An investigation by Cruise Passenger into the effects of the shock announcement of P&O Australia’s merger with Carnival Cruises shows the country’s cruise ship capacity could be slashed by as much as 30% by 2026.
Thousands of suites and cabins will be cut from the market in the next 24 months, probably leading to job losses at ports and among tourism operators. As well, price rises of up to 30% on homeported cruises are almost inevitable.
Ports like Melbourne, part Chinese owned and which tried to raise its berthing charges by a 15% last year, as well as Adelaide will be big losers as cruise lines pull out of Australia, a move that will hit regional tourism. New Zealand too will find its economy hit.
Jobs lost by cruise capacity cuts
Jobs among producers and contractors who provide food, wine and staff will be lost, and the $5 billion in economic benefit will be seriously hit.
Carnival’s CEO Christine Duffy, who flew in from Miami to make the momentous announcement that P&O Australia would be “sunsetted” after 92 years, had no doubt over-regulation and the fact that Australia is now one of the most expensive places to operate a cruise ship is to blame.
She also cited New Zealand’s biofuel regulations, imposed with so much zeal that cruise ships and thousands of passengers on board had their holidays ruined for the sake of a few molluscs on the hull. There are no operators who could guarantee hull cleaning, and this lack of certainty was a main driver in pushing operators away from our region.
The result: while cruise interest is booming, cruise lines are going elsewhere to find governments that welcome them and allow them to ensure their revenues.
Peter Little is the Carnival Corporation Country Manager and this week he also became chair of Cruise Lines International Association.
He, too, was keen to point out that Carnival has been trying to persuade governments to help with port and regulation.
“It’s been, It’s been a big week for our corporation and a big week for the P&O Cruises brand. I think we’ve had a extraordinary response to the news.
“I suppose we’ve been a bit overwhelmed by the outpouring of affection for the brand, which we which we knew was there. We’re just making sure that our guests understand that it’s it’s business as usual.
“We’ve got three ships operating normally until February and cruises on the website, and even voyages after that on Adventure and Encounter. Sailings are on sale and remain on sale through the website. That’s the message that we want to get out there.”
“Demand is strong. It’s a much loved brand with 92 years of heritage. So we’re seeing people booking on those final voyages under the P&O brand, so we haven’t seen cancellations coming through.
He also blamed high port charges and other costs for challenging the viability of cruise in the area.
“In this region you have ports who are putting their prices up in double digits or even in triple digits, and that that’s not sustainable, to continue to be lifting the prices and the price of doing business in the region. So naturally we have to look at the economics of operating here so that companies are looking at the economics now.
“Many of the operators in this region are just saying there’s headwinds that need to be addressed if we’re to continue to see growth in this region. But it’s not sustainable at the moment.”
He added: “We’ve been talking to governments in Victoria and governments in New Zealand as well.”
He said he could not talk about what would happen to prices. But his message to cruisers was:
“We’re maintaining a 3.5 ship fleet. We have three ships year round cruising out of Sydney and Brisbane. So there are so many opportunities to take a year round voyage, no matter where you want to go. South Pacific, Queensland, and even around New Zealand from from Sydney is still available.
“In the portfolio of brands that we have there are many summer opportunities still to take a great cruise on a Carnival brand ship. So my message is: Don’t don’t worry about your cruise holiday because we we’re not coming out of the market.
“We’re not leaving the market, and we want to continue to offer great voyages to Australians who want to take them.”
Cruise Lines International Association Australasia MD Joel Katz recently predicted massive growth in the Australian market based on demand from cruise passengers.
But he told Cruise Passenger: “I think I think from a demand perspective, we don’t see the demand slowing. We know that demand is increasing.
“We’re still expecting that the demand will increase and we’re predicting that the source market numbers will remain as they are.
“But as we see local capacity tighten and the supply tighten, a lot of that may need to convert into fly cruise.
“We’re expecting the numbers to be probably flat this coming season, and we’re going to see a contraction in the supply in the market.
