Posted By Cruise Market Watch / 19th November 2009
In mass-American culture, bigger hasn’t always meant better to everyone, but it has certainly meant brand buzz.
While some refer to the Mall of America as “Sprawl of America,” it is also the most visited shopping mall in the world. Opening in 1992, it attracts more than 40 million annual visitors and employs over 12,000 people. Complete with indoor theme park, underwater adventures, hotels and shops, the mall is a successful mix of entertainment and consumerism.
Also in 1992, the High Mobility Multipurpose Wheeled Vehicle (HMMWV or Hum-Vee) began selling to the public under the brand name “Hummer.” The Hummer became the world’s most distinctive SUV and an iconic brand. Its main appeal lay in its unique appearance, sheer size and the feeling owners experience driving one.
In 1999 Royal Caribbean launched the first of five Voyager class ships, the Voyager of the Seas. At 3,114-passengers it was a revolution in design and size. With on-board amenities that included an ice-skating rink, inline-skating track, basketball court, mini golf course and rock-climbing wall the ships became a brand signature for Royal Caribbean. The ship and the “Get Out There” advertising campaign opened the cruise market to new, younger and more active vacationers with an “explorer” mind-set.
Branding Royal Caribbean
The Oasis is a further extension of Royal Caribbean’s brand differentiation. In the Nation of Why Not, the Oasis seeks to continue to fulfill the brand promise of cruise innovator and “tell-your-friends you have been there” experiences.
As large as it is, only 5,400 people in the world can experience it each week. That creates scarcity, and as long as the buzz continues to create demand, that creates pricing power. Within the contemporary cruise segment, Disney has been the best by far at creating a brand consumers want to be associated with so much they are willing to pay 100% premiums. Pricing power gained through branding is the Holy Grail Royal Caribbean investors are risking their $1.4 billion dollars on.
Currently, ticket prices for a seven-day cruise aboard the Oasis start at $1,049. The Oasis features 37 different cabin types to maximize revenues by finding the right fit to various traveler budgets. This compares to a seven-day on the Norwegian Jewel for as low as $249, and eight days on the new Carnival Dream start at $599.
Maintaining higher ticket prices will be essential for shareholders. Royal Caribbean’s new ship builds have run at a cost 20% higher per berth than the Voyager, Radiance and Millennium class ships and 14% more expensive than peers. Royal Caribbean ships have been 7% more expensive to build than Carnival historically, but net yields have been 7% lower. So far, higher capital expenditures per berth have not paid off. While the higher barrier to entry makes it harder for competitors to match, it is also not a proven model others are yet willing to chase.
Onboard Revenues
For all cruise lines, onboard spending has risen 25% over the past decade while ticket prices have actually declined. Moreover, onboard spending has been historically less volatile than ticket prices. So, with approximately 28% of cruise line revenues already coming from onboard spending, Oasis certainly creates the “right environment” for increased onboard spending. With the port of call faded into the background in importance, cruisers seek out the variety of onboard activities and shopping experiences. On the Oasis, these can include botox treatments, teeth whitening, and dozens of shops (including a tattoo parlor), boutiques, cafés, casinos, bars and restaurants.
The Oasis also offers opportunity for improving returns through improved fuel efficiency and other fixed costs of operation, such as payroll and victualing may be lower on a per passenger basis.
Something for everyone
Cruisers who want exotic, quaint and remote ports of call seek out luxury lines such as Seabourn and Regent. On my cruises aboard Carnival, I am genuinely chagrinned by cruisers who are willing to go different islands, yet visit essentially the same Margaritaville’s and Hard Rock Café’s that aren’t that dissimilar to bars in their home towns. I prefer to seek out the uniqueness of each island. Others prefer the comfort of something familiar, while at the same time being able to say “they were there.”
If it is truly about brand differentiation, the onboard experience vs. the island destination argument is not relevant. So the Oasis is limited to ports of call that can handle 5,400 passengers debarking at the same time and dock a 220,000-ton ship. If the Oasis attracts new cruisers, ones seeking the Oasis experience and what it uniquely has to offer, then it strengthens the brand and grows the market. If the strength of that experience is such that it can continue to generate higher ticket prices, then it will reward shareholders as well.
