Value trumps price

By Tom Stieghorst

When all-inclusive drinks packages were introduced two years ago, cruise lines hoped to earn some extra revenue, figuring some people wouldn’t drink as much as they expected to.

But the drinks packages are also being used as a kind of loss leader for several cruise lines. They’re dangled for free to help induce passengers to book a particular line or sailing.

Such promotions have reshaped cruise marketing in the past few years. Be it a reduced deposit, free gratuities or onboard spending credits, it’s a rare guest who sails today without something extra in his or her pocket.

For cruise lines, value-add items have been the ladder out of the deep-discount pit they fell into after the economy tanked in 2008. Prices on some seven-night cruises fell as low as $113 per person as financial gridlock made a cruise seem like an extravagance.

Prices have improved, in part because value-add has augmented discounting as a ship-filling strategy.

“We’re really working hard to create more promotions,” said Royal Caribbean Cruises Ltd. Chairman and CEO Richard Fain. “I think we can do a better job offering more for the same money rather than just discounting.”

Value trumps priceDiscounts do more than harm revenue, said Adam Snitzer, president of Peak Revenue Performance, a Miami Beach consulting firm that specializes in revenue management.

“You see a cruise for $499, it creates this perception that, OK, a seven-day cruise is worth $499,” Snitzer said. “And then if you try to raise prices, there’s still that lingering reference price in consumers’ minds, that this is what one should pay for a seven-day cruise.”

When demand is not filling ships to the 100% level that the industry’s business model calls for, cruise lines have to do something to get balky consumers off the sidelines.

“So it’s very smart to go into the value-add position for a few reasons,” Snitzer said. “One is you offer a higher price, so you raise that reference price. And what you bundle in often has a higher perceived value in the customer’s mind than the cost for the cruise line.”

Cost vs. perception of value

Take the example of the drinks package. Snitzer said the profit margin at cruise ship bars can be up to 90% of the drink price. If a guest gets a $100 onboard credit and spends it at the bar, the value in the customer’s mind is $100, but it only costs the cruise line $10, he said.

Other promotions cost even less. The promise of a reduced deposit may ease the decision for prospective buyers, and it has immediate value in managing their budgets, but in the end it costs the cruise line nothing.

“They’re going to collect that money,” Snitzer said. “They’re just going to collect it later.”

Royal Princess' SeaWalk and balcony cabins.A two-category upgrade, a popular value-add in Carnival Cruise Lines promotions, has a perceived value of whatever the difference in brochure cost is between the two cabins.

“But if those cabins aren’t full, then there’s no lost revenue,” Snitzer said.

Some value-adds, such as onboard spending credit, can actually drive incremental revenue by making things affordable that might otherwise seem out of reach.

For example, a family that can’t afford the whole price of a swim-with-the-dolphins tour, one of the more expensive excursions in the Caribbean, might reconsider if they have a spending credit to soak up part of the cost.

For travel agents, the focus on promotions has several benefits.

First and most important, it buoys ticket prices, which keeps commissions higher than they might otherwise be.

“A price drop obviously affects our earnings potential,” said David Crooks, senior vice president of product and operations at World Travel Holdings. “A value-add has more impact on the cruise line’s economics than it does on the trade.”

Second, value-adds make shopping a little more challenging for the consumer. No longer can they simply type dates and locations into a search engine to find the best deal.

A $599 price at one line might not be as good as a $699 price at another if the second offer also includes a night in a specialty restaurant, or a reduced deposit or a money-back guarantee.

“It helps us keep the client rather than having them go direct,” Crooks said. “We can navigate them through the different offers, tell them what they mean.”

Stephanie Turner, president of Brentwood Travel, in St. Louis, agreed that value-add promotions can enhance the agent’s role as a knowledgeable adviser to clients.

“I’ve always said that if our suppliers make it complicated enough, we do become valuable,” Turner said.

