Did the Industry Create Their Own Monster?

[ducklite]

Reading the announcements about cut backs, additional fees, and rising fares over the past week or two, it got me to thinking. For half a dozen years or maybe more, the cost of cruising hasn't kept up with inflation, despite small cut backs here and there.

 

Has the cruise industry in it's never ending quest to attract new guests--sometimes at the cost of losing existing ones--finally hit the wall? Have they finally over saturated the market and offered such ridiculously low fares that they've actually cannibalized their own business?

 

Have they finally realized that the business model they've been operating under is not sustainable?

 

I suspect that five things will happen over the next half dozen years.

 

1. Fares will begin to rise--in some cases, significantly.

 

2. New ship builds will slow to a trickle as the lines begin to find it difficult to fill the huge number of berths they have built.

 

3. Cruise lines will overhaul loyalty programs like the airlines have done with frequent flyer programs. I suspect that there will be significant cut backs in perks and moving forward the programs will be tied to the number of days cruised and the fare paid--those with deeply discounted fares might get no points credited while those paying full fare in suites might get bonus points.

 

They might also begin to reward passengers with points based on their total shipboard folio as opposed to just the cruise fare--rewarding the big spenders. I suspect some lines might even remove past guests who do not reach a specified spend every few years from the loyalty program in order to spend their money to capture the most loyal and biggest spenders as the casinos do.

 

4. At least one of the major corporations with multiple brands will combine at least two of their lines to remove duplication and will divest itself of some of it's ships in order to concentrate on filling berths.

 

5. There will be a new emphasis on quality over quantity on many lines, and a "race to the bottom" on one or two who will continue to cut back rather than raise fares.

 

Opinions?

[Hlitner]

You think? Ahhh, but we do disagree....at least for the next few years. The cruise lines continue to order plenty of new ships and we even have a new luxury cruise line (Viking) that recently joined the fray. For the doubters here is a current listing of ships and boats under order: http://www.cybercruises.com/orderbook.htm.

 

The industry planners keep insisting that only a small percentage of folks who can afford to cruise have ever been on a cruise...and they are going after that market. This is part of the reason that RCI has expanded their ultra huge ships since they tend to to attract new and younger cruisers...who also happen to spend more money per passenger day onboard the ships. And the US based lines are also starting to base more ships in other parts of the world such as Australia and China to tap into those markets.

 

We do not have a clue as to what will happen to quality. But over the years we have felt that quality with the mass market lines is like a see-saw. The lines move into a cut-back phase (we have seen this the past 3 or 4 years) until bookings start to decline and then they reinvent themselves and improve quality. But some traditional cruise line events like the nightly lavish midnight buffets seem to be long gone.

 

Pricing is, to me, a fascinating part of the industry. Increased competition and increased berths limit the ability of the mass market lines to implement major price increases. Several key industry executives have already pledged to increase pricing (and quality) but we are skeptical of their ability to pull it off. Today we received an e-mail from Princess with several "last minute specials" for European cruises. Balcony cabins on some of their best ships are being sold at less then $100 per passenger day in order to fill unbooked berths. DW and I recall taking a European cruise over thirty years ago on the RCCL Sun Viking when we paid about $100 a passenger day for a tiny forward outside cabin that was about about 130 sq feet. Now, thirty-some years later we can cruise for the same price in a much larger balcony cabin. And when you adjust the price for inflation we are actually paying today, a fraction of what cruises cost in yesteryear. Go figure.

 

Hank

Edited May 8, 2015 by Hlitner

[Nic6318]

I don't see a risk to the industry for a long time.

Their competition is land based, typically all-inclusive. For the multitude who are sold on the idea that " I'd rather be cruising " ( and I am one of them )there is no real choice.

As far as cutbacks, they are only apparent to someone who has seen something different. As you suggested, they would rather have a new customer than a return customer. The industry can still make substantial changes that lower the cost of service before new cruiser will turn away. It is that base price that actually attracts people once they enquire.

