HOW THE GAME IS PLAYED:
THE SALES COUNTDOWN
CRUISE LINES WORK WELL IN ADVANCE to schedule cruises and develop promotional brochures. It is essential to roll out marketing campaigns quickly to avoid “fire sales” as sailing dates near. Most itineraries and dates are announced 10 to 18 months in advance. Particularly attractive dates on popular ships and itineraries sell out quickly. Likewise, cruises to seasonal destinations like Alaska fill fast. The highest- and lowest-priced cabins sell out first. Usually the last cruises to fill are low- and shoulder-season cruises to yearround areas. Many consumers used to wait for last-minute discounts available when cruise lines hit the panic button. The lines finally wised up, reasoning that early-booking discounts could generate cash flow and indicate sales prospects for each cruise. Although some distress selling continues, cruise lines are learning to control the inventory more efficiently.
Breakthrough Pricing
Pioneered by Brian Rice, Royal Caribbean’s chief financial officer, breakthrough pricing seeks through the analysis of many variables (season, weather, price- sensitivity data, competitive pressures, and the like) to determine a minimum floor price for each type of cabin on a particular sailing month before the sailing date. The floor price is theoretically the lowest price to be offered for a particular cruise and is predicated to stimulate early demand and cash flow in the form of deposits. If the ship fills according to expectations, demand for the sailing will increase as the number of available cabins decreases as they’re sold. This puts the cruise line in a position to raise fares for passengers who book later rather than earlier. As it’s communicated to the public, the cruise line is essentially saying that you’ll get a better deal by buying now than if you wait. Therefore, a consumer who books a November cruise in the preceding April would pay less than a passenger who books in June. That passenger, in turn, would pay less than someone booking in August, and so on.
This strategy allows the line and the travel agent to tell the customer that “this cruise will not be cheaper than today.” The line can maintain the discounted rate if the ship is filling slowly, or raise it incrementally as the cruise approaches being sold out. Identifying the pricing model is useful, because then it’s easier to understand what the cruise line does to nudge the ship to capacity. In practice, cruise lines operate two pricing systems. Primary is breakthrough pricing. If the cruise sells to near capacity, only that model will be employed. If sales lag behind expectations, however, the line goes to its separate and collateral model: the special-situations system.
Special-Situations System
Special-situations initiatives—usually time-limited and tightly targeted efforts for boosting sales—run concurrently with, and independently of, the escalating base-rate system. Examples of such initiatives include a deeply discounted senior citizen’s rate, a direct mailing to previous customers offering a big discount, a regional campaign, advertising last-minute bargains on the Internet, or a heavily discounted group-sales overture to a large company for their executives or employees.
Each special-situation initiative targets a carefully selected market segment. Initiatives may run sequentially or concurrently but usually are short-lived and end when the cruise sells out. What is really important about special-situation initiatives is that the price offered might be less than the breakthrough pricing minimum floor. If you can locate such an initiative, you may have found the lowest possible fare. If the special is advertised in Atlanta and you live in Buffalo, the package’s air component will be useless to you. However, if you can buy the cruise-only part of the special and arrange affordable airfare from Atlanta, you’ve got a deal.
A common special-situations approach is for the cruise line to join forces with specific travel agents or Internet sellers. Like travel agents who have preferred suppliers, cruise lines have preferred retailers. When a cruise is not selling to expectations, some lines have policies permitting them to enlist favorite big-volume agencies to help move the remaining cabins; other lines’ policies may prohibit this, in an effort to give all retailers equal opportunities for sales. When this tactic is used, it develops promotions with these agents featuring extra-deep discounts and special incentives, such as cabin upgrades or discounted air add-ons. Many preferred agencies and Web sites sell cruises only and field hundreds of calls daily. If they have an especially juicy deal to offer, they can sell lots of cabins fast. Big-volume, cruise-only agencies advertise in magazines, including Cruise Travel, Travel & Leisure, Frommer’s Budget Travel, and Condé Nast Traveler, and in large-market newspapers.
The Dump Zone
In the cruise marketplace, anything can happen. Sometimes, lines expert in special-situations initiatives don’t fill their cruises. The upshot is that a goodly number of empty cabins may be sold at distress prices during the final eight weeks before sailing, especially in the off-season. When time is short, agents and cruise lines know it is much easier and less complicated to sell a cruise to someone who doesn’t require air transportation to the port. Florida is a huge market for latebreaking deals because of its large population of retirees and its proximity to ports. Major ports on the Pacific Coast and Northeast likewise enjoy distress sales. If you live within easy driving distance of a major cruise-ship port, you live in a dump zone. You are well situated to benefit from last-minute discounts, but you probably will have no choice in cabin selection or dining-room seatings.
