Conflict with Iran and oil prices threaten to eat into cruise lines’ profits

The global cruise industry is reporting record demand and renewed consumer enthusiasm, but leaders running the world’s largest cruise companies say the sector is also facing some of the most complex challenges it has seen in decades.

“We’re not a vacation anymore. We’re a vacation.” Carnival Company CEO Josh Weinstein said during a keynote panel Tuesday at Seatrade Global, a cruise industry conference.

As demand rises, passengers are becoming younger; A third of cruise travelers are now under 40, according to the 2026 State of the Cruise Industry report from the Cruise Lines International Association, or CLIA. A third of trips are multi-generational, and families often travel together. According to the report, nearly a third of cruisers take ship vacations several times a year.

The cruise industry hosted 37 million passengers worldwide last year, and expects the number to reach 42 million annually by 2029, CLIA found.

“This prevailing demand sets us up very well for volatility,” Weinstein said.

At least six cruise ships remain stuck in the Persian Gulf due to the deadlock in the Strait of Hormuz. One of them is MSC Euribia.

Although nearly 1,500 passengers were safely evacuated amid Dubai airport closures and missile warnings after the US and Israel launched an attack on Iran in late February, there are still some crew members on board to maintain the ship.

“It is clear that we are living day by day. The situation is very fluid,” said Pierfrancesco Vago, CEO of MSC Cruises, during Seatrade Global’s keynote.

Already, the closure of maritime traffic in the strait has disrupted cruise routes in the Middle East and southern Europe. Threats of blockades, seabed mines and spotty negotiations keep cruise managers guessing about when they can move their ships.

“Morning is one thing, lunchtime is another, dinner is another,” Vago said of the numerous and often conflicting announcements issued by government leaders. “We need to remain calm and actually be prepared to leave as soon as the possibility and opportunity return.”

Despite these challenges, cruise executives say the industry has never been better positioned to absorb shocks.

“Every crisis we’ve faced — financial, geopolitical or health-related — we’ve adapted to it,” Carnival’s Weinstein said. “There’s no reason to think it will be different this time.”

Volatility in fuel prices has once again put energy strategy front and center for the cruise industry, especially for Carnival, which does not hedge fuel prices.

“No one asks us about hedging when prices are low,” Weinstein said. “But our strategy has been consistent: use less fuel.”

The cruise industry aims to reach net-zero emissions by 2050, but CEOs agree they can’t achieve that goal just by conserving fuel.

Industry leaders see biofuels, green methanol and synthetic liquid natural gas (produced by combining captured carbon with hydrogen) as the most promising solutions to meet their fuel needs.

Royal Caribbean Group Cruise lines already invest hundreds of millions of dollars annually in technology and energy innovation, but the availability of alternative fuels remains a bottleneck, CEO Jason Liberty said.

“It’s not about what we want to use,” Liberty said. “It’s about what’s scalable and available.”

Bud Dar, President and CEO of CLIA, added: “We will have intense competition with other sectors for this type of fuel as well. There is no guarantee that we will get it.”

Even as the industry navigates choppy seas, cruise companies are looking for their next avenues of growth.

Technological advances in artificial intelligence are being used to reduce food waste, plot and flight paths, and increase efficiency. Cruise Line executives say the most important application is reducing friction in the guest experience.

“A more flexible business environment has been a big driver of demand for us,” Liberty said. Most Royal Caribbean ships now host Starlink fast internet connectivity on board.

Private destinations, exclusive ports or islands owned or controlled by cruise lines, continue to be a priority for investment. For example, Royal Caribbean currently has three private destinations on its itineraries, but will have eight destinations by 2028.

It is developing a major land hub in Puerto Williams, Chile, to reduce or eliminate the amount of time travelers to Antarctica have to spend crossing the rough seas of the Drake Passage.

Although the luxury sector represents a small percentage of the total industry, it is growing rapidly. Customers are increasingly interested in exploring health, wellness and longevity – and these trends are showing up in their vacation habits as well.

Small ships and river cruises accommodate niche interests in ecotourism and remote areas – those not yet discovered by social media influencers – and culinary or art enthusiasts.

The demand for tourism due to social media also sparked backlash from some destinations that were inundated by crowds. The cruise industry works with destinations on what it calls managed and predictable tourism.

MSC has worked with Dubrovnik, Croatia, for example, to coordinate the flow of visitors to the medieval city, which wants tourist spending but without destroying the quality of life for residents, Vago said.

“A lot of these coastal communities really appreciate it. We plan ahead. We put together itineraries three years in advance,” Vago said.

“The strength of this industry lies in its ability to evolve without losing its soul,” Liberty said. “That spirit is hospitality.”

in Norwegian Cruise Lines HoldingsThe challenge facing new CEO John Chidsey is to right the ship.

In his first earnings call, just days after taking over in February, Chidsey acknowledged that the company had made many mistakes.

Margins are under pressure. Stocks were volatile. Critics have questioned efforts to expand Caribbean cruise itineraries before the private Norwegian island destination is completed.

Earlier this year, Elliott Investment Management took an active stake in the Norwegian company, which may have provided an incentive for the board to make a change in leadership.

Chidsey told CNBC that Elliott’s goals align with his own and that he intends to create a culture of accountability and urgency where teams work together rather than separated into silos.

The Seatrade conference marked the cruise industry debut for Chidsey, who was previously CEO of Subway, Burger King and Avis.

When asked what “the sandwich guy knows about sailing,” Chidsey doesn’t miss a beat, insisting he’s “the shift guy, not the sandwich guy.”

“I didn’t know anything about fast food when I went there. I think getting fresh eyes is really what a Norwegian needs,” he said. “It’s all about execution.”