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CRUISE REVIEW 2014PUBLISHED MARCH 2015

CONTENTS

2015: A SPECIAL YEAR FOR UK CRUISING 3EXECUTIVE SUMMARY 2014 5MARKET BECALMED BEFORE 2015 SURGE 6CARIBBEAN COUP 8RECORD NUMBER OF UK PORTS VISITED BY CRUISE SHIPS 10THE LONG GOODBYE (TO WINTER) 11CRUISING REMAINS BEST VALUE 12SILVER TRAVELLERS BECOME COMPULSIVE CRUISERS 14WHEN IT PAYS TO PLAN AHEAD 15BRAND LOYALTY MAJOR FACTOR IN CRUISE CHOICE 16CRUISING’S NORTH:SOUTH SHIFT 17A TALE OF TWO RIVERS 18

2015: A SPECIAL YEAR FOR UK CRUISING

All the indicators suggest that 2015 will be the best year in the UK cruise market’s history. Record numbers of cruises should be taken as a result of the higher profile created for cruising by a combination of events which include the arrival of two brand new ships operating out of Southampton. Britannia is the largest ship built for P&O Cruises and also the largest ever dedicated to the UK market. Royal Caribbean International’s Anthem of the Seas is an even larger ship and sister to the ground-breaking Quantum of the Seas which created much press and social media coverage when it visited the UK last year.

Both represent significant increases in capacity for the ex-UK market and they are not the only arrivals to do that.

Cruise and Maritime Voyages has acquired a new ship, Magellan, for its fleet which will boost its own capacity in this market by 40%. And Princess Cruises is also adding extra beds by bringing the Royal Princess to Southampton this summer just two years after the ship was named at the port.

There has already been an upsurge in TV, radio, press and online marketing activity by the cruise lines in support of all the new ships and as a result, cruising has moved to the top of the agenda among the travel trade and their holidaymaking clients.

There is confidence that 2015 will reverse last year’s one off dip in passenger numbers and almost certainly top the peak 2013 total of 1.72m.

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EXECUTIVE SUMMARY 2014

Growth for Mediterranean and Caribbean means fly-cruises reverse trend towards UK port departures

Increase in passengers taking 3-plus cruises a year

Cruises to Western Europe top 200,000 for first time

Fall in cruises from UK to Mediterranean and Norway and also in Arabian Gulf fly-cruises

Small dip recorded in bed nights of less than 1%

Record number of UK ports visited by cruise ships

UK cruise consumers choose longer itineraries, particularly in winter – and they are also booking earlier

All-inclusive packages are an increasing influence on cruise choice

A fourth successive year of growth for the UK river cruise market

MARKET BECALMED BEFORE 2015 SURGE

Following a few years of slow growth, the number of UK and Ireland ocean cruise passengers has dipped.

Several major cruise brands moved some capacity away from the traditional UK port market in 2014 and, although that prompted a 14% increase in Caribbean fly-cruises, there was an overall downturn in the number of UK passengers last year.

Another factor in the fall was a trend towards longer cruise itineraries but this also meant that the number of bednights booked actually fell less than 1% (0.8%).

The 4.8% drop in passengers was the first since 1986 when numbers fell by 500 to just 91,500. To put cruising’s subsequent growth into context, 2014’s total – despite the decrease – was 1.64m.

It does, though, reflect the expanding reach of the now-global cruise industry and the increasing competitiveness between markets and destinations to secure cruise traffic which brings such significant local, regional and national economic benefits.

Rapid growth in the German cruise market sees that country now ahead of the UK as the world’s second largest source market for cruises taken, whilst UK recorded more bednights and its smaller population means that the UK still has a higher penetration of cruise-buyers.

Since 2001, UK-sold cruises have also doubled their share of foreign holidays booked from the UK and nearly trebled their share within the package holiday sector.

However, renewed investment and a new focus from the major air-based tour operators on copying the cruise model by offering a more inclusively-priced product, has increased competition between the two sectors.

