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Gonchar Details Cruise Marketplace Trends, Agent Survey ResultsJune 26, 2013 By: Susan Young
One of every six dollars spent on cruise bookings in 2014 will be spent online. That eye-opening fact was among the research gleanings provided by Tony Gonchar, vice president, American Express Travel Representative Network, at CLIA's cruise3sixty conference in Vancouver last week.
Speaking about cruise trends, consumer demographics and cruise client buying habits, Gonchar also told 1,300 agents attending the General Session about results from a cruise survey American Express recently conducted among its travel agents and consortia affiliates. Here are highlights of his presentation.
Changing Consumer Behaviors
What’s going on with the consumer today? How have behaviors about planning and purchasing a vacation changed and why is this happening?
“Since the start of the financial crisis five years ago, we’ve seen the boom years of ‘conspicuous consumption’ transition into an environment of ‘considered consumption,’” Gonchar told the 1,300 agents in attendance.
But consumers are still spending, he said, noting that consumer confidence is returning as reflected in both the stock market and housing prices.
“Consumers are moving beyond the material consumption of the boom years and seeking more enriched lives and personal fulfillment through experience and learning,” he said.
They seek the rich life which is less about money and things and all about enriching experiences. Gonchar also said they are going to great lengths to see that they are getting the greatest value of their travel investment.
One fundamental change is businesses are now presenting products to consumers – expanding beyond core function and into being deeply embedded in consumers’ lives. He gave these examples:
Special K: It’s not just a breakfast cereal any more. “It is now so much more,” he stressed, citing the MySpecialK.com web site, which is custom tailored to advise consumers on diet, exercise and overall wellbeing.
Pampers: It’s not just a diaper company any more, Gonchar said, but rather a way for parents to raise happy healthy children. The Pampers Web site, for example, has customized parenting tips
Nike: It’s grown from a sports apparel company to the ultimate measurement system for your athletic life through their Fuelband product.
American Express: Gonchar said his firm has moved from being a financial company to developing into a lifestyle services company enabling people to fulfill their passion and interests.
“What all brands really want to get to is here,” Gonchar said as he put up a slide of a man who tattooed Harley-Davidson motorcycle symbolism and coloring on his entire head.
As the audience chuckled, he continued: “Harley customers are this passionate about their motorcycles, and while your customers may not tattoo your name on their body, you need to have customers who are this engaged with you.”
Shift in Buying Habits
Gonchar also said research shows a fundamental shift in the way customers are purchasing: “We’ve moved from a ‘linear purchase process’ to a ‘customer decision journey.’ Your customers have become digital omnivores, consuming information 24 hours a day across hundreds -- even thousands – of sources.”
And as technology advances, so do customer expectations. Travelers want timely information and a quality experience during each step of the travel planning process.
Citing an eMarketer report, Gonchar said 76 percent of leisure travelers relied on the Internet when considering a cruise – far more than any other resource.
Thirty percent of those consumers also admit they are overwhelmed by the online information and resources available for booking travel. “The other 70 percent are lying,” he quipped.
Many consumers won’t admit they’re confused and overwhelmed. “They all could use a good travel advisor to competently help them sort through the information overload,” he said.
The numbers are astounding. As a country, the U.S. is close to a trillion minutes of time spent on the Internet monthly. In 2000, there were zero smart phones, and now there are 137 million in the U.S. alone. There were zero tablets in 2010 and now there are 60 million of them.
And according to a PhoCusWright report, cruise sales are moving online in a big way. Research shows that in 2014, one in every six cruise dollars will be sold online, representing 18 percent of cruise transactions.
One likely outcome? “We can pretty much say video will kill the travel brochure within the next couple of years as consumers continue to march online for dynamic resources to plan their travel experiences,” Gonchar said.
According to comScore in December 2012, 75 million unique users in the U.S. watched 39 billion videos, an average of about 20 hours and 213 videos per person per month. “People please, come up for air,” he said.
U.S. demographics also are changing in a big way. African-American buying power rose from $600 billion in 2000 to $947 billion in 2010.
Hispanic consumer purchasing increased from $488 billion to $1 trillion during the same period. Today the Hispanic market is larger than the entire economies of all but 13 countries in the world. It’s larger than the GDP of Mexico.
Asian-American buying power rose from $272 billion in 2000 to $609 billion in 2010. “We’re seeing a major shift in the composition of the United States – 2042 marks the year when the entire U.S. reaches ‘minority [is the] majority’ status. Several states have already reached this milestone.