Lotus Spa on Royal Princess.However, Crooks said it’s important that the offers not become too complex. He said promotions that are not combinable with other offers are especially frustrating to agents and consumers.

“There’s a perception of a bait-and-switch. Those that allow it to be combined with the best price tend to be most successful,” he said.

Another attribute of a good value-add promotion is that it be fairly broad. Joni Rein, Carnival Cruise Lines’ vice president of worldwide sales, cites the line’s Great Vacation Guarantee as one example.

Vicki Freed, Royal Caribbean International’s senior vice president of sales, trade support and service, said prepaid gratuities and shipboard credits are among the most popular value-adds with consumers.

“They tend to favor shipboard credits over things we pick,” Freed said. A free beverage package only appeals to a certain audience, she said: “If you’re not a big drinker, that beverage package isn’t a value to you.”

Some cruise lines have attacked that problem by offering a suite of value-adds from which to choose. Celebrity Cruises has its 123Go! and Pick Your Perk promotions, in which passengers can choose among free gratuities, a beverage package, a $300 onboard credit or airfare savings of up to $600, depending on which is most meaningful.

Other premium lines have followed suit. Princess Cruises has 3 for Free, and Holland America Line calls its version Explore 4.

Norwegian Cruise Line has even experimented with a kind of package of packages, which offers virtually every value-add item in its inventory.

Norwegian Breakaway's Shanghai Noodle BarCalled the All-Inclusive, the product bundles Norwegian’s Ultimate Dining and Ultimate Beverage packages with Internet minutes, plus a bevy of other items not included in the cruise fare.

The package, priced at $899 for a seven-night cruise, was offered in August and September for 2015 cruises.

MSC Cruises recently introduced its own take on packages and value called “Inclusive Experiences,” which essentially does away with cabin categories and instead offers consumers four amenity levels from which to choose.

Although big globally, MSC has been a small player in North America until this year, when it positioned the 3,959-passenger MSC Divina in Miami. The Genoa-based line has historically offered value-adds such as a standard “kids sail free” policy that other lines have avoided.

In the new structure, the most price-conscious travelers can choose the entry-level “Bella” experience, in which most amenities are a la carte. The levels progress through “Fantastica,” which costs $30 to $60 more per person, and “Aurea,” which costs an extra $400 per person, to the top “Yacht Club” experience, MSC’s ship-within-a-ship enclave.

Ken Muskat, MSC’s executive vice president for sales, said the Bella experience satisfies MSC’s bargain customer who will give up choice of cabin location and dinner seating for a “bottom of the barrel” price.

He said the Fantastica level adds another $250 of hard value. “So it’s very easy for the travel agent to upsell you for another 50 bucks, give you a better location stateroom choice, give you a priority confirmation on dining room time preference, and you get $250 value in drink vouchers, the free room service, the 50% off fitness classes, etc.,” Muskat said.

“And then it goes up from there,” he said.

Breaking free of the discount trap

Of all cruise lines, none has a greater interest in shifting the conversation from price to value than MSC. The brand’s unfamiliarity to most North Americans has consigned it in some cases to filling ships with price.

But price is what most cruise lines had to resort to in the 2008-09 period when the financial panic, a foreclosure crisis and high unemployment left few people game to cruise without a discount fare.

One of the first cruise lines to break out of that trap was Regent Seven Seas Cruises, which in early 2009 introduced “ultra-inclusive” pricing. Regent was already hailed for including things like drinks and gratuities in the overall ticket price.

The Celsus Library in Ephesus, Turkey.To hold the line on rate, Regent added a selection of free shore excursions to prime the demand pump. Regent and sister line Oceania Cruises have continued to refine the model since then.

Snitzer said the two Prestige Cruise Holdings brands start with a “truly high” brochure price, then add back free air, free Internet, free gratuities and, in the case of Regent, free shore excursions.

