Soft cruise bookings coupled with aggressive cruise line pricing undercut profitability for many cruise-selling agents in the third quarter, especially those catering to the middle market. But industry members are generally optimistic for the fourth quarter and beyond.
Despite consumer caution in the run-up to the presidential election, cruise sales are picking up and while pricing remains an issue, the outlook for 2013 appears healthy, agents and industry experts told Travel Market Report.
Ramping up promotions
Travel seller Jason Coleman noticed a slowdown in new cruise bookings starting in late July.
“It hasn’t picked up yet, like it usually does at the end of the summer slowdown period,” said Coleman of Jason Coleman Inc. in Los Angeles. “There’s a lot of uncertainty in terms of the presidential election, regardless of which way the election will turn out.”
Coleman noted that “the cruise lines have really been ramping up their promotions, sales and flash fares to get people in booking mode. This makes me think they’re feeling it [the slowdown] as well.”
At CruiseOne, executive Dwain Wall said cruise pricing continues to be a challenge.
“Bookings are strong, but prices are not as strong as they should be. That is putting pressure on total sales,” said Wall, senior vice president and general manager.
“The most important reason is the economy. Discounting is happening in all industries,” Wall said.
“The other thing is that there’s not as much demand as in previous years. However demand is starting to come back. Thankfully we are on the right course.”
ROI is down
At CTA Travel in Cerritos, Calif., agency president Cathie Lentz-Fryer said bookings were solid, but her firm’s bottom line was still suffering, with net returns on cruise sales staying flat year over year.
“Our sales are up, but it’s unfortunate our ROI has been devalued, because the cruising industry has done a great job at doing promotional pricing.”
Deals drive sales
On the bright side, those promotional sales do bring in business.
“My clients are booking heavily in 2013, with a still few coming in for 2012,” said Karyn Farr, ACC, MBA, at Cadence in La Jolla, Calif. “They’re taking advantage of the really good sales.”
Farr, who sells mostly luxury product, said last-minute sales in Europe have boosted her numbers heading into fourth quarter. Interest in river cruising in Europe and Asia also has helped sustained her upscale business, she said.
But for price-sensitive clients, high airfares are a major impediment. “If there is a reasonably priced seat to get to a destination, that makes a difference,” said Farr. “Maybe that’s why I’m getting people booking so far ahead of time for 2013 and 2014.”
Seeing a bounce
Carolyn Spencer Brown of the consumer website Cruise Critic also noted a positive trend. “We’re definitely seeing a bounce. People are interested in cruise travel the way they weren’t earlier this year,” said Brown, who is editor in chief.
“There’s pent-up demand, an end in sight to the presidential election and bookings are pretty attractive.”
Will pricing improve?
Wall said that cruise pricing looks stronger too. “We are seeing a good trend in the right direction on pricing. We are seeing strong demand for 2013 – the goal is to get pricing up where it belongs and where it needs to be for our margins.”
But at one major cruise company, Carnival Corp., discounting is expected to continue for the foreseeable future.
“Broadly speaking, it’s fair to say in order to keep demand going . . . we will continue to have fairly heavy spend in promotions and sales,” said Howard S. Frank, vice president of the board and COO.
“That seems to be driving the business – if we do it smartly and selectively, it will be good for us,” said Frank, on the company’s third quarter earnings call.
Luxury fares could increase
Brown of Cruise Critic predicted that mainstream cruise prices will remain competitive well into 2013, but that luxury fares are likely to increase.
“You’re going to see prices going up in specialized cruising, in high-demand periods like spring break and prime Alaska months,” said Brown. “I think fares at large are going to stay fairly competitive until the economy is firmly turned around.”
At CruiseOne, Wall was generally optimistic. “If everything continues as is, bookings and sales will be up next year – especially once we get through the election. Cruise lines comments are backing this up. And we’re still selling a lot for 2012.”
For his part, Jason Coleman said he expects a solid turnaround in November and even before that an additional boost from CLIA’s National Cruise Week promotions later this month.
Senior Editor Maria Lenhart contributed to this report.