Cruise Fuel Costs Expected to Fall, But So Is Demand

Deteriorating demand and yield pressure will offset any potential gains for cruise lines from declining fuel prices, according to a report by investment firm William Blair & Co.

Bob Simonson, William Blair analyst, predicted that a decrease in consumer spending over the course of the coming economic recession would deteriorate earnings for all parts of the leisure sector, and that cruise pricing would suffer as demand weakens.

“We expect these pressures will become more evident as this year comes to a close, accelerate during the Wave period after the first of the year, and be most intense during the peak third-quarter summer season,” Simonson wrote. “These pressures may well prove most intense this summer in higher-margin European itineraries.

Simonson noted that the only earnings pressure on cruise companies over the last few years were due to sharply rising fuel costs, while demand and pricing remained positive.