Terror attacks, rapid expansion increase vulnerability of cruise sector

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The cruise industry has never been more vulnerable to a downturn in business, according to a new report from Mintel Travel and Tourism Intelligence. Not only is it dealing with a slump in passengers following the September 11 attacks on the US, but the sector is in a period of unprecedented expansion, placing further pressure on profitability.

The report's author Tony Peisley said: "Nearly $19bn is committed to building 49 ships over the next five years. This represents a 52% increase in worldwide capacity. With 70% of cruise passengers sourced from North America and one line, Renaissance, already forced into Chapter 11 administration following the terrorist attacks, the industry now faces its biggest ever challenge."

Planned expansion in the sector is based on the increasing age and wealth of populations, with cruise passengers doubling during the past decade to 10.1m in 2000.

Peisley said: "Before the attacks, the lines were planning to add even more ship orders. To fill them all, the number of passengers would have to nearly double again, to 19m by 2009."

Until the last couple of years, cruise lines were recording ever increasing profits as passenger numbers rose sharply. But in 2000 yields fell as investments in capacity rose. Competition too is increasing, said Peisley, as new, high quality ships emerge which still offer budget prices for the mass market.

• The report "World Cruise Market", is available from Mintel at £595.