President's Panel: When Will Cruise Pricing Improve, Given the Value?

When will cruise fares rise to the level that reflects the value provided to cruise guests? That was a question Alex Sharpe posted to five cruise line presidents at Cruise360 last week. Moderating "The President's Panel" discussion at a general session, Sharpe, president and CEO of Signature Travel Network, said, "At Signature, we sell a fair amount of sun and sand—all-inclusive." But in evaluating cruise fares and what's included, "I’m a former cruise revenue manager guy so it drives me crazy," he said. "I never think cruise gets its fair share of price. I always think it’s undervalued and I know our advisors do, as well." 

While Sharpe credited the executives for making big investments post-pandemic, he asked: "How do we get the price where it deserves to be? How do we, the advisors, do a better job of articulating value and getting more people to book cruises, which will ultimately raise prices?" 

Cabezas: Showing Clients "The Math" 

Carol Cabezas, president of Azamara said this: “My go-to has always been ‘do the math.’ Very simple.'"

She explained that when advisors stack up everything that a cruise fare includes, "particularly in our sector where you have all of your beverages included—wine, beers—everything throughout the ship all day long, as well as gratuities and other amenities (and also credits, which we usually include), it is such a tremendous value."

And, "it's all commissionable," she added. “So, when you stack that up against any type of land vacation, there’s no comparison."

Cabezas also stated her belief that the cruise lines "own" the customer in terms of superb service, soaring above what hotels can and will do for guests. The segments are built differently, she noted. 

Concurring, Sharpe said a “contemporary, all-inclusive mainstream [hotel/resort] doesn’t touch what all you guys can do aboard ships."

Herrera: Demonstrating Cruise Value

Industry people all are frustrated when seeing that cruise is a better value, according to David Herrera, the new president of Norwegian Cruise Line. But, "how as an industry do we communicate that?"

He believes it's important to focus on the philosophy of Frank J. Del Rio, outgoing CEO of parent company Norwegian Cruise Line Holdings, who “always reminds us it’s about the deal and value." For NCL, "the way we emulate or demonstrate the value is with 'Free at Sea' because the cruise experience is outstanding to begin with," Herrera said. But by overlaying that cruise experience with "Free at Sea," which includes special dining, a free open bar, Wi-Fi, shore excursions and so on, it enhances and elevates the cruise value. 

"More importantly it makes it easier for you, our partners, to sell the cruise," said Herrera, asking: "What sells? It's not just price. If it was just price, it would be a race to the bottom." Instead, it's important to show value, he believes, "to reinforce the value that our guests are getting," and "'Free at Sea' amplifies and demonstrates that value for our guests." 

Rodriguez: Showing the Experience's Richness


President's Panel of cruise executives at 2023 Cruise360
Alex Sharpe moderated a "President's Panel" discussion at Cruise360 last week. Left to right are Sharpe of Signature Travel Network, Michael Bayley of Royal Caribbean International, Carol Cabezas of Azamara, David Herrera of Norwegian Cruise Line, Ruben Rodriguez of MSC Cruises USA and Nirmal Saverimuttu of Virgin Voyages.  (Photo by Mike Faust of CLIA)

Talking about the return of cruising, "we're filling ships, thank God," said Ruben Rodriguez, president, MSC Cruises USA. "And, as we're filling ships, we're pricing up, which is good for the industry and that's wonderful."

Still, he believes, that even with slightly higher pricing, the value is still really robust. To increase prices further to reflect what guests are actually receiving, he told the audience: "It's all about communications and marketing."

Both cruise lines and advisors need to communicate that exceptional value, Rodriguez noted. Helping MSC Cruises in that regard are new, recently added U.S. social media channels including TikTok and Instagram. Those are now focused on "showcasing the richness of the experience," he stressed. Yes, the line will continue to use other, more price-focused marketing channels, too, but the new experiential social media approach in the U.S. is an added effort to entice new customers.

Saverimuttu: Delivering the Best Experience

The way to deliver rising pricing? To Nirmal Saverimuttu, president, Virgin Voyages, it's simple: "If we can deliver the best possible experience [then] that leads down to experience as a 'point of distinction.' And that leads to pricing power."

So, Virgin is working to better explain what that experience is because that's exactly what can impact pricing in a positive way. For instance, an Airbus A320 flight experience for travelers flying on one airline is a different experience than on a different brand's A320 flight, he noted. Alternatively, going to one steakhouse over another might deliver a different vibe, ambiance and experience, causing the price level to be potentially higher.

The differentiations are important, according to Saverimuttu: "Those are the kind of things that we can be better at communicating to our partners who then [will] place the right client on the right product. That results in preference, which results in not having [to rely] on price to close the deal. That makes people want that experience and want to pay more. We just have to do a good job of explaining to them." 

Sharpe interjected: "You try getting a hotel on South Beach during Spring Break—$1,200 bucks a night for a 4.5-star property. It's incredible. I think we have to drive the demand in order to get the price."

Bayley: Targeting the Marketing 

In terms of driving demand, Michael Bayley, president and CEO, Royal Caribbean International, said that all the cruise lines put a huge amount of energy into creating their brands and then putting even more energy into delivering exceptional experiences. In particular, for his brand "a lot of work goes into target market and market sizing," he said.

He continued: "We don’t invest all these billions of dollars in creating new ships by happenstance. We’re very focused on what we think the size of the market is—based on how we’re constructing the brand to deliver an experience." That's "where travel advisors become true partners," Bayley told the audience. "You really do play an important role in connecting these brands and these products with the right demographic and the right customer."

Yes, Royal Caribbean International is a very large, multi-generational, mass-market brand, he noted, but "we have huge segmentation within that brand. We have more suites than any luxury brand on the planet. There’s a rich opportunity to focus your marketing and put your time into that segment." 

In addition, he said that how the line allocates its marketing investments is very much based on how it sizes the market and who that target market is. "And we try our best to put that marketing investment to best use—to push people to either coming to us or coming to you," Bailey stressed. "And I think that's where there is more opportunity for all of us."

Putting Cruise in the "Consideration Set"

Advisors approached by potential clients who ask about an all-inclusive stay or something else for their vacation should at least "put cruise in the consideration set," Sharpe recommended. 

Considering the latest technology that consortia and other travel agency groups have for their advisors' use, his view is: "How hard is it to pick a cruise line that you think fits that customer and then print something out?" In other words, give guests a choice. Look at a weekend night on South Beach versus a cruise, for example. "Then you can start talking about the value proposition," he suggested. 

"I think there's a lot of opportunity there, and until we can get to the point where people are standing in line [to book a cruise], we're not going to get what you all deserve in terms of the billings and dollars that you have invested," Sharpe told the audience. "It's something to think about."

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