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Europe Cruises Down 5 Percent, Alaska Up 22 Percent, Says Avoya's KoepfJune 13, 2016 By: Susan Young
|Scott Koepf, senior vice president, Avoya Travel Network, recently talked to an audience of travel agents attending Cruise360 in Vancouver.|
During the first quarter, Avoya Travel Network bookings showed that cruise demand for Europe was down 5 percent while Caribbean bookings were 5 percent ahead of the same quarter last year. The demand winner was Alaska, with sales up 22 percent in that first quarter.
Travel Agent spoke one-on-one with Scott Koepf, senior vice president of sales, Avoya Travel Network, about the results shortly after he appeared at this year's Cruise360 in Vancouver, BC.
“Certainly, coming into the year, there was huge optimism and everyone thought it was going to be a monstrously good year,” Koepf acknowledged. “Every indication certainly pointed that way.” But he noted that terrorism, Wall Street's woes and the election year have impacted sales.
A Little More Work
“So I think coming into the year, while highly optimistic, we ended up coming into a year that’s been a little more work than maybe the industry had expected,” Koepf said.
The biggest impact has been in Europe. “Yes, it’s been a tougher sell and more difficult to get the consumer to make the decision," says Koepf.
Interestingly, the “interest level” for consumers thinking of Europe has really not waned at all, he's noticed: "It’s been the same level of interest moving into 2016 and through the year. It's just that they balk when making the decision to actually do it."
While getting clients to actually make the decision to go to Europe is more difficult, he says the good news is that cruise lines have added more aggressive pricing, promotions and value-add opportunities that have helped drive the market up in a difficult time and make the opportunity even more affordable for guests.
That said, "generally, the farther east you go [in the Mediterranean], the more difficult the sell," he notes, pointing to some cruise lines pulling out of Turkey earlier this year and others changing their itineraries in the eastern Mediterrananean.
But just talk to anyone who's done a Greek Isles cruise, and he says you'll find, it's "still fabulous and still extraordinary" in terms of the region, just a bit more difficult sell for their travel agent.
Koepf said the Baltic really isn't having an issue at this point.
Tapping Into New Ship "Buzz"
Certainly, though, what's helping build demand are the new ships, creating "tremendous buzz and tremendous excitement," he emphasizes. Among those are Carnival Vista, Holland America Line's Koningsdam, Regent Seven Seas Cruises' Seven Seas Explorer, Royal Caribbean International's Harmony of the Seas and others.
From his perspective, though, while those new ships are certainly driving consumer interest and demand, "it's not just about the new baby, but about how [the cruise lines are] making their other children look like the new one."
|Harmony of the Seas' thrilling 10-deck slide, The Abyss, is turning heads. It's the type of industry innovation that builds demand. // Photo by Emily Goldfischer|
He cites the industry's tremendous investment in ship hardware, and "if they're not brand new, they're certainly being brought up to the levels that the new ships are establishing."
Regent's soon-to-be-launched ship has driven great buzz at the luxury level, he said, noting that this is being elevated further with the announcement of more new ships to come.
In addition, with new ships, it creates creates a little bit of a different buzz, because of a few innovative things that draw the consumers' eye. One example is the SkyRide on Carnival Vista, another is the 10-deck Abyss on Royal Caribbean International's Harmony of the Seas.
Dining, spa and accommodation innovations also tend to navigate from one ship to another. "We also know that if it's 'good innovation,' everybody's going to have it on their ships at some point down the road," he said.
The beauty of the business, from his perspective, is that the cruise lines continue to innovate, and that drives everyone else in the industry to do the same.
Processwise, he also said the little bits of information the lines release over time about new ships serve to build demand. Collectively, it all helps agents who sell cruise products to grow their business.
North to Alaska, South to the Caribbean
It's always the case, and it's somewhat true historically, Koepf said: "If Europe has a bit of a down year, Alaska has a good year. The two counterbalance each other."
While there's much more to the equation and it's not like everyone is suddently running to Alaska, he said, "Alaska is doing very well, very strong, and I think Caribbean also [is strong]," although he acknowledges the seasonal inventory is less in summer.
But because of the buzz about new ships coming, such as Holland America's Koningsdam, demand is also higher for the upcoming Caribbean season in winter 2016-2017.
Yet, "it's not a slam dunk or 'oh great, it's sold out'" situation, there are still lots of opportunities he says, "but it's doing well."
On the Luxury Side
While Europe is a tougher sell this year, that more deeply impacts the luxury lines than non-luxury lines, he says: "The luxury players have a good portion of their inventory in Europe, so by the very nature of that, that means that's going to be more of a struggle to get the demand for the product."
In contrast, the non-luxury lines have the benefit of their other inventory across the globe -- with ships spread out in Alaska, the Caribbean, Asia and elsewhere.
