Monthly Archives: April 2019

Market Research #011: Cruising Industry

Cruising to Strong Returns with Royal Caribbean

This is the Eleventh in a series of Independent research produced by the Murray Wealth Group Research Team. The purpose of this series is to provide insight into our portfolio construction and how our research shapes our investment decisions. We welcome any feedback or questions you may have on these monthly commentaries.

The cruise industry presents an attractive opportunity for investors. With the perception of cruising having changed over the last date, the industry has been expanding into both new geographic and demographic markets globally. China represents a strong new growth market as its middle class emerges, and new onboard features/entertainment options are appealing to millennials and families as alternatives to destination resort vacations. As well, cruise lines are now able to better maximize capacity utilization as the ships can be relocated to high demand markets based on seasonality.

The industry is dominated by three major players (Royal Caribbean, Carnival, and Norwegian) that combined make up 75% of the market (based on available capacity), with smaller, niche operators limited to certain markets or demographics. Barriers to entry are relatively high, with sales distribution, significant capital requirements, quality/reputation and port/berth access representing the main barriers to new competition. The last major company to successfully enter the cruise market was Disney, in the 1980s (although it remains a niche player with 2.2% share and Disney-themed ships), and it was only able to do so by leveraging its established brand as well as holiday distribution and marketing.


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