A crack in the wall?

[Dolebludger]

There have been threads where posters wondered when (and if) the sour economy would bring cruise fares down. Perhaps, I have just seen the beginning. Yesterday, I got a letter from Lindblad (never cruised them) practically begging me to book a cruise by 11/30/08 to be taken before 6/30/09, in exchange for their promise and guarantee of a 10% discount on any future cruises FOR LIFE! The letter didn't specify whether it meant Lindblad's life or my life. Probably for whichever ended first!

 

In any event, it was the tone of the letter that struck me. Almost despirate. Trends have to start somewhere, and maybe this is the start of a trend toward lower fares. At least one can hope.

[canadagal]

Good heavens Richard! I sure hope it means at the end of a pax life and that you will have many, many, many, more decades.

I found this articile interesting but unfortunately it only gives some stats for the first half of 2008 and that was before this mess went globally.

Pat

Cruising's US economic impact hits $38bn

15/10/2008

The North American cruise industry’s economic impact in the US grew by more than 6% in 2007, creating more than 350,000 jobs and generating $38bn in total economic output, according to a study just released by Cruise Lines International Association.

In addition, CLIA released passenger statistics for the first half of this year that show a 5.43% increase from January to June, with an overall occupancy averaging nearly 105%. Internationally sourced customers played a key role in the uptick.

 

The study shows cruising continues to make a 'significant and growing' contribution to the US economy, generating business development and investment, job creation and spending in all 50 states, said CLIA president and ceo Terry Dale.

 

The passenger numbers indicate consumers continue to respond to the value that a cruise represents, he added. Affordability, greater choice in destinations around the world, innovative ships and more embarkation ports close to the customers all contribute to growth, Dale said.

 

Figures through the first half of 2008 show a 31% spike in internationally sourced passengers for CLIA-member lines, reflecting the deployment of more capacity in Europe and the Mediterranean.

 

North American-sourced passengers posted modest year-over-year gains of .29% through the second quarter.

 

In 1995, as few as 10.6% of passengers on CLIA lines were sourced outside of North America and, year to date, that percentage has grown to 20.5%.

 

The 2007 economic impact study, executed by Business Research & Economic Advisors, found that direct spending by the industry and its passengers in the US exceeded $18bn, a 5.9% increase over 2006. Cruising was directly and indirectly responsible for generating 354,700 US jobs, up from 348,000 in 2006, paying a total of $15.4bn in wages and salaries.

 

The total economic impacts affected all 50 states. The top 10 states accounting for 78% of direct purchases and 82% of the total employment and income impacts are: 1. Florida, 2. California, 3. Alaska, 4. New York, 5. Texas, 6. Hawaii, 7. Georgia, 8. Washington, 9. Illinois and 10. Colorado.

 

More than 60% of gross output and 40% of job creation affected seven industry groups (ranked in order of output): nondurable goods manufacturing, professional & technical services, travel services, durable goods manufacturing, financial services, airline transportation and wholesale trade.

 

Factors contributing to the growth included an 8.8% increase in available bed days and an increase in average cruise length, from 6.9 days to 7.2 days. The industry realized a 9.8% increase in actual passenger bed days and an industry wide capacity utilization of 104.9%.

 

By year-end, CLIA’s fleet totaled 159 ships, with a capacity of 268,062 lower berths. In 2007, the industry carried an estimated 12.56m passengers worldwide, a 4.7% increase over 2006. Some 9.45m US residents were cruise passengers in 2007, accounting for 75% of all CLIA-member customers.

 

Ten US ports accounted for 83% of US embarkations: Miami (21%), Port Canaveral (14%), Port Everglades (14%), Los Angeles (6%), New York (6%), Galveston (6%), Seattle (4%), Honolulu (4%), Long Beach (4%) and Tampa (4%).

 

US embarkations from additional ports increased by 17.2% reflecting the growth in embarkation cities, including Baltimore, Jacksonville, Boston and others, while embarkations at the top 10 ports declined by 2% percent in 2007.

[Ragnar Danneskjold]

"North American-sourced passengers posted modest year-over-year gains of .29% through the second quarter."

 

This is compared to 2007. I bet a lot of cruises in 2007 and earlier this year were paid for with money people extracted from their home equity. That has come to a screeching halt and so I suspect the cruise lines will get hit hard (except maybe the high end).

