Recession tactics in the Cruise Industry

One does not need to be a Maritime expert to understand that the Cruise Industry like any other Tourism sector, is naturally affected by the Global slowdown that plaques our planet in 2009. In public everyone is putting on a brave face, however the recent Seatrade Event in Miami is an excellent barometer of the current state of the Industry. Firstly the number of stands was significantly and notably down, secondly a large volume of the participants attending were seeking work rather than new business contacts. To illustrate this point, a leading Industry figure told me that he could not walk 50 Meters to his stand upon arrival without receiving dozens of CV’s in his hand. 

Subsequently as a consequence of the current economic status quo, they are forced to resort to certain tactics and strategies to make ends meet and in some cases even turn a profit! This article gives a sneak preview on what the Cruise Lines are up to… 

In particular US and UK Cruise Lines are suffering, for the following reasons

a) Together the US and UK are the most developed markets in the Cruise Industry by far and going by the principle of the bigger they are the harder they fall, these 2 markets have proportionately the most to lose.

b) Due to the abundant Cruise Lines in each market, the options for the established Cruiser are many, yet the appetite to cruise is reduced. To attract people to cruise the prices are dropping in many cases to lower than real cost. In other words the competition of pricing is fierce to say the least.

c) Both currencies (USD & GBP) are weak compared to the euro and with the European summer season about to start, the costs will rise. Sterling is in the worst position here.

Some of the European Cruise Lines also face challenges, as the recession has hit Europe zone with full force too, however the euro is strong, hence revenue income is holding up and many of the costs can be diverted to USD for the savvy operators. Cruise Lines such as Costa Crociere that feature a wide diversified market with the ability to adapt to new language markets are fairing better as the Brazilian season, Dubai region and Asia itineraries performed well. 
Whatever the case, virtually all Cruise Lines are taking rather extreme measures to cut costs and in some cases to generate new creative income streams. Here is a summary of the main tactics…

CORPORATE CUTS
Most Cruise Lines are slashing Corporate heads wherever possible to cut the central HR costs. There are a lot of former Director’s, VP’s and Managers seeking employment. Some are even considering going back on board! Carnival Group has taken a more pragmatic approach by simply not replacing anyone that leaves and placing a freeze Corporate new hires.

The situation with some Cruise Lines such as Regent, NCL and RCCL is rather destabilizing and certainly where heads have been cut, it does not foster an environment or creativity, development, innovation or new business, as people fear for their jobs they tend to go into their shells and avoid anything that could involve that deadly word RISK!

MANNING CUTS
As Crew members disembark, many are simply not replaced, as a number of Cruise Lines cut manning counts to the bare bones. Of course this will certainly impact on the service product delivery and the overall passenger cruise experience. This is rationalized by the fact people are generally paying fro the cruise, however passenger loyalties are invariably won and lost in recession time, that goes for the Crew too! It’s a recruiters market again, so suddenly there are plenty of willing crew to go around (quality and experience is still a little challenging to come by though), which is in stark contrast to this time last year.
 
COST EFFICIENT ITINERARIES
In line with the high fuel prices a year ago, Cruise Lines already started working on more low fuel cost itineraries. Now port costs and excursion potential income to cost ratios are being calculated and crunched more than ever before. Agents are being pressured into reducing cost to extremely low margins and global deals are being made to cut costs across the board. Its difficult to be an Port or Excursion agent these days and again the quality of tours and port agent service is being trimmed to meet the new demand to lower cost. Agents that refuse to cooperate will simply be replaced.
 
ON BOARD REVENUE EMPHASIS
On Board Revenue departments are under pressure like never before to produce results and counter the diminishing cruise ticket sales. New income streams are being created and this is the one area where creativity is allowed to thrive. Passive sellers are becoming aggressive, however this will only serve to put the passengers on the defense as they psychologically read the desperation to sell on board. 
 
OPERATIONAL CUTS
Food cost / quality, extras, freebies and serving sizes are all being questioned and trimmed where possible. The number of free food Restaurants on board certain US ships are becoming few in favor more dedicated space to paid Restaurant. What was once free may now well be charged. This again challenges the fabric of passenger loyalty and may turn our to be counter productive in the long run in terms of product to cruise lines that overdo it! Again passenger loyalty is won and lost in the hard times.
 
Is there any good news for the passenger I hear you say? Indeed cruising is about to get even cheaper and great value for the smart cruiser, as wonderful quality real deals can be found if one is prepared to look around! Its never been a cheaper time to cruise, but can you afford the booze?
 
Happy Cruising
Grant Holmes 
Publisher 
Perpetual Traveller Sphere: Related Content