Editor's Note: At the annual Cruise360 conference at the Greater Fort Lauderdale/Broward County Convention Center in South Florida, Alex Sharpe of Signature Travel Network moderated a discussion by five top cruise brand presidents.They talked about a range of topics and here's Part 1 of that discussion. Stay tuned for second article focused on cruise pricing.
Soaring bookings, strong cruise industry growth, new ships, new home ports and how to enhance recognition of the value of cruising versus land-based travel were among the hot topics discussed by five top cruise line executives during Cruise360’s “President’s Panel” discussion last week. The high-level discussion was moderated by Alex Sharpe, president and CEO, Signature Travel Network, with several audience members also providing questions for the executives.
Assessing the Marketplace
Christopher Grum, ECC, founder of Premier Custom Travel, Iowa Colony, TX, and a CLIA Hall of Fame inductee, asked this question: “Since 2023 is clearly a year where we’re returning to pre-2020 or even better levels, what most excites you for your brands and for the broader cruise industry?”
Revenge Travel
While the term “revenge travel” is used a lot, David Herrera, president, Norwegian Cruise Line, said it's absolutely something his brand is seeing in a big way. People cooped up during COVID missed doing the activities they enjoyed and seeing the people they loved. Now they can do both again, making multigenerational travel on a cruise ship a great fit. “I’m excited that cruising is back, ya’ll, because it really is,” he emphasized.
Herrera explained that on a cruise ship, everyone can go out, do their own thing for different demographic levels, and then the group can get back together, have a meal, relive what they just experienced and share as a family: “That’s what people are seeking. “
Sizable U.S. Investments
Ruben Rodriguez, president, MSC Cruises USA, responded: “We’re just excited to see the remarkable growth. We’re making large investments in the U.S. market to support growth.” He cited investments in deployment, new ships, new homeports, new itineraries, travel partner support, marketing, the line’s private Bahamian island experience and infrastructure including the line’s PortMiami terminal.
That’s “paying off,” Rodriguez said. For the U.S. market, "we’ve had booking volumes of 2.6 times what we had in 2019."
A Desire to Splurge
Heading up a relatively new brand with sizable growth on the horizon, Nirmal Saverimuttu, president, Virgin Voyages, pointed to another key factor that he’s seeing right now: Consumers who were cooped up in the pandemic are “looking for experiences. They’re looking to splurge.” So, it's not just about getting the lowest price, it's about getting the best experience.
Saverimuttu told the audience that two more Virgin Voyages’ ships are coming to the fleet soon. "We're building these ships at a record pace," he said. "It's exciting for us to be launching” and for the new brand to provide more options that travel advisors can sell.
Accelerating Demand
As with others, “we’re delighted we came through the pandemic,” said Michael Bayley, president and CEO, Royal Caribbean International. At first, as the bookings began to build, people thought “this isn’t going to last," he noted, but “it just continued to improve, to accelerate.” For 2023 and 2024, “we see demand coming back in a very strong way."
Thanking crew members, he said that it’s "wonderful to see our ships full and people enjoying themselves.” Now, the line awaits the highly anticipated 2024 arrival of Icon of the Seas, a new ship with sizable industry buzz. In fact, when Bayley mentioned it, the trade audience reacted with strong applause. “Book it quickly because it’s really selling out,” he told the advisors.
Plus, Royal Caribbean has another Oasis-class ship, Utopia of the Seas, coming in June 2024. He also added that the line soon will open Hideaway Beach, which is another part of Perfect Day at CocoCay, and “we just received approval from the Bahamian government to move forward with our Royal Beach Club in Nassau.” That's slated to open in summer 2025.
An "Opening" World
Agreeing with the sentiments of her colleagues, Carol Cabezas, president of Azamara, told the trade audience that “it’s been a heavy, heavy lift for all of you”—in reference to advisors’ ability to weather the storm and return to selling cruises once again. “So, thank you for everything that you have been doing.”
Motivating Cabezas is "seeing the world open up,” with Azamara just completing its first season back in Japan. "This was a place in the world that up until a few months ago, we weren’t sure we were going to be able to get in," she acknowledged. But it's happened and "it’s lovely to say that we can take people to all these extraordinary destinations again."
That's bolstered Azamara's confidence for its upcoming World Cruises in 2024 (sold out with wait list) and 2025 (with some space still available).
From his perspective, "now everything has really opened up," agreed Sharpe. "And that’s what this business is all about. It’s about travel. It’s about these great destinations.”
Engaging Guests, Building Bookings
Turning to the “guest” equation, Sharpe talked briefly about the need to get load factors back, fill ships, create the right ambiance aboard and so on. How are the lines working to build demand?
Cruisers or Non-Cruisers?
With Virgin Voyages operating an expanded fleet of four ships by year's end, Sharpe asked Saverimuttu “about where you’re shopping for customers." Sharpe mentioned that initially, at least, Virgin seemed to be targeting non-cruisers, but now that seems to have shifted.
Yes, “there was this perception that we at Virgin Voyages were always about the non-cruiser,” said Saverimuttu, “and a little bit of that was our own doing. We used some of the wrong words. We communicated some the wrong things in the marketplace.”
But Virgin Voyages “is a product for cruisers” and “cruisers love this product,” Saverimuttu emphasized, adding that a recent review in a major consumer cruise site assessed that “this product really does work for cruisers.” But, at the end of the day, it’s the brand’s experience and that “works for both” cruisers and non-cruisers, he pointed out.
“The other misperception that developed about us is that ‘it’s all about young people,’” Saverimuttu said. That’s not the case, he told the audience, instead mentioning the importance of the "no kids" sailing environment and, again, the experience that the line delivers. “Our average age is 47 and people are very surprised when they hear that," he said. So, it's more about the guest's approach to the cruise experience than a demographic. “Young” can be a dangerous word, he acknowledged.
