Starting the middle of March this year, most of 400 cruise ships around the world have been idle. Only a few cruise ships have been operated on a small scale, and many cruise companies have been bankrupt. In mid-June this year, "Pullmantur Cruise", the largest cruise operator in Spain, announced that it had applied for bankruptcy and reorganization, becoming the first cruise company to go bankrupt and restructure due to the epidemic situation.
So why is the impact of the epidemic on cruise industry so heavy? In this regard, Associated Prof. Lin Shanshan, from Department of Tourism and Hotel Management, School of Management, Zhejiang University, said in an interview with Zheshang Magazine recently that the COVID-19 epidemic is a direct trigger for the bankruptcy of Pullmantur Cruise. However, from the macro industry level and the enterprises own operating conditions, its bankruptcy is an inevitable result.
"Tourism industry is fragile, sensitive, and vulnerable to external shocks. Positive events such as Olympic Games and other sports events, major festivals and exhibitions will stimulate tourism development, and negative events such as infectious diseases, earthquakes, tsunamis, strikes and terrorist attacks will hinder tourism development."
Prof. LIN pointed that "the impact of the COVID-19 epidemic is unprecedented, which is different from previous SARS and other diseases. Patients in the incubation period may not have any symptoms. Cruise tourism with highly intensive and relatively closed space, prevention and control is very difficult, so cruise companies have no choice but to suspend all flights. Therefore, I think that the COVID epidemic is the most important and direct reason for the bankruptcy of Pullmantur Cruise. " She further explained that the COVID-19 epidemic is a direct trigger for the bankruptcy of Pullmantur Cruise, but from the macro industry level and the enterprises own business conditions, its bankruptcy is an inevitable result. First of all, it is facing fierce industrial competition crisis. At present, the cruise industry is still in the stage of oligopoly competition. Large cruise companies such as Carnival, Royal Caribbean, MSC Mediterranean occupy about 80% of the global market share in cruise industry. If small cruise lines want to make a room in the remaining market share, they will face very fierce competition. Secondly, Pullmantur Cruise has experienced two acquisitions and property rights restructuring in 2000 and 2016, which can be inferred that there are many problems in its internal operation and management.
It is understood that in the revenue structure of cruise business, ticket revenue accounts for 70%-75% of the total revenue, and the rest is the consumption on board. The profit model of the whole cruise industry can be summarized as follows: the ticket revenue can basically cover the operating costs, and the consumption of passengers on board becomes the operating profit of the company. In addition, the suspension will not only cause a loss of revenue, but also may cause a fatal blow to their most valuable assets, the ship itself, because from mechanical problems to hurricane risks, then to regulatory barriers that may constitute criminal crimes, and various cruise maintenance costs are huge.
In a document recently submitted to the U.S. Securities and Exchange Commission, Carnival Company said its current ship and management costs are expected to reach USD $250 million a month once all ships are suspended. The company said the time for resuming flights was uncertain, and the cost was a long-term item on its balance sheet, costing it USD $4.4 billion only in the second quarter.
"In the face of the ongoing global epidemic situation, major cruise companies are actively coping with it. Most of them maintain normal operation by cutting expenses, reducing business scale, refinancing and other measures, waiting for the market to restart." In Prof. LIN s view, cruise industry practitioners need to take effective measures to eliminate consumers panic and enhance consumer confidence, so as to push the cruise industry out of the current predicament and move towards recovery. "Specifically, we can further improve the health standards of the cruise industry, establish and improve the emergency plan for cruise ship health emergencies, enhance the emergency response capacity of emergencies, and recommend the provision of contactless intelligent services.", Prof. LIN indicated.
Meanwhile, she believes that the epidemic has also greatly promoted the intelligence of the whole tourism industry. Contactless intelligent services, such as the use of intelligent monitoring system to measure the temperature of tourists, the use of intelligent robots for reception, food delivery and other multi-scenario services, have been rapidly promoted in different scenarios of the industry. Intelligent cruise will also be one of the development trends of cruise industry in the post epidemic era. After the epidemic, it is expected that the health standards and service level of the cruise industry will be further improved.
Though the epidemic is still spreading and it is not easy to predict the resume time of global cruise ships, in Prof. LIN’s opinion, compared with other tourism products, the tourist satisfaction and revisit rate of cruise vacation are relatively high. Cruise tourists who stagnate and delay consumption due to the epidemic situation will experience explosive growth after the epidemic. Under the relatively conservative forecast scenario, the cruise industry will recover in 2022 at the latest; under the relatively optimistic forecast scenario, the cruise industry will return to the previous level by the end of 2021.
