Expert Column COVID-19 Pandemic : Changes in the Cruise Ship Market

A cruise travel is a trip using a ship for the purpose of enjoying leisure away from daily life. It shares the concept of tourism with ships providing transportation services, hotels providing accommodation and food services, and resorts providing recreational activities.

Accordingly, it can be defined as a “trip for the purpose of pure tourism rather than transportation that uses ships, equipped with facilities necessary for various levels of accommodations, food and restaurant facilities, and various recreational activities, that safely cruise regularly or irregularly to Korean and international ports or ports of call, while providing high-quality tourism services.”

Cruise tourism started in 1960, and by 1970, the number of cruise passengers worldwide reached 500 thousand. By the late 1970s, that number exceeded 1 million. The cruise industry has developed rapidly since the 1970s, and the number of cruise passengers worldwide exceeded 25 million in 2017. The average annual growth rate of cruise tourism was about 8.5%, higher than the average rate of global tourists (3.8%).

In the case of Korea, the number of foreign cruise tourists visiting Korea is on a downward trend, reaching a maximum of 2 million in 2016. The decrease in Chinese cruise tourists due to economic coercion from the THAAD dispute in 2017 had a direct impact on the overall decrease in cruise tourists. Due to the impact of COVID-19 in 2020, Korean cruise tourists are only about 0.15% compared to 2016.

Traditionally, the cruise market has a high market share in North America (USA) and Europe. Looking at the market share for 2018-2020, North America is 51%, Europe is 21%, and Asia is 12%, which is more than 80% in the three regions.

According to 2018 Cruise Industry News, four cruise lines account for 84% of the global cruise market and have the following market share: Carnival Corporation (44.1%), Royal Caribbean Cruises (23.9%), Norwegian Cruise Line (8.8%), and MSC Cruises (7.0%). Among the Cruise lines, US-based Carnival Corporation and Royal Caribbean Cruises account for about 68%, and EU-based Cruise Lines account for about 15% of the market share.

The cruise industry consists of pre- and post-cruise tourism, ports of call tourism, shopping for souvenirs, duty-free goods, and various goods, and shopping for crew members. It is an industry, where cruise lines enter ports and purchase various products needed for cruise operation, such as food materials, hotel supplies, refueling, water supply, product supply, and cleaning. Also, it incurs costs for various services that support global cruise operations, including travel agency fees, advertising and promotional fees, and other professional and business service fees.

According to a report by the Korea Tourism Organization (2020)^[1], the economic impact of the global cruise industry is $154.5 billion, the number of tourists is 29.7 million, job creation is 1,166,000 people, and wages are $50.53 billion as of 2019. As of 2018, it was recorded that global cruise passengers spend $376 per person before boarding and $101 per person at the port of call, for a total of $68 billion.

The Ministry of Maritime Affairs and Fisheries (2017) announced that cruise tourism in 2016 generated a total of 5.4 trillion won in economic effect and that there was an effect of inducing employment of about 24,000 people.

Changes in the Cruise Market After the COVID-19 Pandemic Regarding cruises during COVID-19, the cruise ship ‘Diamond Princess^[2]’ was anchored in Yokohama Port, Japan on February 3, 2020, and a confirmed case of COVID-19^[3] was discovered inside the ship. Beginning with this, the cruise market took a blow as each country took measures to block borders, close cruise ports, and prevent ships from entering after the World Health Organization (WHO) declared a pandemic in 2020.

After COVID-19, cruises have been hit hard by the rest of the tourism industry. Compared to 2019, it was analyzed that the number of passengers decreased by 81%, and the jobs in relevant industries^[4] decreased by 51%. The economic effect was reduced by 59%.

With the stabilizing of the COVID-19 pandemic, global cruise lines are developing and implementing safety/sanitation protocols to overcome the COVID-19 crisis. In the European and Asian markets, new health and safety protocols have been developed for the resuming of operations, and certifications from reputable organizations have secured the trust that cruise tourism is safe from infectious diseases. Moreover, cruise operations are resumed through close consultations with national health authorities to overcome COVID-19. In addition, major countries in the world, such as Europe, the United States, and Singapore, are making efforts to attract cruise arrivals by establishing a quarantine system for cruise arrivals and announcing operating guidelines that are suitable for the region.

Cruise Lines International Association (CLIA) has analyzed three scenarios. Despite the decline in tourists in the aftermath of COVID-19, CLIA expects a rapid recovery to a pre-COVID-19 by the end of 2022, which is an upside scenario, and the end of 2024, which is a downside scenario. They are optimistic about the reopening of cruises in the future.

The Direction of Improving the Cruise Industry of Korea The cruise industry of Korea is focused on attracting foreign tourists. For this reason, there is no national cruise that operates as a home port in Korea. In 2012, Polaris Shipping started Harmony Cruise from Busan Port as its home port, but the operation was suspended in January 2013 due to difficulties in securing Korean passengers. It started other pilot projects^[5], but there are currently no cruise programs that use Korean Ports as their home ports. Due to these situations, the cruise industry of Korea is inevitably affected by the arrival of cruise ships from overseas. Particularly, the arrival of Chinese tourists, who prefer tourism in Korea, has a significant impact on the cruise industry.
To develop a stable cruise industry, a certain level of demand in Korea is required. In addition, marketing and strategies that can induce cruise arrivals from overseas based on various nationalities are necessary rather than a strategy to attract tourists from a specific country. Also, referring to the cases of developed countries, there are increased interest and demand for various activities at sea in the era of earning incomes of U.S. 30,000 dollars or more. In Korea, activities such as sailing and fishing are active on the coast. However, interest in cruises is low compared to other sea activities, as there are no cruise ships serving Korea as their home port. Therefore, promoting the cruise service with the home port in Korea is considered the most advisable direction to foster the cruise industry of Korea and bring about a stabilizing effect.

References [1] Korea Tourism Organization (2020), ‘A New Era of Life, Marketing Plans to Promote Cruise Tourism in Korea’, pp.24-27.
[2] ‘The Diamond Princess’ is a 120,000-ton cruise ship with a total length of 290.2m, a width of 37.49m, and a height of 62.48m, with 13 decks, equivalent to three soccer fields.
[3] Out of a total of 3,711 people (2,666 passengers and 1,045 crew), 705 were confirmed to be positive.
[4] Port, ports of call, service companies, travel agencies, and associated small businesses
[5] Pohang International Cruise Pilot Project (2016-2020)

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