Government warned by the industry
“It’s something that we’ve been monitoring and we’ve been warning the government about because, as you know, the pressures on the cruise lines to deliver their yields and to be competitive in the international environment means they need consistency and competitiveness in costs, But they also need a regulatory environment that gives them the comfort that they can operate in Australia or in our region without ongoing uncertainty.”
Katz said the coastal trading exemption regulations are a case in point. Cruise ships are allowed to operate without the swinging regime of rules that govern local martime which would make them uneconomic.
“The exemptions expire on the 31st of December this year, and we’re none the wiser as to what the government’s intention is about extending it.”
Ports costs and New Zealand’s regulations added to the uncertainty around the business case for cruising in Australia when it was easier, closer and more lucrative to sail in the Caribbean and Europe.
“At the end of the day, we’re a very, very high cost environment, and we’re struggling to be competitive with other ports and destinations around the world. How do we deal with that?
“Our exchange rate is not great. We aren’t a cheap source of local produce either. But it is primarily the port cost, and the berthing costs that really have become very, very expensive.”
And he added: “The sad part about this whole situation is that we’re working so hard with the regional ports and the destinations to develop those partnerships, develop the collaboration so that they can grow their their cruise visitation, and there are ports around Australia that actually rely on that.
“Thrive 2030, the government’s plan to grow tourism specifically talks about growing cruise in in regional ports and growing visitation. At the same time, you know, government policy doesn’t support that.”
Katz’s message to cruisers was book early to avoid price rises.
“As always, book early and to secure the best deals and the best cabins and do your homework because cruise still represents really good value.
“People are looking for value and cruise still delivers that value.”
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We have decided to give cruising a miss until the cruise lines wake up to themselves.
Link to show outrageous costs in NSW and Victorian ports by owners and governments.
KILLING THE INDUSTRY.
https://cruisepassenger.com.au/news/port-charges-are-driving-away-cruise/
Another big tourism award to the PORT UNIONS AND GOVERNMENTS…NOT.
High fees come from massive wages and fees imposed by unions and governments in NSW and Victoria driving business away. WELL DONE.
And who let the Chinese buy into OUR PORTS? FIRB has lots to answer for.
Great way to kill an industry that generates 1000’s of local jobs.
The disrespect shown by Carnival in trashing the iconic P&O brand is inexcusable. P&O is probably the greatest of all the the famous British shipping lines and has a connection with Australia going back to 1852 when their first ship the Chusan arrived in Australia. It is insulting for Carnival to suggest that it will encompass the P&O Australia heritage into the rebadged Carnival Encounter and Carnival Adventure – the Carnival Group will never earn the pedigree and reputation that the P&O name has earned in Australia.
Carnival has also been very disingenuous in suggesting that their decision in reducing the four Princess ships deployed over the 2023- 2024 season to just two ships in the 2025-2026 season and unjustly blaming Australian and New Zealand regulatory and port costs as a prime reason for the reduction in capacity. It has has been known for well over a year that Queen Elizabeth and Grand Princess were to be re-deployed to the US market from 2025 onwards to satisfy the increase in demand for cruising from the American public which of course would earn greater profits for Carnival. Unfortunately Carnival chose to blame the moderate port cost increases in Victoria announced late last year as the misleading excuse for ceasing the home porting of those two ships in Melbourne as it was not the true reason at all. Similarly the loss of Majestic Princess and Coral Princess from Sydney and Brisbane will further reduce cruise passenger capacity over the next few years with the Australian public and the southern states in particular being the biggest losers.
Perhaps it is better to just let the great P&O Australia name settle into the sunset after all so we can reflect on its heritage and the great memories it has created for so many generations of Australians.
Carnival needs to take a good look at Australia
As we have come out of the biggest wave season.
