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Is Royal Caribbean Trying to Swim Upstream?

Written by: Kuki

I’ve witnessed Salmon swimming upstream during spawning season in Alaska, and watched the bears “fishing” for dinner, swatting at the Salmon as they tried to get upstream. I’m wondering now if Royal Caribbean Cruise Line is also attempting to swim upstream.

Economists throughout the planet have pretty much agreed the world economy is fragile at best. Consumer spending is lagging, unemployment rates are climbing, and the cruise industry is trying to react, to make certain they survive, and hopefully even flourish. Travelers are sitting on the sidelines needing to be lured with great deals.

The last two months my email inbox has been flooded with all variety of sale and discount offers from the cruise lines, including the premium brands. Even the luxury brands are offering all forms of incentives from 50% discounts including free airfare to $2000 shipboard credits.

Yet, frankly, in the past several months it seems to me that Royal Caribbean Cruise Line is acting as though this battle doesn’t exist for them. They have at the very least taken a different tact.

On January 6th of this year I wrote a block entitled “The Nation of Why Not.. Charge More”.
It discussed the fact that RCI seemed to be out of touch with the economic times, and the competition going on in the industry, with other lines steeply discounting their pricing to attract business, while they were introducing additional fees.

RCI’s reaction to address the issue of competition and discounting in the industry was an announcement by CEO Richard Fain stating that he’d rather RCI sail with empty cabins than discount the prices.

Since that proclamation it seems Royal Caribbean has taken a series of steps which to this admittedly feeble mind seem contrary to the marketing required to attract more business in today‘s world. Some of them may seem insignificant, and some may be viewed as understandable steps to attempt to increase onboard revenue, but when viewed as “a package” or over-all strategy,  they may illicit the opposite reaction by the cruising consumers than what Royal Caribbean envisioned.

Not necessarily in chronological order, but here’s the basics of the changes I’ve been referring to.

-Richard Fain’s proclamation of no deep discounting

- the cessation of dividends paid to shareholders.

- Reducing shareholder benefits- When those owning a minimum of 100 shares were able to receive a shipboard credit, they are still able to, but it is no longer combinable with other onboard credit offers, general loyalty offers, “dollars off” promotions and savings certificates. Guests have the option to choose between the shareholder benefit or the other offer.

- $3.95 Room service fees for room service orders after Midnight.

- a price increase for Johnny Rockets Diners onboard – to $4.95 per guest

- $14.95 for a “better quality” steak in the Dining Room

- no longer offering complimentary cocktails at the Crown & Anchor repeaters party

- Reserved sun-loungers by the main pool for Suite guests only, as well as reserved seats in the theatres and Studio B for ice shows (where applicable)- which naturally means restricting access for those who are not Suite guests.

- A $7.95 charge for a children’s lunch and play program for those ages 3-11.

- The reduction of benefits to the most loyal members of their “Crown & Anchor” repeat cruisers program. No longer allowing “Diamond members” of the program (those with more than 9 cruises) access to their Concierge Lounges.

As well, while instituting these policies Royal Caribbean recently took a Public Relations “hit” when it came to light they had been working with Buzz Metrics since 2007, establishing a viral marketing campaign at work on several Internet Message Boards called “The Royal Champions”; as first brought to the forefront by Anita Dunham Potter on MSNBC.com
- with follow ups other journalists covering the industry.
http://www.usatoday.com/travel/cruises/item.aspx?type=blog&ak=64050869.blog
http://consumerist.com/5166291/royal-caribbean-caught-infiltrating-review-sites-with-viral-marketing-team
http://www.jaunted.com/story/2009/3/21/13404/4209/travel/Clarifications+and+Righteous+Indignation%3A+%22Royal+Champions%22+Saga+Ignites+War+of+Words

I am not going to comment on the problems I see in each of the above listed items individually, but the cumulative affect seems to have ignited a firestorm of backlash. At least that seems to be the immediately obvious reaction when scouring the message boards and Internet blogs for reactions.

Considering Royal Caribbean is the 2nd most successful cruise line in the world, the planning, sequencing, and implementation of these changes seems to be uncharacteristically badly thought out.

This is normally a company which is tremendously forward thinking, particularly in their ship designs; adding unique activities and amenities to each new ship as it is floated out of the shipyard, but…..

The question is – will this backlash negatively impact Royal Caribbean in real ways; real dollars going to bookings on competing lines by both customers looking for lower prices, and by  their own past guests and shareholders feeling damaged by the additional new charges, and RCI having moved the goal posts to access their repeater’s program perks?

