Final Paper:

COVID-19 Impact on the Cruise Line Industry

Jessie Michael, Austin Mathews, Roz Jaf, and Jake MacLean

Marketing 482 - Marketing Analytics

Section 1 - Group #7

James Madison University

12/16/2020
Industry Background
Prior to the 1960’s, the cruise line industry was used strictly for commercial
transportation of passengers. However, unable to compete with the high speeds and luxury of air
travel, the cruise liners needed to differentiate themselves from other forms of travel. The 1970’s
brought the concept of leisure cruising to the public eye through the hit TV show “Love Boat”.
This began a race for cruise liners to build the biggest, most luxurious ships possible and provide
passengers with an unforgettable travel experience. Post-1970’s ships began to be equipped with
amenities such as casinos, pools, fine dining, cinemas, and spas. The cruise line industry entered
a new era of mega-ships that would grow to become one of the most popular forms of leisure in
the United States (Wilde, 2017). In the last two decades the cruise line industry achieved
tremendous year-over-year growth in the number of passengers. In 1999, 6.3 million passengers
were carried worldwide on cruise ships. This figure would grow to 17.2 million passengers in
2009 and 27.5 million passengers in 2019 (Cruise Market Watch, 2020). However, as COVID-19
began to spread and non-essential travel was halted, the cruise line industry began to suffer. The
number of passengers carried in 2020 dwindled to just 7 million; the financial repercussions of
this decrease were felt industry-wide. From late April 2020 to late March 2020, industry leaders
Royal Carribean, Norwegian, and Carnival faced their stock prices plummeting by 85.78%,
88.24, and 84.98%, respectively (Yahoo Finance, 2020). Overall, the pandemic has impacted the
growth of this industry and continues to threaten any potential success in the near future.

Business Problem Summary

Prior to COVID-19, the cruise line industry was increasing its revenue yearly, however
COVID-19 panic, travel restrictions, and guidelines resulted in numerous problems across the
industry. When the pandemic began, there was much uncertainty regarding containment of the
virus. Eventually scientists found that the combination of wearing masks and maintaining a
distance of at least six feet from others proved to be a beneficial way to decrease the spread of
COVID-19. Despite the implementation of masks and social distancing, these guidelines prevent
cruises and other travel and leisure industries from reaching their previous revenue goals. Cruises
heavily rely on the presence of customers, and with strict regulations, their entire business was
negatively impacted. Once the cruise line industry begins to operate again, companies will need
to find ways to meet the specific guidelines in place and also create an environment that their
customers feel safe in.
Each company within the cruise line industry needs to create solutions to operate under
different regulations and conditions. For example, when the ships begin to travel again, they can
decrease the maximum capacity of each ship, or they can require masks and social distancing.
Companies will also have to keep the price and duration of the cruise in mind as they will still
need to profit on a lower capacity. Also, many consumers may have less interest in going on a
cruise because of the pandemic. Some people may feel comfortable with regulations on board
while others will want to avoid wearing a mask or social distancing on vacation. Overall, the
business problem this industry faces as a result of COVID-19 restrictions is determining the most
favorable cruise profile for potential customers while still being able to retain a profit.

Dataset
In order to obtain more information about the preferences of consumers for cruises with
COVID-19 restrictions, a survey was created, and an extensive analysis was performed. The
survey was created using the software QuestionPro. Within the survey, there were a series of
cruise profiles where participants were asked to rank each profile based on how favorable they

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are. In total, there were 11 different profiles that had the factors of price, a mask requirement, a
social distancing requirement, capacity, and the duration of the cruise itself. The price was either
listed as 10% off or 50% off, the requirement for both masks and social distancing were either a
yes or no decision, the capacity was determined as either 25% or 75%, and the duration was
either 1-7 days or 8+ days. Each profile had a different combination of factors that was
determined by using the minimum combination codes in R Studio. The attributes were rated on a
scale of 1-5, 1 being unfavorable, 3 being neither, and 5 being favorable. Also included in the
survey were demographic questions asking about the participants age, income, most recent
cruise, number of cruises they’ve taken, and their gender.
Once the survey was created, the data was collected using Amazon Mechanical Turk. The
survey was initiated on November 18th, 2020 and the goal of 100 completed surveys was
reached within a few hours. The data showed a variety of results for each profile but was
predominantly taken by those who identify as male. The results also displayed a favorable
attitude towards profiles where masks and social distancing were required. Once the results were
gathered in Amazon MTurk, a full analysis was done using R Studio. To begin, the preferences
were installed into a conjoint analysis. The conjoint analysis determined the ideal profile for the
cruise, along with the most important attributes. Next, a cluster analysis was performed. The
cluster analysis exemplified two major groups within the data and grouped them by what
attributes were most important to them. Also, each cluster has its own ideal profile. Finally, a
buyer persona was created using Power BI which exemplified the characteristics of the two
clusters. It includes the demographic aspects of each cluster, and what attributes were most
important to them.