The kicker is an offer of two-for-one fares, “the strongest offer that’s ever been invented,” Snitzer said. “They’ve added so much value, so many things to the cruise, that the price becomes impossible for anyone to understand, what is this really worth?”

Snitzer said a cynic or a sophisticated buyer would say that many of the free items are really built into the cruise price.

“But at the same time, a lot of consumers don’t go through that arithmetic,” he said. “That’s just not the way they approach things. They say, ‘It looks like a great deal, so I think I’ll do it.'”

Some cruise lines say that enhanced product is just as important as tactical promotions in transmitting value signals to consumers.

Several luxury lines such as Azamara Club Cruises and Crystal Cruises have recently added dedicated shore events as a value component. At Windstar Cruises, they are called Private Events.

Examples include a fire dancer performance and dinner in Tahiti or a two-day tour of Luxor in Egypt. Windstar also takes every opportunity to tout its small size, high service and intimate port lineup.

“The whole value discussion always starts with us explaining what a small-ship luxury experience on Windstar is all about,” said CEO Hans Birkholz.

Enhanced product value goes to the heart of each brand. At Royal Caribbean, it means innovation, Freed said.

“Nobody has the bells and whistles that we do,” Freed said, citing the AquaTheater on the Oasis of the Seas or atrium aerial shows on multiple ships as examples.

Seuss at Sea on the Carnival FreedomAt Carnival, upgrades such as Seuss at Sea or the Carnival Live concert series have added value that helped its business recovery from negative publicity surrounding the Carnival Triumph engine room fire in 2013, Rein said.

While the emphasis on value is enabling cruise lines to raise fares, cross currents have kept ticket prices from rising to the level that prevailed before the 2008-09 recession.

“What we’ve seen, as the economy has rebounded, cruise line net ticket revenue yields are still running probably 8% to 12% below where they were at peak,” Snitzer said. “That of course is a concern.”

Several safety and service incidents have contributed to that, starting with the Costa Concordia capsizing in 2012, and continuing with fire episodes on the Carnival Triumph and Grandeur of the Seas last year.

A second factor has been a glut of berths in the Caribbean starting last fall, which led to both price discounting and an avalanche of promotions.

“I think this year we’ve sort of undone some of the good, if you will, because we needed to,” Rein said. “I think consumers now are more inclined to look at the value-add and the price.

“We’ve seen the most creative promotional season I’ve ever seen since I’ve been in the business for 30 years,” she said. “It almost became the price couldn’t be low enough and the value-adds couldn’t be rich enough. Those two concepts collided this year.”

Rein said she hoped that will change in 2015 as some of the excess Caribbean capacity begins to clear.

“For 2015, we’re going to continue down that path of being creative and trying to maintain pricing, which I think we’re all very concerned about,” Rein said. “I think we’re open to being more creative because 2014 taught us that creativity is not necessarily bad.”

5 Ways to Stay Healthy on a Cruise

<p>Nutritious meal options abound on Holland America Line menus, including many vegetarian dishes. // © 2014 Holland America Line</p><p>Feature image...

Conventional wisdom has it that people gain weight on vacation, especially on a cruise vacation where the culinary options are generally outstanding and abundant. But that doesn’t have to be the case.

An extremely healthy friend of mine shared this experience with me, just after returning home from what she described as a fun-filled Carnival Cruise: “I haven’t lost this much weight in a week except when I was sick,” she said. “Forget the spa vacation. This was great!”

Cruise lines have made being at sea easier and more desirable for the health-conscious, and now my cruise weeks also serve as renewal weeks. I feel refreshed while sailing, get off feeling even better and make each trip a renewed commitment to health and pleasure.

Here’s how you can advise clients — who might be worried about weight gain on a cruise — how they also can step off at the end of their vacation feeling rejuvenated and healthy.

Change Your Mindset
The vacation mindset is that this is the time to let go and enjoy yourself. While that’s true, the momentary pleasure of eating huge amounts of rich food is usually followed by guilt, body discomfort and regret rather than the fun and relaxation you’re looking for.

