(Bloomberg) — America’s Independence Day holiday is fast approaching, but instead of the usual beach barbecues and fireworks displays, many US travelers are setting sail for some exotic port.
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The cruise industry has emerged as the popular option for cost-conscious vacationers looking for something more affordable than a typical trip. From January through May, Americans across income levels cut their spending on airlines, lodging and other forms of leisure as economic uncertainty rose and the US dollar weakened, but cruises kept growing, a Bank of America Institute study found.
“If you want to go visit a Caribbean island, the best value by far is doing it on a cruise ship,” Truist Securities analyst C. Patrick Scholes said.
A record 19 million Americans are expected to go on a cruise this year, up 4.5% from 2024 and the third straight year of all-time high volume, according to projections from the American Automobile Association. Cruise Lines International Association projects that passenger numbers worldwide will increase 9% in 2025 and continue to climb through 2028.
The growth is showing up in the bottom lines of cruise operators, with Carnival Corp. posting better than expected second-quarter earnings and raised its outlook for the second half last week. Since then, Carnival’s shares are up 23% compared with a 3% gain in the S&P 500, and are trading at the highest level in four years. Meanwhile, Royal Caribbean Cruises Ltd.’s stock has soared 18% and is at an all-time high, Norwegian Cruise Line Holdings Ltd. is up 14% and Viking Holdings Ltd. has gained 8.8%.
“Cruise companies were hit hard earlier in the year by perceived recession risk, and now represent maybe the most clear-cut buying opportunity given a more resilient macro environment,” Citigroup analyst James Hardiman wrote in a note to clients last month.
Low Inflation Risk
In addition, the industry isn’t being hit hard by inflation, at least not yet. Cruises operate with a long reservation calendar, so many of these trips were books in 2024, according to Don Bucolo, co-founder of the travel blog “Eat Sleep Cruise.”
“They have a very long booking curve, so they have a lot of visibility into next year,” Melius Research analyst Conor Cunningham said.
In times of economic unease, cruises become attractive travel options because they’re far cheaper than flying to your destination and staying at a hotel or Airbnb. For example, a three-day Royal Caribbean cruise to the Bahamas this January costs $469 per person, while a three-night stay at the Atlantis resort at Paradise Island Bahamas costs $894.
Passengers lined up on a Brooklyn dock on June 29 preparing to board a ship headed to the Bahamas agreed with the value proposition.
“It’s not only your hotel, it’s your transportation and your restaurants,” said Nicholas Picard. “So it’s just something that brings us back for more.”
Picard, a nurse, said that the need to be careful financially weighed more on his travel plans this year than in the past. Another passenger, Amy Gravell, said that her seven-day stay at a resort in the Bahamas last year cost twice as much as the week-long cruise she was about to embark on.
One appealing aspect is the up-front cost of traveling by boat. Passengers on a cruise have a clearer idea of how much they’re going to spend since so much is included in the price, according to Gabriel Podbereski, a pilot from Miami who also creates content about cruises on Instagram and YouTube under the handle @thecruisevibe.
Young Cruisers
“Many travelers find the pricing strategy on a cruise to return a higher value for their dollar, especially as the USD and CAD have seen a continued weakening,” said Gina Gabbard, chief strategy officer at First In Service, a travel experience company with advisers worldwide. The company has seen “ongoing growth” in its cruise business, Gabbard said, and the trend is continuing.
Part of the enthusiasm for the industry is being driven by increasing numbers of younger travelers who are opting for cruises. In addition, the business has recovered from the debacles of a decade ago that gave cruising a bad reputation, as captured in the recent Netflix documentary “Trainwreck: Poop Cruise,” about a 2013 voyage on a Carnival ship where passengers went four days on a without power.
“If we go back 10 years ago, we see this industry went from self-hurt to self-help,” Truist’s Scholes said.
One corner of the market that isn’t seeing a boost from the growth of cruise vacations is fuel demand. In part that’s because cruise ships represent a small fraction of the marine fuel market, said Iain Mowat, principal analyst for refining and oil product markets at Wood Mackenzie.
Cruise ships are also becoming more fuel efficient. Fuel consumption per available lower berth day decreased 6.3% compared to the prior year, Carnival reported in its 2025 Q2 earnings release. Improved fuel efficiency mitigates some of the increased demand for fuel, according to Alex Hodes, director of energy market strategy at StoneX.
While the cruise industry is thriving in a tough economic environment, with the big operators trading at records, for investors the question is how long they can keep it up. With each quarter of growth, the comparisons get more difficult to beat, so they need to continue enticing new travelers for the trend to stick.
“Really, this was a stock sector, if we go back to last year, that really did extremely well,” Scholes said. “They would beat every quarter and have big earnings raises. I think that the ability to have really large beat and raises is going to be pressured.”
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