Thread: Small Reductions on Big Ships?

(The Cruise Examiner - written by Mark Tre for CyberCruises The Cruise site with news, articles, list of ships, discounted cruises, specials, travel agencies, links, e-zine, web cards, lines, agencies - Monday February 16)

That's the way the cruise lines would like it to be. But despite some ingenious ways of reducing client costs, it seems unlikely that they will succeed at accomplishing this.
All reports to date for 2009 have bookings up but revenues down. According to Ryan Wahlstrom at Cruise Market Watch, this year is forecast to see a 2.9% increase in the number of cruise passengers but a 9.5% fall in fare revenue.
It is against this background that Richard Fain, Chairman and CEO of Royal Caribbean, said last week "We will accept slightly lower occupancy levels in order to keep pricing up and to maximize yields."
This attempt to maintain some sort of integrity in fare levels has resulted in cruise lines creating new and innovative ways to attract customers. It may have started with on board credits (where, unlike with a straight fare cut, the client actually has to spend the money on board) but it has now spread to things like free gratuities, flights or upgrades, children, and, most interesting of all, free unlimited shore excursions on Regent.


NCL On Board Credits

While on board credits were used as a perk in the past they are now more often used as an alternate way of discounting that will bring the money back to the cruise lines' treasury. For instance, last week NCL came up with across the board on board credits of $75 per person on Western Mediterranean cruises in the Norwegian Gem, up to a maximum of $150 per stateroom. (Compare these numbers with some that follow).
But although NCL has come up with something that is attractive and will keep the money in house, there is still a lot going away in fare reductions.


Third and Fourth Passenger Promotion

As opposed to some "book one, second passenger travels free" deals such as easyCruise offered last week (essentially a two-for-one offer), NCL has come up with a third and fourth cruise only passenger fare of just £99 for one-day sales. These are ex-UK for certain Mediterranean departures from May through November, as well as some January-March 2010 Canaries cruises. This at least preserves the fare for the first two passengers and ups ship occupancy as well, and presumably also has an effect on onboard revenues, especially for adults. And as opposed to MSC's free children fares it does generate at least some revenues from children travelling with parents.


Carnival Early Savers


Carnival, on the other hand, has come up with some big reductions - early saver fares that start at $179 ($80 off) for 3 days, $199 ($80 off) for 4 days, $249 ($110 off) for 5 days and $399 ($180 off) for 7 days. The kink in this one is that deposits are non-refundable (common in Europe but rare in North America) and non-transferable, and name changes are not allowed, although a fare protection program does apply so if the fare goes lower these early bookers will be protected in that any cut will be funded back to them as an on board credit.
These fares are available five months in advance on 7-day cruises or three months prior on cruises of 5 days or less. This is just a fare cut of course but it does have the benefit of reducing the many cancellations that have been common in North America by the line keeping the deposits.
This will mean less cost to Carnival to administer the program as those who are not serious, knowing they can't get their deposit money back, will not waste their time with multiple bookings, as has happened in the past.

Regent's Unlimited Shore Excursions

This is one area where an all-inclusive line becomes even more inclusive and seems to be a brilliant ploy. Available on 35 select 2009 cruises that must be booked before the end of March, clients can book unlimited shore excursions on these departures. Seeing as the usual mark-up on line-purchased shore excursions is 100%, this means that effectively this is costing Regent about half as much as it appears to be costing them, a smart move.
Free flights are also added in some cases, which while maintaining price intergrity will still cost the line whatever their contract rates may be with the airlines. And there are still some two-for-one offers out there on distressed sailings.


Bigger On Board Credits at Silversea and Crystal

Not quite as original as Regent, but beating them to the punch and still keeping the money in house, Silversea came up with a $1,000 per cabin on board credit for select cruises. This would be the equivalent of a contribution towards the cost of shore excursions, mainly because drinks are already included in Silversea fares. Then this weekend Crystal came up with a $2,000 on board credit per couple, doubling the odds on Silversea, except that drinks are not included in Crystal's fares.
Silversea, however, include flights on some cruises and Crystal is also offering discounts of up to $3,000 per couple, thus giving something away on price integrity.