 

By the way:

 

 

Dow 8,787.54 523.45 (5.62%)Nasdaq 1,676.11 102.90 (5.78%)S&P 500 932.22 65.79 (6.59%)

[BILLP1]

Just read a newspaper article from St Martin indicating that hotel bookings are down 20 to 30 percent for the winter season. As final payments become due for the winter cruising season , it will be interesting to see just how many people write that final check in these uncertain markets.

[Dolebludger]

Yes, the current economic situation will just have to have an impact on cruise bookings, and then on cruise fares as a result. Some have said that the lux lines are somehow immune from these economic facts. I think they are in error.

 

Lux cruisers either have very good jobs, very good investment portfolios, or both. Economic times like these make those very good jobs insecure, and those with them less likely to book an expensive cruise -- often a good number of months into an uncertain future. Portfolios? My small one lost about three Regent cruises in value TODAY!

 

Keep reporting any news on this subject. It is not only interesting, but if cruise prices on RSSC return to their 2003 levels I may actually get to cruise again!

[Ragnar Danneskjold]

Bill,

 

You are right! I just checked a hotel we were thinking of for our Dec cruise. Two weeks ago the lowest cost regular room was shown as $839 per night and now it is $379!!! I just reserved it :D

 

Dolebludger, we went to 100% cash at the end of 2006, so it's beginning to feel like everything is going on sale...

 

 

Ragnar

[Ragnar Danneskjold]

COLE BAY--Early bookings are 20-30 per cent off target compared to last year, casting a dark shadow on prospects for the fast approaching high tourist season and the island’s tourism-based economy for the coming months.

The upheaval in the United States money markets is pinpointed as a main factor for the low number of vacationers planning and reserving airline seats and hotel room.

However, the pending US presidential elections, considered by many voters extremely important for the US and the world, may also be a drawback for vacation planners.

St. Maarten Hospitality and Trade Association (SHTA) President Emil Lee said Friday it is not uncommon in an election year to see bookings coming in after the Ballot Day, but this coupled with the crisis in the US, the island’s main source market is worrisome.

“There is no other way to describe it. This is a crisis just like Hurricane Luis and 9/11,” Lee told The Daily Herald. To mitigate the devastating effect of low bookings now and possibly lower bookings later in the season, a concerted, strong and well-funded marketing push is needed immediately to encourage those US residents who will still travel to choose St. Maarten, he pointed out.

Lee said this situation warrants emergency funding from the Dutch Government and fast. We received emergency funding for Luis and 9/11 and this is the same.” SHTA, St. Maarten Timeshare Association and government are already pooling funds to increase destination marketing, but at this juncture, more funding is extremely necessary.

“The recession is not confined to the USA. We can call it a global recession,” Lee said. He added that the recession may not be such a bad thing for St. Maarten or the Caribbean region in general, because “many, many people have come to see a vacation as a necessity, a right and not a luxury.” “People will go on vacations,” Lee predicted, “but will want to stay close to home, which puts the Caribbean in a good spot.” Meanwhile, the Aruba Hospitality and Trade Association (AHTA) has poured an extra million dollars into its US marketing budget and US $150,000 for Europe. The group was able to put these amounts into destination promotion quickly, because it was readily available from the percentage of the room tax it receives. SHTA and SMTA do not receive any portion of the room tax collected on St. Maarten. Instead, their funding source is from membership dues, fundraising and the Dollar-A-Day programme that encourages guests to voluntarily leave one dollar for every day spent here.

[Dolebludger]

Though I am a strong political partisan here in the US (won't elaborate more, as this is a non-political board), I must say that in the short term, the Presidential candidate that is elected will have little effect on the sour economy here, which has spread to the rest of the world. Regent, it is time for you to develop a "plan B" involving substantially reduced fares -- if you want your ships anywhere near full.

[Judyumcer@aol.com]

Let's hope the fares do go lower and the fuel surcharge is eliminated. They do need to keep these ships full. Every industry is suffering economic loses to some degree. Even our hospital has cut overtime. Nevada Power where our son works has cut overtime. This is a serious situation and every industry needs to cut prices to keep going until we get out of this mess. Even Delta has raised the amount of FF miles by thousands for a biz ticket to Europe. People's retirement and 401K's are bleeding to death. We do have to seek out bargains in these rough times.

[OrpingtonT]

People's retirement and 401K's are bleeding to death. We do have to seek out bargains in these rough times.

