There is no denying that cruises can be had cheap for the year 2021. Many, if not all, cruise lines have extreme discounts up to 100% to fill up the vessels once cruising resumes. And for a good reason, guests will be hesitant to return to the ships if protocols will be too strict.
An industry that has burned over a billion USD a month over the last six months will need to make money somewhere. And that money will be made from the passengers sailing onboard the ships.
Therefore, it makes sense for the lines to offer these steep discounts now, but do you have to book now? Or can you wait?
An insight into cruise pricing
During the 1970s, cruise lines priced their voyages as list prices. What you saw in the brochure is what you got. This included everything that you could think of—your cabin, food, drinks, and of course, the cruise details. Everything was included in the list price.
Cruise pricing became a lot more complicated in the 1980s and extremely complicated in the 1990s. Before the pandemic, cruise pricing had become complex arithmetics done solely by computers.
Cruise lines set base rates for a specific voyage, cabin, date, and what is included in the pricing. While the cruise dates get closer, prices are adjusted accordingly and automatically, based on occupancy rates, demographics, ongoing promotions, and much more.
While a hotel will typically have a 70-75% profit target, the number of rooms that need to sell to be profitable, onboard cruise lines this number needs to be 90-95%. Cruise lines can only achieve this number by having many promotions and discounts that will entice people to book a voyage.
While the cabin price will not necessarily pay for the passengers’ cruise cost, what that passenger spends on average in bars and restaurants will cover the cabin revenue loss.
Cruise pricing in the ‘New Normal’
While it’s great for passengers to see that cruise lines are putting out massive discounts, don’t expect this to last much longer.
Cruise ships will be sailing at 70-80% occupancy, and as we’ve seen, cruise ships need 90-95% occupancy to be profitable. So what will happen? Very simple. Cruise lines will go back to the pricing strategies that they had in the 1970s. Maybe a bit more sophisticated, but that will be the bottom line.
First of all, cruise lines know that they will sell 70% of the cabins on board, no matter what the protocols are. The last 30% is what is challenging to sell. These are the inside cabins, the expensive cabins, the outside cabins with a blocked view, etc.
But if the cruise line sells only 70% at the old rates, they will be making a loss. MSC Cruises made a promotion for a 100% discount for front liners. It’s a great promotion if you are a frontliner. But, promotions like these are only done to entice people back on board.
Once the ball is rolling, and reservations are coming in, the cruise lines will no longer use or need these promos.
They will need money, and they will only make enough money by hiking the prices of cabins and charging full price on each cabin.
Traditional ways are out of the window
Cruise lines might have made up for any losses in bars and restaurants before. With people having to socially distance, sit apart during dinner, bars being table service only, no mingling, and nightclubs closed, the cruise lines will not expect to make money on Food and Beverage.
Not only that, premiums onshore excursions have gone, photography sales will go down, shop sales will go down.
All the traditional areas where cruise lines expect to make money are or will be gone. That only leaves making money on the cabins. And the cruise lines will take every dollar they can get.