Is Royal Caribbean the fish swimming upstream, and will be they be swatted at by the hungry bears of the other cruise lines as they try and swim by?

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Comments

Comment from Ephraim
Time April 1, 2009 at 5:58 am

I wonder what the employees paid from tips think of all those empty rooms on the ship….

Comment from Trip
Time April 1, 2009 at 7:56 am

While many of the issues, discussed separately, to actually see all the cutbacks as a whole, listed, is actually shocking, as is, Fain’s statement about sailing with empty cabins, rather than discount the rates.
The velvet rope around the pool, to me, just smacks of elitism. I know, suite guests, get perks, and they should, for paying for a premium cabin…this is not one of them. If I did indeed book a suite,this is one perk, I would walk right by…
By slowly implementing some of these charges, over the course of time, I bet many cruisers had little knowledge of them, till they got onboard. RCI, does need a dose of reality, and maybe they will get it, sooner than they might expect.

Good artilcle Kuki, thanks….

Comment from Beth
Time April 1, 2009 at 8:11 am

Brilliant…

Comment from Bye Bye RCI
Time April 1, 2009 at 8:16 am

Great summation of all the bone headed things RCI has been up to lately.

After cruising exclusively with RCI for the past 19 cruises, they’ve convinced me that I should look around a bit before my next vacation. I was climbing RCI’s loyalty ladder so I could continue to use the concierge lounge. Now that the lounge has been closed to loyal continuously repeat cruisers and left open for suite guests only, my vacation dollars are up for grabs. Princess, Carnival, HAL do you hear us??? Let’s see, how many suites are there on a ship vs how many non suites are on a ship? If they want to sail empty, so be it.

Comment from Coxswain
Time April 1, 2009 at 8:25 am

Brilliant Article Kuki – Head in the Sand sums up Royal Caribbean.

Comment from Todd De Haven
Time April 1, 2009 at 8:35 am

Kuki,

As I’ve stated previously, I’ve only sailed on the Explorer of the Seas twice previously in June and am doing so again this June 11.

Out of curiosity, I’ve kinda’ kept tabs on the vacancy rate but not as closely as I have this year due to the economy. So what follows is certainly not to be construed as any “scientific study.”

That being said, this morning the vacancy rate on our cruise was a total of 48 cabins or using an average of two per cabin, 96 passengers.

This might be close to “normal” for this stage of the game for this ship on this itinerary. I don’t know. There are some $100 senior discounts on some of the cabins.

But what appears to me at least to be unusual, are the number of suites and balconies still available.

I shan’t bore anyone with the details of the differences in the categories within a specific type of cabin save to say, the higher you go in the alphabet, the lower grade the cabin.

They are as follows:

GRAND SUITES:

5 vacancies, all on Deck 10

JUNIOR SUITES:

1 vacancy on Deck 10
4 on Deck 10

BALCONY

D-1:

1 on Deck 6
1 on Deck 8
1 on Deck 9

D-2:

Guarantee Only

D-3:

5 on Deck 6

E-1:

1 on Deck 8

E-2:

3 on Deck 6
1 on Deck 7

OUTSIDE

F (large outside):

2 on Deck 7
3 on Deck 9

INSIDE

Inside Promenade 3 on Deck 6

STANDARD INSIDE

L: 5 on Deck 10

M: 3 on Deck 9

N: 5 on Deck 6

Comment from Snoozeman
Time April 1, 2009 at 9:15 am

If we didn’t know it to be true one would think this was an April Fools joke. Quite a list of cut backs and changes.

Great blog, yes I think RCCL is swimming upstream.

Comment from Martha Pennington (aka Msblackjack)
Time April 1, 2009 at 10:49 am

Wow. I tend to agree with Snoozeman it would seem like an April’s Fool joke…. but we all know the changes have been in the works, so maybe they just hired a Fool to

Comment from CruiseNOID
Time April 1, 2009 at 11:05 am

Great article.

In an economy and time when some businesses will end up making it though this rough time only by their service, Royal will see the impact as the months follow. Once everyone really begins to experience the full financial impact of the free perks they were so used to getting, (especially after this summer), Royal’s bookings will show a decline.

I do think that their “forward” thinking on thier plan is that they expect other cruise lines to follow suit and start charging for these additional service. It is all too similar as the airlines have done – charging for the first checked baggage to compensate for the increased cost in fuel. Now that fuel has come does to a semi reasonable price, we haven’t seen these fees removed.

