Will the 2022 Recession affect Royal cruise fares?

[DrSea]

Royal is one of my favorite lines as I really enjoy the flow rider. With the US technically being in a recession with 2 quarters of negative GPD growth, how do you think this will affect cruise fares? Do you think bookings will be affected at all due to pent up demand from the COVID shut down?

 

I am not an economist. I just am always on the lookout for good bargains. Thoughts?

[smokeybandit]

Unlikely. 

[Biker19]

36 minutes ago, DrSea said:

Thoughts?

Follow the Going, Going, Gone thread.

[irishgal432]

Lots of good deals on a lot of non suites, especially for senior and resident discounts.  

[robsmom]

If you lookat todays data, yes GDP is down, but so was unemployment.  The 2 quarter GDP decline is one measure of recession, but most economists also say a recessions includes increased unemployment.   That said, with the rise of interest rates the fed is trying to cause a small recession and we arelikely headed to a recession of some sort.  Hopefully small.   Within the data, demand is still up for travel and services had GDP growth while hard goods declined.   There is still pent up demand from Covid and the US households have good balance sheets.   I don’t think you will see prices decline anytime soon.   JMO

[twangster]

Only time will tell.

[rudeney]

2 minutes ago, robsmom said:

If you lookat todays data, yes GDP is down, but so was unemployment.  The 2 quarter GDP decline is one measure of recession, but most economists also say a recessions includes increased unemployment.   That said, with the rise of interest rates the fed is trying to cause a small recession and we arelikely headed to a recession of some sort.  Hopefully small.   Within the data, demand is still up for travel and services had GDP growth while hard goods declined.   There is still pent up demand from Covid and the US households have good balance sheets.   I don’t think you will see prices decline anytime soon.   JMO

 

The definition of a recession is two contiguous quarters of a decline in GDP.  Any exceptions or conditions anyone tries to put on that is just an attempt to redefine the term, although other economic factors could help (or hurt) how a recession affects us.  Low unemployment was not the result of newly-created jobs (which would be good for the economy), but is the result of pandemic lockdowns and "relief money", which is bad for the economy. 

 

Consumer debt dropped some during the pandemic, but it is quickly on its way back to record highs, and higher interest rates are going to hurt - badly.  Unfortunately, The Fed has no choice but to raise interest rates.  It's the only way to make money more valuable, and right now, inflation nearing double-digit rates is our biggest economic challenge.  Yes, it's like turning a water hose on in your house to put out a fire - it's going to make a mess that will take time and effort to clean up, but it's better than letting the whole house burn down.   

 

In terms of cruise fares, I believe that for the next year, not much will change since they are still riding the wave of pent-up demand with the slow return to "normalcy".  I expect that demand for the most and least expensive cabins will remain high, but the "middle" will suffer - i.e. balcony rooms, JS, etc.  As is usual, most people who can afford suites and other expensive vacations tend to be less affected by economic changes, whereas the people booking mid-class cabins will downgrade to the cheapest options just to have the opportunity to sail.  I can see demand for the UDP , The Key, and some ShorEx waning.  Liquor sales and the DBP will likely not change much - people gotta have their booze.  We'll see more last-minute bookings, which may result in more sales to fill cabins. 

 

Basically, RCCL better enjoy what they have now because it's probably going to get worse, but still not as bad as the shutdowns. 

[ONECRUISER]

1 hour ago, DrSea said:

Royal is one of my favorite lines as I really enjoy the flow rider. With the US technically being in a recession with 2 quarters of negative GPD growth, how do you think this will affect cruise fares? Do you think bookings will be affected at all due to pent up demand from the COVID shut down?

 

I am not an economist. I just am always on the lookout for good bargains. Thoughts?

Only time seen Prices since the 80's dropped related to economy is Post 9/11 for about a yr and during Covid. Not going see any lower then has been last 2yrs

Edited July 28, 2022 by ONECRUISER

[robsmom]

12 minutes ago, rudeney said:

 

The definition of a recession is two contiguous quarters of a decline in GDP.  Any exceptions or conditions anyone tries to put on that is just an attempt to redefine the term, although other economic factors could help (or hurt) how a recession affects us.  Low unemployment was not the result of newly-created jobs (which would be good for the economy), but is the result of pandemic lockdowns and "relief money", which is bad for the economy. 

 

Consumer debt dropped some during the pandemic, but it is quickly on its way back to record highs, and higher interest rates are going to hurt - badly.  Unfortunately, The Fed has no choice but to raise interest rates.  It's the only way to make money more valuable, and right now, inflation nearing double-digit rates is our biggest economic challenge.  Yes, it's like turning a water hose on in your house to put out a fire - it's going to make a mess that will take time and effort to clean up, but it's better than letting the whole house burn down.   

 

In terms of cruise fares, I believe that for the next year, not much will change since they are still riding the wave of pent-up demand with the slow return to "normalcy".  I expect that demand for the most and least expensive cabins will remain high, but the "middle" will suffer - i.e. balcony rooms, JS, etc.  As is usual, most people who can afford suites and other expensive vacations tend to be less affected by economic changes, whereas the people booking mid-class cabins will downgrade to the cheapest options just to have the opportunity to sail.  I can see demand for the UDP , The Key, and some ShorEx waning.  Liquor sales and the DBP will likely not change much - people gotta have their booze.  We'll see more last-minute bookings, which may result in more sales to fill cabins. 

