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Cruise Prices Hikes Get Mixed ReviewsMarch 30, 2010 By: Susan Young Home-Based Travel Agent
Given strong Wave Season bookings, many cruise lines are increasing cruise fares. A week ago, Carnival Cruise Lines increased its pricing— up to 5 percent for June, July and August sailings. Next to come, competitor Norwegian Cruise Line will raise its fares on April 2.
For example, a seven-day NCL Hawaii cruise in a balcony cabin on Pride of America will increase $100, while a 12-day Norwegian Sun Baltic cruise will increase by $220. Other lines too– from contemporary to luxury– have increased prices over the past few months.
“What a difference a year makes,” said Robin Farley, cruise line financial analyst for UBS Warburg, in communicating with her firm’s investors on March 17. “Ticket pricing trends sound positive across the board…We believe Norwegian had its biggest volume booking week last week, in what is traditionally a trailing off of Wave Season, perhaps helped by its March 5 announcement of price increases…”
And after Carnival Corp reported positive earnings last week, Farley said: “Over the last nine weeks, Carnival Corp. [brands are] still seeing strong booking and pricing momentum with bookings for the next three quarters are up 8 percent and with pricing for these bookings running 17 percent higher on a year-over-year basis.”
Other lines too have been gradually increasing pricing over the past few weeks and months, as inventory becomes less available.
But is this growth in cruise sales helping agents? Are customers clamoring to book and avoid higher prices? Given the anecdotal feedback we’ve received from agents this past week, it’s a mixed bag of results with some positive trends.
A Turning Tide
Earlier last week, Michael Given, MCC, franchise owner, Cruise Planners/CruisePlan.net, from New Jersey, told us he was seeing: “No benefits yet to higher prices. A few [customers] have mentioned it but were skeptical as to whether it was cruise line scare tactics.”
But a few days later, he talked with us again and eagerly exclaimed: “Hold the presses! Today, I booked two NCL cruises. Clients both feared rising prices.”
Given said that “maybe there was a skeptical waiting period and then repeated messages started to get them motivated.” He also said social networking information and online media reports may have helped. Given said one client specifically cited an article about rising cruise prices that was re-Tweeted on Twitter, while the other client talked about reading an AOL article about the looming price increase.
Similarly, Sabine Harris, a Cruise Planners franchise agent from Tampa, said: “I did have some clients that were concerned from Carnival telling everyone the rates were going up.”
“As an agency we have aggressively promoted this in order to help close sales faster,” stressed Jack Ezon, president, Ovation Vacations, New York City, which does $60 million annually in luxury leisure sales. “Many people have responded positively to this sense of urgency and confirmed faster than they ordinarily would.”
That said, Ezon still sees [consumers who are] skeptics who, pessimistic on the economy, think cruise prices will go back down once they don’t sell off at higher rates. “Hopefully for us all, they will be proven wrong,” he said.
Ezon said it’s important for cruise lines to maintain price and promotional integrity – “a critical step in getting our industry back to where it was before the crisis.”
Some agents say the pending price hike hasn’t totally wowed clients. Margie Jordan, CEO, ASAP Travel, Jacksonville, FL, put it this way: “We have definitely made every effort to notify our clients but it seems that most don't think the increase will be significant.” That said, she’s booked a group cruise prior to the increase.
When it comes to the fare hikes, “frequent cruisers have taken more notice than those new to cruising,” said Jordan. “New cruisers don't have knowledge of typical cruise pricing and many spend more time deciding if a cruise is the vacation experience they're looking for.”
In contrast, Jordan says experienced cruisers act more quickly and are eager to lock in the next cruise, sail date and best pricing.
To some extent, geography also counts. Nationally and in many metropolitan areas the economy is clearly improving. That’s a plus for agents who are aggressively promoting as well as for consumers in those areas who feel more confident about the economy and are ready to book.
The latest national jobless rate from the U.S. Bureau of Labor Statistics shows unemployment at 9.7 percent. Thirteen states mimicked that, but 24 states were even lower. Many agents in metro areas like New York, Chicago and Seattle are upbeat and say it’s time to put the recession behind.
Executives too are bullish. Stein Kruse, president of Holland America Line, told conference goers at Cruise Shipping Miami that Seattle malls are full, and “try and get a restaurant reservation in Seattle [right now]…good luck.”
But the economic picture is a bit more sluggish elsewhere. In some geographic areas – such as the District of Columbia and 13 other U.S. states, among them Michigan, Nevada, Rhode Island, California, South Carolina and Florida— jobless numbers remain in double digit percentages. And, the jobless rate continues to head upward in Florida, Georgia, Nevada and North Carolina.
Of 49 large metropolitan areas, the largest unemployment increase is occurring in three Florida metropolitan areas— Jacksonville, Orlando-Kissimmee-Sanford, and Tampa-St. Petersburg. In some counties within those areas, unemployment is between 13 and 15 percent. Tampa-based Harris says: “I wish business was picking up more, but it comes and goes in spurts.”
From another but similar perspective, “the economic difficulty is certainly not over in Jacksonville,” stressed Jordan. “Unemployment rates are still high and the housing market is making a very slow turn.” But Jordan says some consumers are still booking travel and, not surprisingly, they're preferring cruises because of their all-inclusive, inexpensive nature.
Regardless of locale, agents including Harris and Jordan report they’re aggressively marketing, using the pending fare hikes to try to motivate clients to book, continuing to network and relying more on referrals from existing customers.
Some agents say, however, they’d like to see cruise lines to give a bit more added value such as an additional customer perk when they raise prices. For more on this, check out the discussion on our Facebook.
Exactly when will cruise pricing return to pre-recession levels? “I think it will take time,” said Kevin Sheehan, NCL’s CEO, in talking to conference goers at the annual Cruise Shipping Miami conference. “The industry really got whacked in this economic recession.”
But he said the line sees a lot of health in bookings over the past few months and that’s allowing the line to raise prices by as much as 7 percent on April 2.
Agents trying to beat that NCL deadline this week now with new bookings have a tad more time to bring more business in the door at lower rates. NCL says it will give travel partners an extra hour to book – with its call center staying open until 1 a.m. on Friday, April 2, the morning of the fare increase.