What to do with the Art Galleries?

[Philip217]

I believe that the cruse lines enjoy substantial gross margin profit on shore excursions. While on a Carib. cruise we met some ex pats in St. VIncent who were very involved in the tourist/tour industry. They said, on average, the cruise ship companies pay 1/3 of the shorex cost to the tour operator with the balance sailing off into the sunset with the cruise ship. They said that there were a few exceptions to this but from his perspective the least that he had seen the cruise companies pocket was 50 percent on shorex's with a high third party content such as admission to a very popular, public venue. After speaking to them I understood why the private tours that we have taken have been so much better-far less crowded, longer tours, great guides, and usually at a considerably lower price. They also went into a lot of detail about just how much money the average cruise ship takes away on a stop. It starts with shoreex, but continures through to percentage of sales at 'recommended stores' as well a high flat monthly fee that is paid by recommended merchants to the cruise line.

 

iancal,

We are all free to believe whatever we want - or whatever we hear.

But in the retail business - be it supermarkets, department stores, hotels, or cruise ships - common sense normally prevails.

When a particular item or venue generates plenty of profit, it gets great placement and plenty of space.

If a particular item or venue does not generate a lot of profit, it gets pushed to the back or gets minimum space.

 

On the 27 cruise ships I have worked on, Shorex has made very little net profit. So we dedicate a minimal staff and minimal space to it. Salaries and perks for Shorex staff are at the lower end of the scale.

On those same ships, Art Auction has always been the top profit generator on the vessel. The Art Auctioneer gets whatever he wants, whenever he wants. He is the highest paid employee on the vessel and has whatever perks he wants.

 

I would never agree to allow the shorex team to take over a lounge or theatre if I needed it for something else.

The Art Auctioneer can have any space he wants - any time he wants it.

[Cinema15]

One needs to know the very important difference between a "huge money maker" and a "huge PROFIT maker".

Or one needs to be aware that cruise lines dedicate incredibly valuable onboard space based on PROFITS generated - not on revenues generated.

 

Although Shorex generates very high revenues every cruise, a very high percentage of those revenues are paid to the shore tour operators - in cash - the very same day you take the tour. All the major cruise lines have been forced by sue-happy passengers to carry enormous liability insurance packages for shore excursions. This insurance is quite expensive. It eats up much of what is not already paid to the operators.

 

Art Auction is a different story. Cruise lines receive a very high percentage of the price of a piece of art sold on their ships. Any liability is carried by the Art Auction company.

It's nearly all profit.

 

The question was what to do with this now empty space. Since Park West was no longer using the space my suggestion was to give more room to the shore excursion dept. Of course if the cruiseline wants to get involved with another bunch of crooks disguised as art auctions then so be it. Yes it's nearly "all profit" and so is robbing a bank!

[Travelight]

Maritime history books, art work, and reproductions would probably be a big hit with cruisers. It would be nice to have a full range in prices from inexpensive posters to beautifully framed prints. Sounds like a good idea to us! :)

 

A maritime museum type area would also be extremely interesting with all sorts of artifacts.

[docksider21]

Since the art auction are destined to remain with us, now under the

guidance of P-F-A-G, perhaps HAL could allocate some

shops' space to an art area with HAL reproductions, posters,

objet d'art, and the like.

[iancal]

Philip217....do not know what you mean by saying the that the 26 cruises you were on made very little net on shorex. Just finished watching CNBC Cruise Inc. According to them, shorex is the number 3 moneymaker (i assume after casino and bar) on cruise lines. They also said on average 40-50 percent of the sale price goes to the operator-the balance the the cruise line.

[m steve]

When I go to an art gallery or auction, I don't expect them to provide me with food, pools or transportation. Same when I go to the dentist for a tooth whitening.

[Philip217]

Philip217....do not know what you mean by saying the that the 26 cruises you were on made very little net on shorex. Just finished watching CNBC Cruise Inc. According to them, shorex is the number 3 moneymaker (i assume after casino and bar) on cruise lines. They also said on average 40-50 percent of the sale price goes to the operator-the balance the the cruise line.

 

Sorry. Not 26 CRUISES, but 27 SHIPS. I have been on nearly 1,400 cruises in my career.

You need to re-read your own post. Shorex is generally the #3 MONEYMAKER on a cruise ship. But it is not the #3 PROFITMAKER on a cruise ship.