The Oasis, however, is not an experiment. Allure of the Seas, its twin sister, is due for delivery in Port Everglades in a year.
Sources: DVB Research & Strategic Planning; Pareto Securities
Posted By Cruise Market Watch / 21st September 2009
The growing Indian tourism sector has proven an opportunity for new venture Louis Cruises India. The subsidiary of Louis Cruises was officially launched in India on the 19th of September 2009. MV Aquamarine, a 1,200 passenger capacity cruise vessel will cruise from its homeport in Kochi (colonial name Cochin). The vibrant city situated on the south-west coast of the Indian peninsula is located in the scenic and prosperous state of Kerala, hailed as “God’s Own Country.”
Kochi currently receives 6 million domestic and .5 million internationational tourists annually with a 15% growth rate. Its proximity to the equator, the sea and the mountains provide a moderate equatorial climate. Its historic blend of Arab, British, Chinese, Dutch and Portuguese influences provide a rich cultural setting.
According to Mr. Oneil Khosa, CEO & MD of Louis Cruises India “exotic voyages to Maldives and Colombo are generating a large interest.” The product offering will be a fusion between Western and Indian themes – in entertainment, food and service. As a part of the launch, Kerala Tourism has signed an exclusive deal with Louis Cruises India wherein both parties will engage in joint marketing efforts for promoting Louis Cruises India. These include an inaugural sailing in Mumbai (Bombay) with media guests and Bollywood tie-ins.
Aquamarine will be conducting Kochi-Maldives-Kochi and Kochi-Colombo-Kochi cruises with overnight stays at both the destinations. The cruises have been specially designed to allow guests the flexibility for either 3-night or a 7-night cruises.
Mr. Khosa previously served DVB Bank as a cruise industry focused financier. DVB Bank has been active in the cruise industry M & A activities apart from conventional asset lending. Before joining DVB, Mr. Khosa was employed as a First Officer with Royal Caribbean Cruises Lines.
Posted By Cruise Market Watch / 17th September 2009
Travel agents report an average increase of 14% in cruise ticket prices during June, July and August of 2009 compared to April 2009, according to the quarterly Cruise Pulse survey.Pricing, while still below the same period the year prior, indicates stabilization in the cruise market.
There is also evidence of stronger pricing for cruises booked for 2010 departures, driven by interest in the new ship builds, more favorable demand in the European market and re-surging interest with luxury cruise lines.
Data was gathered August 25 to September 8, 2009 from 349 travel agents from around the world. Margin of error +/- 5.2%.
MSC Cruises has been a regular trackside advertiser at Formula 1TM races around the world for the past several years. They even have a Formula 1 Simulator aboard the MSC Fantasia.
But they aren’t just settling for sponsorships at the racetrack. They are aggressively getting into the race to acquire market share in the growing cruise industry.
MSC Cruises just launched its tenth ship – the MSC Splendida in Barcelona. The Splendida is the sister ship of the MSC Fantasia, launched last December 2008. She was the largest ship ever build by a European owner, carrying 3,959 guests. The MSC Poesia was introduced the March prior and the MSC Magnifica comes into service March 2010. Moreover, MSC unveils two more new ships MSC Meraviglia and MSC Favolosa in 2011 and 2012.
Head swirling? Here is a chart to help you get you oriented.
Date
Passengers
MSC Poesia
Mar ‘08
3,013
MSC Fantasia
Dec ’08
3,959
MSC Splendida
July ’09
3,959
MSC Magnifica
Mar ’10
3,013
MSC Meraviglia
2011
1,245
MSC Favolosa
2012
1,275
That is 130% growth in passenger capacity in just five years. What is the impact on market share? From a worldwide market share in 2009 of 4.3% to 5.1% in 2012. Doesn’t sound like much? That eight tenth of an extra percentage point alone means $230 million in gross revenue from a $29 billion 2012 worldwide cruise market.
