First the good news: cruise holidays are still amazing value. Now the bad: it won’t last much longer.
Already, on board costs are rising by as much as 20%. Soon, fares will follow with similar hikes. Probably on next year’s itineraries.
Bank loans used to shore up the industry during covid are one reason. Banks want their money back, and paying off loans means cruise lines need more revenue.
Cruise holidays are booming following the pandemic. And they have an edge as hotels and airlines, raise their prices.
None of this is helped by a plunging Aussie dollar.
Truist, an analyst specialising in hotel and cruise told Reuters that prior to the pandemic, cruise holidays were 15-20% cheaper than a land holiday. And that gap has jumped to 50% now.
Unfortunately, Josh Weinstein, CEO of Carnival Corporation, says the industry will inevitably have to close this gap.
Mr Weinstein told shareholders: “We are working hard to close the outrageous and unwarranted 25% to 50% value gap to land-based offerings over time.
“We’re looking at growth with respect to price increases as we get to 2024, 2025 and 2026.”
Royal Caribbean CEO Jason Liberty shared a similar view on a call to shareholders, stating that the gap to land-based vacation would lead to an increase in fares.
“While we have made positive strides in narrowing the gap to land-based vacations over the last several months, cruising remains an exceptional value proposition, allowing us to outperform broader leisure travel as we seek to further close the gap to land-based vacations, drive better revenue and welcome even more happy customers.”
Harry Sommer, president and chief executive of Norwegian Cruise Line Holdings says despite strong earnings, higher prices are on the horizon.
“The continued strength in the demand environment is evident not only in this quarter’s results, in which we generated a meaningful increase in pricing on 19% capacity growth compared to 2019. But also in our forward booked position which is within our optimal range and at higher pricing.”
Mr Sommer says the company will be “right size our cost base through our ongoing margin enhancement initiative”.
Royal Caribbean group, Carnival Corp and NCL Holdings together account for nearly every major cruise line. With all major CEO’s suggesting price hikes are on their way, cruising might not remain the steal it currently is.
A rise of 20% would see an average cruise price of $5,000pp go up $1,000.
Onboard spend increases on cruise holidays
The major cruising corporations have all reported spikes in onboard spending. NCL reported a 49.9% rise since 2019, Royal Caribbean a 36.8% rise and NCL a 17.2% rise.
While much of this can likely be attributed to customers having lined pockets after the pandemics, there has also been a definite trend towards creeping charges on cruise ships.
Last week, Cruise Passenger reported on Princess cruisers entering into uproar over changes to complimentary dining. What many passengers are calling ‘nickel and diming’ continues to spread across the industry.
MSC Cruises have just become the last cruise line to add extra prices to the main dining room. Guest sailing on MSC Seaside reported being made aware of a new notice, a USD$5 surcharge ‘or more’ for additional entrees.
Whilst changes like this are minimal in a vacuum, cruise passengers wallets are feeling the weight of them stacking up across ships.
Cruise dining, particularly in the main dining room, has always been all-inclusive, making cruises very defensive of any changes.
UK-based Ambassador Cruise Line has also just announced about a 15-20% price hike for their drinks packages. The cruise line stated they want “to ensure we can offer the very best experiences in our lounges and bars.”
There have also been rumours of Celebrity Cruises cutting back on butler services for a number of suite categories. Celebrity Cruises have been contacted for comment.
Aussies fighting against the dollar
The Australian dollar is at a 14-year low, with many Australian vacationers feeling the pinch. The dollar has lost 13% against the Euro from this time last year, and 6% against the US dollar.
This is bad news for cruisers for a couple of reasons. Most simply, many cruise lines such as Royal Caribbean operate their onboard spending in US dollars, even when sailing in Australia. This means that when onboard, your Australian dollars won’t take you as far as they used to.
Furthermore, there are still some cruise lines that sell their fares in USD, even when sailing in Australia. For example, Virgin Voyages and Disney Cruise Line are both booked in USD. The lower AUD will make these cruise holidays proportionally more expensive.
As well as this, even when cruise fares aren’t in USD, they have generally been converted from a USD figure. This means that even if you don’t directly see it, a weaker Aussie dollar will lead to higher cruise fares.
The Australian dollar isn’t just weak against the USD, but also the Euro. This has lead to many Australians travelling to Europe and noticing their bank accounts emptying faster than usual.
Combined with Australia’s rising cost of living, a weak AUD and strong Euro make European cruising significantly more difficult to budget for.
What to do about it?
Cruise prices are looking very attractive at the moment, but with this forecast to change, what should cruisers do about it?
Katrina Van Der Merwe, Flight Centre Cruise Specialist says with prices staying steady for now, cruisers should strike while the irons hot.
“At the moment, things are holding steady. Each year sees a slight rise, as the cost of living goes up. For the time being though, prices are great.”
Ms Van Der Merwe says with cruises through to 2025 already available, booking early is the way to beat any rises.
“Many companies already have their 2025 cruises available for prepurchase. Book it early! Remember though, until that final payment is made, even with a deposit holding the cabin in place, if the cruise line fares increase, they are allowed to increase your fees as well.
“It’s in the paperwork you sign, either online, or in person.”
If you’re in a position to pay the full-fare early on, you can make sure your price is locked in.
“The only times the fares are solid, is when you’ve paid the entirety of it. Please don’t fuss at your agents, or the company’s agents. If it was up to us, it would be different, but we don’t make the rules. Be kind.”
As well as locking in a solid cruise fare, Ms Van Der Merwe always shares some ways to keep your cruise fare down.
“Book it early. Buy the wifi package – you know you’re going to use it.
” However, the drinks package? You might not get your full money’s worth. Look carefully at how much it is per person per day, and how much you actually drink. No judgement – if you know that you’re going to party, and will be drinking 10+ drinks a day, then yes, get the package.
“If you just want a glass of wine with dinner, and maybe a cocktail by the pool, just pay for it on board.”