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News Analysis: Cruise Inclusivity on the Rise?May 17, 2010 By: Susan Young
Agency leaders add gleanings and perspective
|Regent Seven Seas' Voyager ship|
During the past year or two, certain premium and luxury cruise products, along with many river cruise products, have either touted their inclusivity or added more inclusive features. Agents cite Regent Seven Seas as the best example in the luxury cruise segment because it includes shore trips in its commissionable base fare; other luxury and a few premium lines also have added more inclusions.
“Many river lines have also begun including shore excursions, which we feel is a great move,” says Steven Hattem, vice president of marketing, CruiseOne and Cruises Inc.
But is inclusivity as a product philosophy really a trend? Will it continue to grow? Or will it be business as usual for many lines that offer a cheap base fare and then make revenue from sales of prolific extras onboard? What role does the economy play?
While NCFs or non-commissionable charges such as government taxes and fees have long been a sore spot with agents who wish those to be included in the commissionable base fare, for the purposes of this piece, we went “beyond” the NCF issue.
Instead, we asked a sampling of agency and consortia executives for their personal insight and perspective on such onboard product features as wine, gratuities, shore trips or other extras clients may pay for onboard.
Is Cruise Inclusivity on the Rise?
The answer to this question is “definitely,” says Steve Tracas, president and CEO, Vacation.com, who says when economic times are challenging, suppliers tend to be more flexible and creative to spur sales.
In addition, Tracas says cruise lines are aware that agents become more motivated to sell products that provide the highest value for their transactions, plus “inclusivity allows the lines some justification for maintaining or raising fares while adding value for the client.”
“Cruising has always been marketed as an ‘all inclusive’ vacation product although, of course, with limitations,” notes Brad Anderson, co-president, America’s Vacation Center/Avoya Travel. “Among some upscale cruise lines, there has definitely been an increase in the philosophy to move closer to a truer definition of ‘all inclusive.’” Anderson views this as a function of the recent economic conditions, combined with consumer desires for increased value and vacation cost control.
Jack Mannix, president and CEO, Ensemble Travel Network puts it this way: “Yes, consumers are coming out of a difficult economic time, want to know upfront what they will be spending for their vacation, and need to be convinced they are getting the best value. Inclusivity speaks to all of those aspirations.”
From another perspective, though, Tom Baumann, president of Travel Leaders Leisure Group, says, “No, I have not seen any increase by cruise lines during the past year to be more ‘inclusive.’” His firm’s brands include All Aboard Travel, CruiseDeals.com, Cruise Holidays, Cruise Specialists, Luxury Travel Network, Partners in Travel and SinglesCruise.com brands, along with Travel Leaders’ owned leisure-focused offices.
Will Contemporary Lines Ever Adopt More Inclusivity?
“Contemporary lines may not necessarily follow the luxury, river and premium line trend of inclusivity,” stresses Hattem. He says that while such luxury and premium lines as Regent Seven Seas and Azamara Club Cruises have started to include more in the base cruise price, “we have not experienced any new marketing signaling a similar change with the contemporary lines.”
In the contemporary segment, “it is all about price,” acknowledges Hattem, although his groups' agents also try hard to focus on value. But ultimately consumer demand and perceptions rule. “Although it would be great to see more inclusions from the contemporary lines, I am not sure it is possible as price is a major purchase criteria,” Hattem says.
Executives note that many working class, drive-market clients simply love the value a cheap cruise provides and may not choose to buy a lot of extras onboard. Hattem also says any move toward inclusiveness for any contemporary line would likely require all lines to follow suit. If not, due to a higher price point, the more inclusive line could end up looking uncompetitive when marketing its product to consumers.
“I do not believe we will ever see more inclusivity apply to the contemporary market,” says Baumann. “The onboard revenue is too critical to their profit stream and cruise lines would have to raise cabin prices tremendously to make up for this lost revenue source.”
Mannix shares that view, noting “there is little motive to change that, because overall, it [that onboard revenue stream] is quite effective.” Plus, Mannix points out that even if certain onboard items on large ships might be prove effective as inclusions, such as specialty dining charges and shore events, they likely could not be offered to all guests simply because of hard costs and limited capacity.