Another eye opener, the MSC Fantasia was scheduled to host U.S. President Barack Obama, British Prime Minister Gordon Brown and other leaders from Russia, Germany, Japan, Italy and Canada at the G8 “Group of Eight” Summit in Italy early July. While those plans were scrapped when Silvio Berlusconi switched the venue from La Maddalena to L’Aquila, MSC Cruises nevertheless remains on a fast track.
When my wife and I moved to Miami we fondly told each other “it’s like a dream.” The dream kept growing, as she is now working on the Carnival Dream’s set-up in Montefalcone, Italy. Scheduled for its first sailing Sept. 21, it will be Carnival’s largest ship. As if these two things weren’t enough to get excited about, CruiseMarketWatch.com is eager to experience the new on-board technological features, dubbed the “FunHub.”
The FunHub creates the cruise industry’s first on-board social network, along with access to ship’s services, facilities and daily activities information.
Guests can:
create a personal profile to meet and interact with others on-board
create groups based on interests
find details about the Dream’s numerous on-board activities
browse food and beverage offerings
learn about ports of call and excursions
access weather updates
read biographies of key shipboard personnel and see ship maps
receive cruise director announcements
participate interactive polls
I think this is a really smart, forward looking move (in fact, one I preached about in an Sept. ’08 blog post and subsequently developed similar features into our own iPhone application for cruisers that is waiting iTunes review). I applaud the year-long collaboration involving Carnival’s hotel operations, marketing, IT and guest experience departments.
In addition to FunHub portals, access to the FunHub is available on any guest computer or Wi-Fi enabled device free of charge. Internet access to sites outside the FunHub is available with purchase of a special Internet package.
Many reasons, but none more important than what real customers have to say. Here are some video comments from real cruisers interviewed by CruiseMarketWatch.com July 18th at the Port of Miami.
Decision criteria in ship selection from onboard interviews are summarized on our research page.
Below are price ranges for three different contemporary cruise lines for August 2009 sailings, balcony cabin, all 7-day eastern Caribbean cruises:
Brand 1 = $739 – $1,309
Brand 2 = $999 – $1,149
Brand 3 = $1,463 – $2,309
Why is one line able to fill cabins at rates 50% to 100% higher than the others? Why are consumers willing to pay a steep premium even in tough economic times?
It is due to passion – consumer’s passion for the brand. Review the passion pyramid below. At its pinnacle is aspirational attainment – a brands ability to fulfill a market’s goals and dreams. Consumers who get here feel a kinship with the brand, they are where they belong and are willing to pay to get there. At the bottom is the mass market, where there is no pricing power because the vacation experience is a commodity competing on price.
Consider an example from the auto industry, where consumers pay more to purchase and maintain large SUV’s with four-wheel drives that are rarely if ever engaged. What is engaged is the fulfillment of the dream or idea that one could escape – a member of the group that can climb mountains and steer around avalanches – even if it is only on the way to the suburban grocery store.
A family vacation at its core is functional, but the choice of what vacation you take is “what does it say about me.” Consumers today consciously choose to associate with your brand. It is the label you use to display your kinship, like kachina dolls displayed in Native American Hopi family dwellings to designate membership in various clans. It is not just your vacation, it is telling others who you are.
And who is willing to pay a 100% premium for a contemporary cruise? Consumers who aspire to become members of the Disney clan. Disney’s power is derived from the fact they are not communicating in monologue, but engaging across multiple channels; cable networks, teenage pop stars, theme parks and 80-year-old characters that are cultural icons. Professor Ludwig Von Drake introduces me to cruising via podcast on my iPhone.
Most recently Disney Cruise Line is partnering with Kodak and Disney Channel to deliver themed cruises where cruisers will mingle with stars from Disney Channel shows like Hannah Montana, Sonny With A Chance, The Suite Life on Deck, JONAS, Camp Rock and High School Musical. All complete with autograph session and live performances.
What do you call a 335-Day circumnavigation of the world visiting 242 Ports of Call, 14 Oceans & Seas, 52 Countries and 85 UNESCO World Heritage sites besides the journey of a lifetime? Marketing geeks like me call it a creative and unique response to emerging trends.
