Sluggish economy affecting cruise industry?

[lysolqn]

Besides adding supplements to cover increased fuel costs, is there any indication that the cruise industry is being adversely affected by the sluggish economy? We have three cruises booked between now and year's end and not one of them has shown a price decrease; in fact, fares on one cruise have increased significantly since we booked months ago. What with increasing air fares and decreasing confidence in the economy, I'd have thought the travel industry would have been one of the first to feel the crunch - and one of the likely first signs would be a drop in fares but that doesn't seem to be the case. Has anyone noticed a drop in cruise fares?

[Gonzo70]

I don't know that they can drop the fares as their expenses are shooting up and people are likely spending less on board due to the weak economy. Cruise lines biggest expenses are fuel and food and both of those have been going up, up, up. I don't think they can drop prices any more than the airlines can drop them (barring a significant drop in oil).

[lysolqn]

I don't know that they can drop the fares as their expenses are shooting up and people are likely spending less on board due to the weak economy. Cruise lines biggest expenses are fuel and food and both of those have been going up, up, up. I don't think they can drop prices any more than the airlines can drop them (barring a significant drop in oil).

 

Agreed; however, unlike airlines, cruise lines are known to lower/increase fares when bookings are less than stellar or particularly strong for specific cruises. It's a marketing tool they've been using forever, either to increase interest in cruises that aren't selling well or increase revenue for cruises that are selling especially well.

 

I guess the gist of my post is that my experience with respect to the three cruises we have booked, is that in spite of the economy, they're selling well enough not to need to increase interest by lowering fares. That seems to be contrary to what one would expect at this point in time. I was wondering if others who have cruises already booked for the rest of this year are finding fares moving up, down or staying the same.

[Cooks_Bay]

Looks like they could be hurting a bit, but it might be a couple of quarters before we know:

 

May 23 (Reuters) - Morgan Stanley downgraded U.S-Norwegian cruise group Royal Caribbean Cruises (RCL.N: Quote, Profile, Research) to "equal-weight" from "overweight" and cut its price target on another cruise company Carnival Corp (CCL.N: Quote, Profile, Research), citing rising oil prices, weakening revenue yields and the difficult economic environment.

Strong sales in the fourth quarter helped 2007, which meant the operators entered 2008 with less left to sell, analyst Jamie Rollo said in a note to clients.

The long lead time between bookings and sailings means it can take time for price weakness to filter through to reported yields, Rollo said.

The investment bank, which also cut its price target on Royal Caribbean to $37 from $40, said it sees more risks at Royal Caribbean, with lower margins and higher leverage.

Morgan Stanley named Carnival its preferred pick in the cruise-lines subsector and maintained its "overweight" rating on the company. It cut its price target to $49 from $56.

Royal Caribbean shares closed at $28.48 and Carnival shares closed at $37.95 Thursday on the New York Stock Exchange. (Reporting by Esha Dey in Bangalore; Editing by Pratish Narayanan)

[FinelyCruising]

Yesterday they said with the price of oil dropping the buy was airline stocks.:cool:

[jimgev]

I don't see any desparation sales to fill empty ships.

[Gonzo70]

Yesterday they said with the price of oil dropping the buy was airline stocks.:cool:

 

Whoever "they" is is crazy.

 

This is what I think of airline stocks: :eek: :eek: :eek:

[FinelyCruising]

I thought it was odd too, but 'they' seem to know more than 'I' do about this stuff....

 

'They' are investment experts, I just try to stuff my retirement fund. I am hoping my plan's expert did 'their' thing for the better of me!

[pris993]

The only thing I notice is more and more ships in Europe where the euro is strong, think this may have to do with the slower economy in the US, but don't know.

[Gonzo70]

I thought it was odd too, but 'they' seem to know more than 'I' do about this stuff....

 

'They' are investment experts, I just try to stuff my retirement fund. I am hoping my plan's expert did 'their' thing for the better of me!

