Opportunities and Threats for the Ferry Industry

Apart from the challenges of a succession of jetstream driven Atlantic storms battering our islands*, three major longer term market challenges currently face the UK ferry industry:

• Lingering fears over a post-Brexit trade deal and implications for UK-flagged vessels
• Long term customs arrangements and port capacities
• The costs of transitioning to environmentally sustainable ships

But it’s not all bad. Consumer demand for ferries remains buoyant: according to Discover Ferries, 38 million ferry journeys were made last year between the UK, Ireland, France and other continental European markets. Driven by growing passenger numbers and consumer demand, the industry is benefiting from the commissioning of a number of new ships, many running on liquified natural gas (LNG), batteries or a combination of the two.  Brittany Ferries, P&O Ferries, DFDS, Stena Line and Irish Ferries are all making substantial investments in new vessels.

Despite the obvious challenges and uncertainty posed by Brexit, it also brings opportunities, not least a renaissance for duty free.  The pressure to minimise port delays may make new routes financially more attractive. Meanwhile, the investment in environmental sustainability should have a long-term financial upside: taking as an example, P&O’s two new super ferries for the Dover – Calais route (which are set to join the fleet in 2023), fuel usage will be cut by an estimated 40% - a handy boost to operating margins when you have a reported €260m of new ship to amortise!

For consumers, the main advantage of ferry travel remains enduring: the flexibility that comes with travelling with your own car – and packing everything you can humanly fit into it (or on top of it)! Yet despite investment in new ships, the ferry industry has not previously been renowned for innovation: the onboard customer experience (CX) on many routes has seen only incremental change, while booking systems and the associated user experience (UX) sometimes appear clunky and behind the curve.

As investors look for returns on their new assets, optimising revenue from fixed on-board space ought to be high up on the ‘to do’ list. This, in turn, requires customer behaviour to be placed at the heart of the planning process – even when that extends to dealing with the exuberant behaviour of some passengers who have over-indulged in the bar, a stock story for British tabloids. Furthermore, if ferry operators are to maximise the potential of growing demand – including during off-peak periods, growing the ‘reach’ of their consumer-facing brands is also a strategic priority.

*Finally, if you want to be impressed by the skills of CalMac’s crews, watch how MV Caledonian Isles was brought safely into Ardrossan in the teeth of Storm Dennis.  Respect!

To find out how BVA BDRC can help you negotiate and take advantage of these challenges, don't hesitate to get in touch.