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YearPassengers (000s) % change

2005 1,071 4.1

2006 1,204 12.4

2007 1,335 10.9

2008 1,477 10.6

2009 1,533 3.8

2010 1,622 5.8

2011 1,700 4.8

2012 1,701 0

2013 1,726 1.5

2014 1,644 (4.8)

Source: IRN Research for CLIA UK & Ireland

1 UK Ocean Cruise Market 3 Ocean Cruising’s Share of Foreign Holidays Market From The UK

YearForeign Holidays (000s)

Foreign Inclusive Holidays/tours (000s)

Ocean Cruise Holidays**(000s)

Ocean Cruises’ share of inclusive foreign holidays

Ocean cruises’ share of all foreign holidays

2001 38,670 20,631 776 3.8% 2.0%2010 36,442 14,257 1,622 11.2% 4.5%2011 36,819 14,740 1,700 11.5% 4.6%2012 36,173 14,470 1,701 11.8% 4.7%2013 37,604 15,465 1,726 11.2% 4.6%2014 38,744* 16,122* 1,644 10.2% 4.2%* Estimated ** Includes Republic of IrelandSource: IRN Research; International Passenger Survey Crown Copyright 2015

YearBednights (000s) % change

2008 15,378 18.4

2009 16,943 10.2

2010 17,735 4.7

2011 18,524 4.4

2012 18,472 (0.3)

2013 18,064 (2.2)

2014 17,915 (0.8)


2 Bednights booked by UK passengers

CARIBBEAN COUP

Recent changes to the controversial Air Passenger Duty, which now make Caribbean flights more affordable for families, came too late to impact last year’s fly-cruise sales. This makes their 14% rise in 2014 all the more impressive.

It is a more mixed story for the Mediterranean as, although the number of people flying to join their cruise was marginally up at 441,000 (the second highest on record), the number of cruises

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taken from a British port to the region was down 15% because of the reduced capacity.

There was a 40% dip in cruises to Norway from a UK port but this did follow several years of unprecedented growth which meant that the 130,000 in 2014 was still double the number taken just seven years earlier. Cruises to the Baltic, which had not grown quite so rapidly, continued to increase steadily increase in 2014.

Western Europe has also seen major recent growth and has not been impacted by capacity changes so cruises from the UK to Western Europe topped the 200,000 mark for the first time and was double the 2011 figure.

Asia and Australasia are the hot topics in global cruising right now, with the emergence of the Chinese and re-emergence of the Australians as enthusiastic cruisers. These two regions

have also created interest in the UK with passengers rising by nearly a third last year.

The Arabian Gulf, on the other hand, has seen passenger numbers dropping sharply in 2014. However, recent moves by several major cruise lines to re-enter that region or increase their capacity suggests that this will be just a temporary setback.

4 Destinations Booked by UK Passengers (000s)

Destination 2001 2010 2011 2012 2013 2014% change14/13

Mediterranean 334 697 767 698 643 613 (5)

Northern Europe 98 303 342 443 531 467 (12)

Caribbean 146 272 238 189 183 205 12

Atlantic Islands 77 98 116 145 161 151 (6)

Other Areas 121 252 237 226 208 208 (0)

Total 776 1,622 1,700 1,701 1,726 1,644 (5)


5 UK Port Cruises Vs Fly Cruises

YearPassengers(000s)

%growth

UK Port Passengers (000s)

%share

Fly Cruise Passengers (000s)

% share

2008 1,477,000 10.6 557,000 37.7 920,000 62.3

2009 1,533,000 3.8 594,000 38.8 939,000 61.2

2010 1,622,000 5.8 653,000 40.3 968,000 59.7

2011 1,700,000 4.8 729,000 42.9 971,000 57.1

2012 1,701,000 0 807,000 47.4 894,000 52.6

2013 1,726,000 1.5 844,000 49.0 883,000 51.0

2014 1,644,000 (5) 739,000 45.0 905,000 55.0


RECORD NUMBER OF UK PORTS VISITED BY CRUISE SHIPS

There was a 12% rise in passengers calling at UK ports during a 2014 cruise so that their number had more than doubled in just five years.

