And, since UBS conducted the same research in 2015, the main reason to choose a particular brand has swung to service reputation, not price.
UBS found that in the US, the intent not to take any cruises in the next 12 months rose to 18%, up from 15% in the year-ago survey. Intent to take one cruise over the next 12 months, however, rose among US respondents to 50%, up from 38%
In partnership with UBS Evidence Lab, the brokerage surveyed more than 9,600 consumers across six countries—the US, UK, France, Germany, Japan and Australia—in June and August. The margin of error is plus or minus 1%.
Overall, across all regions UBS surveyed, intent to cruise over the next 12 months in terms of number of cruises to be taken is down to an average 1.74 cruises, from 1.95 cruises in the 2015 survey.
What's driving this average down is the fact that those who intend to take at least three cruises made up 9% of respondents this year, compared to 13% last year.
About 29% of respondents do not plan to take a cruise over the next 12 months, up from 27% in the 2015 survey. However, intent to take one cruise is up overall, now at 49%, compared to 42% previously.
UBS analyst Robin Farley sees upside for brands where the intent to cruise in the next 12 months is higher than actual cruises taken in the prior 12 months. She said 21% of respondents intend to take a Royal Caribbean cruise versus 16% having taken a Royal Caribbean cruise over the past 12 months. Intent to take a Carnival cruise over the next 12 months is at 14% versus 11% having cruised with the line over the past 12 months.
The research found the main reason behind a decision to choose a particular brand is service reputation, at around 49% of responses, a bigger deciding factor than price at 41%. This reversed the sentiment of a year ago when price was the main factor for 48% and service reputation came in at 44%.
'This is a particularly positive read-through for the cruise lines as more brand differentiation means better pricing power and ability for operators to defend against discounting by less known brands,' Farley said.
In terms of service reputation among different brands, more than 50% of respondents believe service reputation is a reason to cruise on Carnival, Azamara, Celebrity, Norwegian Cruise Line, Princess, Royal Caribbean and Seabourn.
UBS remains positive on the cruise sector with 'buy' ratings for Carnival Corp. and Royal Caribbean, and a 'neutral' rating for Norwegian Cruise Line Holdings. The brokerage's price target for CCL is $58 and for RCL, $101, both based on a multiple of 14 to 16 times UBS's earnings per share estimate for each stock in 2017.
The UBS price target for NCLH, $42, is based a multiple of approximately 12 to 13 times its 2017 EPS estimate for the stock, since NCLH may trade below the sector average given its near-term challenges, Farley said. (NCLH is due to report third quarter results Nov. 9.)
On Monday CCL shares closed at $48.99, up 95 cents or nearly 2%, and RCL closed at $76.48, up $1.25 or nearly 1.7%. NCLH ended the session at $37.83, up 83 cents or nearly 2.3%.
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