Because of shifting population dynamics, businesses and brands must change the way they promote and sell to multi-cultural consumers. “The old rules no longer apply,” Gonchar said, noting “there is no one size fits all approach to selling travel to a multi-cultural audience.”
It’s much more than just demographics; it’s about individual lifestyles that are greatly influenced by strong ties to cultural backgrounds.
Survey of American Express Agents
American Express conducted a new proprietary survey designed specifically to present at cruise3sixty; responses were tallied from responses of more than 240 American Express call center agents and travel advisors who are part of the American Express consortium.
Summarizing the insights based on 12 questions asked, Gonchar said smaller ship experiences and river cruises are the hottest thing out there with 65 percent of American Express agents citing these as the highest demand cruises. And that's despite Europe's bad weather of late with the worst flooding in a century. Mega-ship voyages came in at 31 percent.
Sixty-three percent of agents indicate that the Mediterranean and European river cruises are the highest demand cruises. Gonchar also stressed that consumers are going to Europe despite airfares of at least $1,200 per person.
Amex agents responding to the survey said cruising the Mekong in Cambodia and Vietnam and the Amazon in South America totaled 50 percent when agents were asked about emerging destinations.
That’s followed by almost 20 percent voting for Italy and the Po River. “It’s no surprise to see that agents are seeing a huge uptick in demand for river cruising,” he said.
For cruise length, the sweet spot for these agents was four to seven nights. Because of how the question was phrased, he said American Express didn’t see any agents with clients who typically booked more than 12 nights.
Almost three quarters of Amex agents say balcony cabins are the most requested cabin category, with a healthy 21 percent seeing a high demand for penthouses and suites.
“Bless the little hearts of the customers asking for an inside stateroom,” he noted, as the audience chuckled. “We love you too.”
Almost 70 percent of Amex agents said customers are asking for higher-end room categories. Only 5 percent of clients are asking for more affordable category options.
Fifty percent of agents said that onboard credits are the perk most requested most by clients. That was followed by stateroom upgrades, tours/excursions and smaller ships -- all comprising just 22 percent of requests.
In addition, 50 percent of agents see honeymoon and romantic travel as a growing interest group, followed by 40 percent for religious group travel. Gonchar also said “we will likely see the LGBT market grow in the future as well.”
When looking at the negative media reports about cruise ship incidents, 66 percent said they saw little or no booking impact. That said, 20 percent of agents noticed some impact in the form of hesitant customers, and 15 percent said sales have dried up completely.
Some 66 percent of agents felt price discounts and onboard credits were the most effective offers to close a sale; that was followed by free air promotions and pre-paid gratuities.
Almost 50 percent of agents said the biggest challenge they face on closing a cruise sale is the customer waiting for a price drop. “Consumers have been clearly trained,” he said, and “we’ve got to figure out a way to untrain them from focusing exclusively on the waiting game.”
Other agents cited rebating, price undercutting by other agencies, recent negative cruise publicity and customers who want to either spend less or take a land-based vacation.
Insights for Effective Sales
Know the customer: Ask the right questions to learn about the potential client’s demographic, cultural and social needs. Probe to ask about personal interests and passions when selling travel. Gonchar said more consumers want to incorporate personal passions into their travel experience such as participating in cultural and culinary activities.
Know what you’re selling BETTER than your customers do: Travelers want to be the foreign “local” when they arrive in a destination. Tools are available that give instant familiarization such as giving clients the name of the bartender at a hip new Oslo bar, he said. Use supplier and consortia tools as these ese businesses have invested heavily in driving more business through their most important distribution channel – the agent.
Be accountable to your customers: Shoppers will continue to be concerned about trust and transparency, he said. They also will continue to seek simplified lives and great value from their travel advisor relationship. Know how to address any concerns, talk with first-time cruisers, and be an expert about the Passenger Bill of Rights developed by CLIA.
Be confident: Have a good answer when a customer asks you to re-sell a cruise to them again, because they found it for $5 cheaper online.
Be a consultant not an order taker: Be the travel advisor who provides consultative services based on deep travel experiences, not an order taker that gives the customer what they ask for but not what they really want. Build long-term relationships; give them something they can’t Google.
Never ever be afraid to ask: As the survey showed, 68 percent of customers are asking for higher end staterooms so why not ask them first. "Ask for the upsell and ask for referrals to new clients," said Gonchar. "You might be amazed at what happens."