Instead, shift the emphasis for your vacation from unlimited indulgence to looking and feeling glamorous. Pack some clothes you really love that fit perfectly — meaning, no extra room for wolfing down unnecessary extra servings. You’ll want to strut your stuff in them, and that counters a lot of temptation.

Plan Around Activities
Choose a ship for its onboard culture — which emphatically includes its food — but instead of planning the day from meal to meal, plan your day from activity to activity.

Learn something new. Tango, swim a couple of laps, get a spa treatment you’ve never had, try a cuisine you haven’t encountered, learn to create a website or speak a few words of Italian. Meet new friends at the pool, or in a class or lecture, rather than hanging around for that extra dessert or more drinks.

Move!
Cruise ships often invite their passengers to dance with events and classes, and you don’t have to have a partner to enjoy them. Lots of unaccompanied cruisers drop into the disco or join the salsa crowd for an hour or two each night. Learn a line dance by the pool or enjoy a workout in the gym. Princess Cruises and Celebrity Cruises both have Zumba classes, which are fun and never about doing it “right.”

Holland America Line has “Dancing with the Stars: At Sea” classes. Carnival Cruise Lines encourages dancing with everything from a jazz combo to a country band, and Cunard Line and Crystal Cruises excel in providing music for ballroom dancing. The wildest European discos (they don’t really get started until about 2 in the morning) are on Costa Cruises.

Not a dancer? Head to the gym. You have a luxurious, cutting-edge gym with no membership fee just steps from your door. Exercise relaxes you, makes you conscious of your body and gives your endorphins a nice boost. And there’s instruction provided for the boxing ring, the Kinesis Wall, black light spinning class or ice-skating. On some lines, you can also roller skate, play golf or work out with an avatar.

You can also join the group walking around the ship’s track in the cool of the morning or walk from shop to shop on shore while exercising your credit card. Shore excursions provide opportunities to explore ports on foot or by kayak, bicycle or canoe.

Indulge in Gorgeous and Good Food
The cruise lines have figured out that people who get off the ship feeling content with themselves — and their weight — will be back as repeat customers. So cruise lines now offer everything from Canyon Ranch cuisine (Oceania Cruises and Regent Seven Seas Cruises) to raw food menus (Seabourn Cruise Line). Royal Caribbean International has a Vitality option (a three-course meal with a maximum of 800 calories), and on Oasis of the Seas and Allure of the Seas, the line offers an entire health-focused buffet restaurant.

In 2012, Holland America introduced a 22-dish vegetarian-only menu and added 30 new vegetarian dishes to their main dining room menu. A chef will make you all the goodies you need to follow your preferred food choices for optimal health, vitality and dining pleasure — all you have to do is enjoy it.

Another tip: Whatever you eat, savor it. And don’t let your dining room waiter mother you into eating something you don’t want.

Sleep, Nap, Doze
Remember naps? Life is so hectic that the pleasure of taking a relaxed, well-exercised body and stretching it out to rest is a luxury. The beds are great, the temperature is yours to control and the “Do Not Disturb” sign guards your privacy. Enjoy some sleep!

The 20 Best ‘Free’ Things to Do on a Cruise 

Cruise travelers who feel like they get onboard and immediately start emptying their pockets of nickels and dimes are not alone. Today’s mainstream mega-ships offer an ever-increasing number of eating, drinking and entertainment options that levy fees atop the base fare. Long gone are the days when a perilous bar bill was the only onboard financial concern. Surcharges and add-ons are here to stay.

But there are plenty of noteworthy experiences still included in the ticket price, including Vegas-style shows, thin crust pizza and simple pleasures like free toothpaste or shaving cream. Sure, (optional) surcharges are the new at-sea reality, but it’s still more than possible to find $0.00 on your final bill. Check out our list of the best “free” cruise offerings, and share your own favorites in the comments below.

