Demand and inventory, a delicate balancing act

Image result for river cruise ships

When you have more bookings than you know what to do with, that’s the good kind of problem to have in the travel industry, right?

Well, sort of. No travel company ever wants to have too many empty beds/seats/cabins. But not having enough openings to meet demand, that’s a tricky problem too, because that’s when you risk losing clients to the competition.

And when demand is a bit in flux, as it currently is in the river cruise market, it’s hard to plan for unknown growth and an unknown future. For those watching closely, you may have noticed that shipbuilding momentum has eased up in the river cruise industry. Viking River Cruises is only building two ships next year, down from the six it debuted this year, 12 last and the record 18 the company launched in 2014.

AmaWaterways too is only launching one new vessel each in 2017 and in 2018 (the company typically launches two each year). And Avalon Waterways doesn’t have any new ships planned for 2017, after several years of consistently building two or three vessels annually. The shipbuilding frenzy clearly has died down a bit for now, even as some newer players (I’m looking at you, Crystal) have entered the market.

But then there is the issue of pent-up demand following a softer year such as the one the river cruise market just experienced, driven by the terror attacks in Paris and Nice and by high water levels that disrupted some departures. River cruisers who put off the popular travel style in 2016 may now be looking to get onboard in 2017.

Noting pent-up demand from the U.S. market and on the heels of two promising future booking months, AmaWaterways this month announced its 2018 sailings are open for booking. And several other river cruise lines have been promoting their 2018 availability as well. If there really was some pent-up demand as AmaWaterways claims, a shipbuilding slowdown could potentially create a capacity bottleneck that might force river cruise lines to offer up 2018 cabins as an overflow alternative to 2017.

Then again, let’s not get ahead of ourselves. This past year was a challenging one, and river cruise lines will likely be happy to simply fill their 2017 inventory at higher capacity levels than they did in 2016. If demand for river cruising returns with a fervor strong enough to have some river cruise lines regretting they didn’t put in some additional ship orders, that is a problem they would probably prefer to have over figuring out how to fill empty ships.

Advertisements

Should river lines be worried about Crystal?


By Michelle Baran

Throughout the last several years of seemingly unstoppable growth in the river cruise market, ocean cruise lines have resisted getting in on the river action, a segment of the cruise market that, while clearly very popular, represents entirely different economics of scale (in other words, much lower passenger volumes) than ocean cruising.

So when Crystal Cruises announced a massive expansion initiative, including plans for two new river cruise vessels, it effectively became the first ocean line to cross into the river world.

Until the Crystal announcement, the only significant crossover in Europe had been in the opposite direction: river cruise heavyweight Viking Cruises launched its first ocean-going vessel this year (there are several smaller scale examples, such as Haimark, which has both river cruise vessels and a coastal cruise vessel, as well as the now-defunct Peter Deilmann Cruises and Cruise West, both of which dabbled in river and coastal cruising). And Crystal has been involved on the rivers before, via a marketing partnership with AmaWaterways.

Crystal hasn’t revealed much detail about the river cruise piece of its ocean-yacht-river-jet expansion plan. Lloyd Werft, the German shipyard that will construct Crystal’s new ocean ships, is also building two luxury, Crystal-branded river cruise vessels that will operate in Europe. (Crystal CEO Edie Rodriguez told Travel Weekly’s Tom Stieghorst that Crystal will reveal additional information about its river cruise product at a later date for competitive reasons.)

Looking at all of this, should river cruise lines be somewhat nervous? Could Crystal entering the river cruise business put a dent into the all the hard work they’ve put into creating, growing and developing the market these past years?

Well, Crystal still has to fit those plans into the same 38-by-410-foot dimensions that all river cruise vessels are limited to, due to the locks and bridges along Europe’s inland waterways. In that regard, Crystal will be up against the same innovation challenges the river lines have been grappling with through these growth years: how to maximize space and onboard offerings when square footage is so limited.

Additionally, for now at least, it’s only talking about two vessels, a tiny fraction of the overall river cruise inventory in Europe.

But under its new ownership of Genting Hong Kong, which clearly has ambitious plans for the company, Crystal could have enough resources at its fingertips to at least make some waves in the river cruise market, both from a hardware as well as from a marketing point of view.

“I think Crystal is doing a very smart thing,” said Donald Baasch of American Canyon, Calif.-based LastCallCruises. “They might as well make money on their customers instead of letting someone else have them, especially if they believe that a lot of them will inevitably want to try a river cruise.”

So, all told, surely the highly competitive river cruise industry has its eye on Crystal’s plans, but I doubt they are shaking in their boots quite yet.

Piggybacking on the river boom

Craigslist

By Michelle Baran
Do you ever find yourself, as I often do, reflecting about a seemingly simple concept that has become incredibly successful (like Craigslist, the beyond basic classifieds website now worth hundreds of millions of dollars), and say to yourself, “Drats! Now why didn’t I think of that?!”

As the river cruise market continues to boom, some in the travel industry might be feeling that very sentiment about river cruising. They might have a little case of river cruise envy as it were — “If only I had thought to start building riverboats several years ago,” the regretful might muse.

Michelle Baran
Michelle Baran

But rather than bemoan the fact that they aren’t among the pioneering companies that built up the river cruising market, several factions of the travel industry have instead been working to benefit from the myriad of business opportunities that have arisen in light of the the river cruise industry’s success, and their piggybacking strategy is working.

For instance, the wholesale tour operator Avanti Destinations has been promoting its customizable FIT offerings as pre- and post-cruise city-stays that agents can tack onto a river cruise to increase their earnings.

“We encourage agents to ask their cruise clients about adding extra days — or even a week — to their itinerary,” said Harry Dalgaard, president and founder of Avanti.

“We’ve had clients, for example, who start with a Danube cruise, add a few nights in Vienna, continue on to Salzburg and then head to Florence, the Tuscan countryside and Rome before returning home,” he added.

The result is that Avanti is seeing big booking windfalls in destinations linked to river cruising. In the past year, the company has seen bookings for Bordeaux and Lyon in France increase 85% and 100%, respectively; bookings for Budapest, Hungary, have grown 30%; and for Nuremberg, Germany, bookings have jumped a whopping 175%.

Consequently, Avanti has developed new pre- and post-cruise suggested itineraries geared specifically toward river cruisers, including a three-day Bordeaux package (from $725 per person), a three-day Amsterdam itinerary (from $595 per person), a three-day Nuremberg package (from $329 per person), and a three-day Vienna package (from $515 per person).

Travel agents too are getting in on the action. Several years ago, it was difficult to find any agents that were dedicated solely to the river cruise market or who knew very much about it. But today, there is a growing roster of river cruise specialists, including several that have been featured in Travel Weekly, that have built up an entire agency business and/or website focused only on river cruising.

Sometimes it doesn’t matter whether you had the good idea in the first place. What matters is whether you can make someone else’s good idea work in your favor. The river cruise industry isn’t just one business, it is a ripple effect of businesses and opportunities for those who choose to ride the wake.