Recovery of the expedition cruise market from the aftermath of the pandemic has lagged behind that of mainstream cruise. While the challenges that discouraged people from booking have gradually eased, and the constant flow of more capacity is evaporating, operational challenges remain which could be structural rather than cyclical in nature.
By Kari Reinikainen
Figures from Lindblad Expeditions Holdings show quite a bit of fluctuation in net yields per passenger and day over each quarter of last year, but the figure for the full year 2024 of $1,170 exceeded the 2023 figure by about 6.7%.
Source: Lindblad Expeditions Holdings
It is interesting to note that the yield for the second quarter of 2024 fell well short of yields for the first and third quarters. The second quarter marks the end of the Antarctic season, when ships need to reposition to other parts of the world, and these repositioning voyages are often long and do not command high yields.
Source: Lindblad Expeditions Holdings
Occupancy ratio also shows considerable variation between each quarter of last year, but the whole-year 2024 figure of 78% was one percentage point higher than the figure for 2023. While group revenues increased to $644.7 million in 2024 from $569.5 million in the preceding year, it still made a net loss of $28.2 million, reduced from a loss of $40.9 million in 2023.
HX Expeditions, the London-based expedition cruise operator that has demerged from the Hurtigruten Group of Norway, said in a presentation that its third-quarter 2024 occupancy ratio of 60.9% was 7.2 percentage points higher than in the corresponding quarter of 2023. However, yield per passenger-day had decreased slightly, from €672 to €661.
Source: HX Expeditions
Source: HX Expeditions
The data released by these two companies suggest that while recovery is on its way, the business is hardly roaring ahead.
Affecting factors
There are several factors affecting the recovery of the sector. “People mostly book expedition cruises well in advance, and the year 2022 was still clouded by the pandemic. China, a major source market for expedition cruises, only opened for outward travel in the third quarter of 2023, which also played a significant role in the slow recovery,” said Andrea Zito, CEO of Swan Hellenic.
Airfares remained at very elevated levels until early 2024, which had an impact on bookings for cruises in the Antarctica for the 2023/24 season. “People who book cruises in the Antarctica usually fly business class, and return air fares from the US and Europe to Buenos Aires and on to Ushuaia were in the region of €7,000 per person, roughly double their normal level,” Zito said.
In the first half of 2024, the air fares returned to normal levels, which encouraged bookings for the 2024/25 season. According to Zito, there was a significant increase in bookings in September and then another one after the US presidential election in November 2024. Swan Hellenic sells roughly 30 to 50 per cent of its cruises 18 to 24 months in advance. Despite the recent significant improvement, bookings are not quite back to pre-pandemic levels yet.
In the Arctic, the situation has changed considerably from pre-pandemic times. The Russia-Ukraine conflict means that the Russian Arctic, including the North East Passage, is not on the menu of expedition cruising, and its return cannot be expected any time soon.
Northern Alaska and the Bering Strait in the Pacific remain open for business, but the Jones Act forbids foreign-flagged vessels to operate in US domestic maritime routes. The nearest foreign ports that could come into question with these itineraries are in northern Japan, some six days’ steaming from Alaska. “Such long sea voyages are not really good for expedition cruises, which focus heavily on destinations,” Zito said.
Carsten Lund, chief commercial officer of Miami-based expedition vessel tonnage provider SunStone Ships, said that they too had seen a delayed recovery of the expedition cruise segment.
“Things are getting back on track now, and our charterers are having a good 2024/2025 Antarctic season,” said Lund. “I believe we will see a continued improvement through 2025 and 2026, as passengers are returning to expedition cruising. This segment sees passengers and operators planning several years ahead.”
Lund also drew attention to the long lead times in bookings, which were often made 12 to 18 months in advance. “If passengers felt ready to travel again mid-2023, they might only be going on the planned trip now,” he said.
Broadening scope
Expedition cruise has evolved into a multifaceted segment. This should aid recovery, as the products are now more differentiated and more appealing.
“In addition to the traditional expedition products in polar regions, we see an increased interest in using these vessels for warm-water exploration,” said Lund. “The unique features and smaller footprint of expeditions vessels, which make them suitable for exploration of remote, hard-to-reach areas, also make them very suitable for exploring small ports in the Mediterranean or distant archipelagos in Oceania.”
Broadening the scope of the expedition cruise segment, from heavy reliance on often longer cruises in the polar regions, might be needed to put it in better health, as not everyone is convinced about its recovery.
The expedition segment, which, in line with the entire cruise industry, faced severe headwinds during the pandemic, has not developed green shoots of recovery yet, in contrast with the rest of the industry, according to Peter Shaerf, managing director of AMA Capital Partners, the US-based merchant bank that focuses on transport, energy, and infrastructure.
The segment is evenly divided into two groups, depending on the type of ships they operate: the first group comprises companies operating modern tonnage, which are often able to charge per diem in the region of $1,000 per person; the second group comprises mainly smaller operators that rely on ageing tonnage – in some cases very old – which can command per diems of about $700 per person.
