Johanna Jainchill
As far as buzzwords of 2020 go, for the cruise industry, it's "FCC."
As anyone in cruising knows, this stands for future cruise credit. For cruise lines, it's enabled them to hang onto much needed cash during an unprecedented and continually extending no-revenue pause in sailing. For travel advisors, it's a good way to keep clients booked and maintain the potential for commission when they sail.
For cruisers? It may be their best investment of 2020, and travel advisors say that they know it.
The FCCs cover the cost of the original booking and typically offers a bonus credit of up to 25% -- in other words, a vacation credit equal to 125% of the original cost.
Brad Tolkin, co-CEO of World Travel Holdings, said that the additional 25% value is so enticing, clients are buying cruises knowing that even if they get canceled they are likely to get an FCC, a better return on investment than they'd get almost anywhere else this year.
"We're seeing a lot of people buying cruises for this year, and they know that that cruise might not go," he said. "They are comfortable if it does, but they are betting that if the cruise is canceled they're getting a supersized FCC. They say, I can put my $1,000 dollars in the bank and earn nothing -- it will still be $1,000 three months from now. Or I can put it put down on a cruise, and if it goes I'm happy to go and if it doesn't my $1,000 will be worth $1,250."
Some of those clients are using the additional 25% to upgrade, he said.
"What we're seeing is that people are buying up with this amount," he said. "If they spent $3,000 on a cruise before, now they have $3,500, $3,600 to spend, and they're spending it and buying up. We're seeing so much of that with these FCCs."
Cruise Planners agencies very early on began marketing the extraordinary value of FCCs to their clients, even calling them "golden tickets" to encourages clients to take advantage -- not only of up to 25% in additional cruise value but also on no-risk booking policies that enable people to cancel up to 48 hours before departure.
Cruise Planners CFO Vicky Garcia also said that the FCC value is "a big opportunity."
"We said, try not to let your customers cancel and just get their money back, because what other kind of investment can you get 25% back on your money?" she said. "I've bought stocks and it hasn't worked out that well."
It's probably one of the reasons that the acceptance rate on FCCs is as good as it is: Carnival Corp. CEO Arnold Donald said on May 14 that more than 60% of guests are choosing the FCCs over cash refunds.
"It's also encouraging to note that the majority of guests affected by our schedule changes want to sail with us at a later date, with fewer than 38% requesting refunds to date," he said in a statement.
Also during earnings calls in May, Royal Caribbean Cruises Ltd. and Norwegian Cruise Line Holdings said that their FCC uptake rates were 55% and around 50%, respectively.