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Goldring Travel Blog – Making Waves

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Troubled Waters on the Luxury Cruise Front…And A Safe Harbor: Seabourn

Over the past days I have seen a number of troubling things happening in the luxury cruise market.  I preface my comments below by stating just because it is “troubling” it doesn’t mean it is a disaster.  So please take a breath and then read on….

One of my Seabourn client’s wrote two weeks ago, “These markets are taking their toll though. people are scared on the ship and the talk at dinner is often about the “market.” Thought we could get away.” 

But just yesterday, upon her return, the email was remarkably different:

“We are back from another perfect Seabourn experience. The weather was magnificent, food seemed more delicious than ever and we had a great time. It is the ideal vacation for us. So ideal that I’m sure you know by now, along with [our friends], we have already signed up for the next trip.”

With the concept of “Is taking…or even thinking of taking…a luxury cruise at a time like this?” at the fore of most people’s minds, the cruise lines are feeling the pinch.  The question becomes, from the guest’s perspective, how much trouble are the cruise lines?  That is not, in most cases, an easy question to answer.

Case in point:  Royal Caribbean/Celebrity/Azamara, etc. (albeit not luxury lines).  This week it announced record 3rd quarter earnings, but great concern for the future.  This raised concerns over cash flow. Fortunately, it assured the markets by announcing it has $1.4 Billion dollars in cash and no need for new financing.

But on the luxury front the story, at least for some, MAY be a bit different:

First, Regent pushed off its heavily touted new ship, then it announced the ending of its relationship with the Paul Gauguin and now rumors abound that its $40 million dollar refurbishment of two of its three ships will be cut back (though this has not been confirmed.) and its third ship, Navigator, will be waiting about 2 more years for any upgrades…if at all. While all this may well be prudent business (a good thing), it is evidence that reliance on the perception of their being a high profit/cash flow “gravy train” in luxury cruising may have been a bit too much. 

Then , Crystal announced a very generous reworking of its booking policies so that you cancel within 45 days of departure without incurring penalty.  To me this signaled a concern for getting people to book cruises they were “just not sure about”  and to get them onboard the ships…to, in part, generate onboard revenue.  There is a great truth that once someone books a cruise they become emotionally invested and, therefore, are less likely to cancel it even if times get rough.  It  did not concern me much since it does not seek to keep your cash if you cancel.

Then Silversea came out with drastically discounted cruises…and a 25% travel agent commission on close in sailings.  (I did not previously mention the amount, but it quickly was spread publicly over the internet, so what the heck.)  This is a clear cry for cash.  To me, and honestly to most of my clients I have spoken to about it, it is a Red Flag that Silversea may be in serious trouble.  A cruise line cannot sell a $10,000 cruise at a 40-50% discount (OK, it is really at a 35% discount, since a 10% Early Booking Savings already applied) and then discount it another 25% for the travel agent’s (frankly, perverse) commission.  The result, at least for me, has been interesting:  Not a single booking.  Rather, the questions are uniformly, “I am uncomfortable booking with Silversea.  Will my deposit and final payment be protected?  Do I need added insurance…and from whom?  Will my cruise actually take place?” 

Now SeaDream has announced a “Cancel Anytime Within 48 Hours of Departure and Get a 100% Credit” toward a future cruise within 18 months thereafter.  This is, again, very scary…and SeaDream is quite a fine product.  SeaDream had always prided itself on its charter schedule being its base.  But charters are drying up as corporations are not making the same profits and perceptions of such expenditures are presently more negative then positive.  Being a unique product it is not the easiest cruise experience to get people to consider and, honestly, not many travel agents even think about SeaDream as an option.  With its new program, a more aggressive play on the new Crystal approach, SeaDream will keep your cash so that it operates today with a (hopefully) positive cash flow and worry about what cruise you take later.  Clearly this short-term strategy is worrisome.

Seabourn has, at least for now, taken a different approach.  Ala Tiffany’s and Louis Vuitton, it is taking the approach of Stability.  It has not changed its deposit policy.  It has not changed its cancellation policy.  It has not offered travel agents any increased (or absurd) commissions.  Has Seabourn reduced some amenities?  Yes, such as the less-and-less popular once a cruise complimentary tours. Seabourn has done, possibly with a bit more aggressiveness, what it has always done when there is a slower selling sailing:  It has offered a better deal…but never “giving away the store”.  For example, its $1,000 off on any 2009 Med Sailing is a way to lower its prices for some and to, possibly, attract new business.  (Truth be told, that promotion has caused me more headaches than happiness because the vast majority of my clients already had a better deal since they were on 14 day or longer cruises or on Club Signature Value sailing offering 50% off.) 

Will Seabourn be making better or different deals?  My guess is: Yes, but with a caveat.  When you are not taking drastic actions (because you do not need to:  Stability), you can tailor your promotions to the then existing market (subject to forecasting sailing performance).  So will there be some offers for complimentary upgrades?  Sure.  Will there be added values?  I am confident there will be.  But will it give you a sense of desperation?  I am confident it will not.

Seabourn is mostly concerned with the long term…because it has no short term need for cash.  Yes, it wants full ships and, after being spoiled with, consistently selling out cruises, the concept of empty suites is a bit hard to come to grips with…but a few empty suites does not create a disaster.  Plain and simple:  Seabourn is focused on keeping “luxury” luxury.

When I think of Seabourn I keep thinking of the old commercial, We Make Money the Old Fashion Way.  We Earn It!” 

How does it make you feel?

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