Voyages of the Great Explorers from Cruise West is meeting these trends head on. Future Brand recently invited Rossitza Ohridska-Olson to be part of an expert panel discussing future trends in travel.Two of Rossitza’s five trends were experiential and creative tourism.
Experiential describes our growing hunger for authenticity, discovery and sense of adventure – one that will push further the geographical boundaries of tourism by seeking out more destinations. We blogged here last December that authenticity was a scarcity in 2009, and as such a sought after luxury. Cruise lines like Cruise West have defined what is scarce and unique by introducing the opposite of anything that has already become too affordable, accessible or well-known.
“No other cruise line – big or small — offers a journey as long or as varied as Voyages of the Great Explorers,” said Richard West, managing director and chairman of Cruise West.
Another trend, creative tourism, means engaging in and learning about the cultures and communities being visited. A hallmark of the Cruise West experience is thought-provoking presentations by local experts and onboard Exploration Leaders who expand upon the significance of the cultural and historical highlights.
Departing Singapore on March 6, 2010, Cruise West’s flagship, the 120-guest, all-suite Spirit of Oceanuswill sail westward, following the sun, to return to Singapore on February 3, 2011. Book the entire voyage starting at $233,995.
Here is a link to the eBrochure for the Voyages of the Great Explorers World Cruise.
According to Jo Kling, Founder and President of Landry & Kling, Inc, a premier cruise event services company “We anticipate the number of corporate and incentive cruise programs and meetings at sea to triple.”
And here at Cruise Market Watch, the trend is our friend.
How can one take advantage of a trend? It begins by identifying the market, then developing strategies to win it over.
How big is the market for corporate meetings and incentive travel? Annual estimates range from $175 billion to $40.3 billion. I prefer the Incentive Research Foundation’s $77.8 billion. If cruise acquires 2% (roughly its same share of the overall world-wide travel market) it would represent $1.6 billion in revenue or about 6% of all cruise revenues.
How to Win them
As one can see from our chart below – providing superior meeting experiences aboard a cruise ship at a competitive price will lead over time to market share gain from the competition.
The cruise lines are doing their part by building conference facilities on ships to rival those in hotels. For example, Royal Caribbean’s Freedom of the Seas boasts dedicated conference meeting space with breakout rooms and reception area accommodating up to 400 people. It also includes high-tech presentation rooms with color touch screens, wireless remote controls and teleconferencing equipment.
With the basic physical needs of corporate meetings taken care of, it is up to branding to communicate the message to corporate planners. The experience of a corporate meeting on a cruise is more exciting, motivating and rewarding. In addition, a cruise ship adds to employee camaraderie and bonding (ask Oprah).
Jo Kling and her team are going a step further. By understanding the habits of the target market they are re-engineering the group quote process online with a new venture called Seasite. Since nearly 80% of corporate meeting planners use the Internet for research, Seasite will for the first time consolidate cruise information online from strictly a meeting planners perspective. It also facilitates a single RFP and quicker quotes. The goal is to make the cruise booking experience equal to or better than the hotel experience. Speaking the customer’s language is always good thing.
“At Seasite, we understand that cruising for many planners is virtually uncharted territory. Seasite demystifies the entire process by providing easy access, depth of knowledge and the tools and resources needed to successfully plan and execute corporate meetings” says Kling.
I like the strategy. The Seasite slogan “One-Third Land, Two-Thirds Meeting Space” successfully evokes the question in a corporate planners mind – why not at sea? And Seasite accomplishes this without going directly to price (maintaining the brand and margins) or using a picture of a cruise ship (we know what a ship looks like – create the desire by selling us on the emotion).
The competitive cruise pricing structure, favorable meeting facilities and overall cruise experience leaves plenty of opportunity to deliver on the promise – rich and rewarding meetings that motivate and inspire employees. This will help cruise lines continue growing market share.
