Is the Cruise Industry Changing?

| March 5, 2008

Has the cruise experience changed? Or do some passengers have unrealistic expectations about today's ships? A perspective for new cruisers.

Passenger ships have gone through significant changes since tropical vacations replaced trans-oceanic crossings as the primary reason to go to sea. In their early days, cruise vacations were still the domain of society's elite. For the middle class, the cost of a cruise could easily be more than many people earned in months.

Those wealthy enough to afford a "luxury cruise" sailed in the lap of elegance. One would never enter the dining room in anything less than a suit, and a formal night always required a tuxedo or gown. Except for the ship's top officers, staff onboard would never address passengers unless they were spoken to first, and would certainly include "Sir" or "Madame" with any exchange.

The cruise experience is quite different today, and not by accident. Cruise lines like NCL, Royal Caribbean and Carnival were instrumental in making cruising an affordable vacation option for the average person. They achieved "mass market penetration" in a number of ways: building ever-bigger ships to benefit from economy of scale; offering lower fares and shorter cruises; and making up for the lower prices by generating revenue from onboard activities like casinos, spas, nightclubs and shopping.

Some people argue that this style of "budget cruising" has ruined the cruise experience, but others point out that it's still easy to find a luxury cruise of the old style. Who is right? Obviously, the appeal of cruising to the middle class, as demonstrated by the increase in the number of people cruising, seems to grow every year. The question is, has the advent of "budget cruising" been an evolution or a revolution?

The State of Luxury Cruising As far as true "luxury cruising" is concerned, it has certainly been an evolution rather than a revolution. The luxury lines that focus on the upper crust -- Regent Seven Seas, Seabourn, Silversea or Crystal Cruises -- have experimented with changing and enhancing their products, and it's obvious that there is no single perfect formula for winning over the most prosperous cruisers.

Some of these lines offer "all-inclusive luxury" with complimentary wine and spirits, unique shore "experiences" to which all passengers are invited at no extra cost, prominent guest speakers, theme cruises, and "tips included" policies. This allows them to keep fares high and still appeal to the discerning traveler willing to pay the price. This concept has proven successful, and the two lines that previously were not "all inclusive," especially with liquor, have moved toward making their cruises more inclusive.

Meanwhile, a separate class of near-luxury lines known as "deluxe" has sprung up, including Windstar, Oceania and Azamara, where "resort casual" is the consistent dress code (no formal or even semi-formal nights) onboard. Their pricing is not all-inclusive -- liquor, all tours and tips are always extra -- but they still offer a luxury experience in other ways, with deluxe accommodations, small passenger loads, exotic itineraries, and butlers and other special staff made available to most cruisers.

The cruise lines that still promise the old-time traditions like strict formal nights, high tea, string quartets and baked Alaska (Cunard and arguably Holland America, for example) do so at cruise prices a notch higher than the mainstream lines. Both these lines are subsidiaries of Carnival Corp., the parent company of Carnival Cruise Lines, and both offer the same onboard revenue generating activities as the mass market lines.

The point is that the elite cruise experience of the "good old days" has been re-defined as a menu of alternative luxury cruising options. The old style "vanilla" has been discontinued, but you can get French Vanilla, Rum Raisin and Chocolate Chip.

One Size Fits All? Since the upper crust of cruising has become so stratified, what about the more popular cruise lines most of us are familiar with: Carnival, Royal Caribbean, NCL, Princess and Celebrity?

Today's cruise lines offer affordable cruises to people from almost any walk of life. More cruises are offered each year as these lines commit to building new, larger ships to take advantage of economy of scale.

Little more than a decade ago, a 70,000-ton ship was considered enormous; but today, the industry is rife with 160,000-ton behemoths. In 2009, we will see the first ship debut at 220,000 tons, a one-third increase in size over today's largest cruise ship.

Even the luxury cruise lines are not immune to the "economy of scale" temptation. Seabourn, Silversea and Oceania all have ordered new ships that are on average twice as large as what they are currently sailing. The trick with luxury lines is to deliver the kind of experience their customers expect, but on a slightly larger ship. They want the benefits of economy of scale without disappointing their loyal passenger base.

The "mass market" lines have the same challenge, but they are also in a heavy competition to add activities, amenities -- and what some refer to as "gimmicks" -- hoping to draw the most attention and vacation dollars from the cruising public.

Ship design and engineering teams are being challenged to come up with imaginative attractions such as "Flow Rider" surfing pools, gigantic poolside LCD TV screens, 300-foot water slides, water parks, bowling alleys, and more. They struggle to fit them into the deck plans and ensure they function in this unusual surrounding.

And so we have a different perspective on cruising. Critics would say the mass market lines are ruining the seagoing experience because modern ships are such a departure from the "grand old days of cruising."

But if financial success is any indication, this is an additive revolution, not a devolution. Experienced cruisers rush to the ships with the newest and grandest onboard "toys." This encourages competitors in the same market to experiment to find the next big thing.