 

Yes, approximately 50% of your shore tour cost goes back to the shore operator. Some areas and countries - like Hawaii and most of Europe - the cruise lines are paying closer to 70% back to the operators. Then the cruise line pays millions to the insurance companies to cover the massive liability insurance they need to carry when you sue them because you stubbed your toe while on tour.

Depending on the cruise line, they carry between $2Million and $5Million liability coverage per person, per tour.

 

If they were insuring you while on tour in Ohio, the cost would not be so bad. But when they purchase coverage for your tour in a 3rd world country, the rates are pretty scary.

 

The average breakdown on REVENUES on a cruise ship, largest to smallest are:

1. Passage

2. Art (until the recent financial downturn)

3. Shorex

4. Boutiques

5. Bars

6. Spa

7. Casino

8. Photos

 

Over the past year, Art has dropped to around #7 on REVENUE

 

The average breakdown on PROFITS on a cruise ship, largest to smallest are:

1. Art (until the recent financial downturn)

2. Bars

3. Boutiques

4. Spa

5. Casino

6. Shorex

7. Photos

8. Passage

 

Over the past year Art has dropped to around #5 or #6 on PROFIT.

[okcfuncruiser]

Haven't been on Princess in years.

 

Tell us more about their "Fine Art Gallery" -- is it just another art gallery run by a different company doing the same thing as Park West?

 

The fine art gallery is totally owned by princess. and is a fun time.

[hammybee]

 

I have been on nearly 1,400 cruises in my career.

 

 

Oh sure, like this makes you an expert, on such matters. ;):D

[jhannah]

I like the idea of signed lithographs of Captain Card's works. Various sizes/prices. I'd also suggest they offer Delft ware. HAL could commission the Delft factory to produce a variety of items featuring traditional Dutch scenes and notable events in HAL's history. These pieces would be unique to HAL, and only available on their ships. This would also promote their brand, as nothing is more Dutch (except maybe cheese and chocolate. Hey, they could offer that, too!)

[Taxguy77]

and they could have it decorated with HAL posters and art that the bartenders could take orders for and they could be shipped to you or delivered the last day like the DF liquor. Or expand the liquor dept from the shops.

 

Combining two good ideas!:cool:

[RedmondCruiser]

Sorry. Not 26 CRUISES, but 27 SHIPS. I have

The average breakdown on REVENUES on a cruise ship, largest to smallest are:

1. Passage

2. Art (until the recent financial downturn)

3. Shorex

4. Boutiques

5. Bars

6. Spa

7. Casino

8. Photos

 

Philip217 --- As someone in the industry and one who seems to have to pulse of the cruise lines, what is your feelings as to the likely effect that the economic downturn will have on the industry. We all see cutting back and lower prices, much as after 2001, but this downturn looks more drastic. Could we see ships layed up ? With the debt load that RCI has could we see a bancrupcy at some time ? I know that this is all conjecture but what are the feelings, behind the scene.

[Philip217]

Redmond,

 

You ask a very difficult question.

Please note that if I really had all the answers, I would be earning far more than I currently am.

 

The answer(s) (as I understand them) are rather complex.

 

Despite all the hype going around, some cruise lines are doing pretty well. We learned some very valuable lessons after 9-11. Those lines that remembered those times and have planned accordingly will see slightly lower overall profits (somewhere between 7% and 15%) in 2009, possibly extending into 2010, depending on the speed of the anticipated recovery. Three major factors will determine where exactly between the 7% and 15% we will fall:

1. Fuel costs rising and/or falling

2. How deeply we must discount to keep the ships full

3. Fluctuating exchange relationship between the US Dollar and the Euro

 

Unfortunately the cruise lines can control only item #2.

We are at the mercy of the other two factors.

 

Some other cruise lines are not doing so well. A few decided to play mortgage games similar to the ones played by many middle Americans who are now in serious trouble. They over-extended themselves, gambling that increasing revenues would keep pace with - or stay ahead of - their increasing debt load. It didn't work out very well. RCCL is the best example of that right now.

 

Laying up ships is a very complex issue. Smaller ships are not so much a problem. But there aren't so many smaller ships left today.

Laying up a large vessel is potentially more costly than keeping it in service with low occupancy, operating at a loss. NCL is the best example of that conundrum right now.

 

After distilling all the "inside gossip", a few things are relatively clear:

1. We will not be seeing very many new build contracts signed over the next 24 months.

2. All the major players will be discounting to various degrees (similar to 9/11) for at least 12 more months, and quite possibly longer.