For example, specialty dining choices like Carnival’s Steakhouse carry a per person fee; without the fee, the seating capacity in that club wouldn’t be able to handle the full complement of passengers onboard.
Tracas sees the potential this way: “Once contemporary lines test enhanced inclusiveness and see if it moves share and increases revenue, a few will take that course. It all involves finding the right model of inclusivity that best fits with their particular brand.”
However, Tracas also says cruise lines that focus their marketing on low prices will most likely shy away, since inclusivity would drive up prices and erase their main selling point.
Will More Lines Include Shore Trips in Base Fares?
“We applaud Regent for including shore excursions in many of their prices,” says Hattem, who believes those inclusions can only enhance the vacation experience and the client’s satisfaction. But adding in shore trips is also clearly a competitive tool.
Anderson says cruisers who like a particular product are essentially “voting with their wallets” and that spurs other firms to move to satisfy those needs, using the example of Apple’s new iPad and his belief that other manufacturers will be introducing new tablets into the marketplace.”
“Historically in the cruise industry, cruise lines don’t tend to maintain unique competitive advantages for too long before the competition comes out with a comparable product or offering,” Anderson says.
Those competitive responses also may take new twists – giving different definitions of inclusivity. For example, Crystal Cruises doesn’t offer free shore trips in its base fare but is giving its customers a sizable onboard credit that can be used to purchase shore trips or alternatively, such perks as spa treatments or gift shop purchases.
When it comes to river cruising, “no doubt [including shore trip inclusions] will continue,” says Mannix. “It is so well-suited to enhancing the feel of smaller more intimate vacation products by bringing guests together to enjoy a common experience.”
But for those higher capacity ocean cruises, it is important for any other line considering the inclusion of shore trips to offer clients several choices – as Regent does – Mannix stresses: “Based on inventory, a first choice is not always available to everyone. Therefore, I don't see included shore trips as a trend likely to impact the contemporary or other large ship categories.”
Baumann doesn’t see shore trips being an inclusion outside of a handful of lines including Regent and AMA Waterways. “Again, shore excursion revenue is a huge part of their onboard revenue stream and they cannot give that up,” Baumann says.
But the changing dynamics in the marketplace that have recently fostered the growth and success of river cruising, the luxury Regent product and third-party tour providers, as well as a switch by some cruise only agencies to a broader cruise-and-tour agency status show that “the distribution channel [is] migrating toward new revenue streams that will only grow over time,” says Tracas. “These dynamics alone should spur the cruise industry to refocus their distribution channel with more inclusive offerings.”
He says cruise lines might, as a start, compensate individual agents who have the ability to produce more onboard revenue on a per passenger basis than the cruise lines can themselves, Tracas emphasizes. “Why not motivate and compensate the distribution channel if they can do a better job of selling onboard products and services?”
Is it Choice? Or, are Clients “Nickeled and Dimed”?
Yes, most of our experts said they believe— at times— that clients are indeed “nickeled and dimed” onboard some cruise ships; the level varies widely per segment and per line.
“I hear more and more of this from clients all the time – especially with some cruise lines; every time you turn around they are trying to sell you something,” says Baumann. He says the extra charges might range from joining a blackjack tournament for a $20 entry fee, to spa specials, a jewelry extravaganza sale or wine tasting for a nominal fee. “There are things to spend money on everywhere,” Baumann stresses.
“No one likes being nickel and dimed, especially people who have already spent a good chunk of change for the cruise ticket, says Tracas. He says travelers want to “enjoy their vacations to the fullest—enjoying all the excursions, drinks and activities they want—without reaching for their wallets.”
Looking at the contemporary market, it’s often a matter of value and perception. “Contemporary cruise line customers end up paying significantly more than their base price for drinks, specialty restaurants, gratuities, tours and specialty coffees, even though the perception may still be that because the base price is lower, they are getting the better deal,” notes Hattem.
Clients may not even realize the level of their spending until the final bill appears on the last day of the cruise. Mannix says clients never want to be pressured to buy onboard, and gives some examples of how the pressure surfaces: “This applies to pressure to buy spa products after a spa treatment, pressure to buy a bottle of wine at dinner rather by the glass, or pressure to buy cocktails when sitting out on deck.”
