Are Economic Jitters Hurting Cruise Sales?
by Maria Lenhart and Dori SaltzmanIn the midst of continuing economic jitters, cruise lines are offering an unusually high number of discounts and tactical promotions this fall. Should travel sellers be worried about a softening market, or are the promotions driving more business?
The ongoing bad news about the economy, exacerbated by poor job numbers, a rock-and-roll stock market and this summer’s downgrading of the U.S. credit rating, has most everyone, including travel sellers, a little on edge.
“The biggest problem right now is uncertainty about the economy, even among people who have money to spend,” said consumer behavior expert Lars Perner, assistant professor of clinical marketing at the University of Southern California. “There’s fear that things could get worse.”
Aggressive discounting
Travel Market Report spoke to a number of travel agents who noted a high number of targeted promotions and early booking discounts over the past few weeks.
“There’s a very unusual amount of discounting going on right now, especially for the whole winter season,” said Henry Wiseberg, CTM, president of Talk of the Town Travel, a TRAVELSAVERS agency in Toronto. “We’re even seeing some discounting for 2013, which is highly unusual.”
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Dwain Wall, senior vice president and general manager for CruiseOne and Cruises Inc., agreed. “We are seeing more tactical discounting through repeat customer special promotions, early booking discounts for 2012 and onboard credits.”
Wall said the fact that cruise lines are trying to fill ships earlier is a symptom of a soft market.
Sees no downturn
Michelle Fee, CTC, president and CEO of Cruise Planners/American Express, said she too is noticing more early bird discounts than usual, especially from luxury lines.
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But Fee said she didn’t see the moves as an indicator that sales are off, nor has Cruise Planners experienced a recent dip in bookings.
“They’re trying to front-load 2012. So they’re giving a little bit more value-add to get money on bookings earlier on in the year.”
Usual, not so usual
In fact, it is customary for cruise lines to offer specials this time of year to fill empty berths for the remainder of the calendar year.
But this time around cruise lines are extending those discounts and upgrades into 2012, and that’s atypical, said agents, who also commented on the number of short-sales in the market.
The promotions are across the market, from contemporary and premium brands through to luxury and even river cruises, including from lines that don’t typically discount.
Short-term plunge
Cruise sales are currently “going strong” at San Marin Travel, a Signature agency in Chino Valley, Ariz., said owner Mike Hannan.
But this summer business came to a grinding halt right after the news of the downgraded credit rating broke in early August.
“There were no phone calls or emails from clients for the next five days,” he said. “I contacted some clients who had been talking about planning something, but was told those plans were now on the back burner.
“Then, five days later, the floodgates opened, so it must have been just a temporary reaction to the news,” said Hannan, whose agency does two-thirds of its business in cruise.
Lingering concerns
In fact, the agency has more cruises booked for 2012 than it has ever had for an ensuing year before. Still, Hannan said he is not complacent.
“Next year looks strong, but there is still a great deal of concern about high unemployment and the real estate market. So I think that business would be even stronger if it weren’t for those concerns,” he said.
‘Uncomfortably quiet’
Wes Rowland’s agency also experienced soft bookings after the credit rating news. Business has not yet picked up, said Rowland, president of CruiseExperts.com, an Ensemble-member agency in Visalia, Calif.
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“We actually had a reasonably strong August, but the first couple of weeks of September have been uncomfortably quiet,” he said.
“The booking climate is a tough read for us right now. We’re just trying to figure out how and what it takes to get things moving.”
According to Wiseberg, people are booking shorter cruises than usual. “Because of the economy, some people are reluctant to stay away very long from their business. Four-and five-day cruises are more popular now,” he said.
Cruise promotions welcome
Some travel sellers said they appreciated the recent spate of cruise promotions, which they credit with sparking last-minute business.
“While yields may be lower on these last-minute rates, these are sales we may not have had in the first place if not for the attractive pricing. Early bird offers always get the phones ringing,” said Denis Lim, president of Vancouver-based CruiseExperts Travel, a Signature agency.
Fee commented that “any time there’s a good promotion out there it gives us a story to tell. People love to see that they get some kind of value-add.”
Cruise line strategies
Are tactical promotions from the cruise lines working? At Cunard Line, a three-day sale earlier this month promoting the line’s Feel Famous Fares, prompted a 25% increase in call center volume during the sale, according to Brian O’Connor, director of marketing and public relations.
“We are offering some inviting deals through a variety of channels and are pleased with our repeat and first-timer booking pace for 2011,” he said.
Seabourn, which has tripled its capacity since 2009, had a one-week, close-in sale in progress last week. The luxury line has offered “the best fares we’ve ever offered during the past three years,” said spokesman Bruce Good. He added that Seabourn is “starting to move away from this.”
“A close-in sale is unusual for us, as our strategy is to push bookings out further by offering generous savings for out in the future.”
Good said that while luxury cruise lines like Seabourn have historically weathered recessionary times better than others, “It’s now a brave new world, so it’s hard to say how history will hold up. We are managing to fill the ships — and that’s our goal.”
New pricing approach
At Crystal, newly reduced fares reflect a new tiered approach to pricing, said Jack Anderson, vice president of sales and marketing.
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The line is offering bonus savings on about half of its 2012 sailings. “Our motivation and strategy was to put out as early as possible for the entire year of 2012 our very best, most aggressive pricing,” Anderson said.
Coincidentally, Crystal’s lower fares appeared in the market the first week of September, the same week several agents said they noticed a dip in sales.
Crystal said it plans to raise some of those prices on Oct. 31. The line will then advertise the new pricing as being the lowest available until Dec. 31, when prices will go up again.
Anderson said he hadn’t noticed current softness in the marketplace. but he anticipated that consumers will be more cautious about spending next year – thus the drive to obtain next year’s bookings now.
“Any cruise line executive will tell you that election years are very, very tough years,” he said. “For whatever reason, that’s a huge anchor in terms of people making commitments for travel plans.”