For more on our “growing cruise markets” series see:
You would normally worry about seeing the words “tipping point” and “cruise” used in the same sentence. No such worries here. The phrase tipping point, coined by Malcolm Gladwell, refers to when small numbers of people (or businesses) start behaving differently and that behavior ripples outward until a critical mass or a ‘tipping point’ is reached, changing the world. Contemplate some recent activities of cruise lines:
Disney Cruise started delivering podcasts on iTunes.
Royal Caribbean posted a job opening on LinkedIn, with a position requirement of having at least ten LinkedIn recommendations.
I think it is safe to say the term “tipping point” wholly applies.
Why Now?
Ten years ago (April 1999) Chris Locke, Doc Searls and David Weinberger wrote The Cluetrain Manifesto. It was a call to arms signed by a few thousand people (including me).
The manifesto declared the web would require businesses to engage consumers at their level and really listen and react to their voices. Consumers had reached the tipping point of web usage in 1998 – 26.2% of U.S. households had Internet access. Today, 16% of Fortune 500 companies have a public-facing blog.1
Why Get In? B.C.O.N – Branding, Customer care, Opportunities and Networking.
Branding. Product evangelists can spread the good word farther, more effectively and more efficiently. Compare the initial interest as measured by Google search in two new search engine launches. The small start-up Wolfram Alpha garnered nearly as much initial interest as Microsoft’s bing. The former used blog buzz and resulting news coverage, the later has upwards of a $100 million ad budget.
Your brand online can be more like the transparent, friendly, one-to-one human connections you expect with family and friends than the faceless issuance of a corporate press release.
Customer care. What I see developing is traditional customer service departments breaking down and going social. There will come a day when, if I say something bad about Bank of America on Facebook, I’ll expect someone from BOA to contact me and make it right.
Opportunities. Social media is leveling the playing field for entrepreneurs in the long tail of niche. Bloggers for little or nothing provide information in topical areas that big media can’t cover. It is no longer a news or broadcast business – but an audience business and audiences are made up of millions of small groups.
Demos are dead. Are you female 18-35? If you are reading this blog, you are more likely a member of the cruise community with an intense interest how lines market and communicate. It is about shared values not age or stage. Want to create something for everyone? Welcome to the middle of the road.
Networking.Email usage will decline like “snail mail” has in favor of “wall to wall” posting on social media networks like twitter and Facebook. From a marketing perspective, direct mail and “email blasts” (I’ve always hated that word) will give way to engaging with consumers where they live online. Direct marketing will be become Network marketing. Foreverism, from trendwatching.com, means the relationships being created virtually today are lasting and lifelong links. Isn’t that more powerful than a one-off email blast?
How to Get In? L.E.A.P – Listen, Encourage, Advocate and Participate2
Listen. Don’t monitor. That means hear what customers think about your products, services and the competition. Discover within the conversations emerging trends and do something with that instant feedback. Tweak your product, respond to complaints – get your hands dirty by getting in the mix. Dazzle customers by acting.
Encourage. Develop new ancillary products and features that allow people to do more of what they already like to do. Facilitate making your customers experience around your product and brand even more fun and easy (contact me, I have some ideas).
Advocate. Show support for social activities, sponsor local tweet ups, social media events and contests, bring new services to light, partner and create opportunities.
Participate. The 10 commandments as so well put by Lon Safko of Fast Company:
Thou Shalt Blog (like crazy).
Thou Shalt Create Profiles (everywhere).
Thou Shalt Upload Photos (lots of them).
Thou Shalt Upload Videos (all you can find).
Thou Shalt Podcast (often).
Thou Shalt Set Alerts (immediately).
Thou Shalt Comment (on a multitude of blogs).
Thou Shalt Get Connected (with everyone).
Thou Shalt Explore Social Media (30 minutes per week).
Thou Shalt Be Creative (go forth and create creatively)!
You can find more on how the cruise lines are engaging on the Social Media page of Cruise Market Watch. The landscape is an ever-changing fluid environment, so if you notice a cruise line doing something new please alert me and I’ll update the page.
1 Society for New Communications Research. 2 The acronym LEAP was liberally borrowed from my friend Harish Bharadhwaj
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Stuart Falk
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