Comment from WildRover
Time April 1, 2009 at 11:15 am

I agree RCL’s approach to these economic times is puzzling when compared to the other cruise lines. Maybe sailing empty and annoying their loyal base will work for them, though it seems unlikely.

I can’t help making a comparison of RCL to the banks who were too slow in recognizing the subprime mess and then failed. Like a massive cruise ship, RCL’s management may prove to be unable to stop on a dime and turn the ship around when needed.

It’ll be interesting to see what each cruise line looks like a year from now. Some may not be able to weather this storm.

Comment from Mike M
Time April 1, 2009 at 11:37 am

I just took advantage of a deeply discounted by Carnival on the Pride. While the cost of the aft balcony cabin was under $100 pp/day Carnival will make at least $500 on tips and onboard expenses.

The point of this is that by sailing under 100% capacity the cruise lines will sacrifice the fixed costs of operation (fuel, salaries, operating expenses) and the tip salaries for the tipped staff.

Royal Caribbean may be able to get by with this strategy but I believe it will deteriorate service and in the long run it will make many first time and repeat cruisers look for another line. Looks like they are taking short term gain and sacrificing long term profitability.

It will definitely reinforce the “Nickle and diming” stereotype that cruiselines have.

Take care,
Mike

Comment from Trackypup
Time April 1, 2009 at 1:04 pm

Excellent Article Kuki…kind of scary when you see all these cut backs listed together. You seriously have to wonder where there head is at. And to the person that posted how many cabins were available on their cruise, if you’re getting that info from a website, you’re never going to see all availability.

We just booked HAL 7 day Alaska, VA Balcony for under $100 pp pd. We hadn’t planned on cruising this May, but that was too good a deal to pass up. RCL is going to be in so much trouble when Allure comes out. There’s no enthusasium

Comment from blahblahgirl
Time April 1, 2009 at 5:29 pm

im a travel agent and i myself have been wondering why this is the case- when carnival is offering an earluy saver promotion where i can get a balcony for 700$ per person rccl still has prices of 1500 or more. their prices ahve not fluctuated very much unlike the other cruise lines. then again, rccl has ALWAYS run higher than the other cruise lines, and they’ve still managed to survive, so you really cant judge at this point. only time will tell!

Comment from Clearvoice
Time April 2, 2009 at 11:39 am

It is amazing the bold attitude they are taking.
While their ships do amaze most, their prices are often the highest in the mass market lines.
There food has slip to new low levels. They gave a poor excuse for charging $14.00 for a steak in the main dining room. This took nerve which most object.
They took away the coffee, hot tea and ice tea station in the buffet dining room to save a buck. No more chocolate mints on the pillows. There are many ways to raise revenue without sticky it in the guest’s face. As a travel agent, my sales for Royal Caribbean have been cut in half while my sales for Princess a clearly superior line have doubled. Best cruise value of any.
The problem is their lack of Caribbean presence in the summer.

Comment from Gordon
Time April 2, 2009 at 12:16 pm

I’ve never sailed RCI, and I can’t see any reason why I would.

I have lived in towns with smaller populations than the passenger load on Freedom class, and Oasis – forget it, there aren’t enough amenities in the world to convince me to share the lido buffet with 5000 others at lunch time, or the show rooms with these mobs at night.

Both Carnival and Princess undercut RCI on cost, and they beat RCI on food and service, too, from what I read.

They’ve got the names of their new ships all wrong – instead of “Oasis” and “Allure,” it would be more accurate to call them “Hubris” and “Nemesis.”

Comment from Bryan
Time April 2, 2009 at 1:28 pm

Princess is also shooting themselves in the foot in my case. I booked a cruise from Sydney to Honolulu, actually Sydney round trip but I got a variation to disembark in Honolulu. However, Princess flatly refused to rate the cruise on a per night basis (i.e. pro-rate the fare, but insisted that I had to pay the entire r/t fare, notwithstanding the fact that they are selling space from Honolulu to Sydney and would need empty cabins to book.
Of course I cancelled the booking, so they are now out the money I would have paid them and will also have an empty cabin.

Comment from Bruce
Time April 3, 2009 at 4:44 pm

It is amazing to me that the loyal customers of RCI are seeing that RCI is not loyal to them. Looking at all these cutbacks togather is very shocking, no a better word would be OUTRAGEOUS.