Discount Alphabet Soup
Before you shop for discounts, pick the cruise type that appeals to you. Once you start looking, don’t get sidetracked by price alone. Instead, stay doggedly on the trail of the cruise that meets your needs and will satisfy and exceed your vacation expectations. Never equate cheapest with best, but don’t equate it with worst, either. More than a dozen types of cruise discounts are commonly offered, other than seasonal discounts. As you encounter them, be aware that catchy marketing come-ons, like “two-for-one” or “sail three days free,” aren’t always what they seem. For example, a promotion advertising 50% off the second person in the cabin (a frequent gimmick) is nothing more than 25% off for both (you probably could have done better with an early-booking discount). The best method for comparing rates, with or without discounts, is to calculate the per diem (cost per day) of your cruise vacation. Add the cruise cost and the airfare cost if it isn’t included, plus taxes, port charges, and other applicable fees (transfers, etc.). Divide the total by the number of nights you will stay on the ship or in hotels included in the package.
Always compare apples to apples. Some cruising areas are more expensive. For example, Caribbean cruises should be compared with Caribbean cruises, not with Alaskan or Mediterranean cruises. Remember also that cruise lines are not created equal. Comparing a seven-day Carnival (Holiday Inn–type) cruise with a seven-day Silversea (Ritz-Carlton–type) cruise is meaningless. The cruise line profiles in Part Two will describe the differences.
Early-Booking Discounts
The more common of two kinds of early-booking discounts, the breakthrough pricing model, was described earlier. Minimum floor rates are capacity-controlled and can be withdrawn or escalated without notice. Most of the major lines employ capacity-control pricing. A similar type of early-booking discount is the flat cutoff date. If you book before the specified date, you get the discount. This, too, is common practice on selected itineraries. Passengers who pay in full by a specified date (as much as six to nine months before the cruise) receive a 10–20% discount. This discount is popular with Crystal, Silversea, and others in the luxury market.
Free Days
Passengers are offered 7 days’ cruising for the price of 6, or 12 for the price of 10. Variations include complimentary days (with hotel) in the port city before and/or after the cruise, or “book a seven-day cruise and receive a free two- or three-day land package.” Divide the double occupancy price by the number of days in the package to get a per-diem cost for comparative purposes.
Two-for-One and Second Passenger Cruises Free
The deal is that two passengers cruise for the price of one, but some tricky math is involved. Pick your cruise and cabin category and find the double-occupancy price per person, air included, on the brochure’s rate chart. The twofor- one price is this rate less the cruise line’s air cost for one person from your gateway city. Let’s say the brochure’s air-inclusive doubleoccupancy rate is $2,000. If the brochure does not give it, ask your travel agent to call the cruise line to learn the round-trip airfare cost from your gateway city. This amount is subtracted from $2,000, and the remainder is your cruise-only cost for two persons. You must then make your own air arrangements or buy airfare from the cruise line as an add-on. Celebrity, Oceania, Princess, Costa, and Holland America are among the lines frequently offering two-for-one promotional fares. These fares work well if you can travel to and from the port on frequent-flier miles or by car. If you have to pay for air, however, comparative math might demonstrate that a discounted air/sea package is a better deal. Two-for-one offers come and go with supply and demand. It’s difficult to keep up with them. They also might pop up on short notice. Such fire-sale fares aim to boost short-term sales and can be withdrawn at any time.
Flat Rates
This is an early-booking program in which every cabin in the ship, except probably the luxury accommodations, is sold for the same flat rates (one for inside cabins and one for outside cabins) on a firstcome, first-served basis. The earlier you book, the nicer your cabin. Flat rates are usually cruise only, but airfare may be purchased as an add-on. Flat rates are frequently offered by Princess, Crystal, and Norwegian Cruise Lines.
X Percent Off Second Passenger in a Cabin
In this very common discount offered by many cruise lines: The first passenger pays the double-occupancy brochure rate and the second passenger gets 40% to 70% off. Some simple averaging demonstrates that this works out to a discount of 20% to 35% per passenger.
Reduced Rate Air Add-ons
If you purchase airfare from the cruise line separately (as opposed to included in the cruise price), that is an air add-on. Sometimes cruise lines will couple a discounted cruise-only rate (no airfare) with a very attractive air add-on. This usually occurs when the cruise line is able to negotiate an exceptionally good bulk airfare purchase with an airline from a specific gateway city. In essence, the cruise line is passing some of their savings along to the consumer. Typically, this kind of deal applies only to specific cities and is offered only for a short time. It often results from an airline’s slow sales and its need to stimulate air travel from a particular area, as opposed to being a cruise-line initiative.