Koepf's "take" on opportunity for agents: "We are seeing some pricing opportunities at that luxury level that we may not see again for many years...in terms of the promotions and value-adds, it's a great year to go to Europe."
"The luxury guys are having to be just as aggressive at their own level as anyone else to build demand for the European product," he stresses.
That said, "you do have a good buzz around the product delivery, and more and more folks are realizing the value of that luxury product," he said, noting that as demand grows and as the Boomers grow in age and spendable income, "that market looks very strong."
Moving on Up
With such value in luxury and new people "trying" a luxury product, will the pool of new luxury cruisers continue to grow?
|Edie Rodriguez, Crystal Cruises, & Scott Koepf, Avoya Travel // Photo by Susan J. Young|
Yes, but it's really a top-of-mind message for the entire industry, emphasizes Koepf, who believes "new to cruise" travelers are critical for the entire industry.
Value is helping. "If the pricing is more appealing, and the value is more appealing, you're going to bring people who may not have considered a cruise vacation otherwise," he says.
Another trend that value brings is that seasoned cruisers are also moving up within the industry. "They've cruised before but now they're looking at moving up and moving into something a little different."
It's a very interesting exercise, and one compelling reason why agents are essential, Koepf says: "You have the mass-market, premium and upper premium lines really touting the benefits and advantages of their suite experience, and how fabulous they are, and in many ways, they are a luxury experience."
In other words, with so many choices, it's not necessarily that one is better than the other, but they do need explanation, making agents more valuable as a skilled consultant.
Plus, he adds: "I think today there is a great value across that entire spectrum -- whether [clients] move up within the brand they're already used to or move up within a category perspective, or whether they do some comparatives and move into a different category of ship altogether."
Selling Small Ships
While river cruising as a type of cruise travel remains hot with consumers, Koepf notes that 85 percent of the river cruise industry's inventory is in Europe. "No doubt it's a tougher year for river cruising," he says.
"That being said, it's still a magnificent way to travel," he believes, citing the strong brands that are marketed in the U.S. and his perception that the European river cruise brands deliver exceptional products.
But while agents are getting the sales, after perhaps a tougher sell given the region, "maybe it's not booked as far in advance as it was in previous years," he said.
Does that translate into more American river bookings? Avoya's marketing for river cruise products tends to be European-focused and it doesn't do a tremendous amount of domestic river cruise marketing, so Koepf says, "it's hard for me to see whether there's any [demand jump], although we certainly sell it and the product delivers."
Demand for small-ship expedition cruising? "What's interesting is that it trends to be driven by a much higher end product," Koepf notes. For many years agents that sold so-called adventure travel were arranging backpacking in the Himalayas and sleeping under the stars. That evolved into more soft adventures with interesting eco-experiences but nice hotels and amenities.
Now, he stresses, small-ship expedition cruising is highly luxurious and, in fact, has become "high-end within the luxury segment" with very unique itineraries. He sees a growing market, with greater Baby Boomer demand, and a strong desire by them to mark things off their bucket list. "So these more unique and more unusual destinations will have much stronger demand."
He points to a traditional premium line, Celebrity Cruises, that has its own Galapagos expedition product with Celebrity Xpedition; more new expedition vessels are also planned.
"How does that fit the Celebrity brand," he asks? "It doesn't from a pure ship standpoint, but in terms of their customer base," it sure does, he says, citing Baby Boomers having "been there, done that" and seeking to do something different like the Galapagos.
That type of mentality means "we're going to have that growth" in expedition style products, Koepf notes. "I think we'll see it at some different levels, but I do think it's going to continue."
Seventy-five percent of all travel transactions today start with the consumer being online and looking online, says Koepf. "So the client has likely spent 40 to 50 hours of research before they even begin the shopping process in terms of when they begin talking to a travel agent."
So the information overload that the consumer has is overwhelming. "So it all looks good," he quips. That makes it very hard for the consumer to differentiate what's important and what's best, and what cruise product is best for them. They need a skilled agent. That's a positive.
The other trend he's seeing is a bit of a quandry: "How [from a marketing perspective] do you get the value equation across through that marketing media."
For example, it was easy in the past to run a commercial or a print advertisement that simply pushed "50 percent off." The message was easily understood, but not what agents or cruise lines really wanted to do.
Now, promotions focus on added-value and choices, rather than simply a price drop, which is more lucrative for both agents and the cruise lines, but more complicated with shore excursion credits, bar packages, onboard credits, dining inclusions and so on.
Those value-adds are all good for the industry, but Koepf says: "The problem is that they're more difficult from a marketing perspective to get the attention of the consumer and explain to the consumer in a short period of time -- which is all you have in the marketing world -- as to what that value is."
"But how how do we market that and really make that value proposition sing to the consumer prior to the sales process?" he asks. "That's where the biggest challenge lies for all of us -- especially for all of us that are very heavily into the Internet world -- but it's one we're up to."