Opinions mixed a year after cruise lines’ discounting shift

A year after several cruise lines began a concerted push to
curb deep discounting within 30 days of a cruise departure, travel agents said
the policy is a qualified success from their point of view: It has made
business more efficient, helped to mollify customers upset about paying higher
fares and, combined with value-added promotions, is stimulating business.

But others said the window for discounting has merely
shifted to five to eight weeks from sailing, and still others say the policy
does not keep them from having to continuously reprice tickets.

“It’s a step that doesn’t go far enough,” said Gene
Haemmerle, president of Travel Creations in Naples, Fla.

Royal Caribbean International was the first to formally say
it would stop selling cabins at deep discounts so close to sailing. Its
original strategy involved different cut-off dates for cruises of different
lengths.

In February, it simplified the policy to bar any new
discounts within 30 days of sailing.

Cruise lines have traditionally used deep discounts offered
through key retailers as a last-ditch way of filling ships that have empty
cabins as the departure date approaches.

“The biggest issue with that type of strategy is you are
upsetting people who have booked previously,” said Rob Clabbers, president of Q
Cruise + Travel, a Virtuoso agency in Chicago.

Although some lines are good about letting agents reprice
cruises not past final payment, Clabbers said that doesn’t help the travel
adviser or the cruise line itself. “You’re selling the same piece of business
twice, and for a lower amount,” he said.

Clabbers and others said that the impact of reducing
discounts is not so much that agents are making more commission on higher
fares; it’s that they don’t have to spend time and resources rebooking tickets.

“The biggest thing is that we can confidently make a sale
earlier in the sales process,” said Amy Hobbins, president of Journeys
Unlimited Travel, of Green Bay, Wis., “knowing that hopefully there’s not going
to be something further down [the road], where we’re going to have to price
match or reduce or whatever the case may be.”

Although it has improved pricing at Holiday Cruises
Tours in Arvada, Colo., agency owner Bud Smead said the primary economic
benefit is improved productivity.

“If you have to reprice everything two or three times, it
obviously affects the efficiency of how we run our business,” Smead said.

Laurie Hristov of Just Cruises Tours in Delray Beach,
Fla., said the policy has helped revenue, but the cruise lines in many cases
have moved their discounts to the period four to eight weeks from sailing.

“I explain to customers, ‘Don’t wait until there’s two weeks
left, because there’s no inventory.’ At that five-week point, they’re selling
it out at those reduced prices again,” Hristov said.

For some agents, the chronic repricing of cruises already
sold has been a factor in de-emphasizing cruise sales in favor of other travel
products. Haemmerle said he has not actively marketed cruises in about a year.

“When I have a customer who walks in my office [in June] and
they say to me they want to book a cruise on Feb. 9, I tell them to come see
me, if they want the best deal — let’s say in Royal Caribbean’s case — four to
eight weeks out, because from my own experience, that’s when the rates continue
to drop,” Haemmerle said.

He said eliminating discounts 30 days before sailing is a
step in the right direction but is not enough. More meaningful, he said, would
be a policy timed to final payment, 60 to 75 days before sailing, “so the 30
days with Royal Caribbean means nothing to me.”

Other contemporary lines, such as Carnival Cruise Line and
Norwegian Cruise Line, have reduced the amount of last-minute bookings, often
in tandem, by embracing a strategy of offering value-add amenities such as a
free beverage package.

“Value-add in general is a very, very good thing,” Hristov
said. “In sales, value-add is always very important. Norwegian’s really trying
to drive that point home, to sell the value. And it’s really there.”

But in March, Norwegian began offering a “Sail Away” fare
that strips out the value-add items and discounts the fare. Norwegian
executives said the new fares represented less than 10% of inventory and were
designed to be competitive for online travel agencies, where the savings from
value-add amenities are hard to convey.

Matthew Eichhorst, president of Expedia CruiseShipCenters,
said Norwegian probably got a little too aggressive in taking prices up.

“That person who is looking for contemporary, while you
don’t want price to be the only factor, price still is a factor in the
contemporary space,” Eichhorst said. “We saw a little bit of a reset over the
last quarter. They kind of tweaked their pricing, and they’re back in play and
doing well.”

Eichhorst said that in general, fewer last-minute discounts
are a “good thing for the distribution channel.”

Anthony Hamawy, president of Cruise.com, said he’s done
“very, very well” with fewer close-in discounts, but he also said that price
discounts should be one of the arrows that cruise lines keep at the ready.

“Different things move the needle at different times,”
Hamawy said. “As you get out of the family market, which is mid-August and
beyond, now you’re dealing with a larger segment of retirees. That segment of
the market is much more flexible than the family market. These guys are waiting
for deals. You’ll get them out of the condos when that price drops.”

Hamawy said using value-adds rather than discounts is a good
long-term strategy for several reasons, including that consumers get exposure
to the amenities they might not otherwise have picked for themselves.

“Having said that, in challenging times there is no better
way to move the needle than discounting,” Hamawy said. “No matter what product
you’re selling, if you lower the price, you’re more likely to sell more than if
you’re just throwing in an extra something. I don’t think it’s any different in
our industry by any means.”