Posted on April 2, 2005 - by Ralph Grizzle
Full Sale Ahead
Last year in this space, our article was headlined “Tsunami!” The story focused on Wave Season, the first-quarter period of intensified North America cruise sales and marketing efforts. This year, the word tsunami has a bitter ring, as it conjures memories of the tragedy that struck so many nations bordering the sea in late December.
Its immediate concerns being those affected by the natural disaster, the cruise industry contributed to relief efforts and pitched in where possible. The cruise industry itself was affected by the tsunami, with some ships having to cancel itineraries. Cruise piers and docks in Sri Lanka were damaged so badly that the future of cruise tourism in that country appeared uncertain.
Our use of the word tsunami last year was meant to emphasize the colossal surge in cruise bookings. We would not use the word this year, and in fact, it would not properly characterize the current market trend.
Wave has been strong, but, say some, not quite as strong as the previous year, 2003. “Bookings are strong, way up from 2003, but not quite as strong as 2004,” says Phil Swartz, owner of Cruise Holidays in Tallahassee. “Profit margins are holding strong, however, slightly up from 2004.”
Profits during the Wave period likely are up for many cruise sellers, primarily for two reasons: Cruise fares are about 15 percent to 20 percent higher than they were last year during the same period, with vessels sailing at capacity (even so, Carnival President and CEO Bob Dickinson maintains that even with the increased pricing, cruises are still underpriced).
Also, at least a couple cruise lines put the quash on rebating, which initially meant a level playing field for agents. “The no-rebating policy that Royal Caribbean instituted in August of last year has stabilized the price picture,” says Ove Nordqvist, of South Beach Cruises in Miami Beach. “Not only have we been selling Royal Caribbean and Celebrity with no rebate, but there was also a marked decrease in in the marketplace of commission-based rebating during the fall and into this year.”
Lately, however, large cruise sellers have come up with creative ways to circumvent the cruise line policies against rebating. Travelocity.com, for example, was offering cruise consumers who book at its site gift cards to large U.S.-based Target stores, with up to $600 value, plus a $100 bonus for using Mastercard. So while cruise sellers can no longer rebate commissions for some cruise lines, they can apparently give away color TVS, clothing, groceries or anything else sold by Target and other stores.
Agents were challenged by the fact that coming into Wave quite a lot of inventory appeared to be booked for 2005. But this could have been little more than the cruise lines saber-rattling. Cruise lines responded that there was still space in Europe, and agents appeared to respond accordingly. “Europe has been selling early like never before,” Nordqvist says.
Many cruise lines emphasized — and continue to emphasize — that Europe this year is a better value on ships than on land-based tours. A recent Windstar Cruises press release reads: “With the US dollar versus the euro, Americans traveling on land-based vacations are spending considerably more to visit Europe these days. A better option for exploring Europe is to sail aboard Windstar Cruises . . . ” (clutching Target store gift cards, no doubt).
Sales in the luxury sector have been riding a cresting wave. Crystal Cruises reported that for the week ending January 10, call volume was up 45 percent over 2004 and bookings were up 62 percent over last year. Even world cruises are prospering. At Crystal’s Century City, California headquarters, Bill Smith, senior vice president of sales and marketing, told us that world cruise bookings on Crystal were running 60 percent ahead of last year. Indicating that the world cruise market is attracting newcomers, Smith said 26 people who had never cruised on Crystal before booked a world cruise this year.
As in past years, Wave is extending into early April. “Wave used run from about mid-January through mid-February,” Nordqvist says. “It was absolutely crazy for three to four weeks. We have seen a gradual change to a longer and longer period, with much less of a peak. To some extent I believe this has to do with relatively less inventory in the Caribbean market compared to other markets. The Caribbean market – and Mexican Riviera – created the peak in January, when cruise lines always sold out their remaining winter inventory. Add that to sales for other cruise regions for sailings throughout the year, and we had a Wave.
“The past couple of years the Caribbean market has not had the same effect, because of healthier advance bookings for the winter season,” he adds. “This year the warm weather across the U.S. winter also meant that remaining inventory has been sold over a longer period. There were no snowstorms in January to make the phones go crazy.”
Nordqvist adds that sales for the short cruise market, 3 to 5 days, has been slower than last year. Of course, no one complains about cruisers opting for longer cruises — including world cruises — or about a protracted Wave extending well into the spring. Sales are healthy, the industry appears poised to raise rates and perhaps add inventory. All in all, this year’ wave has been smooth sailing — make that, smooth “selling.”