If that isn't enough, they have already seen how easy it is to charge extra for almost anything and people will gobble it up.

 

Personally I don't believe they will increase the price of the cruise significantly. I do think they will continue to reduce services slowly and for those that are willing to pay extra they will find more things that they can charge us for and increase the fees for the services they charge for now. I also think they will continue to make more money, unless we see a major global recession.

 

my opinion

Edited May 8, 2015 by Nic6318

[cruisemom42]

It's probably not accurate to make generalizations as if the cruise industry is one monolithic product in one market.

 

Instead, there are multiple lines targeting different demographic groups operating in multiple markets, some of which are already well aware of cruising as a vacation and some (like Asia) that are growing rapidly. And even within those lines there are sometimes quite a range of ship sizes.

 

I doubt prices will change across the board. We may see a lot more differential pricing in different markets.

 

I do suspect ship building will slow though. The last decade has been a frenzy of building that I'm not sure is sustainable.

[AZ Ocean Lover]

There is a huge untapped market in China as the middle class grows. A cruise will be a perfect vacation for this market because of their love to travel with their extended families. What better place to do it but on a cruise ship that has activities for all ages and interests.

 

The second market that is untapped are the Millennials. Once ships improve their connectivity this market could boom. This group doesn't want to be unconnected for long. Certain lines are moving towards this market now.

 

There is a bright future for cruising if you ask me. It may not look like it does today, and certainly nothing like it did in years past, but still bright.

[cruisevv]

 

I suspect that five things will happen over the next half dozen years.

 

1. Fares will begin to rise--in some cases, significantly.

 

2. New ship builds will slow to a trickle as the lines begin to find it difficult to fill the huge number of berths they have built.

 

 

Your first and second points seem contradictory. They need to fill those rooms and pay for the huge staff servicing the ships so prices will have to fall or stay low to keep the customer base coming back.

[marco]

Let alone prices not increasing over the past 1/2 dozen or so years ..... and I posted this the year we took the cruise 2 years ago. We took a cruise 2 yrs ago. Same # of days, same basic itinerary (Caribbean) same cabin category as a cruise we took THIRTY YEARS PRIOR and the cost was price was $40 more then it was 30 years ago. They can't give you what they gave 30 years ago for the same price. Something's got to be cut back in conjunction whit a lot more on board discretionary spending.

[wwcruisers]

You make some good points, Ducky -- your crystal ball is working about as well as anyone's is, right now (lol)! ;)

 

If I may, I would like to add two points:

 

-- First: The rapidly escalating fares are not in the future. They've already arrived -- with a vengeance -- for those of us on Celebrity. Of course, they've been cleverly disguised, by using a number of "freebie" perks (drink packages, OBC, and new suite amenities -- to name a few).

 

-- Second: If the cruiselines don't find a responsive market here, they will go wherever they can find it. Royal Caribbean is ardently courting the rapidly expanding Asian cruise market, by committing not one, but two, of its brand-new Quantum Class ships to Asia.

 

At any rate, it will be interesting to see where the industry stands, five or ten years from now. I think that you are right, in that big changes are coming -- for better, or worse.

[maywell]

Dunno - Its seems to me the market is more niche than before; perhaps for the better to the point where one can actually tell the differences between lines, imo. Also, depending on the cruise line, the pricing is either up, like others said with a vengeance so much that one can't do a last-minute or even a year out trip on that line anymore. Or pricing is so down that a person can book numerous trips for the next year or 2 and still have enough money for additional trips even if the line is a 'nickel and dime' one.

 

Its a tough call to make now, how the market especially for North America is going to go - For Europe, Australia and Asia; the market can only go up since there's really not much cruising unless it a river cruises and even those are popular in Europe.

[sail7seas]

We can all only give our opinions as none of our crystal balls can be taken as guaranteed........

 

My guess ducklite's suggestion some cruise lines will merge to eliminate duplication of like product is highly possible. I suspect Princess and HAL (both sister companies under Carnival Corporation's umbrella) could be in the early start up stages of that happening.

 

I believe ships will become very much more a la carte. You want a hamburger, order and pay for it like in any restaurant. You want to see the show, the price of a ticket is whatever amount. Possibly the only included food might, at least initially, be the buffet. MDR's will become extinct and those spaces will be converted to small venues offering various dining choices.

 

I think two things are going to be critical in cruise lines' short term future: economy and specifically economic stability and growth in Asia. There is some talk China/Asia are new focus for bookings to a growing middle class....... IF that growth continues, if their economies continue to grow.

 

It seems to me unrealistic to not consider the state of world unrest and terrorism as not very pertinent to stability of leisure travel. The more hot spots, the more terrorism, the more fear and concern......the fewer travelers.

 

JMO ....

Edited May 9, 2015 by sail7seas

[Warm Breezes]

Your first and second points seem contradictory. They need to fill those rooms and pay for the huge staff servicing the ships so prices will have to fall or stay low to keep the customer base coming back.

 

That was the first thing I thought reading his list. Economics would tell us if they need to fill rooms prices would drop not rise.

[sail7seas]

That was the first thing I thought reading his list. Economics would tell us if they need to fill rooms prices would drop not rise.

 

The prices of cabins may drop but the price of all on board purchases could increase as well as starting to charge for things that used to be included in the price or eliminating them entirely.

 

[BullDawg91]

We can all only give our opinions as none of our crystal balls can be taken as guaranteed........

 

 

 

My guess ducklite's suggestion some cruise lines will merge to eliminate duplication of like product is highly possible. I suspect Princess and HAL (both sister companies under Carnival Corporation's umbrella) could be in the early start up stages of that happening.

 

 

 

I believe ships will become very much more a la carte. You want a hamburger, order and pay for it like in any restaurant. You want to see the show, the price of a ticket is whatever amount. Possibly the only included food might, at least initially, be the buffet. MDR's will become extinct and those spaces will be converted to small venues offering various dining choices.

 

 

 

I think two things are going to be critical in cruise lines' short term future: economy and specifically economic stability and growth in Asia. There is some talk China/Asia are new focus for bookings to a growing middle class....... IF that growth continues, if their economies continue to grow.

 

 

 

It seems to me unrealistic to not consider the state of world unrest and terrorism as not very pertinent to stability of leisure travel. The more hot spots, the more terrorism, the more fear and concern......the fewer travelers.

 

 

 

JMO ....

 

 

Paying a la carte will certainly turn me off as a cruiser. I'd rather pay a little more and have more things included.

[lbjen]

I definitely think there will be changes like these to the loyalty programs, going by what I've read lately. Both of my main hotel loyalty programs have cut back in recent years on what is included, and put expiration dates on my points. It seems that more and more people are reaching the higher levels and the cruise lines are struggling to keep up with providing everything they're offering.

 

 

Sent from my iPhone using Tapatalk

[hubofhockey]

Paying a la carte will certainly turn me off as a cruiser. I'd rather pay a little more and have more things included.

 

I think that is where the industry is headed and it might be too late to turn the clock back. Based on empirical data, they understand that they will lure passengers in with low base prices and a la carte pricing if passengers want more. It is unfortunate that "more" includes things that used to be included. Of course, the hidden "thing" is just plain quality. That's a product of cruise lines cutting on the cost side, whether it's fewer room attendants, fewer wait staff, or even less live and more technology included in entertainment. It's disappointing when it becomes evident to us.

 

From a corporate standpoint, the marketing game of gross margins is more conservatively won with lower costs. It's sound business that eliminates upside risk of investing in quality only to have no return. Royal Caribbean seems to take on more risk in its approach and won with higher pricing on the mega ships that deliver an amped up level of entertainment at a higher price and also going to several pay for restaurants. It worked for them. There are people out there willing to pay more for a 7-day cruise in the Caribbean. Their Celebrity line devised of segmentations on the same ship with different classes of cabins/passengers. People are willing to pay for that. I am not sure that Carnival Corporation has been so bold. However, their business strategy, while disappointing to me (used to love Princess), is probably wise for them and pays off. I think that those of us who would pay more for quality might need to look around a little more to find what we're looking for because the standard base cruise experience that we took for granted is no longer standard on the mass market lines.