How can we have less ships . We sail p&o and princess
We are not going to sail on a Carnival ship
Price are going to go up big time and kill of cruising for Australia and New Zealand
Cruise ships operating in Australia need to have some itinerary changes. Going the the islands and Queensland coast in cyclone season is ridiculous and often these cruises get last minute changes. Australians work hard to afford a cruise holiday but they are not willing to spend their holiday money going to the same destinations over and over repeatedly. Summer time in Australia is a great time for ships to go to Tasmania with potential overnighting in Hobart as well as more New Zealand cruises out of Brisbane. Itineraries from Brisbane could go south in summer with stops in Newcastle, Sydney, Merimbula and back to Brisbane for example.
Carnival Corp. Is in My Thoughts
Latest Figures Boast:
60% World Market
70% Asia Pacific
Australian Figures Pre Covid:
76.7% @ 77%
Carnival in June 2024 States:
“Carnival Corporation & plc will have seven cruise lines sailing 19 ships calling on 78 destinations … by far the largest cruise operator in the region.”
Where in Lies the Problem:
These %’s can only increase into the future with the removal of other lines like Virgins Resilient Lady and Royal Caribbeans downsizing the numbers of the passengers their ships operate in Australia.
Past Market Share and how Carnival Corp has used this:
Threat of stopping ships going from Melbourne because of a 15% increase in Port Fees there, increasing from $28.50 to $32.00pp.
Effects for Perth Western Australia:
P@O had some cruises operating from Perth, with their ships based here for short times allowing us the choices of a number of cruises over a period of around a month. For example, cruises like the cancelled X513 a Three Day Short Break departing March21, 2025 and the X514 departing 24 March on a 5 day Reposition Cruise.
The prices at discount of our cruises from Fremantle, like the 3 Day Comedy Cruise, were usually considerably more than those from Brisbane and Sydney.
Questions:
Is one operator holding too much of the share within Australia?
Do they need to bring back their own P@O cruises that catered for a particular market to pacify their cruisers?
Will prices rise with more control of the market share?
Will Perth have an even further reduced access to cruising from the Port of Fremantle?
You missed that Princess cruises will start the 25/26 season 2 months late.
I do not trust Carnival to maintain an around the year fleet in Australia. Once rebranded, Carnival can move Carnival Adventure and Carnival Encounter to other markets.
A major reason carnival have made up this story is due to many competitors not repositioning and moving ships via the suez.Carnival have ramped up prices due to demand and those costs were factors they knew of. What a load of self focussed spun to soften competition and some gnal to competitors to rip off aussies.
Govt Should allow all operators to bid the lowest for access. Call their bluff.
I avoid australian cruises and especially Carnival brands
People will just not take cruuse holidays. P&O has a loyal following..Carnival has no relevance to Australian travellers. Already P&O has been affected with cost cuts..in food..the number of ports and staff cuts. Carnival will be the death of the remaining ships ported here.
Nobody has yet addressed the issue of cruise company’s building bigger and bigger ships.
If these companies had left the smaller vessels here and NZ we would be able to fill these ships. These ships are cheaper to run and staff. Our Pacific Islands are only really suitable to ships carrying around 2,000 passengers. We’ve all been on ships trying to disembark on small islands.
Dawn Princess / Pacific Explorer is the perfect size. She will go like her sister ships because she doesn’t carry 3,500 passengers plus.
We also have many smaller ports in Australia suitable to smaller ships.
Greed is totally to blame, from all parties involved.
Decisions made in America by Americans are not always suitable to our, and our surrounding neighbours.
What a load of self serving blather from the cruise lines, don’t forget they operate on massive margins and have your money months before they deliver anything, and with rapacious refund policies. Couple this with their fee for everything, except gambling, policies. And being stopped from having a divine right to polluting environments in various nations. Crocodile tears!
If they want to maintain their business model, that is their call, move everything to the Carribean, which recent reports say is massively over supplied. Anything rather than admit that megaships were a bad move.
Everyone seems to have forgotten about WA. Post-COVID cruising had already reduced considerably and now is becoming almost non-existent except for the smaller very expensive cruise lines.