"We’re filling these ships with people in their 30s, 40s, 50s, 60s," Saverimuttu noted. "That means lots of celebrations and 40th, 50th and 60th birthday parties."
Two Diverse, New-to-Cruise Approaches
Focusing on new-to-cruise guests, Sharpe asked Bayley and Herrera about their brands being "a gateway" for those potential guests. How is each brand going after that audience of first timers?
Short Product, Newer Ships
"The gateway for new-to-cruise is short product,” believes Bayley. “And short product is the gateway to longer product.” So, if people are a little anxious or unsure about cruising book a short cruise as a result and have a fabulous experience, then "they're likely to repeat," he stressed.
Years ago, Bayley said the industry's collective deployment philosophy was one of "putting older hardware into the shorter product and offering mediocre destination experiences. So, what we were doing was that we were attracting a higher percentage of new-to-cruise but they weren’t repeating because the experience was average."
Bayley continued: "We flipped that around when we invested in Perfect Day at CocoCay, (the line's private Bahamian isle experience). We now take 3 million people to Perfect Day a year. It is the No. 1 most desired destination for Royal Caribbean anywhere in the world—and it’s the highest-rated guest satisfaction experience that we have.” Many short cruises include the stop.
Another shift to bring more new-to-cruise guests? "We also have put newer ships into the short product market," Bayley explained. "And what we saw was a radical transformation of volume, demand and rate for customers who were new-to-cruise and loved it. Not only did they repeat but then they graduated to longer product.”
Cruise executives often hear from advisors that the short product isn't great on the commission side as the fares are obviously cheaper. Bayley suggested that advisors look at it differently: "You need to think of developing your customers and keeping them with you. And one of the ways you can do that is to deliver products that really make them happy. And once you’ve done that, as you know better than I do, you then keep them loyal to you.”
It’s an annuity and the advisor then sells them another product—often one with more commission potential. “We found that to be a real recipe for success," said Bayley. Next year, Royal Caribbean will take 6 million guests all around the world on cruises and “our new-to-cruise continues to dramatically grow and it’s coming from the short product into the long product.
Alaska, Europe and Longer Average Deployment
That said, Norwegian has a different approach for getting those new-to-cruise guests. "We’ve invested heavily in Europe and Alaska, and we actually lengthened our average deployment,” stressed Herrera. “Our average deployment is over eight days now, especially in those markets."
While it's growing its international business, Norwegian is relying primarily on the U.S. market, Herrera said. "And the great thing about the U.S. is that it’s a really big place." There are multiple coasts, so "if you live within driving distance of a port, your cruise decision is pretty straightforward." But, he added, “if you live somewhere else and you have to fly, flying becomes another decision and another friction point." So, the brand launched "NCL Free Air."
"And I’m not going to hide from the fact that we didn’t get it perfect in the beginning," Herrera said. "No pun intended. It was the perfect storm." There were issues, he acknowledged, but, doubling down on those, "we’ve gotten better and we’re getting better." With 'NCL Free Air,' the air ticket is also part of the cruise fare and is commissionable.
"So, if we make it easier for the guest by removing the friction of that air decision or the air process, and you benefit with higher commissions, and we are committed to getting it right, I’m very excited about what 'NCL Free Air' is going to mean for new-to-brand, new-to-cruise," he said emphatically.
Highly Traveled Niche Customers
A different kind of customer is attracted to Azamara, Sharpe said, asking Cabezas to elaborate. Yes, "our customer is somewhat niche," she responded. “It’s mostly having to do with the amount of their travel experience because these are the type of people that who have ‘been there, done that’ and say, 'Elright, what have you got for me?'”
So, for that customer psychographic and to attract more new-to-cruise guests, Azamara has learned the following: Guests say, "It’s gotta be different. It’s gotta be highly experiential," plus “I want to go somewhere that’s very small, remote—only small ships can get there."
Cabezas also said that guests for Azamara are typically unassuming, relaxed and don't seek stuffy or pretentious experiences. “Think about a Lexus customer," she told the trade audience. Those customers want something that’s high quality and reliable, but not necessarily pretentious. "It’s not a Porsche, it's not a Rolls-Royce," she added.
U.S. Market Expansion: More Guests Needed
Sharpe said to MSC Cruises' Rodriguez that, given the European line's sizable U.S. market expansion, “you can’t just get your past guests back. You need a whole new pool of guests [in the U.S.] that are getting to know this new brand. What pillars are you using to pull in those new customers?"
Rodriguez said the line is targeting “curious travelers that love international travel, love exploring and experiencing new cultures, and love meeting people from around the world. And our brand is differentiated along those lines from European heritage—great international character onboard and very rich deployment options across the world—obviously growing in the Caribbean and North America."
In addition, the line's global scope is broad in the Mediterranean, in Europe overall, and in the Middle East/Arabian Gulf, the Southern Hemisphere and South Africa. So, new-to-cruise or new-to-brand guests will try the line first, perhaps with a shorter cruise in the U.S., and "if they enjoy it, then see the world with us," he said.
For MSC Cruises, other levers are providing access for new-to-cruise guests. This week, the line launched New York City as its third U.S. year-round homeport. "And, of course, we’re working on Texas," Rodriguez said. "And we’ve added diverse itineraries including shorter itineraries, all the while bringing out beautiful new ships." He also said that large commercial investments in partners and meaningful marketing are helping drive brand awareness in key source markets in Florida and New York.
Stay tuned for more covereage about the cruise marketplace, focused on pricing as seen through the eyes of these five executives.