Cruise Sellers Divided Over Cost of Onboard Spending

by  and  rew Sheivachman
Cruise Sellers Divided Over Cost of Onboard Spending

Onboard today’s cruise vessels, a surfeit of specialty dining options, activities, classes and services are available for guests to enjoy. On mainstream cruise lines, most such goodies come at an additional cost to passengers. Some agents say the extra costs are hurting them too.

As the number of cruise berths has multiplied and cruise fares have dropped, major cruise lines increasingly look to shipboard spending as a significant revenue source. Recent financial statements of Carnival Corp. and Royal Caribbean both show shipboard spending increasing as a share of total revenue. (See sidebar.)

Nickel and diming
Cruise lines are in the hunt for alternate revenue sources, suggested Peter Fanizzi, owner of My Going Places Travel in Staten Island, N.Y. “In the never-ending quest to operate huge megaships, the cruise lines are running into basic economic problems.”

The impact on passengers? “The nickel and diming [of passengers] is ridiculous,” he said.

Travel agents lose out when cruise lines drastically reduce fares, thereby reducing commissions, then supplant the lost income with onboard revenues.

“When clients spend extra money on alcohol, activities, taxes and fees, agents don’t get an extra dime,” said Fanizzi.

Pricey onboard temptations affect cruise passengers too, adding to the total cost of their vacations, at least for the incautious.

“We’ve noticed over the last few years that while the dollar cost to get on the ship has come down tremendously, we see [passengers’] shipboard expenses going up,” said Ginny Wilson-Gordon, owner of Travel By Design in Greenville, S. Carol.
 
Danger for cruise rookies
Some agents fear that first-time cruisers will be deterred from future cruise vacations when their shipboard purchases cause them to overspend on their initial trip.

“My new clients, the first-time cruisers, really run up the bill,” said Dillon Pyron, owner of Austin Adventure Travel in Austin, Texas. “Some of them are very upset about it,” he said, adding that it’s not just clients of modest means who are unhappy about shipboard expenses.

Pyron said he thinks the megaships’ emphasis on costly restaurants and shopping outlets will exacerbate the shipboard spending problem in years ahead.

“Chops Grille, for instance, will be in every ship in the Royal Caribbean fleet by the end of the year,” said Pyron. “I think Royal Caribbean has quit viewing the fare as a profit center and are looking at the ship as one.”

Not tempted
Not all agents have an issue with the cruise lines’ drive to increase onboard revenues.

Ruby Estes, owner of Going All Places Travel in Riesel, Texas, said shipboard spending isn’t a problem for her clients, since most are wary of pricy temptations such as specialty dining.

“I have one or two clients who will visit the steakhouse for a special occasion,” Estes said. “But many of my clients say, ‘Why go to the steakhouse when I’m already paying for the cruise?’”

Travel agent Denyse Turner makes it a point to warn clients about the added expenses they’ll encounter onboard.

“I do a lot of large groups, and educate them so they know ahead of time what they’re going to have to pay for,” said Turner, CEO of Rx 4 Fun Travel in Fair Lawn, N.J.

She also builds onboard spending credits into the total package for her clients, “so they have some complimentary cash,” she said.

Drinks packages too
One of the latest opportunities for passengers to spend more money onboard are the all-you-can-drink packages introduced by several cruise lines in 2012. (See: Cruise Lines Expand All-You-Can-Drink Packages, Dec. 17, 2012.)

The drinks packages usually range between $50 and $60, per person daily, for alcoholic beverages. The packages have strict limitations on the number and types of drinks available. Also, all cabin mates are usually required to purchase a package even if one does not drink.

It’s not clear that the drinks plans are a good value, Turner said. “The drink programs are something we have to look into to see if it’s really worth it for cruisers. I’m going to monitor how the policies are really working, going forward.”

Others suggested that the high costs of drinks plans will prove prohibitive. “If they had the drink packages at a more manageable price, like $30 a day, I think they’d have more cruisers buying in,” said Estes.  

A shift away
With their clients spending less on fares and more onboard, some agents are hesitant to sell mainstream cruises.

“With the number of ships out there, and the number of beds in the Caribbean, we’ve found the market is so depressed, in terms of what we can earn on revenue, that we don’t sell those products,” said Wilson-Gordon.

Instead, she’s moving clients to more-inclusive lines like Princess and Oceania, she said, adding: “Our clients don’t want to go into their pockets constantly.”

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Tip of the Day
Remember that we are in an amazing business and you help people fulfill their dreams. Sometimes we just need to look around again to remind ourselves that we are in the mansions of industries with really fun and exciting products to sell.
 
Scott Koepf, TMR Columnist 
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