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Royal reports strong sales pre-Concordia, patchy recovery after

After Costa Concordia knocked the wind out of what began as a strong wave season, bookings are starting to come back. But the recovery is patchy—faster in North America than in Europe, and sales are stronger among experienced cruisers than novices, Royal Caribbean said today in cruising’s first detailed appraisal of what Richard Fain called ‘an unheard of event for our industry.’

Booking volumes started to recover in recent days as Concordia began to fade from the headlines, stateside at least, and Royal Caribbean International and Celebrity Cruises resumed full marketing efforts, including television advertising.

The company’s overall booking volumes from North America had tumbled by low to mid-teen percentages versus the same time last year but recently the drop has narrowed to the high single digits.

In Europe, the decline has been steeper, varies significantly by country, and recovery is weaker. Other markets, including Asia/Pacific and Latin America, were down slightly after Concordia.

Not surprisingly, the greatest punch has been in markets closest to the tragedy.

Royal Caribbean consumer research in North America, the UK, Europe and Australia showed high Concordia awareness but found people view this as an isolated incident and generally feel confident the cruise industry is safe.

Experienced cruisers indicated they are only a little less likely to be interested in cruising now, while potential first-timers are less interested but not completely put off the idea of cruising, according to Celebrity president and ceo Dan Hanrahan.

As a whole, one-third of Royal Caribbean’s business comes from new cruisers.

Hanrahan noted his brand has a broad base of loyal customers to draw on. In fact, it was seeing record bookings by Captain’s Club members prior to Concordia. Also, Azamara Club Cruises has been performing well.

Even now, ‘We’re getting good demand. We’re just not seeing wave demand,’ Hanrahan said.

For Royal Caribbean International, which brings a large percentage of people to cruising, the Concordia impact is greater. But president and ceo Adam Goldstein called it ‘reassuring’ to have a more international customer base, giving the flexibility to act in different markets as needed.

For example, in recent years, 75% of the customers on RCI’s Europe cruises were sourced from outside the US. If, now, the North American market continues to recover faster, the brand can market more strongly in the US and Canada.

As of Jan. 30, full marketing resumed including Royal Caribbean’s new ‘The Sea is Calling’ television ads. Goldstein said the media spend that would have been used in the second and third weeks of wave season will be redistributed to future weeks so the company is holding to its planned wave budget.

Both he and Hanrahan said the resumption of marketing has clearly helped stimulate the demand seen in recent days.

For now, the company hasn’t taken significant pricing actions.

‘We have an arsenal of tools, including on-board credit, that we are looking at across our companies, products and cruise lengths,’ Goldstein said. Hanrahan indicated Celebrity aims to hold fast on rates but can take other steps; for example, this week, it halved deposits in connection with an on-going promotion.

Analysts asked if a surge of future sales could make up for those lost just after Concordia.

In Fain’s view, that’s not likely. He recounted that in past incidents, such as a hurricane shutting down a call center, ‘we never fully recover.’ Some of the bookings that may have come in during the impacted period are lost. However, the Royal Caribbean chief said that doesn’t mean people who didn’t book then will never book.

‘I am absolutely confident [Concordia] will have no long-term impact,’ he stated, citing the general understanding that this was an isolated incident.

He added that though the tragedy is still fresh and painful, and so novel that it’s difficult to forecast the path of recovery, the core business had been thriving before Concordia despite challenges that included ‘the most significant economic and geopolitical headwinds in history.’

The North American market was reviving. Things were tougher in Europe but the company was still expecting positive yields.

During the two weeks before the capsize, Royal Caribbean bookings averaged 5% more than the same period last year and at higher prices. Booked load factors and pricing were ahead of the same time last year in all four quarters.

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