Have done a lot of cruising in the past, however after cruising up the coast in 2020, will never cruise again unless it is in a small ship, found the ship not safe, it was so big we had to use a tender at most ports , ended up with covid, my husband in hospital for a week, many of the benefits we were receiving before Covid were now not given we were Platinum. This cruise I used the credits we had from cancelled cruises which we were diddled out of what we should have received.
The movies shown in our cabin were out of the arc except maybe two that were about four years old, I could go on, did email several times to Princess also had people phone to try & sell another cruise & obviously they do not want to know me & now I never hear from them thank goodness as the way they do business & look after people is something to be desired .
Excellent article Peter.
Carnival Corporation’s decison from their isolated ivory tower in the USA, shows no understanding for the Australian market.
Their decision, driven for no other reason than corporate greed, is a disaster for Australia in ways that Carnival Corporation and Josh Weinstein do not begin to understand or really care.
Have they actually thought that P&O Austrlai cruisers do not want to cruise on the Americanised Carnival Cruise Lines?
I agree that the governments, both state and federal have also demonstrated their absolute stupidity and lack of knowledge of the cruise industry by hiking fees, but have they had intelligent dialogue with Carnival Corporation before P&O was slashed? I doubt it. If Ann Sherry was at the helm of Carnival Australia or even Sture Myrmell, there would have been a massive fight and this may never have happened.
The strange thing is that much of Carnival’s whinging about costs affects Carnival Cruise Lines as much as it would have affected P&O so their arguments are all waffle and make no sense.
I imagine though that Gavin Smith over at Royal Caribbean it rubbing his hands in glee with their largest traditional competitor going out of business to be replaced by the vert lack lustre competitor of Carnival Crusie Lines.
Who knows, with the market now rather open, perhaps Norwegian Cruise Lines will increase its presence in the market even more!
Surely this is an opportunity for Australian investors such as Gina, Andrew and Clive and so on to revive the Australian cruise industry? Bring back something like the wonderful “Kanimbla”, “Manoora”,”Duntroon” and Wanganella” and run weekly sailings along the east coast with a loop out to Noumea in winter and to Auckland in winter. No need for giant ships with thousands of passengers, casinos, “art auctions” and other on-board gimmicks and extra shipboard expenses.Something like the “Astor”, “Marco POlo” and “Athena” would be fine, and there are probably similar secondhand vessels awaiting imaginative purchasers right now. A government involvement should not be out of the question as Canberra says it wants to revive Australian industry: are there not ship-building and outfitting capacities in Adelaide and Perth currently looking for work? Forget about Miami and Las Vegas and give us what the Adelaide Steamship Company, McIlwarith McEachran etc so happily gve us years ago!
“In this region you have ports who are putting their prices up in double digits or even in triple digits, and that that’s not sustainable,”
Yet cruise lines are happy to do the same! Similar price rises for cruises have occurred over the past few years – because travel is up, and people were spending post-covid.
And that’s really what this is about. They’ve had great revenues from the US, so they’re moving ships there, seeking where they get most profit. The reality is with a stronger US dollar, there’s no way our revenues can match theirs even if all supply costs were cut. Which would only be shortchanging ourselves anyway, and is not something the cruise lines would do. But it’s in their interest to cut costs as much as they can, so as to boost profits for the few ships that remain, so they’re just saying what they need to say to boost their business profits.
Getting dramatic over that doesn’t change anything – and won’t change what they say.
It’s akin to Jim Hacker, (“Yes Minister”), complaining about the costs of running a hospital with no patients.
Once bureaucratic red tape and the tree huggers inveigle themselves into a cause, the end result will always be a loss to, in this case, the traveling public.
Unfortunately I don’t see an end to this, and cruise companies, just like other overseas owned enterprises will always gravitate where they are welcome, and not try to “fight city hall”.
And you haven’t included the impact of Virgin and Cunard no longer basing ships in Australia…