3. A few major cruise lines are definitely in "survival mode", with major cut-backs aimed at keeping them alive.

4. More lines are quite healthy and ready to ride out the financial storm. They will continually get more creative with marketing and services, keeping their ships filled and earning slightly lower profits than they saw in the past few years. It will essentially be business as usual, but with decreased fares, increased service levels, and slightly lower profits.

5. Repeat cruisers will become more important. First time cruisers with mortgage problems will be increasingly rare. The cruise lines will work harder to retain past cruisers who already recognize cruising as a great value for the money.

 

Other issues are still very cloudy:

1. Will one or more major cruise lines fail or be dismantled? Possibly one. The vessels from that line will be snapped up by the healthier competitors, giving them more time to delay contracting for any newbuilds.

2. Will any European shipyards fail? Possibly two. This could have a negative effect on the price of newbuilds a few years down the road.

3. How long will the necessary discounting and lower onboard revenues continue? As long as it has to.

[bepsf]

4. More lines are quite healthy and ready to ride out the financial storm. They will continually get more creative with marketing and services, keeping their ships filled and earning slightly lower profits than they saw in the past few years. It will essentially be business as usual, but with decreased fares, increased service levels, and slightly lower profits...

 

You bring up some good points, and I agree with you on most of them - particularly the comparative costs of mothballing a ship vs. operating at lower capacity...

 

...but you foresee increased service levels? How so - from the lines holding prices and finally scrapping the concept of loading up cabins w/ last-minute discount buyers who don't spend money onboard?

[DFD1]

Thanks, Phillip, for your interesting and informed post. I disagree with all the hand wringing around here about how cruising is going to hell in a handbasket because of the economic situation.

 

What is actually happening are wonderful values for those who can take advantage of them, with the cruise lines trying hard to maintain a passerger load factor and a level of service which will allow them to weather this storm.

 

Prices on almost all HAL cruises are at remarkably low levels. There are some great values right now. HAL needs our support in this difficult environment.

 

I, for one, will cruise as much as I can while the prices are lower because it benefits both me and HAL, and if the service level changes a bit, so what!

 

I hope others will do the same.

[m steve]

It looks like we will see fewer car brands in the near future. Probably Pontiac and Buick will be gone. It seems like Carnival Corp have too many ships and lines that overlap and they compete with themselves for the same passengers. We like HAL for the cabin size and quiet atmosphere. Having sailed on Carnival and HAL we don't understand why the Princess cabins are smaller at the same or higher cost. No experience with Costa. Maybe they should drop a few lines and reconfigure the ships to make them more desirable, especially the balcony cabins. They could also try innovative cruises like all inclusive, spa cruises, name entertainment (like the gay cruises offer at a higher price) or land tours. Prices would reflect the added ammeties.

[RedmondCruiser]

Philip217 - Thanks for an in depth and insightful view of the economic problems. Look forward to your future posts.

[Philip217]

You bring up some good points, and I agree with you on most of them - particularly the comparative costs of mothballing a ship vs. operating at lower capacity...

 

...but you foresee increased service levels? How so - from the lines holding prices and finally scrapping the concept of loading up cabins w/ last-minute discount buyers who don't spend money onboard?

 

Brian,

This increase in service will not happen on all the lines.

In these tough times, some cruise lines have opted to pursue and market to the first time cruiser who is about to lose his house and his job.

Assuming that they are successful in convincing him to book a cruise he cannot afford, no amount of service onboard will convince him to spend money he does not have, nor will it convince him to come back again after he loses his house and job.

 

Several of the lines have realized that the currently most desirable cruise passenger is someone who has cruised already and realizes how great a value cruising can be, despite any economic turmoil. As cruising becomes more and more a buyer's market (for the first time since 9/11), savvy cruisers will identify the lines that are slashing everything just to survive. They will also identify the lines who are willing to increase and enhance their product - despite the economic conditions - in order to coax those frequent cruisers back again and again.

 

If you want to know who those cruise lines are, look at their Frequent Cruiser Programs and their Future Cruise Sales Programs. Who is offering more and who is cutting back.

 

The ones biting the bullet and enhancing the current product, perks, and services are going to be the winners when the dust settles.

[skippyy]

I definately would not want the space used for an upscale gallery to

include a topless bar for cigar smokers that hosts a happy hour from

6:00 a.m. to 5:59 a.m. with numerous t.v.'s tuned to sport shows...

add a few of your own ideas ?:eek: