RCCL execs pleased with pricing-discipline policy

Royal Caribbean’s campaign to curb last-minute deep discounts is off to a good start.

So say top execs at Royal Caribbean Cruises Ltd., who had several things to say about what they’re calling Royal’s “price integrity policy,” in talking to Wall Street analysts last week.

Starting in March, Royal said it would stop filling its ships by offering very low prices within a month of sailing. Depending on the itinerary, Royal said it would stop discounting either 10, 20 or 30 days before the ship leaves the dock.

In an earnings call with analysts, Royal Chairman Richard Fain said the company was extending the policy in some cases to apply to bookings within 40 days of departure.

That is what is called incremental progress. If Royal sticks with it, there may be positive results for both Royal and travel agents.

Fain said that Royal is trying hard to be more consistent in its pricing, in part to keep travel agents in its corner.

“There’s probably one thing that frustrates the travel agents that we work with as much as anything else, [and it] is those late last-minute discounts,” he said. “And we can’t afford to frustrate them.”

A bit later in the call, CFO Jason Liberty raised a second reason why curbing the deep-discount cycle will benefit Royal.

“It’s really very important to the branding,” said Liberty. It lacks credibility, Liberty said, to contend that you are a brand that is high quality and has high respect in the industry — “and you can have us for half-price.”

“So the ability to maintain your image as a higher-quality product, which really has to permeate everything you do, is probably a big driver, as big a driver of our thinking as anything else,” Liberty said.

Fain said Royal recognizes that the policy is costing money in the short term. But Royal’s second-quarter earnings were up 34% from a year ago, so any losses are being offset elsewhere.

“It’s still early days, but the impact we have seen from a load factor perspective is relatively small, and it’s in line with our expectations,” Fain said.

Carnival’s impact on the public’s perception of cruising

Carnival’s impact on the public’s perception of cruising

By Tom Stieghorst

*InsightSince the engine fire on the Carnival Triumph in February, the industry has been closely monitoring the public perception of cruising and whether the industry has come under a cloud.

Did the problems experienced by a single Carnival Cruise Lines ship taint perceptions of the entire cruise experience?

There’s more evidence in Carnival Corp.’s second-quarter financial results that the perception of a problem with cruising has mostly affected Carnival’s flagship product.*TomStieghorst 

Carnival said that, excluding Carnival Cruise Lines, bookings for the next three quarters are up, and at higher prices.  That means that Princess, Holland America Line, Cunard Line and the rest of the Carnival stable have been more than holding their own since March.

Competitors such as Royal Caribbean International and Norwegian Cruise Line likewise do not appear to be struggling with lower prices, according to Wall Street analysts.

When Carnival Cruise Lines gets thrown into the mix, however, Carnival Corp. bookings are behind last year, and at lower prices.  Regrettably for Carnival Corp., and perhaps the industry, if Carnival Cruise Lines isn’t healthy, the conversation about cruising suffers. 

It should be noted that two Harris Interactive polls, one in March and a follow-up in May, found that perceptions about quality, trust and intent to purchase for seven cruise brands were down across the board, albeit with Carnival Cruise Lines scoring lowest.

It is hard to square the poll results with the financial results, except to say that the poll is a measure of what people say, and booking data is a measure of what they actually do.

The financial results say that, except for Carnival Cruise Lines, there’s more demand for cruises this year than last. If Carnival Cruise Lines can heal itself, however, the whole industry will undoubtedly benefit.