 

Not strictly on topic, but can anyone tell a poor Limey what on earth is (or are) 401K's. I am sorry that they are bleeding to death and I would like to watch out for the blighters!

[Judith02]

BUT To show that there has been "a crack" in at least one luxury line's attitude toward the current economic crisis. Can the others (Regent, Seaborne, and Silver Sea) be far behind in announcing plans?

 

Crystal Assurance Plan Offers Risk-Free Return On Investment

Line's Reputation for Excellence is Augmented by New Deposit, Cancellation Plans

 

October 14, 2008 - As savvy travelers continue to seek secure return on their investments, Crystal Cruises is introducing a collection of incentives to support its commitment to its guests' satisfaction. In combination with its existing price guarantee, the line is reducing cruise fare deposits and cancellation periods.

 

Guarantees and booking and savings incentives include:

 

Price Guarantee - Crystal will continue to protect guests by giving them the best applicable fare offered by Crystal Cruises even after they've booked;

 

Cruise Deposit - Reduced cruise deposit from 10% to 5% for all 2009 itineraries, except the 2009 World Cruise and its voyages;

 

Cancellation Period Reduction - Formerly a 75 day restriction, guests can now cancel their cruise up to 45 days prior to sailing without penalty for all 2009 itineraries, except the 2009 World Cruise and its voyages;

 

Extended Options - Guests now have an increased period from three to seven days before a deposit is required;

 

2010 World Cruise Deposit Reduction - Deposits for the 2010 World Cruise have been reduced from 20% to $1,000 or $1,500, depending on stateroom selected.

[Travelcat2]

Not strictly on topic, but can anyone tell a poor Limey what on earth is (or are) 401K's. I am sorry that they are bleeding to death and I would like to watch out for the blighters!

 

A quick answer. Usually both the employee and employer make contributions to a fund. The money is tax free until withdrawn (cannot be withdrawn without penalty until age 59 1/2). Many people invest in high risk funds -- hoping to increase the value by retirement age.

 

I'm still hearing about a lot of Regent cruises being booked for 2009 -- and many people are awaiting the 2010 itineraries. . . . I don't expect to see an increase in luxury cruise line business -- but don't think it will decrease dramatically. Just my opinion:o

[RachelG]

Just got a Regent brochure for the 2009 European cruises. MANY are listed as having limited availability, so I think people are still booking. Will be interesting to see if there are lots of cancellations.

But as people still working, we don't use our retirement funds to pay for our cruises, and my income won't really change (unless decimated by taxes), so we are just as likely to book as ever.

[Dolebludger]

People do not usually make principal withdrawals from their 401k and other retirement investment accounts to take cruises. But many who cruise the lux lines have investment portfolios that are not in such retirement-designated accounts. These people often use income or gains from these non-retirement accounts to pay for items such as a lux cruise. But lately, there has been little or no income. There have been losses instead of gains. So investment income and gains are generally no longer a source of funds to pay for cruises. This fact has just got to start hurting bookings at some point.

[Jaffa]

Whilst l cannot comment on RSSC, there have been interesting developments on the othe lux lines already.

The above post has already dealt with the first impact by Crystal.

 

Here is a great thread from the Crystal board that talks about it in great detail and has almost 5000 views in 3 weeks.

 

http://boards.cruisecritic.com/showthread.php?t=852358

It is titled "What effect will the economic siutation have on Crystal"

 

Take a look, it's a great read.

 

Even though some are seeing RSSC with limited availability in 2009 that is only for bookings, definatley not full payments. And here in lies the crunch for the lux lines. It's always easy to downgrade a vacation when moneys tight. It is to early to tell yet the effect on the lux end of the market, but we will know by Jan when the peak seasons full payments are due for March cruises and beyond. Full world cruise payments are due at the end on this month and the first three weeks of Nov.

This is when we will know for sure.

 

Seabourn have increased there discounts with some cruises 14 days or more now discounted by 60%. Seabourn is in the most difficult position as it has 3 new ships coming online to add to the three existing ships over the next 3 years. They may have a real problem with overcapacity. Seatrade has already reported 2 weeks ago that quite a few full world cruise bookings are being canceled or transfered to shorter segments later in the year.

 

Silversea has already started to reduce cruise prices by offering past passengers much bigger discounts, although they are not mainstream advertising this. They are advising via private mailouts and through the venetian value club. Silversea have also just introduced a whole range of cruises with free air to europe, which is very unlike them. Many cruises in 2009 now have up to $750 onboard spending added as a cruise booking incentive for cruises over 11 days.

