The Golden Princess docked in Juneau, Alaska
For travelers new to cruising, one of the things that takes some getting used to is that the pricing model is almost the inverse of the airline model – the closer you get to sail date, the deeper the discounts tend to be. The general reasoning was simple – the cruise lines want their ships to go out 100% full no matter the cost. They’d rather let you have that balcony cabin for 80% off than let it sail empty. Historically, this has been a potential windfall for bargain hunters willing to take the risk and book last minute, as the result could be a close-to-all-inclusive floating vacation at a bargain basement price.
If you put yourself in that category, consider yourself on notice – the gravy train may be coming to an end. A recent Travel Weekly article suggests that the cruise lines, in particular Norwegian and Royal Caribbean International, are toying with giving up on the 100% occupancy model, eschewing big last-minute discounts in favor of trying to convince cruisers to book early, even if it means a few cabins go out empty. In Royal Caribbean’s case, that means freezing prices somewhere between 10 and 30 days prior to sailing, with no additional discounts past the point of no return.
Why the Cruise Lines Want to End Last-Minute Discounts
To some degree, the cruise lines are taking a page from the airlines – they’ve come around to the notion that it’s preferable to shift the discounts earlier in the booking process to fill the ship earlier, rather than have cruisers play games and wait until the last second to score a great deal. The reason is rather simple; customers who booked early become upset when the price drops a month or two down the road, plus travel agents have a difficult time advising their clients whether to book now or later due to the risk of a price drop. I have to imagine uncertainty as to load factor also causes issues for the cruises in much the same way it does for the airlines. It’s obviously not cheap to supply a big cruise ship, and if the cruise lines can better predict load factors through airline-esque revenue management, they can also better manage how much to order for items like food and pool towels.
How Cruisers Could Benefit
As mentioned above, the primary benefit for cruisers is less uncertainty as to whether the price you paid is the best price you can get. Admittedly, this is always a frustrating thing for me when planning a cruise. I don’t have the work schedule flexibility to hop on a cruise at the last second, so I book mine at least a few months in advance. I go ahead and book when I find a combination of price and on-board credits that seems like a good deal to me, but I then have to train myself not to look at prices again, lest I find that the price has dropped and kick myself for paying too much. This especially tends to be a problem when cruise lines announce deep discounts when the penalty period on existing bookings kicks in, in other words, when the final payment deadline and all cruise fare paid becomes nonrefundable based on an escalating schedule. Most penalty periods begin 60-90 days from sail date, depending on the season and the length of the cruise, which also happens to be when the biggest discounts end up appearing if a ship has too many unsold cabins. At that point, you can’t cancel and then re-book at the lower rate without eating at least part of the fare, which of course can lead to unhappy customers. As an aside, even though you can cancel and re-book without penalty outside of the penalty period, you typically lose any promotions, such as prepaid gratuities or on-board credits, that applied to the originally booked fare. That’s a short way of saying, a price drop doesn’t necessarily mean a better deal; you’ll have to do the math and see which option actually comes out cheaper.
As an ancillary benefit, more empty cabins also increases the potential for upgrades for frequent cruisers with elite status in the cruise line’s loyalty program, or those that just ask nicely at check-in. Involuntary stateroom upgrades tend to be rare today, and given the rather slim pickings of cruise loyalty programs, some kind of upgrade system might be a good way to enhance the programs.
How Cruisers Could Be Adversely Affected
Bargain hunters will lose perhaps the best travel deal out there; Princess, for example, currently advertises last-minute deals for 6-day Alasaka cruises in May and early June for as little as $349 per person. I’ve occasionally seen even lower rates for Caribbean cruises. It actually isn’t unusual, in Florida ports especially, to find couples with a lot of free time and in search of a cheap vacation to just show up to the port on sailing day with their suitcases packed, hoping to score a pair of cheap tickets on the spot. That cottage industry will be put out of business. Guess my wife and I won’t have the opportunity to drive down to Galveston and try our luck after we retire.
Two items pointed out in the article, though, could ultimately be of greater concern. First, in Royal Caribbean’s case, while close-in discounts are being scaled back, the policy applies only to North American itineraries, and even there, not to cruises of 2 to 4 days in duration. Inconsistent policies tend to lead to customer confusion, and I can already see complaints rolling in about why deep discounts show up on 7-day Mediterranean cruises but not 7-day Alaska voyages. Second, towards the end of the article, a four letter word of sorts makes its way into the calculus – “yield management”. In the realm of airline pricing, that means prices can change in real-time based on actual booking activity. While some yield management would surely do the cruise lines some good, taken to an extreme, it could make things difficult for cruise shoppers. Making the decision to drop potentially several thousand dollars while herding multiple cats to make a decision on a week or more long vacation can take several days, if not weeks, and constantly changing prices could throw a significant wrench into the decision making process.
Finally, Royal Caribbean’s policy allows for significant discounting up to 30 days out from sail date, which still allows for price drops during the penalty period. Sure, the discounts might be less, but the stated problem of guests who booked early getting irritated by the price of their cabin dropping later isn’t going to be solved.
Truth be told, if close-in discounts are killed, a fairly small minority of cruise customers stand to be affected. Given the large monetary and time commitment required by most longer cruises, the majority of passengers are already booking well in advance. If anything, reducing last-minute discounts will be a net positive, since those who book early won’t have to be paranoid about the price dropping a couple of months later. Shorter cruises, which tend to attract more spur-of-the-moment travel decisions, will still be eligible for last-minute discounts, so there won’t be much change there, either.
That being said, the inconsistency in pricing policy is a concern, and though the stated reason for the changes is to improve brand reputation and reduce customer dissatisfaction due to post-purchase price decreases, discounts during penalty periods will still be happening. I think the cruise lines should also consider handing out funny money if the price drops after an advance booking, similar to what American used to do if a fare dropped after purchasing a nonrefundable fare. Some of the scrip would likely go unused, while the rest will inevitably be used on shore excursions, on-board purchases, and specialty restaurant/bar charges that generate significant profits to the cruise lines. The cruise lines don’t do this currently, and I think it could be a win-win type of gesture to keep customers happy, while also generating additional ancillary revenue for the bottom line.