Cruise passengers increased in early 2008

updated 1:54 p.m. ET Oct. 15, 2008

NEW YORK - The cruise industry grew in 2007 and the first half of 2008, according to an industry report, but U.S. consumers' spending cuts and the global economic downturn are creating rougher seas ahead.

The Cruise Lines International Association, or CLIA, said in a report released Wednesday that about 12.6 million passengers took cruises worldwide in 2007, a 4.7 percent increase over 2006. In the first half of 2008, the industry saw a 5.4 percent increase in passengers.

"We are still cautiously optimistic that we will meet the forecast that we set at the beginning of this year of carrying 12.8 million passengers," said CLIA President and Chief Executive Terry Dale in an interview.

Despite showing growth, the report contained signs of headwinds already in the first half of the year. Tourists from overseas accounted for nearly all the passenger increase, surging 31 percent, for instance.

"As an industry, we're becoming more global," Dale said.

The report, the 2007 CLIA Economic Impact Study, was conducted by Exton, Pa.-based Business Research & Economic Advisors.

Passengers from North America increased by less than 1 percent, as soaring fuel costs, reduced airline capacity, a dismal housing market, rising unemployment and a credit crunch led many Americans to cut back on leisure travel, according to the report.

In 1995, roughly 11 percent of passengers on CLIA members cruises came from outside North America. This year to date, overseas passengers represent more than 20 percent of cruise passengers.

Global demand may be slipping, however. In a note to investors last week, Stifel Nicolaus & Co. analyst Steven Wieczynski said travel agents suggest European demand is slowing. Europe has been hurt by a softening economy and a strengthening U.S. dollar.

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But Wieczynski said he expects the relative value of a cruise vacation, with its all-inclusive upfront costs to continue luring consumers.

Dale said the industry is investing $21.2 billion through 2012 on 34 new cruise ships under construction. Direct spending by the industry and its passengers in the U.S. rose 5.9 percent to $18.7 billion in 2007, and the industry generated $38 billion in total economic output, a 6.4 percent increase over 2006, according to the report.

Dale said the industry has room to grow. Only 20 percent of U.S. citizens have taken a cruise, he said, and the industry has "just started to scratch the surface" of international demand.

Dale said the industry must continue to push the value argument.

"When you're going to vacation in uncertain times," he said, "this is the way to go."

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