 

Hopefully "they" are not the one's managing your retirement fund! :D

[woodofpine]

Personally, I think the cruise industry is extremely well run. Not that I'm always in agreement with trends... I think cruisers as a group are very nostalgic so its easy to critique. But the industry's ability to cost control and expand and market over the past 20 years has been pretty amazing.

 

The downside is that there isn't a huge amount of 'fat' to be cut in keeping fares down given the cost inflations of energy worldwide. Plus there are ships to fill - so the possiblity of a crunch is definately there.

 

Ultimately, the US has been highly, overly debt ridden and this is catching up with a declining dollar. This could bode poorly for the future. On the flip side, positively, the retiring boomer population explosion is the natural demographic for the industry to feed off of. It will be interesting to see how these ying-yang influences work out for an industry that proven to be pretty nimble given the massive physical assets involved..

[Putterdude]

There were some price reductions on some of the spring cruises this year however prices seem to have stabilized presently. Having said that there has has been an over supply of product for Alaska the past few years and some deep discounting at about 30 days out and I suspect that may well be the case again this year.

[Cruising Greek]

Whoever "they" is is crazy.

 

This is what I think of airline stocks: :eek: :eek: :eek:

 

I agree. The entire airline industry is overdue for a big shakeout. I personally would steer clear of them for a while.

[DeepWaterMariner]

The cruise industry has the unique ability to move their ships to take advantage of opportunity or to manage financial risk. Europe seems to be a winning proposition for the lines. If North American passenger levels decline due to problems in the economy the lines can fall back on European travelers. The same approach doesn't work for Alaska cruises where the North American market will always fill most of the cabins so if there are too many cabins available for Alaska cruises I would expect to see better deals. Although fuel is the number one expense of cruise lines (it use to be food) they are more comparable to resorts than to airlines when it comes to investing.

[ocngypz]

Shoulder season in Europe is VERY soft and the cruiselines, Celebrity included, have been dropping the rates in the European markets, but not here.

[bobbyleduck]

I thought it was odd too, but 'they' seem to know more than 'I' do about this stuff....

 

'They' are investment experts, I just try to stuff my retirement fund. I am hoping my plan's expert did 'their' thing for the better of me!

 

"They," obviously, don't include Jim Cramer (Mad Money), who repeatedly says there is never a good time to own or buy airline stocks.

 

Happy cruising to all who can still afford to cruise!

 

Bob

[Nancyquilts]

I agree. The entire airline industry is overdue for a big shakeout. I personally would steer clear of them for a while.

As in United, which is leaving Alaska on September 20th of this year.

[Cruising Greek]

"They," obviously, don't include Jim Cramer (Mad Money), who repeatedly says there is never a good time to own or buy airline stocks.

 

Happy cruising to all who can still afford to cruise!

 

Bob

 

I think Warren Buffet said the same thing. Their entire business model is dependent on continuous cash flow. They don't seem to build any equity. I think that they're in for some trouble ahead. Their fleets are aging, but credit is tight, and they may not have a lot of cash reserves to buy new planes. The new planes are more fuel efficient, but how will they be able to cover such large purchases?

[Parrot Mom]

As of a few weeks ago we had two trans-atlantic cruises booked..one for 9/08 and one for 11/09... The 11/09 one we bought immediately at opening price and prices have doubled and i actually doubt there is much space left (brand new ship). The 9/08 cruise does not seem to be discounted yet...Our final payment is in a month and Im going to watch closely. From reading these boards there are plenty of retirees who seem to live to cruise doing back to back and/or the minium of four or five cruises a year. The extra weeks of the Soltice has brought a buying binge today..at ridiculously low prices.. unfortunately, I dont live close to Ft. Lauderdale

[BEAV]

Could it be the cruise industry might actually benefit from an economic downturn? Consider people who would have preferred to fly to Europe for a summer land-based vacation, but instead have opted for a Caribbean cruise at a much lesser expense. As long as the currency exchange between the US & Europe works against us, people will look to vacation domestically. An added benefit is cruising is more of an all-inclusive type of vacation, which can be an advantage for a family who needs to budget and allocate a set amount for their vacation.

