars, two restaurants, a couple of dance halls, a concert hall, a library, a swimming pool, and a hair salon accessible to all passengers. As the Nazi minister Robert Ley boasted at her launch: “We Germans do not use any old crate for our working men and women. Only the best is good enough.”
So, one might ask, what was the Nazi party doing providing all of this to the working men and women and it all comes down to an essential part of this seduction being provided by the Nazi leisure organization that had commissioned the Wilhelm Gustloff ship – KdF. KdF was established in 1933 as a subdivision of the German Labour Front and it had one, simple premise: state-organized leisure.
Nazism sought to woo the ordinary German worker away from socialism towards “National Socialism”, so the KdF was promising holidays, cultural enrichment, and sports activities as part of the appeal.
The ship ended up being torpedoed by a Soviet submarine on January 30th, 1945, and it sank into the icy waters of the eastern Baltic within one hour.
The White Star Line, owned by American financier, J.P. Morgan, introduced the most luxurious passenger ships ever seen. Olympic was the largest ocean liner in the world for a certain period of time, just slightly interrupted by the Titanic that had the same dimensions but higher gross tonnage, thanks to the revised interior configurations. Unlike the other ships in the class, Olympic had a long career spanning 24 years from 1911 to 1935. In 1935, the ship was withdrawn from service and sold for scrap. By contrast with the Olympic, the Titanic, and Britannic had rather short service lives. The Titanic ended up colliding with an iceberg on her maiden voyage and sank in the North Atlantic in 1912.
The Titanic was a result of intense competition among rival shipping lines that have marked the first half of the 20th century. The biggest rivals were the White Star Line that found itself in a battle for steamship primacy with the Cunard, a British firm that had two ships ranked as most sophisticated and luxurious at the time. Titanic caused a lot of stir when it departed for its maiden voyage from Southampton, England on April 10, 1912. After two stops, one in France and the other in Ireland, the ship set sail for New York carrying 2,240 passengers and the crew on board.
The world’s most celebrated ship carried many wealthy industrialists, dignitaries, celebrities, and high-ranking officials. One of the passengers was the White Star Line’s managing director accompanied by the ship’s builder. The main financier, J. P. Morgan, was also supposed to be on the ship but had a change of plans shortly before the ship set sail. Other notable passengers included the owner of Macy’s, industrialist Benjamin Guggenheim, and many more. The employees were mostly traveling Second Class, along with the journalists, academics, and tourists, enjoying a level of service and accommodation equivalent to First Class on the majority of other ships at that time. Still, even the largest group of passengers that was in Third Class, amounting to over 700 passengers, was offered accommodation and amenities superior to those that could be found in Third Class on any other ship of that era.
After four days of sailing, on April 14th at 11:30 pm, the ship got in contact with an iceberg. After a sharp turn and an avoidance of the frontal collision, the crew was under the impression that no harm was made and continued sailing almost carelessly. Sensing no collision, they were relieved and they had no clue that the iceberg had a jagged underwater spur, which slashed a gash in the hull below the ship’s waterline. After the collision, the Titanic stayed afloat for close to three hours, and those hours witnessed all sorts of acts, such as unimaginable bravery but also craven cowardice. Human dramas were unfolding while the worlds’ most luxurious ship was sinking. Families were getting separated in the chaos and confusion. Selfless individuals were giving up their spots to others, while some were doing their best to skip the line and get to a lifeboat at all costs. In the end, a total of 706 people survived the sinking of the Titanic.
RMS Titanic Sailing from Southampton
As high as an 11-story building and nearly four city blocks long, the Titanic was one of the largest and most magnificent ships in the world. It’s shown here, photographed on April 10, 1912 (Bettmann/CORBIS)
On the other hand, one of the three stars of the English superliners, the Britannic struck a German naval mine and sank in the Aegean Sea in 1916 after being used as a hospital ship in the First World War and had never served her intended role as a passenger ship. With these luxurious liners, space and passenger-oriented comfort took precedence over speed in the design, resulting in larger liners.
Just like the Britannic, certain liners, such as Mauretania and Aquitania were transformed into hospital ships during the First World War. Others were turned into troop transports, or have even participated in the war as warships, such as the Kaiser Wilhelm der Größ, which was scuttled in battle in 1914. The fate that struck the Britannic and the Kaiser Wilhelm der Größ wasn’t uncommon during the war. In fact, numerous incidents of torpedoing took place and large numbers of ships ended up sinking.