These figures are much higher than those quoted in the mass-market end of the cruise offering. As indicated earlier, prices of cruises have been a factor affecting the segment’s recovery. Obviously, reducing the ticket prices will bring in more bookings, thus quickening recovery. But the nature and structure of the product are the issue here.
Ticket prices and occupancy levels are more important in the expedition segment than in the mainstream cruise industry. Most expedition cruise products are sold as all-inclusive offers, so post-ticket-sale onboard revenues will not be substantial. Prices must therefore remain relatively high to guarantee profitability. This limits demand.
To widen their appeal, and in the hope of addressing a wider audience, some expedition cruise operators have started to offer shorter cruises of seven nights in the Antarctica in addition to the longer ones of a fortnight or so.
Insurmountable challenges
Although this proposition can be construed as a valid attempt to propel recovery, it poses a challenge, because most of these cruises depart from Ushuaia in Argentina, which takes quite some time to reach by air from North America, Europe, and the Far East, the three key source markets. This fact alone may limit the product’s appeal, so its impact on aiding recovery may be small.
In Shaerf’s opinion, the key challenge in the expedition cruise sector is the importance of the Antarctic. “It is a bucket-list destination, and I am not sure that there is a lot of repeat business,” he told CruiseTimes, adding that cruises in the region command very high per diems, but the season only runs from about November to March. This is another limiting factor.
After the Antarctic season, ships often face long positioning voyages to the Arctic, where the market is oversaturated and the per diems are nowhere near the levels obtainable in the Antarctic. And in all these other destinations, expedition cruise ships face competition from traditional luxury market operators. “These luxury operators usually have more ships than the expedition lines, which means that they can offer a wider range of destinations to their clients,” Shaerf said.
Some expedition cruise lines, such as Ponant and Lindblad, operate fairly large fleets of ships. They are better positioned to face the competition from the wider luxury cruise sector. Most other operators have no such advantage.
Facing such strong headwinds, expedition cruise operators also resort to other means to aid recovery, such as revitalising the traditional brand loyalty programmes and scaling up the business.
But this is easier said than done. Smaller companies, even with high-quality tonnage, are less well positioned to develop brand loyalty and repeat business: a wider range of destinations on offer is a major factor in this respect. This requires scaling up. “Scaling up is very important: it allows economies of scale (in operations) and flexibility in itineraries offered. Developing loyalty requires varied itineraries,” said Shaerf.
Weakened drivers
In the final analysis, these efforts can be seen as nothing more than tinkering at the edges. At the end of the day, it all boils down to the traditional principle of supply and demand. Simply put, there is currently a lack of demand and too much capacity in the small and niche marketplace.
Because of the high ticket prices and long distances, this segment has a severely limited source market under normal circumstances. In the recent past, its vibrancy was driven by exponential growth in the Chinese outbound leisure travels and the demand generated by revolutionary newbuildings. These key drivers are now either weakened or virtually absent.
Based on these analyses, though we may expect continuing recoveries in the segment, we think a return to pre-pandemic dynamism is unlikely for many more years.
Frits van der Werff, VP commercial at Anglo-Eastern Leisure Management in Miami, agreed that the recovery of the expedition cruise segment had not been as quick as that of the mainstream cruise sector. However, capacity growth has slowed and the supply of berths is gradually being absorbed by the demand.
“While the expedition cruise sector has indeed faced a slower recovery compared to mainstream cruising, we are seeing positive momentum as demand for unique, immersive travel experiences in remote destinations grows,” he told CruiseTimes.
“The slowdown in capacity growth is a positive development, allowing the market to focus on sustainability and quality rather than sheer numbers. As more guests seek once-in-a-lifetime adventures, we are optimistic about the continued growth of the sector, with a focus on delivering exceptional, responsible experiences in some of the world’s most pristine environments,” van der Werff continued.
Sustainability to cap future capacity growth, younger generations and Asia in focus
Looking into the future, the expedition cruising sector is poised for steady growth in the medium term, driven by increasing demand for unique travel experiences off the beaten path.
“While capacity growth will continue, it is likely to remain controlled, with an emphasis on smaller, more sustainable ships that can access remote destinations. The focus will be on providing exceptional, immersive experiences rather than rapid capacity expansion, especially as the industry remains mindful of environmental and regulatory concerns,” van der Werff said.
Excessive growth seen in traditional cruising will likely be avoided in the expedition segment, as operators aim to balance demand with sustainability.
The industry’s growth is coming primarily from regions like North America, Europe, and Asia, with emerging markets in China and South-East Asia showing promising potential. In terms of demographics, there is strong growth from younger generations – Generation Z and millennials – who are seeking unique and experiential travel, alongside an increasing number of multi-generational family groups. “Additionally, luxury and wellness cruises continue to be a growing segment,” van der Werff noted.
The Anglo-Eastern group, a major ship-management company that has its headquarters in Hong Kong, has a long-standing presence in both the Arctic and Antarctic regions, with experience in managing vessels operating in these unique and challenging environments. “Over the years, we have built a strong track record in supporting safe, sustainable operations in these remote areas, ensuring our vessels comply with the strict regulations governing polar waters, such as the Polar Code,” he concluded.
