News of the demise of P&O Cruises Australia may have upset those who have fond memories of the brand’s uniquely Australian-style cruises. But experts say that while cruising remains popular, tastes are changing and new opportunities are opening up, thanks to the expansion of the Panama Canal.
Announcing that P&O Cruises Australia will be closed in March 2025 and integrated into Carnival Cruise Line, owned by global cruise operator Carnival Corporation, CEO Josh Weinstein said the decision was due to “significantly higher operating and capacity” as well as the South Pacific’s small population. He said he was taken. regulatory costs”.
The Australian market is a modest portion of the operations of US-listed Carnival, the world’s largest cruise line, and represents about 5% of its revenue.
According to Carnival’s latest annual report, in 2023 its Australian division generated revenue of US$1.2 billion, compared to US$13.1 billion in the US and US$6.6 billion in Europe.
Relating to: P&O Cruises Australia will close early next year
Due to the larger population and profitability of the northern hemisphere market, companies deploy most of their ships to the Mediterranean and Caribbean. But demand in Australia remains strong.
The local cruise industry has recently revived, with passenger numbers surpassing pre-Covid levels in the latest season; It’s a remarkable resurgence for an industry once synonymous with the outbreak of the deadly pandemic.
Carnival’s Australian division, which includes Cunard, Princess and Seabourn, is scheduled to make 846 domestic port calls in 2024, compared to 575 last year.
Meanwhile, Virgin global founder Sir Richard Branson visited Sydney in December to launch Virgin Voyages in Australia, targeting adults, particularly singles. However, uncertainty regarding Middle East sailing routes has led the company to cancel next year’s Australian season.
P&O has a long history in Australia.
The Peninsular & Oriental Steam Navigation Company, as it was once known, originally operated steamships from Europe to Australia, mostly carrying goods and immigrants rather than tourists.
“P&O is a heritage brand that predates Australia as a country; people came here on the P&O ship in 1852,” says Chris Frame, cruise ship historian and author of a new book on the history of P&O cruises.
“This was a huge moment in Australian history because it had taken quite some time for the colonies to offer steamship service to the continent,” says Frame.
“P&O has become a huge part of the Australian immigration story; Many people moved here to start a new life. And when the company launched a cruise service in the 1930s (a 1932 cruise from Sydney to Norfolk Island sold out in a single day), the brand was trusted and had a place in the hearts of Australians,” he says.
Cruising really took off in Australia in the 1930s. The decline in international trade due to the Great Depression meant that ships could dock longer and passengers could travel slower.
“These cruise ships were not like they are today; Passengers formed committees to decide what activities to do and organized their own entertainment. Frame says you’ll see photos of egg and spoon races on board.
Then, following the advent of jet airliners in the 1970s, P&O repositioned itself as a budget-friendly party cruiser rather than primarily a means of transportation.
“The real change came when P&O acquired Sitmar cruises and Fairstar. [Fairstar] It became a pleasure ship. He was cheap and cheerful and would vacation in the South Pacific,” says Frame.
“There was no dress code, nothing to worry about on board, and that’s where P&O Australia took its current identity as a truly laid-back Australian experience.”
Pierre Benckendorff, professor of tourism management at the University of Queensland, says it’s difficult to point to just one thing about P&O’s demise.
New entrants, the relative affordability of flying abroad for a post-Covid holiday and the growing influence of retired baby boomers flush with cash and whose tastes extend beyond budget travel are among the factors.
Relating to: Cruise bookings remain above pre-Covid figures due to the industry’s aggressive pricing practice
Benckendorff says Carnival Cruise Lines, the company’s largest among Carnival’s 10 cruise brands that range from high-end luxury to niche and budget options, is experiencing a post-Covid boom.
“It’s more about how they want to position these brands than anything else, and it’s fair to say Carnival. [Cruise Lines] It has larger ships with higher capacity and the brand earns more profits than others [it does] With P&O.
“Some P&O ships are also getting quite old, and since they are mostly smaller, it makes sense for the company to invest its resources in the Carnival brand.”
The expansion of the Panama Canal in 2016 also meant it made sense to fold the P&O business into Carnival’s larger brand with its larger, more modern ships.
Newcastle University business school senior lecturer Dr. Consolidating fleets and registering them in the Caribbean rather than the UK provides significant cost savings for companies, according to Patricia Johnson.
“It is only the expansion of the Panama Canal that has caused these massive ships to be released into the Pacific. Before this, it was not possible for them to deploy their fleet from the Caribbean to Asia/Pacific without significant costs,” says Johnson.
Benckendorff says that during the southern hemisphere’s summer season, large ships can now pass through the canal instead of taking them from the bottom of South America to the Pacific.
Meanwhile, investment in new cruise ship facilities in Australia over the last decade means larger ships can dock here, he says.
Ultimately, P&O’s closure reflects Carnival Corporation’s confidence in the strength of the Australian cruise market.
“As a cruise line, I would argue that the brand is fatigued as ships get older and the cruise market becomes very competitive,” Johnson says.
A spokesman for Carnival Australia said “there will be a small number of job losses”. But cruise companies have largely avoided employing large numbers of Australians in recent years as they try to increase their margins, experts said.
Benckendorff previously told the Guardian that companies operating in international waters are not subject to the Australian minimum wage; Registering ships in places like the Caribbean allows them to pay lower fees.
Benckendorff says the Australian market has matured since the Fairstar days and is shifting towards two main segments.
“Most cruisers are either retired baby boomers looking for something to do with their money, or families who get pretty good value from an all-inclusive package – competitively priced compared to staying at a five-star resort,” he says.
“I wouldn’t say budget cruise is dead, but I do think the market is changing… Carnival wouldn’t have made this decision if they didn’t think they could fill larger capacity ships.”