Comment from Fireba11
Time April 3, 2009 at 9:22 pm

Excellent article Kuki. I have never sailed RCI, because of their higher pricing, and probably never will. They do have remarkable ships, I have seen various ones on the travel channel, but not remarkable enough to earn my vacation dollar. Why would I pay almost double for a RCI vessel going to the same ports of call that I can sale to on other lines for almost half the price?

I also hate nickle and diming, such as the extra pay in the dining room for a bigger steak. I have enjoyed every cruise I have been on so far and If I can sail cheaper and still enjoy myself, so much the better.

Chow
Tim

Comment from Timmy Kerwin
Time April 4, 2009 at 12:59 pm

Nice article; however, I must say, I am in a Grand Suite in May. RCI just dropped my price by $1860, combine that with C&A discount and my grand suite is gonna be pretty darn cheap. That being said, I have paid more, and now find out that RCI is giving me all these added perks. I did not book the GS to get perks, I booked it because I’m on a 12 day med cruise and wanted extra space for my wife and myself; perks didn’t exist when I book last July. So that being the case, I will take the perks, and those who booked inside cabins should not be mad at me. When people pay for a 1st class ticket for international travel, they know they will be getting a choice of meals, lg pillow and nice blanket, amenety kit, lie flat bed, etc; so booking suite should be no different. As far as how RCI handled the announcement, that may be a PR problem, but it shouldn’t count against those of us who paid the extra price up front. The loyaty program is no different than airline loyalty programs. I hold elite status with three major us airlines; I have no loyalty to one single carrier, as I also have elite staus at major hotel chains. These loyalty status does not mean I will always fly one airline or stay at one hotel; same with cruising; the loyalty program, or cutbacks will not keep me from looking at other cruiselines. Whoever offers the best price, for the amount of days, and the itinerary I like will win my vote.
Cheers

Comment from Marion
Time April 8, 2009 at 6:51 am

Not only did I take a hit on my stock but I also lost the OBC perks – one of the reasons I purchased the stock in the first place.

I am now shopping price and don’t even look at the cruises that are regular price, why should I. The discounts have been wonderful and we all should take advantage of them while we can. These are not good marketing decisions for RCCL. How are they going to fill their mega ships and continue to make money? I would think they would keep the money coming in by discounting the cabins – passengers still spend a lot while on the ship…just foolish – what is RCCL thinking?

Comment from Rita
Time April 8, 2009 at 5:01 pm

I’m going to go out on a limb here … sort of swim upstream, if you will … and say that I agree with RCI. They should NOT discount their cruises at all in these trying economic times. Why? Because that’s what everyone else is doing and it shows that you are just another face in the crowd. If I ran a cruise line … especially one well-known for being innovative … my feeling would be that our cruises cost more BECAUSE THEY ARE WORTH MORE. And, anyone who wants to take a sailing on my cruise line should be willing to pay a premium for doing so.

Look at Disney. You don’t see them doing too much discounting, do you? Disney has a unique product and yes, there are many people who either can’t or won’t spend the amount required for a Disney cruise, but there are a lot who will … and for them Disney needs to keep the experience unique and special, and it costs money to do that. If I discount all over the place, now I’m not making the kind of money I need to make in order to keep my cruises special.

Now, of course, this opinion isn’t really just for RCI … but for any cruise line … and it pre-supposes that the cruise is special and will be kept that way. For example, if a cruise line routinely starts discounting seven-day Caribbean cruises, I would imagine the effect of that discounting is gonna show up in the finished product … less of the personal touches that made the cruise line special to begin with. So, I am assuming that RCI is planning to also keep their standards high along with their refusal to discount.

Maybe I’m in the minority here believing that these economic conditions are not permanent. We are just going through a very bad time right now, but things will surely improve. If I’ve discounted my cruises deeply, and also cut a lot of the special touches out in order to accommodate that deep discounting, when the economic climate changes, my cruise line is no longer going to be known as something special. Now I’m gonna be lumped in with everybody else … because I am delivering exactly what everyone else is. So, I’d rather sail some of my ships at less that full capacity now, but keep my prices and standards up … which will stand me in good stead later, when the economy is much better and all those former customers want to come back to what they remember as my unique and special onboard experience.

Just my opinion.

Blue skies …

–rita

Comment from Kuki
Time April 8, 2009 at 9:46 pm

There’s certainly plenty of varying opinions when it comes to marketing anything…. from automobiles to widgets to cruises.

