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Cruise Ship Resurgence Is Indicative of a Healthier Economy

06/16/2015 06:22 pm ET | Updated Jun 15, 2016

As the American economy continues to improve and the U.S. dollar reaches new heights, the cruise industry is experiencing positive effects. Travelers are much more willing to spend their discretionary income on travel and companies like Royal Caribbean, Carnival, and Norwegian Cruise Line are bracing for growth by building new ships and adding unique destinations.

The Growth of the Cruise Line Industry

In 1990, approximately 3.77 million passengers were carried on cruise ships around the world. That number remained fairly stagnant until the turn of the century when the total number of cruise passengers jumped to 7.49 million. Fast forward 15 years later and the projected total for this year is somewhere around 22.24 million passengers. It's a steady uphill climb and one that industry experts and financial analysts believe will only increase over the next five years.

North America has always represented the largest contingency of passengers, estimated to account for approximately 13 million of the 22.24 million passengers this calendar year. However, Europeans are also interested in cruise vacations, with around 5.76 million predicted to cruise this year alone.

From 1990-2019, the compound annual growth rate is somewhere around 6.55 percent. However, it's possible that this healthy growth rate is stunted by a lack of new ships and unique destinations. Understanding this, the cruise line industry has big plans for resurgence.

Consumer Perceptions Improving

According to an article by Rob Lovitt of Today.com, consumer sentiment regarding the industry as a whole is on the rise. "The perception of the industry has recovered to pre-disaster levels among the general public, and surpassed them among those who have cruised in the last 12 months."

Lovitt attributes lower gas prices, lower unemployment rates, and rising home equity as the culprits for this rebound. He quotes Charlie Funk, co-owner of a Brentwood, Tennessee travel agency, who says, "A change of $1 a gallon adds up to about $750-$800 a year in savings so the psychological impact is substantial."

But it's not just the revitalized economy that's breathing air back into the sails of the cruise line industry. Another major factor is the improved perception. It's been more than two years since the Carnival Triumph broke down and stranded more than 4,000 passengers - and three years since the Costa Concordia experienced 32 fatalities in Italy.

Plans for Growth and Expansion

This year alone, seven new ships are being added to the worldwide fleet - increasing capacity by 18,813 passengers. In 2016 and 2017, a whopping 15 more ships will be launched - increasing capacity by another 39,637. The financial impact of the new ships from 2015 and 2016 is believed to hover somewhere around $3.6 billion.

But the expansion isn't limited to the next 36 months. Carnival is planning to grow its 10 million annual passengers to a staggering 13 million by 2022. Norwegian Cruise Line is anticipating a 50 percent capacity increase over that same time period - the largest in the industry.

Of the new ships launched this year, Royal Caribbean's Anthem of the Seas is by far one of the more highly-touted additions (although it's nearly identical to its sister ship, Quantum of the Seas, which was released six months prior). The ship features a skydiving simulator, bumper cars, surfing simulator, an extendable arm that reaches out 300 feet above the sea for 360 degree views, a state of the art fitness center, and plenty of restaurants and bars.

In October of this year, Norwegian Cruise Line will add its most highly anticipated ship to an already impressive fleet. The Norwegian Escape will have a capacity of 4,200 passengers and will travel to the Bahamas, Caribbean, and Mediterranean. It will have a private section with keycard access, 55 suites, a courtyard with a retractable roof and swimming pool, 82 studio cabins for solo travelers, and plenty of fine dining opportunities.

New Destinations Entice Bored Passengers

Another problem the cruise line industry has faced over the past decade is that many passengers are bored with the same destinations. While still beautiful, the Caribbean is overpopulated with cruise ships and no longer offers unique experiences to travelers. In response to this, many companies are offering unique itineraries and new destinations.

For example, Iceland is becoming a very popular destination. There are 415 cruises booked for this year, a 36 percent increase over 2014. Some of the cruise ship companies visiting the capital city this year include Royal Caribbean, Norwegian Cruise Line, Princess, Holland American, and Disney.

Southeast Asia - and countries like Cambodia, Vietnam, and Myanmar in particular - are experiencing incredible growth numbers. This year, research suggests 2.17 million passengers will be transported from cruise ships to Asia. This is a combination of both large cruise liners and smaller river cruise ships.

Other hot new cruise destinations include India, United Arab Emirates, Norway, Australia, and the scenic Northwest Passage. However, don't be surprised if this list gets longer in the months and years to come. New ships mean more passengers, which ultimately calls for a wider variety of destinations and ports.

Growth to Continue Indefinitely

Over the next five to seven years, growth within the cruise line industry will be steady and widespread. As large names like Royal Caribbean and Norwegian Cruise Line continue to lead the way, others will follow. And regardless of whether or not you enjoy traveling on cruise ships, this rapid expansion is good news for everyone. If nothing else, it's indicative of a healthier global economy.