Results
In this section, the results from the survey are discussed along with the different analyses
that were performed. The results included a wide-range of responses to each profile and a diverse
demographic pool.
The raw data suggests that the profiles that included a yes for wearing a mask and a yes
for practicing social distancing, were preferred as the responses were a majority of either a 4 or 5
for the favorability score. The mean score for these profiles was also higher. On the other hand,
profiles that involve a no for both wearing a mask and practicing social distancing, have results
that sway towards the unfavorable numbers, like 1 and 2. Furthermore, the price of the cruises
was important to participants as they often favored the cheaper decision of 50% off. The
attributes of duration and capacity were not as important in deciding favorability, but still
impacted the participants score. When referring to demographics, the average age was 37 years
old and 63% of participants were male. Also, 35% of participants had an income of $40,000-
$59,999, which was the most popular answer choice for that question. In terms of past cruises,
44.55% of participants went on between 6-11 cruises, and 41.76% of participants went on a
cruise 3-4 years ago.
Within R Studio, a cluster analysis was initiated to find subgroups from the data set. The
results from the plots suggested that a two-cluster analysis was preferred as there was less
overlapping from the plot. From the plot to the below, it can be seen that cluster one is larger
than the other, and therefore contains more of the data. Out of the 100 people included in the
survey, 69 participants are in cluster 1 and 31 are in cluster 2. Cluster 1 has an ideal profile of a
price of 50% off, a mask requirement, 75% capacity, social distancing enforced, and a cruise
duration of 1-7 days. Despite this being the ideal profile for Cluster 1, the numbers suggest very

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low importance for each attribute. Each attribute number is less than 7% importance, which
exemplifies that Cluster 1 does not have any clear important factors. For Cluster 2, the ideal
profile is 50% off price, a mask requirement, 25% capacity, social distancing enforced, and a
cruise duration of 8+ days. When compared to Cluster 1, each attribute has more importance to
Cluster 2. The chart below that
was created using the results in
R Studio, displays the
importance of each attribute to
each cluster. The mask
requirement is at a 68.23%
importance level along with the
social distancing at 69.03%,
which means these attributes
were important to Cluster 2
when deciding how favorable a
profile was. They were also less
affected by the capacity,
duration, and price; however,
these attributes still had a much
higher importance level than
that of Cluster 1. Despite each
cluster's differences, there are many similarities between the two. For example, the average age
in Cluster 1 was 37 and in Cluster 2 it is 36, and the majority of participants within each cluster
were male.

10% 50 Mask Mask 25% 75% Social Social 1-7 8+

Off % Yes No Capacity Capacity Distancing Distancing days days
Off Yes No

Cluster 1 -.025 .025 .069 -.069 -.003 .003 .015 -.015 .026 -.026

Cluster 2 -.232 .232 .682 -.682 .073 -.073 .690 -.690 -.176 .176

In the appendix, a buyer persona was created to display the relationships that the
demographics and attributes had to the clusters. Outgoing Oliver was created to represent Cluster
1, while Conscious Conrad was the buyer for Cluster 2. Outgoing Oliver, or Cluster 1 has a
higher average income and a higher average number of past cruises. Also, as mentioned before,
Outgoing Oliver tends to find attributes less important for his preferences than Conscious
Conrad. Overall, the buyer persona identifies the results from each cluster in a creative way.
After analyzing the results from the cluster analysis, a conjoint analysis was conducted
using R Studio. The purpose of conducting the conjoint analysis was to understand the
consumers preferences and what attributes they value. The conjoint analysis created an ideal
profile for the cruise line industry based on the attributes identified. This profile includes a
cheaper price of 50% off, requiring passengers to wear a mask, a lower capacity of 25%,
practicing social distancing, and a cruise duration of 8 or more days. The chart to the right below
describes the importance of each attribute based on the participants' responses, which is how the

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ideal profile was determined. The
negative numbers in the chart indicate
that the attribute had a low part worth, as
positive numbers indicate a higher part
worth. Essentially, this determines the
importance of the attribute on the
purchase decision, which further helps
idealize the best profile. Furthermore,
each attribute has an average level of
importance, which is shown in the
graph. Based on the results, the most
important attribute was the mask
requirement and the social distancing
requirement.