Another 12% rise this year would push the total over the million-mark and the benefits are being spread more widely with 57 ports – a record number – handling cruise calls in 2014.

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But that decline in UK passengers cruising from UK ports meant that overseas passengers embarking in the UK increased their share to 22%.

THE LONG GOODBYE (TO WINTER)

UK cruise passengers have been voting with their feet when it comes to coping with grey and gloomy British winters. They have taken longer and longer cruises with the average for 2014 increasing by more than a night to 13.3 nights – the longest for more than a decade.

With a more modest increase in the summer average, the typical cruise length last year was just short of 11 nights.

Year 2008 2009 2010 2011 2012 2013 2014

Total Embarkations 714 733 833 878 962 1062 942

% Increase 21 3 14 5 10 10 (12)

UK Passengers 557 594 653 729 807 844 739

Overseas passengers 157 139 180 149 155 218 203

% share of overseas 22 19 22 17 16 21 22

Source: CruiseBritain

6 Embarkations at UK Ports (000s)

Year 2008 2009 2010 2011 2012 2013 2014

Passengers 420 448 563 651 723 871 922% change 15 7 26 16 11 20 12Ports Visited 38 43 48 50 52 52 57


7 Port of Call Passengers at UK Ports (000s)

Year Summer Winter Year

2007 9.4 10.6 9.7

2008 9.9 11.6 10.4

2009 10.4 12.5 11.1

2010 10.2 12.7 10.9

2011 10.1 13.1 10.9

2012 10.2 12.5 10.9

2013 9.7 12.4 10.5

2014 9.9 13.3 10.9


8 Average duration (nights) of cruises by UK passengers

Cruises were even better value for money in 2014 with passengers paying £1 less per night than in 2013 and £10 less than in 2007.

The fact that the average price paid for a cruise rose slightly – by £9 to £1,379 – was simply because the average cruise booked was longer.

This also explains the increase of 19% in the ratio of £2,000-plus cruises booked. But the recent growth in the number of under-£500 cruises – primarily short, taster voyages from UK ports - was also sustained.

The best value cruises, though, were those off-season from the UK to the Baltic which worked out at just £75 per night while Western Mediterranean fly-cruises were £103 a night.

Meanwhile the ultra-luxury cruise companies had a mixed year with a slight increase in the number of guests taking a winter cruise while there was a slight decrease in passengers on summer cruise holidays. However, it outperformed the overall cruise market with less than a 2% decrease.

Year £

2007 £137

2008 £135

2009 £120

2010 £130

2011 £132

2012 £128

2013 £134

2014 £127


11 UK Market Cruise Per Diems

Year Summer Winter Year

2008 1313 1647 1409

2009 1238 1532 1330

2010 1323 1629 1421

2011 1331 1729 1434

2012 1313 1573 1388

2013 1287 1602 1376

2014 1309 1554 1379


10 Average Revenue (£) per UK Passenger

Year%500

%501-1,000

%1,001 - 1,500

%1,501 - 2,500

%2,501 - 5,000

%5,000+

2005 15 27 26 23 6 1

2006 13 21 22 29 12 2

2007 12 26 25 27 8 2

2008 11 24 23 28 11 2

2009 12 24 21 26 13 2

2010 14 26 21 27 12 2

2011 15 27 22 24 11 2

2012 13 34 24 21 6 2

2013 16 33 22 21 7 2

2014 16 29 24 22 10 2


9 Price (£) Trends In UK Cruise Market

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12 Ultra-Luxury Cruise Passengers

Year Summer Winter Total % of all cruises

2007 13816 7552 21368 1.6

2008 13238 6427 19665 1.3

2009 14710 7960 22670 1.5

2010 16125 7899 24024 1.5

2011 15371 10498 25869 1.5

2012 20057 8393 28450 1.7

2013 18780 8260 27040 1.6

2014 17478 9029 26513 1.6

Source: IRN Research for CLIA UK & IrelandIncluded Crystal, Ponant, Hapag-Lloyd, Hebridean, Regent, Seabourn, Seadream, Silversea

CRUISING REMAINS BEST VALUE

SILVER TRAVELLERS BECOME COMPULSIVE CRUISERS

That old adage about longer cruises attracting older passengers appears to have been borne out in 2014 as, with the length of booked cruises increasing, the average age of passengers also rose.