[BruceMuzz]

Quality costs money - plain and simple.

And it costs more than "a little bit extra".

 

Every day on my ship I hear people moaning about cutbacks and reduced services.

It's all true. We have made many cutbacks and reduced many services.

 

Why?

Because most people are unwilling or unable to pay for them.

 

When those same whiners and complainers tell me they would be happy to pay me more for a return to full services and amenities, I tell them that they do not have to wait. Just book a cruise on Crystal, Seabourn, SilverSea, Regent, Oceania, or Sea Dream tomorrow.

 

Their reply?

 

Those lines are too expensive.

 

If the cruising public was REALLY willing to pay more for quality, those small Crystal, Seabourn, Regent, Oceania, and Sea Dream ships would be chockablock full of passengers every cruise - with long waiting lists of people begging to get onboard.

 

Instead those ships are never even full.

The public votes with their wallets - not their mouths.

[wwcruisers]

Quality costs money - plain and simple.

And it costs more than "a little bit extra".

 

Every day on my ship I hear people moaning about cutbacks and reduced services.

It's all true. We have made many cutbacks and reduced many services.

 

Why?

Because most people are unwilling or unable to pay for them.

 

When those same whiners and complainers tell me they would be happy to pay me more for a return to full services and amenities, I tell them that they do not have to wait. Just book a cruise on Crystal, Seabourn, SilverSea, Regent, Oceania, or Sea Dream tomorrow.

 

Their reply?

 

Those lines are too expensive.

 

If the cruising public was REALLY willing to pay more for quality, those small Crystal, Seabourn, Regent, Oceania, and Sea Dream ships would be chockablock full of passengers every cruise - with long waiting lists of people begging to get onboard.

 

Instead those ships are never even full.

The public votes with their wallets - not their mouths.

 

Thanks for the insight, Bruce!:) It's always nice when you share a peek at your "insider's" crystal ball! ;) And, with X's rocketing Sky Suite prices, I've actually been tempted to look at Azamara and Oceana -- prices aren't much higher.

[maywell]

Quality costs money - plain and simple.

And it costs more than "a little bit extra".

 

Every day on my ship I hear people moaning about cutbacks and reduced services.

It's all true. We have made many cutbacks and reduced many services.

 

Why?

Because most people are unwilling or unable to pay for them.

 

When those same whiners and complainers tell me they would be happy to pay me more for a return to full services and amenities, I tell them that they do not have to wait. Just book a cruise on Crystal, Seabourn, SilverSea, Regent, Oceania, or Sea Dream tomorrow.

 

Their reply?

 

Those lines are too expensive.

 

If the cruising public was REALLY willing to pay more for quality, those small Crystal, Seabourn, Regent, Oceania, and Sea Dream ships would be chockablock full of passengers every cruise - with long waiting lists of people begging to get onboard.

 

Instead those ships are never even full.

The public votes with their wallets - not their mouths.

 

 

I must be one of the few that doesn't complain about the cutbacks as long as they have some complimentary options with the low fares. Heck, I just got a steal of the lifetime for myself for about $2027 for three 7 day b2b trips in 2016 for a studio room and look what's happening on NCL forums regarding the different policy changes that got instituted this year - with a la carte pricing / moves, there always going to be quality issue and/or cutback.

 

It truly comes down to does one wants: quality or quantity on their vacation - Quality now on the cruise ship is white-glove service at all times but you have to pay the high fare / service charges for it with all the bells & whistles. Or quantity, going as many days / trips as possible with as little service such as waited on in the MDR as possible and/or extras like alcoholic beverages. That what the things are looking like now especially for the mass market cruise lines like Carnival, NCL and Royal.

[hubofhockey]

Quality costs money - plain and simple.

And it costs more than "a little bit extra".

