In short, we long to goof off and enjoy it.
One time-honored way to do this is to travel. That is why we have invested for many years in the cruise industry. The demographic forces that drive demand, and the structure of the industry, support growth and return characteristics that are attractive to us.
The world is getting older with the number of people aged 60 and over expected to grow by more than 2.5% annually for the next few decades.1 As people age their spending patterns change. The only areas in which those over 65 spend more on consumption are health care, travel and leisure.2 These trends are potentially positive for the travel industry, as can be seen in the forecast below.
Many of these older travelers prefer cruising to backpacking.
In addition, rising incomes in Asia, particularly in China, are breathing life into a nascent and fast-growing cruise industry there.
Together, these demographic forces are increasing the number of cruise passengers by nearly 4% every year.3
The cruise industry is well-structured to profit from this volume growth. There are few players that matter, with four companies sharing nearly 90% of the market.4 And the market is relatively small, with only 400,000 berths. This is fewer than the number of hotel rooms in Florida. 5
Follow @OFIGlobal for more news and commentary.
- ^Source: United States Department of Labor, Bureau of Labor Statistics.
- ^Bank of America Merrill Lynch: Carnival Corporation, Buoyed by demographics. July 24, 2017.
- ^Bank of America Merrill Lynch: Carnival Corporation, Buoyed by demographics. July 24, 2017
- ^Business Research & Economic Advisors, November 2016.
Investments are subject to market risk and volatility.