Thursday, November 20, 2008
How is the Recession Affecting Cruises?
The economy is really starting to effect the travel industry. Cruise lines are no exception. Facing a large growth in passenger capacity due to expanding fleets among the major cruise lines, the seemingly deep global recession that is approaching is starting to affect the cruise line's bottom line. The main solution: stay closer to home.
When fuel was the problem, the answer was simple: add a fuel surcharge. But with the price of oil literally one third of its peak this summer, the surcharge looks and feels greedy. Most major cruise lines have at least partially ended that practice. However, operations are getting more expensive over time and revenues aren't exactly increasing. Pricing hasn't increased generally for cruising over the last 15 to 20 years, but the ships have become larger and more expensive. The cruise industry appears to be on its way to have a razor thin profit margin. Billion dollar ships won't pay for themselves with $500 cruise fares. And in a competitive marketplace, postponing improvements and innovations won't work either. In some cases, cruise lines have been experimenting with extra a la carte features, like Royal Caribbean's premium steak experiment in the main dining rooms. But by and large, we're seeing an expansion of port usage in the US, and a reduction of European, South American and Asian itineraries.
For proof, just look at Baltimore. In 2008, fewer than 30 cruises departed from this Northeastern port, serving Royal Caribbean and Norwegian Cruise Lines. In 2009, Baltimore sees much more service, jumping to nearly 80 cruises. The Northeast has been a great market for Cruise Lines in the early part of this decade. Norwegian and Royal Caribbean maintain year round service from New York City, where voyagers are willing to pay a premium for service that doesn't require a flight to Florida, California or even further afield. Often times, cruise lines were able to charge more for sailings leaving from the Northeast than the cost for a cruise for Miami plus airfare - especially in the summertime.
Carnival took the hint in a big way this year. The Fun Ship line cut its nascent European schedule in half, and redeploys the Liberty to Miami this summer, instead of the Mediterranean and moves the Pride to Baltimore for regular service this summer. Royal Caribbean is moving out of the South American market in 2009, cancelling a lot of Radiance sailings for the fall and winter of next year and leaving the ship to concentrate on Mexican sailings off the West Coast.
Sailing to exotic ports can have its draw, but for the big cruise lines, whose bread and butter have been the Caribbean and sailings leaving from the US, its a big expense and given NCL's problems in selling South American sailings, there isn't a lot of money to spread around there. Norwegian Sun South American sailings were selling for under $25 a day per person for 19 and 20 night voyages. That's cheaper than many European hostels. If that's what it takes to fill the ships on the most exotic itineraries, it's no wonder that cruise lines are staying closer to home to ride out the recession.
When fuel was the problem, the answer was simple: add a fuel surcharge. But with the price of oil literally one third of its peak this summer, the surcharge looks and feels greedy. Most major cruise lines have at least partially ended that practice. However, operations are getting more expensive over time and revenues aren't exactly increasing. Pricing hasn't increased generally for cruising over the last 15 to 20 years, but the ships have become larger and more expensive. The cruise industry appears to be on its way to have a razor thin profit margin. Billion dollar ships won't pay for themselves with $500 cruise fares. And in a competitive marketplace, postponing improvements and innovations won't work either. In some cases, cruise lines have been experimenting with extra a la carte features, like Royal Caribbean's premium steak experiment in the main dining rooms. But by and large, we're seeing an expansion of port usage in the US, and a reduction of European, South American and Asian itineraries.
For proof, just look at Baltimore. In 2008, fewer than 30 cruises departed from this Northeastern port, serving Royal Caribbean and Norwegian Cruise Lines. In 2009, Baltimore sees much more service, jumping to nearly 80 cruises. The Northeast has been a great market for Cruise Lines in the early part of this decade. Norwegian and Royal Caribbean maintain year round service from New York City, where voyagers are willing to pay a premium for service that doesn't require a flight to Florida, California or even further afield. Often times, cruise lines were able to charge more for sailings leaving from the Northeast than the cost for a cruise for Miami plus airfare - especially in the summertime.
Carnival took the hint in a big way this year. The Fun Ship line cut its nascent European schedule in half, and redeploys the Liberty to Miami this summer, instead of the Mediterranean and moves the Pride to Baltimore for regular service this summer. Royal Caribbean is moving out of the South American market in 2009, cancelling a lot of Radiance sailings for the fall and winter of next year and leaving the ship to concentrate on Mexican sailings off the West Coast.
Sailing to exotic ports can have its draw, but for the big cruise lines, whose bread and butter have been the Caribbean and sailings leaving from the US, its a big expense and given NCL's problems in selling South American sailings, there isn't a lot of money to spread around there. Norwegian Sun South American sailings were selling for under $25 a day per person for 19 and 20 night voyages. That's cheaper than many European hostels. If that's what it takes to fill the ships on the most exotic itineraries, it's no wonder that cruise lines are staying closer to home to ride out the recession.
Labels: carnival, cruises, economics, ncl, royal caribbean, travel
Tuesday, November 04, 2008
3 Ways to Protect Your Travel Investment
Travel costs money. Whether the cost is for a simple one-way flight or an elaborate cruise or tour, what you spend is an investment. In education, enjoyment or business, and it deserves to be protected. As economic times get increasingly difficult, protecting your investment is more important than ever. There are three simple things that you can do to make sure that your travel dollars are well spent and well protected.
1. Take Travel Insurance
Nobody views insurance as important when it comes to vacation. It is. Not just in case you get sick abroad and your insurance doesn't cover you, but also in case unforeseen events prevent your travel. Maybe you've gotten laid off? Travel insurance will have you covered. In the hospital, or stuck in a hurricane? Ditto. Those are obvious scenarios, but there is one that merits more consideration these days. What if your travel provider goes out of business?