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Normally, two-for-one fares are offered far in advance, with a cutoff date to secure early bookings.
Senior Citizen Discounts
Because seniors have traditionally been the backbone of the cruise market, they are often one of the first groups targeted for a discount program if a line is having difficulty filling a cruise. Usually the discount requires that one person sharing the cabin must be at least 55 years old. The discount size varies, as does the inclusion of airfare. Also, Carnival and some other cruise lines have year-round discounts for members of AARP, the American Association of Retired Persons. Kids or Third/Fourth Passengers Go Free or at Reduced Rate This discount is fairly common for lines like Carnival, Disney, and Celebrity that target families and younger cruisers. Third and fourth persons or children sharing a cabin cruise free or at a substantial discount. Airfare for the third/fourth person or children is usually not included. Third-fourth-person rates are generally part of a cruise line’s basic rate structure (rather than promotional fares). They normally appear in the cruise line’s brochure and are applicable year-round. Their promotional use might come into play seasonally by being reduced or waived altogether, perhaps in summer to stimulate family travel or in the shoulder season to stimulate first-timers to buy a cruise when three or four friends can share the cost.
Back-to-Back or Contiguous Segments Discounts
The seven-day cruise is the most popular product offered by any cruise line, as it suits the vast majority of people in terms of time and cost. However, there are people who have both the time and means for longer cruises. To satisfy both groups, the cruise lines have several choices. They may break longer cruises into seven-day segments, enabling a passenger to board in one port and depart from another. Or, they may offer two 7-day segments with different itineraries as one 14-day cruise, offering the second week at a greatly reduced price. For example, a ship departing from Miami sails one week to the eastern Caribbean and the next week to the western Caribbean. In combining the two, the only port repeated in 14 days is Miami, the departure port. Throughout our cruise line profiles, we highlight ships whose itineraries lend themselves to this sort of coupling and offer attractive discounts for the second segment.
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When a cruise line moves a ship from one cruise area to another, this is called a repositioning cruise—and it represents one of the year’s biggest bargains.
Repositioning Cruises
Rather than dispatch a ship empty, lines sell their repositioning cruises; to attract as many passengers as possible, they offer them at cut-rate prices. The majority of repositioning cruises are in spring and fall when the great “migration” of ships occurs—mostly when ships that have spent the winter on Caribbean, Panama Canal, and Mexico cruises are dispatched to Alaska or to New England/Canada and/or Europe for the summer; and again in autumn, when these ships return. Repositioning cruises with interesting and unusual itineraries, such as from the Caribbean to New England via the Eastern Seaboard, are unlikely to have as much of a discount as those with few ports of call, such as transatlantic crossings. Those with more days at sea, however, appeal to folks who really love to cruise and cherish having uninterrupted days or weeks at sea. However, Queen Mary 2, for example, has a wealth of onboard activities designed for every type of traveler.
Group Discounts
Persons traveling together can almost always negotiate a group rate. The larger the group, the better the rate. For a big group, at least one free berth or cabin is customarily provided for the organizer. What constitutes a group varies among cruise lines, but eight or more persons traveling together and occupying at least four cabins generally can obtain a discount, extra amenities, or a cabin upgrade.
Standby Rates
Lines may offer deeply discounted standby rates for specific itineraries and sailing dates. Normally, you rank your ship, departure, and cabin preferences and submit them to the line with a deposit. If your preferred date is available, the line notifies your travel agent at least 30 days in advance. If you are offered your first choice, the deposit is nonrefundable. Airfare is additional.
Cabin Upgrades
Four basic ways to get a cabin upgrade are: 1. ADVERTISED OR UNADVERTISED SPECIALS Usually publicized primarily (some are in press releases to media) to travel agents, upgrade programs give them a powerful selling tool. Upgrades apply to specific sailings and can be guaranteed by the agent and line at time of booking. Such specials allow consumers to buy the cheapest fare and be upgraded from one to five cabin levels.
2. SOFT SAILING UPGRADES A soft sailing refers to a cruise that is likely to depart at substantially less than full capacity. Booking the least expensive cabin category on a low- or shoulder-season cruise offers the best opportunity for receiving an upgrade. Early booking an inside cabin on a ship with few inside cabins (study the ship’s deck plans) might result in upgrading to an outside cabin. But with today’s high occupancy rates, you might be stuck with the inside cabin. Just be prepared to accept it if you are not upgraded.