The challenge is that ship planning and construction can take three to five years, requiring a vision of the final product long before the ship is unveiled. The vision can also change, depending on which innovations other competitors come up with.

For the passengers who love these on-board innovations and additions, consider the resulting increase in costs for hardware, research and engineering. It's a bit like drilling for oil. The lines not only supply what they have for today's market, they have to be constantly investing in the next-generation cruise experience.

The Cost of Profit A ship designed four years ago faces an ever-changing competitive marketplace when it debuts, as the cruise lines constantly read and react to their customers. Royal Caribbean had such a case when it introduced its Voyager-class ships with innovations like rock-climbing walls, roller-blading and ice-skating. At first the line thought it could charge extra for these activities, but it faced an unexpected outcry from customers, and the attempt to charge for these "toys" only lasted for a few cruises.

Besides the structural changes and additions, the way today's cruise lines manage and deliver the onboard experience is affected by many other things: competition from other cruise lines, their ability to make money from onboard revenue, and outside influences like negative publicity or bad weather. Everything is, of course, driven by the need to make a profit.

Take cruise pricing as an example of this constant state of flux. At any moment, the advertised price of a cruise is a major factor in attracting customers. In today's market, one can easily find cruises selling for $75 per day per person, sometimes even less. For an average couple, $150 per day for accommodations, unlimited access to food, transportation to interesting destinations and quality entertainment, is an obvious bargain.

But it isn't quite that simple. The lines keep prices low to fill their ships -- because their goal is to maximize their onboard revenue, i.e., getting more money out of the guests once they are onboard.

The reaction we have seen in CruiseMates' message boards and reader reviews from passengers who miss the "good old days" is that since the cruise lines are such big companies, these attempts to increase onboard revenue are just greedy "nickel-and-diming."

For example, we see people complain about the cost of sodas onboard. Many people post messages saying sodas should be free because they only cost pennies per serving. But that doesn't take into consideration what portion of the revenues from soda sales goes to covering other operating costs. In fact, those sodas may be part of the reason we can get a seven-night cruise on a premium cruise line for as low as $399 per person.

Expectations Clash with Realities While the luxury sector has segmented the customer base so almost any kind of user experience can be found by carefully selecting your cruise line, the vast majority of cruises are now for the "mass market." Many cases of customer disappointment can be chalked up to misguided perceptions and expectations, often instigated and propagated by some of the travel agent community and even the uninformed media.

You will probably never see Carnival referring to itself as a "luxury cruise vacation," but many less experienced travel agents and journalists will call them that. This leads some people to believe they can get a luxury cruise experience at bargain basement prices. I believe it takes a naïve consumer to believe he can take an all-inclusive luxury vacation for $700 to $800 for a week. However, I do believe it is possible to get a "luxurious" cruise vacation close to that price range -- as long as you carefully budget the "extras" you choose to pay for to complete the experience.

Is it semantic gymnastics to claim the terms "luxury" and "luxurious" have different meanings? Maybe, but I think it is important to differentiate between the two. It is up to the consumer to understand exactly what the base fare includes and to decide how much extra they want to spend.

Some people will argue that the cruise lines should add all the extras into the cruise fare, so it is easy to predict what the whole experience will cost you. If that is what you want, such cruise lines are easy to find. The reason why the mass market lines do not go in that direction, however, is because it requires people to pay for things -- whether it be drinks, service or tours -- that many individuals will not use.

Instead, the mass market cruise lines offer us the "pay-for-play" philosophy. You get onboard at a true bargain rate, and then each individual can decide how much to add to the vacation as it progresses. I believe this is the best approach; it offers very reasonable cruise fares with food, entertainment and transportation to exciting ports included, and makes it possible for each individual to budget their vacation as precisely as they want.

All the cruise lines have differences, some big and some smaller. Some lines deliver an experience similar to the "traditional" cruise, but still charge extra for many things. Some lines mix the "traditional" experience with the resort experience, including some things but not others, and some lines are creating their own innovative style of cruise experience.

The question to ask in selecting a cruise is, "what do you want included in your basic cruise fare, and what are you willing to pay extra for?" Some people want to bring wine on board and to have a sommellier in the dining room, some want rock climbing and ice skating. You determine when the total cost is right for you.

Being Informed is Free Sometimes the speed at which lines change direction in their operational policies can create problems for consumers, but in general it is simply a matter of learning the differences between one cruise line and the other.

As similar as the lines appear to be, there are still enough differences to give us plenty of choices. We can find lines that are well matched to what we want for our own cruise experience, but we have to be informed, and we have to be willing to pay the price.

Either way, the goal of this site and others is to help consumers get a better understanding of what they are buying, and what to realistically expect before handing over hard earned money! With the vast resources available on sites such as CruiseMates, it's almost inexcusable to make uninformed purchases.

The cruise industry has changed, and will continue to change. While the "grand old days" of cruising are not nearly as universal as they used to be, there are "grander," though different, new days ahead of us. There are more choices in the industry than ever. If you find the ship that's right for you, you've found the very best vacation value that exists.

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