Current financial woes afflicting Greece and China could rebound severely on the cruise industry, analysts say.
Cruise Lines International Association (CLIA) says direct cruise line industry spending in Greece stands at about USD 620 million a year, mostly spent on wages to support 11,000 Greek jobs.
According to a report from New York by TheStreet.com, Greece is Europe’s seventh-largest beneficiary of direct cruise line industry spending. CLIA estimates that in 2013 and 2014, spending on the cruise industry in Greece rose by about 10%.
If Greece exits the European Union (the “Grexit” prospect raised after the weekend’s “no” vote by Greeks to yet more austerity measures) holidaymakers “could choose to avoid the country for fear of being exposed to social unrest and having a poor travel experience”, TheStreet.com says.
An alternative scenario exists, however. A post-euro Greece might re-issue its drachma currency and price itself so competitively that its tourism industry booms. TheStreet.com does not explore that possibility.
Instead, it points out that for lines like Carnival and Royal Caribbean, Greece may become tougher to market this year and next, triggering discounting.
If Greece quits the European Union, the resultant European economic downturn may lead Europeans to defer their holidays. This, coupled with a move by Americans away from visiting Greece, could impel cruise lines to delay building their new ships in Europe. Profits would be hurt as projects sit in dry-dock.
Roughly 5.85 million passengers embarked on their cruises from European ports in 2014, a 3.6% drop on the previous year’s total. The report quotes Carnival chief financial officer David Bernstein saying “geopolitical risk” in Greece and overall economic weakness in Europe has led to “some challenges on the yield side this year”.
The big threat is that current problems hitting Chinese equities could cause rich Chinese to put off taking a cruise this year and in 2016 “just as the cruise line companies are devoting their newest ships to the region”.
Europeans, Americans and Chinese deferring travel, especially cruise travel, could hit the industry with a triple whammy.
Written by Peter Needham