Recommendations
Based on the results from the data collected, the ideal profile for a cruise under COVID-
19 restrictions involves a cheaper price, wearing a mask, practicing social distancing, a lower
capacity, and a longer duration for the cruise. Below are the recommendations for the cruise line
industry to follow in order to appeal to the preferences of consumers while also generating a
profit.
Unsurprisingly, survey results indicated that consumers would prefer cheaper ticket
prices for cruises; ideally 50% off the original price. While the majority of consumers will
always prefer a decrease in price, some of this result may be due to consumers anticipating
decreased amenities, activities, and destinations on cruises. While cruise lines may be struggling
financially, a decrease in price will incentivize many past cruise goers to set sail again and may
inspire new cruise goers to try it out. An increase in demand early into the return of cruising
post-COVID-19 may lead to higher interest throughout the year as consumers’ fears subside. To
achieve a decreased price, cruises should reduce staff, use cheaper supplies, and eliminate certain
amenities, specifically amenities that are not COVID-19 friendly.

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 COVID-19 has had a major impact on the cruise line industry, so determining the most
effective way to handle the pandemic is vital for success. Survey results show that ideally,
consumers prefer a mask and social distancing rules to be in effect. A good reference point for
cruise lines is the airline industry, which has continued flights during the pandemic. Every major
US Airline has required passengers to wear masks while on board the plane, and many have
blocked middle seats in order to maintain proper social distancing (Forbes, 2020). Cruise lines
should look to have mask requirements during various parts of the cruise experience, such as
during boarding and when moving through populated areas of the ship. Cruise passengers should
ideally be allowed to remove their masks while in their rooms, lounging at a proper social
distance of at least six feet, and during consumption of food and drinks. This will allow for
passengers to enjoy most of the classic aspects of a cruise, while still maintaining proper safety
guidelines during the pandemic.
Cruise employees should be required to wear masks at all times while working, in order
to ensure their safety as well as the passengers. CDC guidelines also recommend single-
occupancy cabins for crew members, closing crew group settings such as bars and gyms, and
canceling standard in person meetings and training (CDC, 2020). Additionally, by December
29th cruise ship operators must begin to collect tests from all current cruise workers to ensure
they don’t have COVID-19. Cruise lines must also have available testing for symptomatic
passengers by the same date (CDC, 2020). All CDC recommendations should be followed, and
all CDC requirements need to be taken very seriously. This will ensure that cruise line business
is being conducted in the safest and healthiest way possible.
As shown by the results, cruise goers prefer reduced capacity on cruise ships. Data shows
that the ideal cruise should operate at only 25% capacity. This may be attributed to social
distance guidelines in place from the CDC and consumers' enhanced awareness of personal
space. Italian Line Costa, a prominent European cruise line, successfully resumed operations
over the summer with reduced capacity (Yeginsu, 2020). Resuming operations ensures a source
of revenue for the company. Small capacity cruises have proven to be very effective in the past.
In addition, cruise lines with fewer than 250 combined crew and passengers are excluded from
CDC guidelines and protocols on board (Glusac, 2020); this could be very beneficial for cruise
lines looking to transition into a long term, reduced capacity solution. This could be the new
trend for cruise lines to start building smaller cruises while maintaining the level of amenities
that larger ships have. Smaller cruises can also dock at ports other larger cruises are unable to,
since many port cities have rules regarding the number of passengers able to disembark (Glusac,
2020). Reduced capacity allows for more stops and longer duration cruises, attributes that our
data found consumers wanted.
Overall, the cruise line industry needs to adapt their current business model to create a
different cruise experience that follows the pandemic restrictions and creates a safe environment
for its customer, while still profiting.

Appendix

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 Buyer Persona

Cluster Dendrogram

References

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CDC. (2020) Technical Instructions for Mitigation of COVID-19 Among Cruise Ship Crew.
Retrieved from https://www.cdc.gov/quarantine/cruise/management/technical-instructions-
for-cruise-ships.html

Cruise Market Watch. (2020). Growth of the Ocean Cruise Line Industry. Retrieved from
https://cruisemarketwatch.com/growth/

Glusac, Elaine. (2020) When Will Cruise Ships Sail Again - and Will It Be Safe? Retrieved from
www.aarp.org/travel/vacation-ideas/cruises/info-2020/cruise-status-during-pandemic.html.

Wilde, C. (2017). Cruise Holidays Through the Decades. Retrieved from

https://www.cruise1st.co.uk/blog/cruise-holidays/cruise-holidays-decades/#Cruising
%20in%20the%201960s%20%E2%80%93%20changing%20currents

Yahoo Finance. (2020). Retrieved from https://finance.yahoo.com/quote/NCLH?

p=NCLH&.tsrc=fin-srch

Yeginsu, Ceylan. (2020) Cruise Ships Can't Sail. Retrieved from

https://www.nytimes.com/2020/09/18/travel/virused-cruise-ships.html