While Mannix says many guests are willing to spend money, most prefer to make their own choices as to what items to spend it on. But again, expectations – not surprisingly – vary by segment. In the luxury category, Mannix says it’s absolutely expected a specialty coffee is available at no extra charge while in the contemporary category guests are likely not adverse to paying for a Starbucks latte.
“Clients in general are educated and know nothing is ‘free,’” says Anderson. “To say that you are all-inclusive to the consumer means they are paying for its somewhere and may be paying for something they’ll never use.” That’s one reason travel professionals are vital, he says; they can explain the different options upfront and avoid the client being totally surprised with the end-of-cruise bill.
Tracas adds another thread to the discussion, mentioning consumer sensitivity about what’s transpired within the airline industry: “The cruise lines need to avoid being caught-up with the ‘nickel and dimed’ mentality, emotion and consumer backlash that is rampant due to add-on products and services.”
What Lines Do You Consider Most Inclusive? Will Inclusivity Affect Agency Patronage or Not?
Mannix believes such luxury lines as Paul Gauguin Cruises, The Yachts of Seabourn and Regent Seven Seas Cruises offer the most inclusivity. Baumann cites Regent Seven Seas, noting "our numbers with them continue to move in an upward motion at a greater pace than we are growing with the others.”
Vacation.com’s agents typically support the cruise lines that support the agency distribution channel, according to Tracas. He too cites Regent voyages that include alcohol and shore trips and notes that luxury line also pays commission to travel agents on taxes. “As a result, they have become favorable within the agency community,” says Tracas, who also cites river cruising’s inclusive value as increasingly popular with clients and promoted by agents.
Our executives stated, though, that booking decisions are based on finding the right client for the brand. Certainly while selling more inclusive brands that limit NCFs as a percentage of the total sale allow agencies to increase their business compensation, Anderson says clients should be qualified by the professional travel consultant first and then “matched to a cruise vacation that is best for them that the agency chooses to sell.”
More inclusivity may have the added industry benefit of helping agents market and sell the product, according to Mannix and Hattem. “More inclusivity does provide a superior value proposition and the strong consumer messaging that may lead to an easier sale,” says Hattem. He says if the value is there and the consumer understands that the base cost of the cruise is only part of their vacation investment, up-selling to luxury or a more inclusive product becomes a more realistic and attainable objective.
One interesting development focused on inclusivity? “The all-inclusive land package also wins here, as consumers may perceive it as having more value than a cruise vacation - even if this is not always the reality,” Hattem says.
Do You See More or Less Inclusivity Moving Forward?
Each brand will need to find right balance for their market, says Mannix, noting that different strategies apply to different markets.
When it comes to more or less inclusivity, Baumann says: “I think they will stay the same…[cruise lines] are not going to remove their revenue streams for shore excursions, alternate dining venues, cocktails, etc. so I don’t think we will see more or less but the same… although it wouldn’t surprise me if we see more and more ways for them to increase onboard revenue and get passengers to spend more money.”
Tracas, in contrast, does see some additional inclusivity in the future. He says shore trips as inclusions within the fare may become the norm across the luxury sector, while alcohol may be included across the deluxe or premium sector. “With regard to the contemporary sector, I think we will see degrees of inclusion, such as wine with dinner or one free shore trip as part of a marketing promotion,” he says.
Our experts said the economy and competition will be key drivers behind any inclusivity trend or not, moving forward. They also say a pool of highly skilled agents just waiting to sell inclusive products and explain that value to clients could be a real plus for lines eager for revenue.
Tracas sends this message to cruise line decision-makers: “Why not experience the full power of the cruise line’s distribution channel — the travel professional — and compensate them for these revenue-generating products and services?”
What’s your perspective as a travel agent? What works – inclusivity or not – for your clients? Do clients feel “nickeled and dimed” or do they appreciate choices fielded by the lines? Do you wish to see more inclusions moving forward? Are clients appreciating the value?
Or, is the present system just fine? Is inclusivity simply a passing fancy that will fade as a trend in future years? Let us hear from you below.