The Mediterranean cruise industry: a buoyant sector

Nothing perhaps better demonstrates the Mediterranean's eternal appeal than the announcement that Royal Caribbean is sending Allure of the Seas, the largest cruise ship in the world, to Barcelona in 2015. Its Med-focused itinerary will feature calls at Palma de Mallorca, Marseilles, La Spezia, Civitavecchia and Naples.

The news follows a similar declaration by Norwegian Cruise Line that Norwegian Epic will also reside in Barcelona from 2015. The 4,100-passenger ship will be the largest boat in the world to year-round home-port in the Mediterranean.

It might have the second biggest share of the global cruise offering, after the Caribbean, but the Med hasn't always seemed like such a fail-safe option. The economic crisis has cloaked traditionally strong tourist destinations in uncertainty; 2012 was a particularly difficult year for Southern European countries, with Spain and Greece accepting bailout packages in exchange for what feels like never-ending austerity.

Additionally, with political uncertainty an almost constant presence in North Africa since the start of the Arab Spring, it has been hard to predict how the Mediterranean cruise market would cope with these external events. The circumstances caused a wide-ranging and short-notice redeployment of ships on Mediterranean routes, leaving Tunisia off-limits for several seasons. Likewise, Egypt's shocking rise in violence led to travel warnings for any tourists considering journeying to the country. Over the summer, virtually every cruise line cancelled most of its 2013 Egyptian port calls.

The combined effect of these economic and political factors is reflected in CLIA's recently released '2014 State of the Cruise Industry Report'. It depicts a predicted 2.8% decrease (21.7% in 2013, 18.9% in 2014) in the Mediterranean's capacity market share this year, with the Caribbean gaining even more ground to 37.8%. But Stavros Hatzakos, president of MedCruise, believes the damage dealt to the industry by political and economic events has largely been exaggerated. He remains optimistic about the Mediterranean cruise market as a whole.

"I think it is important to stress that, even if the southern countries are suffering from the different problems in their economy, it looks like the cruise industry there is going very well and is still increasing," he says.

Pierfrancesco Vago, chairman of CLIA Europe, is similarly positive about the fate of the market and puts this down to the willingness of operators to adapt and offer affordable vacation options.

"A record number of Europeans (6.26 million) chose a cruise in 2012, and the industry has grown significantly in the past five years since the beginning of the eurozone crisis," he says. "Cruise lines have responded well to the challenge and have increased demand by offering more vacation alternatives that satisfy the expectations of everyone. Far from losing business, we have grown significantly as a result."

Good in a crisis

Hatzakos's native Greece is a good example of a cruise region that saw surprising growth last year in the face of its financial troubles: 73 cruises in July brought 106,665 passengers to the country's ports, compared with 65 cruises and 86,724 passengers in the same month in 2012.

He attributes this to an increase in operators calling at Greek ports and some new investment in infrastructure. Analysts predict Piraeus port in Athens to become the biggest commercial dock in the Mediterranean by 2016, due in part to expanding activity in the country's cruise sector.

"A new market was created in Greece dramatically last year. The country continued to invest in new vessels and port infrastructure, and they are still carrying that area," says Hatzakos.

Spain also showed some signs of improvement in 2013. Its growth as a cruise destination and embarkation point prompted a 14% rise in passenger and crew spending last year. The region's A Coruña port set a new historic annual record by accomplishing a total of 108 calls, representing an increase of 16% compared with the 93 calls of 2012.

"What I've seen is that some of the southern countries are doing well now, so we believe that maybe not this year, but maybe next year, we're going to hear much better results from them," says Hatzakos.

It would not be right to consider the impact financial factors have on the cruise industry without acknowledging the economic benefits the sector itself provides. Southern European countries are well aware that increasing tourism is absolutely vital for economic recovery.

"The cruise industry has been one of the few industries to grow in Southern Europe during the economic crisis, generating significant economic benefits for the Mediterranean," says Vago. "In 2012, the cruise industry's direct expenditure in Italy was more than €4.0 billion, the highest of any country in Europe. Spain benefitted to the tune of €1.2 billion and Greece €588 million."

A 2013 report commissioned by Vago's colleagues at CLIA Europe reinforced the crucial role cruise tourism can play in regenerating economies. Entitled 'Contribution of Cruise Tourism to the Economies of Europe', the document revealed the industry generated €37.9 billion of goods and services to the continent. There were 11,000 new jobs created, while European shipyards received an increase in spending on new builds and maintenance, and are scheduled to deliver 20 new cruise vessels over the four-year period 2013-16.

"I think it's obvious that tourists in general - but more specifically the cruise business - really contribute to European economies. And we have to acknowledge that," says Hatzakos. "But, on the other hand, it's true that the cruise industry benefits from this growth in our area, and that is creating a win-win situation. So we see that both of them, ports and cruise companies, are investing in our area, and they get all the benefits out of this."

Safety first

While these countries enjoy attracting tourists from all over the world, Hatzakos and Vago agree that this won't continue unless the regions invest in port infrastructure. Even those with struggling economies must be prepared to spend on maintenance and repair. Many Mediterranean destinations, such as Barcelona and Marseilles, are continuing to develop new platforms and new marine terminals that could make all the difference to the industry.

"Port infrastructure maintenance and improvement are key requirements for the development of a flourishing cruise market, which brings a significant economic footprint to the countries of destination, and creates wealth and invaluable marketing exposure to the ports of call," says Vago.

"Despite the economic problems that exist, we have new ports and new itineraries coming out, and that shows countries still believe in the industry and what it can do for their economies," says Hatzakos. "They continue to improve the facilities in order to protect vessels and grow business. So we are not only optimistic, but we see this going around."

And Hatzakos extends his optimism to North Africa. He says MedCruise representatives there are continuing to be very active and are feeding back encouraging information.

"I believe there will be positive changes in North Africa soon. My view is that we will continue to grow, and we will continue to see positive results in the area," he says. "Of course, when you have a cruise in those countries, you need to have in mind many different things, but I think we should be encouraged by the fact tourists still want to visit."

But Vago does not deny that political upheaval has created a challenge for the sector. He stresses the importance of liaising with international regulators and governments to ensure CLIA maintains a high level of knowledge concerning the current situation in destination countries.

"The safety of passengers and crew is always our number-one priority, and we take into account a very wide range of factors, including political uncertainty, when we plan our itineraries," he says. "Thanks to the uniquely mobile characteristic of cruise ships, we have, where necessary, been able to introduce other attractive alternative destinations in the Mediterranean at very short notice and have not witnessed any significant impact. However, we recognise that the constant feeling of uncertainty could, in the long term, affect consumer decisions."

But, despite challenging times, the Mediterranean cruise industry is proving its resilience and remains a dynamic source of economic activity.

"I can say that we are optimistic about the future, even though we continue to face challenges," says Vago. "There must be a combined effort by industry, governments and regulators to address these, so the steady growth the sector has experienced over the last decade continues."