This is an ongoing trend due to the high level of repeat business generated by cruise lines which continue to maintain one

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WHEN IT PAYS TO PLAN AHEAD

A quarter of all cruises taken in 2014 were booked at least nine months in advance.

This was a significant increase on 2013 and suggests a market swing back to consumers preferring to secure specific departures and accommodation rather than risking missing out on one or both in search of a last minute discount.

of the highest satisfaction levels in leisure travel. In 2014, two-thirds of passengers were repeat guests and more than 53% of all passengers took more than one cruise.

Nearly a quarter (24%) of multiple cruise guests took three or more compared with just 19% in 2013.

16 UK Cruise Market - Trends in Booking Lead Times

% of bookings (no. of months)

Year 12+ 9 - 12 6 - 9 3 - 6 0 - 3

2005 17 17 18 22 22

2006 15 18 18 24 27

2007 18 17 18 23 24

2008 18 17 18 22 26

2009 25 19 17 22 17

2010 16 16 18 22 28

2011 15 15 17 20 34

2012 13 12 17 23 36

2013 11 12 16 21 40

2014 11 14 14 23 39


Year %

2007 38

2008 32

2009 29

2010 33

2011 40

2012 36

2013 32

2014 33


14 First Time Cruisers as % of UK Market

% passengers

Year Up to 26 26-34 35-44 45-54 55-64 65+ Average Age

2005 10 5 9 18 25 33 53.5

2006 8 5 11 21 27 27 52.5

2007 8 4 9 19 27 31 53.2

2008 8 4 8 18 27 33 53.7

2009 7 4 8 18 28 35 55.6

2010 9 4 9 19 27 33 54.8

2011 9 4 9 19 26 35 55.6

2012 8 4 7 18 27 37 56.1

2013 7 4 7 17 26 40 57.0

2014 5 4 5 16 27 43 58.2


13 UK Cruise Market Age Analysis

Cruises taken in last year (%)

Year 1 2 3 4 5 6+

2010 43 33 12 5 3 6

2011 58 27 9 2 1 1

2012 46 30 14 4 2 2

2013 45 33 12 4 2 1

2014 47 29 13 5 3 3


15 UK Passengers Booking Multiple Cruises Annually

Only the itinerary and destinations rate more highly than a positive brand experience among consumers when it comes to choosing a cruise. They are even more important than the price or perceived value for money.

This became clear in the survey carried out for CLIA in the UK last year. Compared with previous years, the multiple answer questions were modified to secure a clearer message on what really drives people to choose to cruise at all and which cruises they pick.

When it comes to the ships, it was no surprise to see service, dining and on-board atmosphere as the top three decision-influencers but interesting that cabins and public rooms are not quite as important in the booking equation as they used to be a decade or more ago.

The growing importance of an attractive pre-booked drinks package is clear, though, while possibly the big surprise is that the same cruise consumers who are increasingly researching cruising online appear to be less influenced by blogs or other online reviews as each year passes.

BRAND LOYALTY MAJOR FACTOR IN CRUISE CHOICE

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Reasons 2011 % 2012 % 2013 % 2014 %

Service on-board 29 24 23 46

Dining 26 23 24 36

On-board atmosphere/service 26 24 22 35

Facilities on board 25 21 23 33

Cabins and public rooms 15 13 17 28

Entertainment 16 15 15 23

Loyalty membership benefits 13 18 15 23

Special Occasion 20 18 16 18

All-inclusive drinks package 11 7 11 16

Cruise themes 5 5 5 7

Maiden Voyage 1 1 1 1

* Asked to select three principal reasons | Source: UK Cruise Survey 2014 (IRN Research)

