Agents cross their fingers as NCL raises cruise fares

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If not now, when? That was the reaction from several travel agents to the notion that the time might be ripe for cruise fare increases in the wake of steep discounting through most of the recession and on into what appears to be a slow but steady economic recovery.

Fare hikes have been few and far between in recent years. Seabourn Cruises announced last fall that it would raise prices by up to $800 per couple on 19 cruises this year. Carnival Cruise Lines and Norwegian Cruise Line implemented increases in 2010 of 5% and 7%, respectively, although Carnival's was targeted only to summer sailings.

But then last week, NCL announced that its fares would rise across the board by as much as 10%, starting April 1. 

"Any cruise line attempting to raise rates is good news for the industry," declared Douglas Crosby, owner of Holiday Cruises & Tours in Henderson, Nev. "The rates have been so low, it's hard for agents to survive."

Crosby said his agency has experienced "an increase in activity since the start of this year, compared to 2009 and 2010."

He added: "And even though where I am [near Las Vegas] is still leading the country in unemployment, a lot of people are just ready to travel again. I think people know that deals aren't going to last forever. Customers will pay higher rates. There comes a point where it won't work, but a reasonable increase is OK, I think."

Tom Kleefisch, a Cruise Planners franchise owner in Dallas, agreed.

"If an increase ends up in commissionable fares, agents will support it," he said, adding, "I don't know if NCL's decision will be akin to airlines: whether others will jump on or will wait to see if it sticks."

But the move by NCL, he said, offers a window of opportunity to "go to a client and say, 'Look, you've been thinking about this. Now is the time to book, because the rate is going up soon.' "

Indeed, that's what NCL has in mind. In tandem with its fare hike announcement came an extension of its Free Upgrades for All promotion, through March 31.

While Kleefisch said he felt comfortable with predicting that the trade would support cruise fare hikes, he was not as certain about how clients would react.

"Business is definitely better this year than last, and I'm sure all the cruise lines would love to bump rates," he said. "Will customers flinch? I can say that people are still playing it conservative on the spending side. There's an overriding 'We're still not out of the woods' perception, and a lot of people are personally insecure."

Choices between cruise lines that have raised fares and ones that haven't are likely to come down to brand loyalty, Kleefisch said.

"Clients will vote with their pocketbooks," he said. "The new frugality is 'I have to compare prices.' Unless there is brand loyalty, it's going to be a question of who gives more bang for the buck," particularly because of increased capacity that leads to more choices and greater competition.

Kleefisch noted, too, that it might be more difficult for the luxury lines to raise prices.

"That's going to be a harder sell," he predicted. "To me, it's that aspiring luxury traveler maxed out on his credit cards who's going to balk. A $7,000-per-person cruise that now becomes $8,000 a person is tougher than a $900 cruise that becomes a $1,000 cruise."

At CruiseOne & Cruises Inc., Dwain Wall, senior vice president and general manager, said cruise fare increases would be a positive sign that the cruise lines believe demand is there and that they expect it to continue.

"We're seeing it, particularly in the last five to seven weeks," he said.

His customers, he said, "are not bullish, but they certainly are more comfortable than they were 18 to 24 months ago."

Some will flinch at a fare hike, he acknowledged, but a lot depends on what the competition does.

"Consumers are very savvy shoppers today, and they shop around," Wall said. "In the end, if it isn't a significant differential, most will probably pay a hike. But some won't; they'll choose a cheaper option that has similar accommodations."

He added that CruiseOne & Cruises Inc. has seen a 5% increase in average selling prices, year to date, adding, "and that's without any rate increases."

The trajectory, he said, appears headed toward higher average selling prices.

Evan Eggers, president of SureCruise.com, based in Londonderry, N.H., said he believed it was time to raise fares.

"Ships are filling up, people are optimistic," he said.

Eggers said he'd be curious to see if NCL's latest move sticks.

"They can get leverage out of it this month, and if they don't like the result, they can always bring the fares down again," he noted. "The airlines do it all the time."

The wild card right now, though, is the rising price of oil.

"We on the front line despise fuel surcharges," Eggers said. "They're bad all the way around.

"A 10% fare increase seems bold enough," he said of the NCL move, "but add a surcharge, and then it's 25%. That would be going too far."

A spokeswoman for NCL had no comment about the possibility that the line might have to consider a fuel surcharge on top of its higher fares if oil prices fail to stabilize.

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