[Sky Sweet]

Could it be the cruise industry might actually benefit from an economic downturn? Consider people who would have preferred to fly to Europe for a summer land-based vacation, but instead have opted for a Caribbean cruise at a much lesser expense. As long as the currency exchange between the US & Europe works against us, people will look to vacation domestically. An added benefit is cruising is more of an all-inclusive type of vacation, which can be an advantage for a family who needs to budget and allocate a set amount for their vacation.

 

Hi Beav...I agree with you :)

 

For as long as I can remember vacations have been considered to be a necessity for one's overall health, so an economic downturn will not prevent people from taking a vacation. What it will do instead is make people rethink the type of vacations that they take.

 

In the days when cruises were considerably more expensive than land based vacations, this might have had a negative impact on the cruise industry, but now the opposite is true. For the past few years, cruises have been considerably less expensive than a comparable land based vacation.

 

Even though it is considered to be a necessity by health care professionals for people to take at least one vacation a year, it is not a necessity to take ten cruises a year. Therefore, I think people who are on a ship more often than they are home might rethink their cruising budget. However, this does not apply to very cheap cruises because with some of them it is more expensive to stay home than take a cruise :)

[Gonzo70]

Could it be the cruise industry might actually benefit from an economic downturn? Consider people who would have preferred to fly to Europe for a summer land-based vacation, but instead have opted for a Caribbean cruise at a much lesser expense. As long as the currency exchange between the US & Europe works against us, people will look to vacation domestically. An added benefit is cruising is more of an all-inclusive type of vacation, which can be an advantage for a family who needs to budget and allocate a set amount for their vacation.

 

In previous economic downturns you are absoulutely correct. However not this time. Part of the economic difficulties this time through are attributable to skyrocketing oil prices. This causes the profit margin to shrink drastically for the cruise industry as high oil greatly increases their fuel costs and even food costs (two of their biggest expenses). Furthermore people have less spending money so they can not raise rates enough to compensate for their increased costs, people spend less on board, and they lose some passengers who can't afford to fly to the ports because of the increased airfares. The current situation is a nightmare for the cruise industry.

[BEAV]

I forgot to mention a TV news story I saw a few weeks ago where a travel expert was suggesting cruises as an alternative to more costly types of vacation. The central theme of the story was how can Americans still take a vacation despite the economic downturn. The suggestion of a cruise vacation was due to the more all-inclusiveness nature of the business.

[BEAV]

In previous economic downturns you are absoulutely correct. However not this time. Part of the economic difficulties this time through are attributable to skyrocketing oil prices. This causes the profit margin to shrink drastically for the cruise industry as high oil greatly increases their fuel costs and even food costs (two of their biggest expenses). Furthermore people have less spending money so they can not raise rates enough to compensate for their increased costs, people spend less on board, and they lose some passengers who can't afford to fly to the ports because of the increased airfares. The current situation is a nightmare for the cruise industry.

 

Your comments certainly make sense and put a good spin on this subject!

 

We are currently toying with sailing the bargain-basement Dec 7 Solstice cruise. While hard to pass up such a good bargain, one of the things keeping us from going forward with our plans isn't so much the cost of air fare from the West Coast to Ft Lauderdale, but merely the fact airline travel in general has gotten to be such a hassle and just plain unenjoyable! A news story the other day claimed 41 million Americans this past year eliminated one airline trip simply because it wasn't worth the hassle of flying. So although rising air fare costs are certainly a factor, so also is the sentiment among many Americans with regard to flying in general.

 

I wonder if we will see more ships homeporting in places like NYC as the cruise lines try to bring the ships to the population base, rather than making them fly to reach the ship.

[woodofpine]

For the first time in American history the average American has negative net worth...

 

Add escalating fuel and food costs and I don't see a silver lining here for the cruiselines in the USA market. Europe and other markets may afford other opportunities for the industry but...