And suggesting they “pretend” they’re special would be one of them. I’m thinking it might be the tact that General Motors and Chrysler took :)

RCI does build special ships, but beyond the hardware I think they are a mass market line.

That’s the point I was making in my first blog on the topic (The Nation of Why Not Charge More). I think they think they are really overconfident in their product. And that’s been further demonstrated with the lates moves I wrote about.

Now.. whether they are right, or I am, I suppose only their financial reports at the end of ’09 will tell.

Comment from Dave Beers
Time April 9, 2009 at 4:02 pm

>>RCI does build special ships, but beyond the hardware I think they are a mass market line.<<

Exactly what I think. To me, RCI’s latest cutbacks and extra fees are akin to Burger King putting one less pickle slice and a smaller patty on a whopper and thinking they are superior enough to Wendy’s to get away with it. They aren’t.

Comment from Robin
Time April 10, 2009 at 2:28 pm

In relation to the Burger King pickle analogy, it sounds pretty goofy but when a company is doing that much volume, the savings on one pickle would be huge.

I prefer a higher end, more intimate cruise atmosphere than the RCI product, but I think the Oasis is going to be the ship that raises the bar once again and will have the other cruise lines who serve the same demographic scrambling to copy or create similar product. Just Central Park alone is enough for me to want to cruise on the Oasis. I love the idea of sitting in a park at sea. It’s as googy to me as removing that pickle! =)

Comment from lysolqn
Time April 11, 2009 at 10:47 am

Since many cruises are planned for and purchased so far in advance, and because RCI is such a popular cruise line, perhaps it has yet to feel the full effect of the economic slowdown, thus the somewhat cavalier attitude of Mr. Fein. If, going forward, bookings get soft and take a hit, I suspect Mr. Fein will fall into step with the competition and do whatever needs to be done to fill unsold berths as sail dates near.

Comment from MagnoliaBlossom
Time April 12, 2009 at 3:39 am

After watching CNBC’s Cruising, Inc. special and seeing the profit margins of cruising, one has to wonder what RCCL is thinking when choosing to sail with empty cabins. I can’t believe that cost of operation is dramatically different between lines so NCL’s figure of needing to sail at upper 90 percentile doesn’t leave a lot of wiggle room. Maybe Mr. Fein is willing to take the losses associated with overpricing and reduced quality, but will his board of directors?

Comment from Paul Motter
Time April 12, 2009 at 9:59 am

Well, I think people may be assuming too much when they say RCL is sailing with empty cabins. No one knows the exact occupancy rate they have been sailing with until they announce their earnings, probably within 2 weeks. That will tell us a lot about where they are as a company.

Comment from MagnoliaBlossom
Time April 14, 2009 at 6:35 am

Like many of you, I received an email today from RCCL reacting to feedback they’ve received from C&A members. I had to chuckle when he remarked that they knew there would be unhappiness with the changes they’d underestimated the degree – duh! At least they are listening – how refreshing.

Comment from Kuki
Time April 14, 2009 at 9:46 am

I actually don’t think there would have been near “the uproar” to the cutbacks in the C&A programs if not for all the PR miscues that proceeded it.

The cumulative effect is what pushed it over the top.

I think it naive to believe that any of this will push RCI to bankruptcy. Though I do think that Mr. Goldstein’s letter proves it put a significant dent in their bookings, I don’t believe it any way would be terminal for the company.

As far as the actualy theories explained in implementing the new new D benefits, it’s really pretty simple. If overcrowding was the total issue, they could have simply opened the newly designated lounges for Diamond members, and offerred the same free drinks they do in the Concierge Lounges. Instead they are offering a 25% discount. So the reality is they are giving back 1/4 of what they took away.

And all the other changes they made adding additional fees, and making discounts non-combinable still exist. Yet many folks seem to be pleased that RCI “listened” to them. Pretty funny really.

Comment from Cathie
Time April 30, 2009 at 5:11 pm

I LOVE RCCL, and in the past they’ve always been my first cruising choice. Yes, I paid more on each sailing than I would have with the same itinerary with another cruiseline. BUT…I didn’t mind because I felt they gave the best service, had the best food & I loved their ships.
Now they want to make it more expensive with more “add-ons”? Are they NUTS!?!?!???! I don’t think they realize that people like me who kept them “afloat” (sorry for the pun!) before these changes will only take so much before we look to other cruiselines. I’m loyal, but not to a disloyal company. Thanks for bringing these issues to light. We are right now looking a booking a cruise and this article has changed my mind of putting RCCL on my first choice list.

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