Essentially, World War I put the building of new cruise ships on pause, while many older liners were used for different purposes. After the First World War, in the years between 1920 and 1940, the most glamorous years of transatlantic passenger ships stepped on the stage. These ships catered to the rich and famous. Moreover, these are the times when American tourists interested in visiting Europe replaced the immigrant passengers. And, the advertisements were all about the fashion of ocean travel, with elegant food and onboard activities.
There was a severe rivalry going on between the English and the French when it comes to the cruise industry. These two countries have always competed with one another and one of the famous attempts of the French taking the throne was the launch of Normandie, a ship whose novel design and lavish interiors led many to consider her the greatest of ocean liners. She took on a record when it comes to speed crossing the Atlantic in just 4.14 days. However, she was not a commercial success and was relying on the government subsidy in order to operate. During the Second World War, she was seized by the American authorities in New York and they changed her name to USS Lafayette. During the efforts to convert her into a troopship, the ship caught fire in 1942 and although she was salvaged at great expense, restoration was deemed too costly so Normandie ended up being scrapped in October 1946.
During World War II, cruise liners were once again converted into troop carriers and all transatlantic cruising has stopped until after the war has ended. European lines ended up reaping the benefits by transporting refugees to America and Canada, along with the tourists and business travelers to Europe.
Because of the rather low number of American liners at this time, along with profit loss, the US government has decided to subsidize the building of cruise liners. On top of the luxurious amenities, ships were being designed in accordance with the specifications for potential conversion into troop carriers.
Increasing air travel and the first non-stop flight to Europe in 1958, however, marked the ending of transatlantic business for ocean liners. Passenger ships were sold and liners went bankrupt from the lack of business. If you want to learn more about the development of Aviation, we have started the Covid-19 series covering exactly that!
The 1960s were the years marking the true beginnings of the modern cruise industry. Cruise ship companies and organizations decided to focus on vacation trips, primarily in the Caribbean, thus creating a fun, carefree image, which attracted numerous passengers who would have never been able to enjoy a superliner in the ‘30s or ‘40s. The environment on cruise ships was casual, with a special treat called entertainment. Consequently, the transportation role of ships transformed into the concept of enjoying the voyage itself, rather than just being transported from one spot to another.
Just like the other sectors of the travel industry, the cruise industry began expanding rapidly and it started changing at the same, fast pace, in order to cater to an ever-growing number of people. As a matter of fact, the cruise industry has been the fastest-growing tourism industry, expanding at a rate double that of any other land-based tourism sector. The cruise industry ended up being a market of a certain appeal to people of all locations, budgets, and demographics. The idea of going to numerous locations within a short period of time, with all the logistics taken care of was, and still is, alluring to many people.
Timeline of the uprise of a billion-dollar industry
Just as Aviation and Hotels, the Cruise Industry has undergone expansion on a massive scale ever since the development of Prinzessin Victoria Luise, the very first cruise ship in 1900. Naturally, when cruise ships first appeared, they were reserved for the wealthy, which marked the period of the early 20th century. In its essence, cruising was an alternate, luxurious way to go from one place to another. The development of commercial air travel meant ships were no longer dominating as a preferred way to travel long distances, which is why cruise ships started being built for the travelers, thus cruising for the sake of cruising was born.
Over the course of time, high demand brought the industry to an expansion from the traditional locations of the Caribbean and Mediterranean into all continents of the world. What made cruising more affordable are technological advancements, resulting in cruises being available to a wider range of demographics.
The process of commercialization comes along with diversification so, in the case of cruise ships, the range of service has expanded significantly, and nowadays we have an endless choice when it comes to cruising. There are cruises for singles, couples, or elderly, Disney cruises, tiny river cruises of 50 passengers but also super floating cities holding as many as 6000 passengers. The modern cruise ships come with everything that a typical land-based resort offers, and much more! On a cruise, you can find restaurants, shopping centers, all sorts of entertainment, spas, pools, and sports facilities. So, for everyone that wants an all-in-one holiday where they don’t need to think about logistics, a cruise holiday will be a way to go.
The industry has noticed an increasing interest in “once in a lifetime” experiences rather than the most common tropical island cruises. So, instead of these, they are focusing on visiting places such as glaciers and wildlife in Alaska or remote and secluded locations in South America and Asia. This trend comes hand in hand with passengers choosing to spend more time on a cruise holiday.
In addition to these experiences, thematic cruises are also gaining popularity. So, people who have an interest in a particular area want to enjoy it with a group of people sharing their interests, such as food, wine, wellness, arts, and diving. The opportunities are endless and rather diverse.