  • Wondering what’s not included in the fare? See our story on hidden fees — and how to fight back.

1. Blue Man Group. Norwegian Epic is one of only a handful of venues in the world where you can watch the confused blue mutes of the Blue Man Group perform their out-of-this-world percussion-and-paint mime melee — and it’s surcharge free. So put on your poncho, and get ready to get splattered.

2. Cruising’s Best Pizza. Long prized by Cruise Critic readers for its best-at-sea slices, Carnival gave its cooked-to-order pizza a makeover on Carnival Breeze in 2012. And it got better. We’re not talking wood-fired-from-Naples good, but the palate-pleasing pies exhibit an impressive balance of (thin) crust, sauce and cheese — and they come fresh from the convection oven fee-free. It’s rolled out that pizza on numerous ships across the line.

3. Sunset Over the Ocean. It’s one of the most beautiful sights in nature, and it doesn’t cost a 15-cent piece extra. Grab a loved one’s hand (or your favorite cocktail), walk over to the ship’s railing, and take a deep breath. You’ve seen it before, sure, but watching the sunset over the ocean never fails to give you that, “I’m on vacation, and life is good” moment. Enjoy.

4. Ham & Cheese Croissant-wiches. When is a sandwich more than just sliced bread and filling? When it’s Royal Caribbean’s addictive ham and cheese mini-croissant, a flaky, cheese-y, three-bite morsel topped with lettuce, tomato, mustard and mayo. The fee-free mini-wich has long been a staple in Royal Caribbean’s signature 24-hour Cafe Promenade. One word of warning: Post-cruise ‘wich withdrawal can be severe.

5. Big-Screen Wii Battles. If you’ve been honing your video-gaming skills, but never had an audience who could appreciate your expertise, you’re in luck. The entire Norwegian Cruise Line fleet is outfitted with Nintendo’s interactive gaming system, Wii. “Boxing,” “bowling” and other tournaments are offered on most sailings. We recommend you show off properly on the two-story screen in the atrium.

6. All-You-Can Eat Indian. To us, the lack of line for Carnival’s fee-free Tandoor dining option is hard to fathom. The aromatic grab-and-go counter, typically open for lunch, serves up Indian comfort food made by the line’s Indian cooks. Dig into grilled meats and fish, curries, daals and basmati rice alongside essential accouterments like mint chutney, raita and achar (pickle).

7. Dancing Lessons. Country line-dancing, waltz and tango, the electric slide — cruise ships are great places to try out a variety of dance genres without enrolling in Arthur Murray classes (which would levy a fee besides). It’s okay to have two left feet — until you try out your new steps during pre-dinner live music. The couples there have been burning up dance floors for decades. And on P&O Cruises there’s also the opportunity to learn some moves from the professional dancers of Strictly Come Dancing onboard selected sailings.

8. Milk and Cookies. You’re lounging poolside in the afternoon, and all of a sudden you get a craving for something sweet — but you’re perfectly comfortable and don’t want to move. What do you do? If you’re onboard a Princess cruise, you relax while the waitstaff bring over fresh, soft-baked cookies and ice-cold milk. And then you silently wish that you could afford to employ someone to do the same for you at home.

9. Free Cabin Toiletries. We can’t figure out why, but finding Carnival’s famous complimentary in-cabin toiletry baskets always inspires a stupid grin. Inclusions rotate, but on our last Carnival cruise, we sucked on cherry Ludens, and kept hair frizz-free with Pantene conditioner and teeth from turning brown with Arm & Hammer whitening toothpaste. It’s the little things.

10. Surfing at Sea. At-sea surf simulators first debuted onFreedom of the Seas, offering passengers a chance to surf and boogie-board, minus the ocean. It’s now on a number of ships throughout the Royal Caribbean fleet. Although it’s free to participate, you’ll have to sign a waiver, hold on to your bikini top and embrace the possibility of public humiliation by way of wipeout. Not the daredevil type? It’s also free to grab a seat on the nearby bleachers and enjoy the spills.