The Cunard Sale

Meant to remind people of the famous Harrod's Sale every January, this more upmarket approach, being used in the UK, is quite effective, but it is still a sale. Cunard has just taken advantage of the Wave Season to do things in a more gentile way without using "d" words such as deal and discount. Admittedly, it's not easy to give away shore excursions on Queen Mary 2's six-night Transatlantic crossings, but the line could have had another look at on board credits.
Meanwhile, in America, Cunard is still sending e-mails to past passengers offering "up to 2-for-1 fares." While the UK effort is interesting, no marks to the American side for originality.


Hurtigruten and Swan Hellenic

Hurtigruten has also joined the discount fray, something that has not been so prevalent in the expedition and adventure trade in past years (see "Big Reductions on Small Ships," 09-02-09). Hurtigruten US is offering a 25% reduction on suites, as well as free flights for those booking them on Antarctic departures in its 382-berth ms Fram. Hurtigruten has already cut back its Antarctic operation to one ship from two after having operated two ships last year.
It is also offering free air fares to Europe from North America on suites on the Norwegian coast. Swan Hellenic, on the other hand, has come up with a unique offer on two May departures and one June sailing of the Minerva in the Mediterranean that involves leg room, offering a 33-inch seat pitch on certain dedicated flights from the UK with Thomas Cook Airlines. This compares with 31 inches with British Airways economy and 32 inches with Olympic and Alitalia.


Summary

Top marks go to Regent for coming up with free shore excursions. When you do that and include drinks in the fare, who needs big on board credits, except of course that spa and shopping expenses will not be included.

Honorary mention goes to lines that are preserving pricing integrity by granting on board credits, even if large. All those credits have to be spent on board, thus bringing the money back to the line. These lines include Silversea, Crystal, Oceania and also the likes of NCL in the mass market. NCL and Carnival are trying to keep money in house by granting on board credits in one case and making deposits non-refundable in another, while Azamara is working a prepaid gratuity scheme worth $24.50 a day per couple, or $245 over a 10-night cruise.
Several lines, such as MSC, Costa, Disney, NCL and even Regent have come up with either free kids or new low-cost children's fares that will attract new custom from families as long as they travel as third and fourth passengers.

From a shareholder's point of view, last place goes to the pure discounters, who by cutting fares can only hope that the money will come back on board, especially if they attract the kind of people who won't replenish their coffers with high shipboard spending.

While NCL and Carnival try to keep money in house, Cunard UK, although original with its Cunard Sale, it is still just a means of cutting fares. Meanwhile, Holland America is out there hawking a $499 fare for seven days to Alaska with its "vacation stimulus plan," something that ill behooves a line trying to stake a claim for a high end reputation, even if $499 only buys an inside cabin. Meanwhile, with MSC starting at $499 in the Caribbean, Holland America is at least at $549.
And while shareholders may not be happy, clients will be * the consumer is now king, at least for the duration of this recession.

Interesting, with the change in economy and the price for air fare, people will be looking for deals to cruise. I don't think a $75 OBC is going to do it, even free tips. Even those who love to cruise may be looking to downgrade to insides just to get on the ship, but if the pricing remains even close to normal, it may not be enough.

And the higher end luxury cruise lines are giving even more to keep their product alive. But even with a 2 for 1 fare special they are still out of price range for the regular cruiser.

I dont think a small OBC is enough to sell cabins either.
What will, and always has, is rock bottom cruise fares. When people feel they get offered an awsome deal they will part with their hard earned cash and purchase the cruise they thought they couldnt afford.

Originally Posted by Char

And the higher end luxury cruise lines are giving even more to keep their product alive. But even with a 2 for 1 fare special they are still out of price range for the regular cruiser.

For regular cruisers, yes, but for those who can afford the luxury brands its still a good deal.
I remember when Regent launched the Seven Seas Mariner. The first year or so the prices for a cabin was aprox $500 per night and the guests thought it was a good deal for the product. Now the price is, and this is according to a friend of mine who cruises with Regent alot, $700 per night. My friend says Regent are just getting to expensive for what they offer.

It also concerns me that some lines kike RC are willing to sail not full to keep their price, I think that is a big mistake, it will come back and kick them in the butt. If people are willing to pay full price there may be much less spending on board and excursions not booked.

I doubt very much that RC will accept lower occupancy when their rivals are filling up their ships with discounted cruise fare passengers.
I dont think the economical situation today can allow them to do so.

I think they will change their minds as well Lars, they will be crazy not to

I have to chuckle a little at some of the "new" incentives.
In the late 70's is was common for cruise lines to offer low cost, subsidized, air add-on's. In the 80's and early 90's free air was often used to fill ships in the slower seasons.