More than 9.5 million people around the world went on cruises last year, a 10.2 percent increase over 2002, according to the Cruise Lines International Association (CLIA).

"Cruising flourished despite significant obstacles that challenged the entire travel community in 2003, including SARS (Sever Acute Respiratory Syndrome), terrorism fears and an uncertain economy," said Mark Conroy, CLIA's president.

The mood at the 20th conference on cruise ships ending Thursday is lighter than last year's, when the war in Iraq loomed.

The mammoth ship Queen Mary II, the largest in the world, was launched in January, while the Italian Mediterranean Shipping Company has ordered two 1250-cabin boats from French ship maker Alstom Marine.

Industry giants Royal Caribbean Cruises and Star Cruises placed major orders in December for 2005-2006.

"Wave season"
This year has started well for the industry, analysts said. "Wave season bookings are off to a very strong start," Timothy Conder, an analyst with AG Edwards, said referring to the season that starts in January and ends in March.

This year "should be the more normal season since September 11," he said. "However, this year's wave season will still not be as important as pre-September 11."

September 11 hurt the industry since many cruise passengers must reach seaports by plane and which many Americans are afraid to use since Muslim extremists hijacked planes to attack New York and Washington.

"Within the industry, the luxury sector has been the most affected by the reluctance of North Americans to fly because their itineraries are designed to offer more exotic itineraries often requiring to fly long haul to join them," said Tony Peisley, a cruise industry analyst.

Other companies have adapted to the flight fear by offering trips starting at ports that clients can reach by car. But the cruise industry has not suffered as much as the airlines from the rise in oil prices.

Growth less than predicted
"The worldwide cruise industry is set to grow to more than 17 million passengers by 2010," Peisley said.

"In the wake of 9/11 and Iraq and taking into account the ongoing war on terrorism, this new expectation is significantly less than the 20 million passengers being predicted for 2010 back in 2000," he said.

"It is still, though, an impressive growth projection compared with the more modest forecasts for other tourism sectors," he added.

The cruise industry is dominated by three big companies that own 80 percent of the market. Carnival Cruise Lines and Royal Caribbean Cruises are the biggest of the three.

The companies have just begun tapping the US market: only 15 percent of Americans have been on a cruise. Most customers tend to be more than 50 years old. "Year 2004 will be the first full year of an industry cyclical upswing," Conder predicted.

Ship makers are looking forward to a good year since orders dropped from 49 in October 2001 to 23 in August 2003, Peisley said.

The decline is cyclical and tied to large orders made in the late 1990s. Plus, a drop in the value of the dollar made ship making more expensive for European builders.

"We believe we are starting to come out of the downward leg, and that the low supply growth in 2005 will continue for a couple more years after that." said Jamie Rollo, a Morgan Stanley analyst.

AFP