18 UK Passengers - Reasons* For Choosing Their Last Cruise

Reasons 2011 % 2012 % 2013 % 2014 %

Itinerary/Destinations 69 70 71 51

Cruised with this line before 64 55 56 39

Price/Value for Money n/a n/a n/a 34

Departure Date 31 38 38 23

Cruised on this ship before n/a n/a n/a 21

No flight 21 25 25 19

Local departure port n/a n/a n/a 16

Duration 22 24 23 12

To try another cruise line 9 17 16 11

Special Offer n/a n/a n/a 11

All inclusive nature of the package n/a n/a n/a 11

To try another ship 10 9 10 8

Flights from local airport 22 13 12 7

Reccommendation family and friends (Personal) 9 6 8 4

Pre and post land stays n/a n/a n/a 3

Travel agent recommendation 4 5 3 2

Recommendation on web/review/blog 4 2 3 1* Asked to select three principal reasons. | Source: UK Cruise Survey 2014 (IRN Research)

17 UK Passengers - Reasons* For Choosing To Take A Cruise Holiday

CRUISING’S NORTH:SOUTH SHIFT

19Cruise Passengers as % by Region of Residence

Region 2006 2013 2014

UK pop %

South East 14 23 22 14

North West 16 13 13 11

South West 10 12 12 8

Scotland 11 8 9 8

Yorkshire & Humberside 8 8 8 8

West Midlands 8 8 8 9

East Midlands 7 8 8 7

East of England 5 9 6 6

North East 6 5 3 4

Wales 5 4 5 5

London 7 4 2 13

Northern Ireland 3 1 2 3


2014 confirmed South East England as the UK’s top source for cruise passengers.

It also highlighted the north:south shift since 2006 with the former top source, the North West – alongside the North East and Scotland – losing significant share since then while the South West as well as the South East has gained ground.

London, though, remains the worst-performing region for cruising. Its share fell again in 2014 and now stands at less than a third of its 2006 level and means it comfortably has the lowest penetration rate of any other UK region.

A TALE OF TWO RIVERS

European Destinations 2010 2011 2012 2013 2014% change2013/14

Rhine/Moselle/tributaries 23.6 20.0 26.9 35.5 37.3 5

Danube 12.5 12.9 15.0 17.3 24.4 41

Rhine/Danube 4.1 8.3 4.6 5.1 7.0 37

Rhone/Seine 8.0 10.1 10.2 14.1 14.2 1

Russian 4.4 4.9 5.2 6.4 7.4 15

Italian (Po) 2.0 2.9 3.0 3.1 2.9 (6)

Elbe 2.5 2.2 2.4 3.6 2.8 (23)

Douro 8.7 9.4 9.3 10.7 11.0 3

Other European 9.1 9.6 13.4 14.2 13.4 (6)

Total European 74.9 80.3 90.0 109.9 120.4 10

Non European Destinations 2010 2011 2012 2013 2014 % change

Nile 58.0 25.2 28.3 12.2 8.9 (27)

Far East/China 4.7 5.0 6.9 4.3 3.8 (13)

Other non-European 4.6 3.3 4.6 5.2 6.4 23

Total non-European 67.3 33.5 39.8 21.7 19.0 (12)

20 UK River Cruise Market (000s)A fourth successive year of modest growth saw the UK river cruise market approach the 140,000 passenger mark but the real stories were the continued soaring popularity of the Danube as a river cruise destination alongside the continued decline of what used to be the most popular for UK river cruisers: the Nile.

The political situation in Egypt saw the number of UK Nile cruisers drop below 10,000 for the first time in many years while a 41% increase to the Danube established that river as second only to the Rhine as the UK favourite. The number of British cruising there has doubled in just four years and this is the main reason why the number of European river cruises booked from the UK has grown 60% over the same period.

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CLIA UK & Irelandwww.cruiseexperts.org

Cruise Lines International Association (CLIA) is the world’s largest cruise industry trade association with representation in North and South America, Europe, Asia and Australasia.

CLIA represents the interests of cruise lines, travel agents, port authorities and destinations, and various industry business partners before regulatory and legislatory policy makers.

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