 

I personally think the lux lines will do everything they can to maintain cruise pricing as long as possible. I believe we will see them tinkering all around the edges with cheaper deposits, full payment times reduced to much closer to cruise dates, better and cheaper covering insurances and cancelation policy's, on board spending credits, complimentary shore excursions, free air, free pre and post hotel accom, ect, ect.

 

I think they will do everything they can to maintain cruise price margins as long as possible. I cannot see them deep discounting unless they are pulled kicking and screaming.

 

Unless of course one of the lux lines decides to take the first step, and then they will all follow very quickly so as not to lose market share.

 

We have interesting times ahead. If the predictions are true and we have not seen the worst of the crisis yet unfold and it does last a long time 3 to 5 years as they are reporting now. Then who knows.

People may not travel even if it is cheaper.

[RachelG]

People do not usually make principal withdrawals from their 401k and other retirement investment accounts to take cruises. But many who cruise the lux lines have investment portfolios that are not in such retirement-designated accounts. These people often use income or gains from these non-retirement accounts to pay for items such as a lux cruise. But lately, there has been little or no income. There have been losses instead of gains. So investment income and gains are generally no longer a source of funds to pay for cruises. This fact has just got to start hurting bookings at some point.

 

Guess I wasn't clear enough. I should have said retirement or other investment accounts. Since all my investments are for retirement whether specifically designated for that or not (I never pull money out of them for any reason), I just call them all retirement, even though they really aren't.

[Dolebludger]

Let me be more specific on the question of investment income, and its effect on ability to cruise. Many of the fine people we've met on Regent are already retired (sometimes early) and get their income from income-producing investments -- both non-retirement and retirement. In the case of several, the investment portfolios were quite large, by my standards, allowing these guests to live as they wished off this passive income. The effect of today's low investment interest rates, capital losses, and reduced dividends must be devastating on such people, who (to my observation) make up much of Regent's repeat market. If such people aren't making all that much anymore (which the performance of my small investment portfolio would indicate), I can't see how Regent can keep bookings up for long at its price structure.

[crusinbanjo]

Not strictly on topic, but can anyone tell a poor Limey what on earth is (or are) 401K's. I am sorry that they are bleeding to death and I would like to watch out for the blighters!

 

401K is a term we use to talk about one type of privately funded retirement accounts in the US. The actual reference to 401K is a section of the IRS, Tax code that makes the private retirement accounts leagle and "Tax Deffered", (we get to put money in from wages prior to calculating income tax but we must pay the tax when we take money out when we are older). This money is likely put into a stock, (shares), account and will gorow or shrink withthe markets.

 

The joke is that our 401K accounts have shrunk so much that they now are 201K! It would be really funny, if it wasn't so sad.:confused:

[Dolebludger]

OrpingtonT:

 

Still off-topic (just a little) but 401k retirement programs became popular with employers in the US a bit over 20 years ago, when employers began having problems paying their former "fixed benefit" retirement plans. Under the fixed benefit plans, the retiree would receive a set amount of retirement income each month, calculated on a formula using pay level and length of employment. We are fortunate to have at least some of our retirement income from a couple of these old fixed benefit plans -- and they pay the same regardless of the economy. If we had to rely on our 401k plans, we'd be in a world of hurt.

[OrpingtonT]

Thank you. Now the reference makes some sense. Saving for retirement and investing the savings is causing big problems here too. We are living longer with more active lives. It all costs money (or don't you, in the US call it "moola"?)

[Ragnar Danneskjold]

Hmmm, our property taxes are so high in California it might make sense to take up permanent residence on Voyager when I retire :D I wonder what kind of deal they would make if one leased a Seven Seas suite for five years....

 

 

(PS - as to cruises having "limited availability", when my brother in law was a young dentist with no patients, he would tell potential patients that called that he was booked for two weeks! He sat around and read a lot of magazines for a while but the perception that he was busy and popular fairly quickly built up his patient base....)

[Gail C]

Ragnar,

 

Here you go...my dream!

 

www.residensea.com

[Travelcat2]

We heard that there are some people on the Voyager who "almost" live there (it is against policy to be on board all the time). The figure we heard was $250,000/year (included laundry service). Not sure which suite they occupied.

[BILLP1]

And no property tax...

[Wendy The Wanderer]

Is that per person?