Abandoning the industry’s traditional “sail full, whatever it takes” imperative, Royal has been forgoing last-minute discounts for the past seven months in an effort to wean passengers from the practice of waiting until close to the sailing date for the best deals.
Moreover, several agents said they were seeing no signs that Royal has been selectively abandoning what the cruise line calls its “price integrity” policy.
“For the short period of time it’s been available, I haven’t seen them break their promise; I haven’t seen them discount at the last minute,” said Jay Johnson, president of Coastline Travel Advisors of Garden Grove, Calif. “I have not had any clients tell me, ‘Hey, we’re leaving next month, and we found it lower online.'”
Patrick Scholes, a cruise analyst with SunTrust Robinson Humphrey, said he was seeing signs in the firm’s monthly survey of cruise pricing that close-in fares for Royal are far higher than they were at this time last year. In August, fares for bookings within one to three months of departure were up 13% after rising 16.9% in July and 15% in June. In fact, they have risen each month since March, when the policy began.
“This is the strongest near-in advertised pricing growth we have ever observed for the Royal brand,” Scholes said of the July numbers.
Under its “price integrity” policy, Royal stops discounting 10, 20 or 30 days before departure, depending on itinerary and other variables. In a conference call with analysts in July, Richard Fain, chairman and CEO of Royal’s parent, Royal Caribbean Cruises Ltd., said that one sign the program is working was that Royal recently extended the no-discount period to 40 days in some cases.
“We recognize that this policy is costing us some money in the short term, but we believe that in the long term it will pay handsome dividends,” he said.
Fain said the impact on occupancy has been “relatively small,” but where it might be costing the brand is in lower prices for bookings made from four to six months before departure.
Scholes said his surveys show that Royal prices for cruises four to six months from departure were up only 1.7% in June and down 0.1% in May.
“We suspect [Royal] is not aggressive on the four- to eight- [month] pricing, so better load the ships earlier on so they have less last-minute inventory to fill,” Scholes said.Other cruise lines might be copying the strategy, at least informally. Scholes said Carnival Cruise Line’s surveyed pricing for bookings one to three months out was up 14.8% in July, which he described as “not too dissimilar to the Royal brand’s.”
However, several travel agents said they were seeing no signs that Carnival was mimicking the Royal policy.
“All the competitors around [Royal] haven’t changed,” said Linda Bosch, owner of Just Cruises & More in St. Louis.
Bosch said she was excited to see Royal try to end last-minute discounts because it makes for smoother planning and fewer rebooking hassles when prices drop.
“We, as the agent, are looking to project that bookings are there,” Bosch said. “We can’t project when they’re doing the discounts at the last minute.”
But Bosch predicted that it will take six months to a year before the changed incentives are reflected in consumer behavior, primarily in the form of earlier booking habits.
Johnson said he fielded an inquiry from one group recently for a cruise on the Harmony of the Seas next summer and the price went up between their first phone call and the time they called back to make a deposit.
“They said, ‘Find out if you can get the lower rate back,’ but I don’t think I can,” Johnson said.