Cost of Cruise Business
Written by: Paul Motter
Is it just me, or does it seem that the one thing that has slipped significantly in our society in the new millennia is basic accountability and integrity in business? It seems like everything we buy these days is made with planned obsolescence and any recourse we may have for problems with a purchase is defeated by the “fine print” of the contract of purchase.
When was the last time you had a truly satisfactory customer service experience when bringing a problem with a purchase to light? Good customer service does still exist, but I am sure most of us agree that for most businesses it is far more rare than ever before.
What is most troubling about this? The lack of candor. Hey, we are all experiencing this bad economy which changes the terms of everything. When an airline starts to charge for luggage and food onboard we can see what they are doing. We may not like it, but the reality is that a trans-continental flight flying full this year may have an actual profit margin of only about $1000 after fuel and salaries are paid for. We still want and need to fly.
But when a company makes changes in their offerings they don’t tell you about that is a different story. We are seeing much lower cruise fares this year as enticements to get you onboard, however the cruise lines are also seeing higher basic costs to run their ships so they have to make cuts someplace.
What costs are up? As the Royal Caribbean quarterly report stated, the price of oil per barrel has dropped by almost 65%, but the price at the pump has dropped much less. Why? This is exactly what I am talking about. Where is the justification and integrity in the oil companies in helping our economy recover by freeing up capital and lowering costs for hurting consumers?
The cruise lines gave rebates to all the guests who paid a fuel surcharge in 2008 based on the price of oil PER BARREL which dropped late in the year. Now they are paying out those rebates and not collecting the fuel surcharge anymore, but they are still paying a premium for fuel just like we are at the gas stations. The cruise lines are also suffering from the cost of capital. Cruise lines need operating money to stay in business, but the cost of borrowing money has also gone up.
Most of all, unlike the airlines which have shuttered down aircraft to keep each flight full, the cruise lines are keeping ships in service and even growing by adding to fleets. This is the correct long term approach as these amazing new ships create new demand for cruising as a vacation (the entire cruise industry is still less than 10% of the overall vacation market). But short term, it means hurt to the bottom line as income must go into new products instaed of making the cruise you are sailing on today the best possible experience.
Flying sucks right now – all the flights are full, there are delays and extra charges for every little thing you want onboard. Cruises are different, ships are less full and the fares have dropped significantly. But let’s be realistic, the cruise lines must cut costs someplace.
One thing I have noticed is fewer food options onboard. On our last cruise the free room service no longer has a huge a la carte menu of options, it has just three options; beverages only, continental breakfast or eggs with toast. The dinners have been cut from five courses; salad, soup, appetizer, entree and dessert, to three courses by putting soups, salads and appetizers all under one category. It is a subtle change merely in menu layout, but it probably saves the cruise line a good amount of money since most people order by category.
Bottom line – you are going to see similar cutbacks everywhere in society. The oil companies are one of the few industries anywhere who have benefitted from a “windfall” of lower cost of doing business (with dropping cost of oil per barrel), but they have not shared it with us at the pumps. Don’t expect businesses like cruise lines who are drastically cutting prices to get you onboard to suck it up and still deliver the same great experience they can provide when times are good.
Cruising is still a great vacation value, but if you see a smaller steak or less exotic appetizers on your plate that is status quo for doing business today. Yes, it is frustrating, but don’t let it ruin your vacation.
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