There have been few bright spots for the cruise industry during its 15-month global shutdown. But one that emerged toward the end of 2020 and has demonstrated staying power is pricing.
Despite the shutdown, or perhaps because of it, cruise lines and travel advisors have been saying that cruise pricing patterns on forward bookings have been strong, even relative to previous periods of high demand.
In May, when asked about prices, Norwegian Cruise Line Holdings CEO Frank Del Rio said he was "just amazed at how much pricing power we actually have, given the difficulties that we all know about and the relatively low marketing spend that we've put out in the last one and a half quarters or so."
Carnival Corp. reported at the end of June that 2022 pricing for its booked position was higher than it was for 2019 bookings during the same period, which CFO David Bernstein called "a great achievement" given that 2019 pricing "was a high watermark for historical yield."
New factors influencing pricing
Travel advisors in the US are reporting the same but acknowledge that 2019 and 2022 are not necessarily fair comparisons.
"Pricing is significantly better than 2019," said Brad Tolkin, CEO of World Travel Holdings, adding that for 2022, "bookings are ahead and pricing is ahead. It's absolutely outstanding."
However, there are three main factors influencing pricing that didn't exist in 2019, Tolkin said. One is the outsize demand due to the industry being shut down for so long. The second is the number of future cruise credits (FCCs) given to customers who chose them instead of a refund. Tolkin said he believes that cruise lines will not discount those cruises heavily, in part to uphold the value that the FCC holders paid for their sailings.
"The ones who took [FCCs] are the most loyal cruise customers, and [the lines] don't want to upset them," he said.
The third factor, he added, is the still unclear outlook on occupancy and load factors.
Matthew Eichhorst, president of Expedia Cruises, also said he believes that exceptional circumstances make it difficult to compare current pricing to previous years in a meaningful way.
"What people are paying for cruises definitely appears to be up, but it's a different market than we've ever been in," he said.
For example, Eichhorst said, the booking window is much further out than it used to be. There is no last-minute market, because relatively few ships are actually sailing in the near-term. And most cruises being booked now are for 2022, in higher-priced markets like Alaska and Europe and on longer cruises. On short, close-in Caribbean cruises, prices are always lower.
"That gives the perception that prices are way up, but in reality it's not apples to apples," he said. "I think as far as what the final impact on pricing will be, we won't really know until the end of the first half when we get into a more traditional market."
Eichhorst is more excited about how much consumer interest there is in cruising.
"From an inquiries perspective, we've seen the number triple over the same time in 2019, which is fantastic," he said. "And we've seen phone calls continue to grow, in fact, doubling over May, which has been very positive, as well."
Source: Travel Weekly