3. GUARANTEES If a cruise is sold out of the cabin category you request when booking, the line will offer a guarantee, promising a cabin in your preferred category or better. You pay the same rate as for the cabin you requested, including early-booking or other applicable discounts. Because guarantees are offered only when a cruise is sold out or oversold in a requested category, chances of getting the upgrade are good. Cabin location is up to the cruise line.
4. PAID UPGRADES A number of lines, particularly on soft sailings, sell upgrades. Sometimes the upgrades are as little as $15 per person per cabin category. Confusion among passengers regarding cabin-upgrade availability often leads to frustration and disappointment. A travel agent wrote us: PLEASE, PLEASE tell your readers that cabin upgrades are a privilege and not a right. . . . With most ships sailing at [near] 100% capacity, most people have a slim-to-none chance of getting upgraded—and almost certainly not from an inside cabin to an outside cabin. Many cabin upgrades are given at the time of booking, but “guaranteed cabin categories” do not mean guaranteed upgrades—these are based solely on availability. The only thing that is guaranteed is that they will get a cabin in at least the category they are booked in! Former passengers and people who book the earliest are the most likely to get upgrades, if they become available. If a certain cabin category is that important to someone, they should book it and pay for it, and not hope to be upgraded to it. . . . Plus, any travel agent that tells [clients] to take a “guaranteed” or “run of ship” rate to increase their chances of being upgraded is setting up their clients for disaster. The agent may say one thing, but the client hears the word “upgrade” and thinks this is a given. Then when it doesn’t happen, the client gets angry with the travel agent and the cruise line.
Free Stuff
Cruise lines might offer cameras, binoculars, and other goods as booking incentives. Or, freebies may be tied to a theme cruise; for example, a photography cruise sponsored by a camera manufacturer. Big-volume producers and savvy smaller agencies may offer a bottle of wine or a photo album.
Organizational Discounts
Cruise lines commonly develop relationships with organizations like the American Automobile Association or AARP. Check for discounts available through organizations to which you belong.
Credit Card Programs
Some cruise lines have credit card programs. Whenever you use the credit card, you accrue points or “cruise dollars.” These can be applied toward a cruise or taken as a credit to spend aboard. Cardholders receive mailings promoting discounts, and charging a cruise on the card may result in cabin upgrades. Similarly, miles accrued on the American Express program offering one mile for every dollar charged are redeemable for cruises.
Travel Agents’ Discounts
We have found that agents selling the same discount program for a cruise may quote different prices. Usually the difference is small, 2% to 5%. What’s going on is that a few retailers are sacrificing part of their override commissions to lowball the competition. Big-volume, cruiseonly agencies routinely do this, but local agents frequently will knock a few dollars off their commission to retain a good customer. Ads that claim, “We will beat or match your best offer,” usually mean an agent is rebating some commission to his or her clients. But beware of this practice. Commissions represent an agent’s costs and profit. As any businessperson knows, if you give away your profit, you will end up with red ink. In addition, cruise lines including Carnival, Oceania, Norwegian Cruise Line, Royal Caribbean, and Celebrity have cracked down on agencies that rebate in any advertised price. So the number of agencies rebating at all is greatly reduced.
Cruise Loan Programs
Pioneered by Princess, cruise loan programs are seen by the lines and travel agents as “a tool for taking away one of the clients’ biggest stumbling blocks: paying in full for a cruise before sailing.” Loans may also help sellers trade the customer up. Basically, you borrow your cruise’s cost on a revolving line of credit (like most credit cards) and pay off the loan in 24, 36, or 48 installments, like a mortgage or car loan. The main difference between a mortgage or car loan and a cruise loan is that the former are secured by pledging your home or car as collateral. Because there is nothing to pledge as collateral on a cruise loan, interest rates are much higher. In 2006, the lowest annual percentage rate for a cruise loan was 9%; the highest, 31%. Loans are administered by participating banks that are unaffiliated with the cruise lines. If you obtain the lowest interest rate for cruise loans on a 36-installment loan, the monthly payment for a seven-day cruise costing $5,000 per couple is $161 per month. Multiply the $161 by 36 months to see you’ll actually be paying $5,796 for your cruise. Most people would do better taking out a loan on their own.
Lost in the Information Haze
Deals come and go so rapidly that a travel agency has to be knowledgeable, well staffed, and computerized to keep on top of the action. Although big cruise-only agencies are the best equipped to handle the information flood, even they occasionally lag. The National Association of Cruise-Only Agencies (NACOA) can provide a list of member agencies in your area. Check out www.cruising. org for a list of member agencies of Cruise Lines International Association (CLIA). Discount agencies usually advertise widely. Always check the reliability of any agency with whom you do business.
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