With incentives not moving the needle, cruise lines cut prices

With incentives not moving the needle, cruise lines cut prices

Cruise specialists say that cruise lines are lowering prices
as well as offering value-adds and relaxed cancellation policies to try and
counter the slowdown caused by the coronavirus outbreak. 

“We are definitely starting to see price-cutting in several
destinations,” said Anthony Hamawy, CEO of Cruise.com. “The deals are starting
to come out, and I expect it to get more aggressive for close-in sailings.”

Hamawy said this was “among roughest times I can remember in
this industry” in his 30-plus years.

Vicky Garcia

Vicky Garcia, co-owner of Cruise Planners, said, “Now is the
best time to book a cruise vacation because prices are the lowest we have seen
in a very long time. Plus, the cruise lines are offering additional amenities,
softening their policies such as extending final payment deadlines, and even
Cruise Planners has some additional exclusive offers such as free WiFi, prepaid
gratuities and more that we are combining.” 

Hamawy was among several advisors who earlier this week
reported that cruise lines were mostly pushing value-added incentives such as WiFi,
onboard credits, dining experiences and beverage packages instead of price
cuts. However, coronavirus has quickly changed the booking landscape.

“If it works without having to reduced prices, that’s
everyone hope,” Hamawy said. “But what moves the needle is price — there is no
better way to move the volume than price. That’s the last knob the cruise lines
like to pull, but it’s the most effective.”

Drew Daly, senior vice president and general manager of
CruiseOne, Dream Vacations and Cruises Inc., had also said the incentives were
more “value-driven as it relates to promotions and inclusions.” 

“Agents should use this time to upgrade existing passengers
and focus on past customers who are not booked to help sell some inventory,” he

Garcia said that Cruise Planners advisors have been handling
a lot of questions about the virus and getting “emails, texts and calls from
concerned clients due to this topic being front and center in the media, which
is spiking fears in travelers.”

She also said that clients are paying more attention to how
they behave on ships.

“More clients are concerned about being a diligent traveler –avoiding
sick people, proper hand washing, and avoiding touching face and nose —
similar to the flu,” she said.

Garcia’s office is regularly checking alerts from the
Centers for Disease Control and Prevention and the World Health Organization “and
providing resources, talking points, templates and support as we closely
monitor this evolving and dynamic situation,” she said. 

Steve Orens, president of Plaza Travel in Los Angeles, has
also been giving his 120 advisors regular updates from the WHO and CDC. He said
there have been cancellations but clients are still booking cruises for the
third quarter of this year and after. 

“We’re lucky that we’ve been on a good run for many years,
so everybody is doing very well, so this is a dip, hopefully a small dip in the
booking process,” he said.

Some advisors say that while cruise lines and other vendors
are starting to be more flexible, advisors have had to do some negotiating.

Orens said that in one instance, a client rebooked an Asia
voyage to a sailing with a South America itinerary with the same cruise line.
The cruise line promised a credit but said the client would not receive it for
four to six weeks. The final payment for the South America cruise was due the
following day.

The advisor called the sales representative and made a case
for transferring the funds to the payment for the new sailing.

“The main thing we have to do is talk in a professional
business manner and ask for accommodations and set expectations in a
business-like, pleasant manner,” Orens said. “I think a lot of people are
coming to the plate and being accommodating because they, too, realize this is
the time to build and solidify strong relationships, and that’s what people
remember,” he said.

Robert Kwortnik, associate professor of services marketing
and director of graduate studies for the School of Hotel Administration at
Cornell SC Johnson College of Business, said cruise lines have sophisticated
revenue models that allow them to understand what travelers are willing to pay.

“Cruise lines are so good at forecasting demand and price,”
he said. “If we have the same kind of really soft demand in, let’s say a month,
and now they’re looking at a sailing in August that should be 70% full
already but is at 40% because the consumer got really worried, I can’t
imagine that the industry overall isn’t going to say ‘We have to charge what
the market will bear at least until this changes.’”

Changing pricing may be an easy thing to do but is it the

“That’s a double-edged sword,” he said. “Cruise lines can do
that. They’re going to cut significantly into profit margins but will still be
able to generate revenue and pay the crew and keep ships running. But there’s
always a concern that if you slice prices too much, you’re going to set a
reference price and the consumer will be a little more sensitive when you try
to push those prices up.”

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