 

Every day on my ship I hear people moaning about cutbacks and reduced services.

It's all true. We have made many cutbacks and reduced many services.

 

Why?

Because most people are unwilling or unable to pay for them.

 

When those same whiners and complainers tell me they would be happy to pay me more for a return to full services and amenities, I tell them that they do not have to wait. Just book a cruise on Crystal, Seabourn, SilverSea, Regent, Oceania, or Sea Dream tomorrow.

 

Their reply?

 

Those lines are too expensive.

 

If the cruising public was REALLY willing to pay more for quality, those small Crystal, Seabourn, Regent, Oceania, and Sea Dream ships would be chockablock full of passengers every cruise - with long waiting lists of people begging to get onboard.

 

Instead those ships are never even full.

The public votes with their wallets - not their mouths.

 

My reply is to try something else. We're giving Azamara a shot next summer for an Adriatic cruise, but we'll also try Celebrity's aqua class a shot.

[cruisead]

It's very simple. People want low fares, so you're going to get lower quality. They can't have super low fares, especially with cabins like inside and ocean view and their very lope prices, and provide excellent food. Add to that the fact that cruise lines are also cutting the number of crew members contributes to much worse service as the crew are way overworked.

[CptSticky]

We can all only give our opinions as none of our crystal balls can be taken as guaranteed........

 

My guess ducklite's suggestion some cruise lines will merge to eliminate duplication of like product is highly possible. I suspect Princess and HAL (both sister companies under Carnival Corporation's umbrella) could be in the early start up stages of that happening.

 

I believe ships will become very much more a la carte. You want a hamburger, order and pay for it like in any restaurant. You want to see the show, the price of a ticket is whatever amount. Possibly the only included food might, at least initially, be the buffet. MDR's will become extinct and those spaces will be converted to small venues offering various dining choices.

 

I think two things are going to be critical in cruise lines' short term future: economy and specifically economic stability and growth in Asia. There is some talk China/Asia are new focus for bookings to a growing middle class....... IF that growth continues, if their economies continue to grow.

 

It seems to me unrealistic to not consider the state of world unrest and terrorism as not very pertinent to stability of leisure travel. The more hot spots, the more terrorism, the more fear and concern......the fewer travelers.

 

JMO ....

Good point. RCL's Jewel just skipped Puerto Vallarta due to a State Department warning. We have always wanted to see Egypt but it is off our list due to terrorism and instability along with most of the Middle East.

[sail7seas]

For what I pay for the Neptune suites we have always booked on HAL ships, I could easily have sailed Oceania, Silverseas, Azamarra, Seabourn. We chose to not but continued to sail HAL suites over 80+ cruises. More important to me than some of the creature comforts (over above the lovely suites we have always enjoyed) are the people. I made visits to some of the upper scale ships and the chemistry aboard just did not suit me. I took a strong objection to the cute little white aprons on black dresses the stewardesses wear (or at that time wore) on Silversea

 

The people, the crews of HAL are their strongest asset, IMO followed by the lovely design and decorating of their ships.

Edited May 9, 2015 by sail7seas

[Hlitner]

I think we all forgot another major economic factor which is that the cruise lines not only compete against each other but also have to compete against the land-based travel industry. Although many cruisers will still book a cruise, there are many of us who are more "travelers" then just "cruisers" and who are always looking at multiple options. For example with the Euro down significantly against the dollar this year, many "travelers" are opting for European land vacations versus cruises. And in the Caribbean market the cruise lines have to compete against the expansive All-Inclusive resort industry. We have done a lot of cruises (nearly 100) and also a few all-inclusives and enjoyed both.

 

Hank

[sail7seas]

We never forgot the comparisons between land based vacations vs cruises.

 

We very often priced out various types of vacations we were booking before making our choices. Sometimes a land resort suited us better (not usually because of price) or a city stay either foreign or domestic. Sometimes a stay at a fine hotel in NYC is in a league totally apart from any cruise on any ships.

 

No, many of 'don't forget' there are choices other than cruising. :)