 

Basically, RCCL better enjoy what they have now because it's probably going to get worse, but still not as bad as the shutdowns. 

 I don’t want to argue the “official” definition of recession, because it has become a political debate today and I am not viewing it politically.   I do have a degree in Economics.    It doesn’t change the answer that we both gave in that right now there is still demand for cruising, but if we move into (or are already in) a prolonged recession that will change.    To modify the famous quote:  What is the difference between a recession and a depression? In a recession your neighbor can not afford to cruise,  in a depression you can not afford to cruise! 

[rudeney]

24 minutes ago, robsmom said:

 I don’t want to argue the “official” definition of recession, because it has become a political debate today and I am not viewing it politically.   I do have a degree in Economics.    It doesn’t change the answer that we both gave in that right now there is still demand for cruising, but if we move into (or are already in) a prolonged recession that will change.    To modify the famous quote:  What is the difference between a recession and a depression? In a recession your neighbor can not afford to cruise,  in a depression you can not afford to cruise! 

 

I also have a degree in economics (E&S) with a dual in Management.  I worked more on the statistical side, but then settled into tech management. The definition of a recession is what it is and we are in one due to the GDP numbers of the last two quarters.  The question is how bad will it be?   It might not be so bad because reduced spending might help with inflation. 

 

My hope for the cruise industry is that the bookings they have into the next year will carry them through this recession.  If not, I could see them doing something like they did with CWC to entice uncertain customers into cruises.  I am not sure what that would be, but companies can be quite creative when they are fighting to survive.  If they throw something out there, I'll bite!  And I do like your recession/depression analogy!  

[bucfan2]

1 hour ago, robsmom said:

 I don’t want to argue the “official” definition of recession

Oh good, because it’s already defined.

[Another_Critic]

24 minutes ago, rudeney said:

If they throw something out there, I'll bite!  

A repeat of double points + no single supplement works for me.  🙂

[John Reid]

I'm  not an economist, but I played one on TV. And last night I stayed at a Holiday Inn Express!

[hotsauce126]

0 to almost 0 effect

[John&LaLa]

18 minutes ago, hotsauce126 said:

0 to almost 0 effect

 

Earnings call said prices are trending upwards

[Vera/Lee]

Higher interest rates could help some people.

[neverbeenhere]

Prices will be lower on the cruises we can't sail and prices will be higher on the one we can sail.

Reality 101.

[topnole]

1 hour ago, rudeney said:

 

I also have a degree in economics (E&S) with a dual in Management.  I worked more on the statistical side, but then settled into tech management. The definition of a recession is what it is and we are in one due to the GDP numbers of the last two quarters.  The question is how bad will it be?   It might not be so bad because reduced spending might help with inflation. 

 

My hope for the cruise industry is that the bookings they have into the next year will carry them through this recession.  If not, I could see them doing something like they did with CWC to entice uncertain customers into cruises.  I am not sure what that would be, but companies can be quite creative when they are fighting to survive.  If they throw something out there, I'll bite!  And I do like your recession/depression analogy!  

Exactly.   Why is this political all of a sudden?   It is what it is.  It is not political in any way to say we are in a recession.   How long and how deep will be the main factor for the future.  But if inflation remains, hard to see fares going down much.  They are already very cheap.  Although maybe they go lower and why they nickel and dime everyone in more ways to hide the price increase.  

[Wineaux007]

All your best cruise deals/prices will depend upon supply and demand.  Econ 101  😉

[John&LaLa]

3 hours ago, neverbeenhere said:

Prices will be lower on the cruises we can't sail and prices will be higher on the one we can sail.

Reality 101.

 

I thought prices were lower when airfare was higher

[LMaxwell]

Royal will do what they need to do to keep revenue and cash flow going. If discretionary spending and demand starts to dry up, prices will adjust downwards. It's a bit "rose tinted lenses" to claim a recession will have 0 impact on the cruise industry.  Discretionary is always the first sector to take a hit in an economic downturn, but pent up demand has been high. 

[Lane Hog]

9 hours ago, rudeney said:

 

Low unemployment was not the result of newly-created jobs (which would be good for the economy), but is the result of pandemic lockdowns and "relief money", which is bad for the economy. 

 

Yeah, everyone's focused on "low unemployment" as though it's a positive sign, yet ignoring the fact that the number of working age people who've left the workforce get dropped from the equation, or those working lower paying jobs because that's all they can find in their area.  I know people who can't afford to drive the 40+ miles they used to drive anymore, and are working lower paying jobs closer to home  simply because of the price of gas... 

When you include working age people who've stopped looking for work (U5), the actual unemployment rate winds up almost a point higher at 4.5% vs the 3.6% that's advertised (U3).

Throw in under-employed (U6), and the actual unemployment rate right now is almost double what gets discussed... 6.7% vs. 3.6%.

There's also the fact wages aren't keeping up with inflation... People who don't already own their own home and/or have low expenses don't have much of a choice but to hold down a job.  
 

Edited July 29, 2022 by Lane Hog

[DrSea]

With Royal raising 900 million, I think Royal will be cutting fare prices in order to get customers onboard to spend. I think it's only a matter of time

Edited August 2, 2022 by DrSea