Finally, a niche market, Ecotourism, has also started to have a significant impact on the industry thanks to the growing interest in environmental sustainability. Nowadays, there’s a lot of allure behind eco-friendly, conscious approaches to travel. Therefore, the cruise industry has also started working hard on adapting the ships to respond to such a request.
The diversification doesn’t really end there. In fact, we’re positive there are types of cruises you may have never imagined there would be such as singles or solo cruises, adult-only, family cruises, gay cruises, and even erotic swinger cruises. The industries’ offer ramification is almost endless, which says a lot about its development over time.
Looking back at the industries’ growth, no one could have even thought of the industry not expanding further. However, at that time, no one could have predicted a global pandemic that would close the countries and shed some light on cruises as Petri dishes for infection.
Knowing what the expectations were will help us understand just how big the blow of Covid-19 actually is. So let’s dive into what the industry was expected to achieve in 2020.
In an Industry Outlook excerpt from CLIA’s State of the Industry report released in order to outline the expectations and projections, they were looking at a continuous growth in 2020, with 32 million passengers that were expected to go on a cruise trip.
When it comes to the deployment areas, the Caribbean and the Mediterranean were expected to make close to 50% deployment:
And, the majority of passengers was expected to come from North America and Western Europe, arriving at an astonishing 20 million passengers:
According to CLIA, cruise activity supports over 1.1 million jobs across a wide cross-section of industries and sectors, from land and air transportation all the way to food, beverage, lodging, manufacturing, hotels, professional services, and a wide range of suppliers and service providers globally.
Sadly, the impacts of Covid-19 and their reverberance is being felt across this enormous community, with up to 2,500 jobs lost each day cruises aren’t fully operating.
Let’s look at the events that put the spotlight on the cruise industry amid the Coronavirus crisis.
Diamond Princess, a ship owned and operated by Princess Cruises, has been all over the news at the very beginning of the Covid-19 outbreak. During a cruise that started on January 20th, 2020, out of 3711 people on board, over 700 have tested positive for coronavirus, which breaks further down to 567 out of 2,666 passengers and 145 out of 1,045 crew. Sadly, 14 of them, all passengers, died. At that time, Diamond Princess accounted for over half of the reported cases of coronavirus outside of mainland China.
In May 2020, over 40 cruise ships were reported to have had confirmed positive cases of Covid-19 on board.
The cruise industry generates over $150 billion in worldwide economic activity and supports nearly 1.2 million jobs. Every 1% drop in cruising that occurs worldwide results in up to 9,100 jobs lost. Each day the suspension of cruises results in up to 2,500 jobs lost.
From mid-March, when the cruise operation came to a halt, through the end of September, the worldwide impact is expected to be over $50 billion in economic activity, 334,000 jobs and $15 billion in wages.
Reflecting the extent to which governments around the world have imposed lockdown measures to contain the spread of COVID-19 and the resulting severe economic shock, GlobalData expects global construction output to contract by 2.3% in 2020.
One of their forecasts assumes that the outbreak will be contained across all major markets by the end of the second quarter, which didn’t really happen, following which conditions would allow for a return to normalcy in terms of economic activity and freedom of movement in the second half of the year.
Still, even with that scenario, they were expecting to see the lingering and potentially heavy impact on private investment owing to the financial toll that has been inflicted upon businesses and investors across a wide range of sectors. Now, in a scenario that looks more like the reality, we are living in, with the spread of the virus continuing into the second half of 2020, further downward revisions to the growth outlook are likely.
The cruise industry generates over $53 billion in economic activity in the US and supports a total of 421,000 American jobs. Each day of non-operating in the US results in a total loss of approximately $110 million in economic activity and up to 800 jobs in the US. In the period from mid-March to the end of September, it is estimated that the suspension of cruise operations will result in a total loss of 163,700 jobs lost (both direct and indirect), and $8.6 billion in total wages.
The cruise industry in Europe generates 53 billion euros in economic activity and supports 435,000 jobs. Each day of the cruise operations being on halt ends up in 3,500 jobs lost in Europe. The suspension from mid-March till the end of September is expected to result in a total loss of 215,800 direct and indirect jobs and 6.7 billion euros in total wages.
One thing is certain, cruises aren’t the source nor they are the cause of Covid-19. What CLIA is very vocal about is the fact that with over 30 million cases confirmed worldwide, cases of coronavirus on cruise ships are just a fraction of a percent of confirmed cases around the world.