Insurance covers that, and if you can't get your cash back from what used to be Skybus, or ATA, or any of the other airlines that folded? If you have insurance, you can get it back and get it back fairly easily. Sure, it costs some money, in many cases between 5 and 10% of the cost of your travel but the protection is worth it.
After all, this year so far saw the end of over a dozen airlines, and the Italian flagship airline - Alitalia got within hours of a complete shutdown. A cruise line, Majestic America said goodbye as well.
2. Use Credit Cards
Although credit cards don't offer the same comprehensive protection that travel insurance does, credit card companies will protect and refund your money if the travel provider doesn't actually provide travel. In many cases, when airlines have given notice to shut down, rather than actually processing refunds, they urge clients to go through their credit cards to be refunded.
The process is complicated, stressful and frustrating but it will ultimately be successful for you in most cases. Did you pay with cash, money order, or a check by phone? These methods of payment may not offer you the same protections a credit card will, because in many cases, the credit card company is withholding a significant portion of funds brought in by credit cards to companies who are in shaky positions financially.
3. Ask The Right Questions
Sometimes the problems aren't with the airline or the tour company, sometimes the problem is with the travel agent that you use. Travel agents can be an incredibly worthwhile resource to use, and able to get you some great pricing and good advice on what to expect on a trip. However, these businesses work on extremely low profit margins and when business turns south, business goes from profitable to marginable and it isn't unreasonable to expect many smaller and mid-size agencies to close their doors during the economic downturn. However, you can avoid problems by asking questions.
Try to use agencies that forward payments to the travel provider directly rather than the agency. If you see an agency that charges itself exclusively for a cruise or a tour, that should be a major red-flag. Doing this is this generally a sign of the agency floating your money before they send payment to a travel provider. Sometimes that money is floated for just a couple days, but in times of trouble, it's not uncommon to see that float last for upwards of 6 to 8 weeks which can put your vacation in jeopardy with the travel provider.
It might be nice to save that extra $50.00 on that cruise, but in the end - the hassle may not be worth it. This is another instance where travel insurance is vital. Your travel provider and your travel agency are not the same things. So if your agency fails, your vacation may still exist - but if the agency floated your money, that final payment on your tour may never be posted to the actual travel provider - leaving your actual vacation unpaid.
This is something that can be managed by the consumer, though. Just ask where the money goes when its charged. Is the cruise line paid directly with your credit card? Or does the agency charge the card themselves and forward payments later? A little research before the charge is made can save you a lot of headache after the fact.
1. Take Travel Insurance
Nobody views insurance as important when it comes to vacation. It is. Not just in case you get sick abroad and your insurance doesn't cover you, but also in case unforeseen events prevent your travel. Maybe you've gotten laid off? Travel insurance will have you covered. In the hospital, or stuck in a hurricane? Ditto. Those are obvious scenarios, but there is one that merits more consideration these days. What if your travel provider goes out of business?
Insurance covers that, and if you can't get your cash back from what used to be Skybus, or ATA, or any of the other airlines that folded? If you have insurance, you can get it back and get it back fairly easily. Sure, it costs some money, in many cases between 5 and 10% of the cost of your travel but the protection is worth it.
After all, this year so far saw the end of over a dozen airlines, and the Italian flagship airline - Alitalia got within hours of a complete shutdown. A cruise line, Majestic America said goodbye as well.
2. Use Credit Cards
Although credit cards don't offer the same comprehensive protection that travel insurance does, credit card companies will protect and refund your money if the travel provider doesn't actually provide travel. In many cases, when airlines have given notice to shut down, rather than actually processing refunds, they urge clients to go through their credit cards to be refunded.
The process is complicated, stressful and frustrating but it will ultimately be successful for you in most cases. Did you pay with cash, money order, or a check by phone? These methods of payment may not offer you the same protections a credit card will, because in many cases, the credit card company is withholding a significant portion of funds brought in by credit cards to companies who are in shaky positions financially.
3. Ask The Right Questions
Sometimes the problems aren't with the airline or the tour company, sometimes the problem is with the travel agent that you use. Travel agents can be an incredibly worthwhile resource to use, and able to get you some great pricing and good advice on what to expect on a trip. However, these businesses work on extremely low profit margins and when business turns south, business goes from profitable to marginable and it isn't unreasonable to expect many smaller and mid-size agencies to close their doors during the economic downturn. However, you can avoid problems by asking questions.
Try to use agencies that forward payments to the travel provider directly rather than the agency. If you see an agency that charges itself exclusively for a cruise or a tour, that should be a major red-flag. Doing this is this generally a sign of the agency floating your money before they send payment to a travel provider. Sometimes that money is floated for just a couple days, but in times of trouble, it's not uncommon to see that float last for upwards of 6 to 8 weeks which can put your vacation in jeopardy with the travel provider.
It might be nice to save that extra $50.00 on that cruise, but in the end - the hassle may not be worth it. This is another instance where travel insurance is vital. Your travel provider and your travel agency are not the same things. So if your agency fails, your vacation may still exist - but if the agency floated your money, that final payment on your tour may never be posted to the actual travel provider - leaving your actual vacation unpaid.
This is something that can be managed by the consumer, though. Just ask where the money goes when its charged. Is the cruise line paid directly with your credit card? Or does the agency charge the card themselves and forward payments later? A little research before the charge is made can save you a lot of headache after the fact.
Labels: economics, insurance, travel, travel agents
