Cruise Advance Bookings: Can There Be Too Much of a Good Thing? 

The Grand Promenade of Royal Caribbean International's Allure of the Seas (Copyright Susan J Young)

Last week Royal Caribbean Cruises Ltd. (RCL) reported robust advance bookings during its annual earnings report. Value-add promotions offered well in advance of the sailing date are helping.

And so is the company’s “price integrity” policy of letting cabins sail empty rather than slashing pricing.

Agents, too, have been highly effective at promotion and educating clients to book early for the top perks. All of these steps have pushed consumers to book farther out.  

But last week, Richard Fain, RCL's chairman and CEO, was asked by Harry Curtis from Nomura/Instinet, a financial analyst participating in the cruise company's annual earnings conference call, if too many advance bookings could possibly limit the upside of pricing power in future periods?

Fain said, no, “I don’t think it limits our capability in the future." On the contrary, he believes it's an indication of how strong the company thinks the situation is or will be. 

But he did stress: “It’s hard to imagine...but if you take too many bookings today, what it really means is that if somebody a month from today decides that he or she wants to take a cruise, and frankly is willing to pay more, it’s simply not available.”

In addition, as consumers who are new to cruising desire to book, but can’t get what they want, travel agents can potentially lose not only that singular booking but perhaps also the annuity for that person's cruise vacation bookings in future years. 

Calling the company's revenue management people, “the best around and quite sophisticated,” Fain says, "Depending on time and circumstances, you don’t want to take too few bookings, but taking too many is just as bad as taking too few. It’s getting that balance.”

The price integrity program has extended the booking window. So it's important to find out when people are coming to cruise and when they’re calling to book. Otherwise, the line loses out on price, and agents, in turn, get less commission. 

"You want to get it right, not just the most [bookings] you can get," Fain said. “If we feel we’re taking too many bookings at a point in time, we will raise our pricing and lower the pace of bookings.” 

“I think it’s important for people to understand that while obviously more bookings is a good thing, we actually have a great deal of discretion … our revenue management people have a great deal of control over that pace, so we just feel in general that probably it shouldn’t be much faster than it has been [recently].”

“Of course, you look at the circumstances at the time, and it could be well different in a year from now," he added.

In a 10K filed with the U.S. Securities & Exchange Commission, Carnival Corporation, the world’s largest cruise company, said it also continues to identify and implement new strategies and tactics to strengthen cruise ticket revenue management.

“We are currently rolling-out our state-of-the-art revenue management system across six brands and expect the roll-out to be completed by early 2018,” the line said in the report. 

For now, at least, travel agents and agency organizations seems happy with the current booking picture. But they also know things can change quickly.

Drew Daly, general manager of network engagement and performance, CruiseOne, Cruises Inc. and Dream Vacations, says his organization is seeing strong booking trends from many factors.

"The booking window overall has increased roughly 15 percent year-over-year for us, resulting from an increase in overall demand, group travel and other industry trends," he reports.   

Beyond the value-adds available for booking early, he indicated that some clients are able to step up to a higher priced product (something they might not normally have done in the past) as they can pay over more time prior to sailing.

Daly says his group's agents and franchise owners recognize that now is the time to book and are stressing urgency with their customers. "Pricing and promotions can go away at any time," he acknowledges.

For now, he's a fan of the expanded booking window the cruise lines are experiencing right now. He believes it's great for all agents because it comes with higher price points—ultimately yielding more commission for the individual agent. 

Today, Robin Farley, a cruise industry financial analyst, UBS Investment Research, told her investors, "Our channel checks indicate a strong start to Wave Season." So it looks as those the advance bookings continue to build.