11. AquaSpa Cafe. With its AquaSpa Cafe concept, Celebrity Cruises is out to prove that healthy cruising is not an oxymoron. The bathrobed, post-gym or -spa treatment crowd flock to the fee-free venue, which proffers salads, sushi and other light-fare foods alongside a few a la carte items (grilled pork, poached salmon). The standard location, Celebrity’s lovely adults-only, glass-covered Solarium, provides just the right backdrop for the guilt-free offerings.

12. Poolside Milkshakes. Most ships do free soft-serve ice cream, but Oceania Cruises steps it up a notch with three flavors of milkshakes (vanilla, chocolate and strawberry) made to order by the pool deck. The ambience is way nicer than a diner, but the treat is just as tasty.

13. Outdoor Movies. The flicks may not be first-run, but admission is free, and you can bring in treats from your cabin or the buffet without having to smuggle them under your jacket. Lido Deck movie screens are even more romantic than the real deal, with prime viewing from the pool by day and on snuggly loungers covered with warm blankets (and popcorn!) at night.

14. Climbing the Mast. Tall ship line Star Clippers lets you embrace your inner pirate by allowing passengers to climb one of the masts up to a crow’s nest lookout. As you sway gently, high above the ocean, you’ll get one-of-a-kind views — if your eyes aren’t shut tight in acrophobic terror. (Don’t worry though: the line doesn’t let anyone climb without a harness.)

15. People-watching. There is no better free entertainment than positioning a chair in a high-traffic zone on the pool deck, promenade or atrium and watching the antics of your shipmates. From fashion snafus to bizarre behavior and juicy conversations overheard, what you witness on a cruise ship can rival the best reality TV.

16. Time to Make Eat the Donuts. Sick of paying extra for sweets at the “specialty cafe”? Step out onto Oasis of the Seas‘ Coney Island-style Boardwalk, and grab a surcharge-free donut at the onboard, er, donut shop. With a rotating lineup of flavors from glazed to key lime, you’re sure to find something you’ll like. (Coffee and other items are also available there, but you’ll pay up to $4 for them.)

17. Broadway Onboard. In the mood to see a Broadway show without paying Broadway ticket prices? You’re in luck. Check out “Hairspray” on Royal Caribbean’s Oasis of the Seas, “Chicago” on Allure of the Seas, “Saturday Night Fever” on Liberty of the Seas, “Rock of Ages” on Norwegian Breakaway or “Legally Blonde: the Musical” on Norwegian Getaway. You can also catch West End and TV stars such as illusionist Derren Brown and classical singing star Russell Watson. And the best thing about this entertainment? — it’s all gratis.

18. Bathrobes for All. Carnival takes a proletariat approach to cabins — there are no 1,000-square-foot suites with baby grand pianos on the Fun Ships. And everyone, from the inside cabin occupier to the passenger in the modest-sized suite, gets a bathrobe. Who is to decree that only cruisers with money should be able to spend their post-shower moments in comfort? Not Carnival. (Note: Holland America also provides robes to all.)

19. Coronary Burgers. If you’re craving a complimentary heart attack on a bun, give one (or several) of Guy Fieri’s burgers a try at Guy’s Burger Joint. This fee-free venue will be added to the pool decks of 14 Carnival ships through 2015, offering burgers on buttered buns with a choice of toppings like blue cheese crumbles, onion rings and chipotle mayonnaise.

20. Mini-Golf. For anyone who wants to avoid crowds and catch some sun without lazing by the pool, top-deck mini-golf is a great option — and it’s free. Offered on some Royal Caribbean, Carnival, Disney, Princess and MSC ships, to name a few, the courses generally aren’t a full 18 holes, but they can still be challenging, as your putting will be affected by the ship’s movement. For an even more competitive twist, join a mini-golf competition, usually offered once per sailing.

–by the Cruise Critic Staff