According to CLIA, cruise ships aren’t any different than restaurants, hotels, movie theaters, or any place where people come together to socialize and enjoy shared experiences. This industry is not much different from other hospitality sectors where people come in close contact with others who may be carrying the infection, such as airlines, subways, and ride-sharing experiences.
Now, as cruise ships are setting sail again, some are still hesitant to go on a cruise. The cruise industry is bringing in an array of strict measures to limit the spread of the virus, but the question is, can these measures be enough to help the sector survive the pandemic?
The cruise industry is relying on strict, new protocols, and hoping it will help regain consumer trust. New measures that include the arrival at cruise terminals at set time slots, screening travelers with temperature checks, medical reviews, health questionnaires, and an antigen Covid-19 swab test.
MSC cruises are going one step ahead, providing their guests with a wristband, which ensures contactless options on board, such as opening cabin doors without touching the handles or making payments. These bands will also help facilitate proximity and contact tracing if need be. The MSC Grandiosa operated with a reduced capacity, with about 70% of normal, pre-pandemic, passenger numbers.
Other cruise companies are experimenting with mitigation strategies, too. So, for instance, TUI Cruises and Hapag Lloyd recently concluded their inaugural “no-call” trips, without any city stop-overs. Both companies have also produced 10-point plans to help reassure passengers and encourage more people to start traveling again. The point plan includes pre-boarding thermal image screening, social distancing, operating with 40% fewer guests, reducing table numbers in the restaurants, reducing the number of participants in sports and entertainment, adding laboratories to the ships, and expanding medical teams. Finally, the crew is also expected to undergo regular Covid-19 testing.
It is expected that prices will be reduced in order to entice passengers back on board. In fact, there are already deals available for 2021, including discounts on certain cabin upgrades. However, some firms are taking a different approach by focusing solely on domestic cruises, thus overcoming the travel restrictions.
It’s clear the industry is going out of its way to earn passenger trust again and stay afloat (literally). It will be interesting to see what type of demographic returns to cruising first. Industry experts think that it will be passengers who traveled in intergenerational parties and madly fall in love with the cruising lifestyle. Only this time, they will return with their children rather than their grandparents. They are the ones who understand how cruise ships operate and they aren’t in the high-risk age group. Research shows that so-called crisis-resistant tourists are less likely to be put off by the risks of cruising.
Regardless of the uncertainty of the long-term sustainability of the cruise industry, there’s solace in the fact that cruise passengers are notoriously loyal. Studies have shown that visitors return even after a disaster. In addition to that, in a survey conducted by CLIA, 9/10 passengers said they will probably (or definitely) cruise again.
It’s certain that Covid-19 will leave the future of the cruise industry in turmoil. Diamond Princess and similar stories that made headlines during the very beginning of the global pandemic have led to increasingly troubling stories emerging from cruise ships, including extended isolation and vessels being turned away from multiple ports. All of this can’t but make extensive reputational damage to the sector. Still, many are hoping that the industry will bounce back, regardless of the long-lasting repercussions and the entirety of changes that need to be introduced in order to ensure standards are met.
The cruise industry has enormous potential when it comes to providing economic to a port state. These economic benefits arise from five principal sources:
Therefore, extended moorings will undoubtedly hit the industry. The financial impact is enormous. Estimations say that the world cruise industry is worth over $150 billion but the share prices have plummeted due to the coronavirus. Carnival Cruises stock has dropped by as much as 60%, while Royal Caribbean and Norwegian reported losing over 70% of their value over the past month, resulting in Norwegian securing an additional revolving loan of $675 million and Royal Caribbean announcing an increase in their revolving credit capacity by $550 million.
Reduced share prices and reliance on loans is just an added pressure on cruise companies. If they don’t manage to find sustainable funding, it is highly unlikely for all of them to survive this crisis. Covid-19 has just added another problem on a list of issues for which cruises have been under intense scrutiny for their carbon footprint and environmental damage they are causing.
On the other hand, many local economies and businesses rely heavily on the success of the cruise industry. The impact of the cruise industry is far-reaching. In fact, reports show that the cruise industry yearly contributes $2 billion to the Caribbean, which translates into a 5.9% contribution to some nations’ entire GDP.
While some residents are finally getting a chance to enjoy cities that are normally packed with wandering tourists, such as Venice or Santorini, on the other hand, there are people’s livelihoods relying on cruise tourism and a fall in it would have disastrous consequences.
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