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Discounting and positioning are driving demand for cruises

If you’re anxious to hear some good news about travel and the economy, the cruise industry may be the best place to look.

In spite of an economy that has challenged many sectors of travel and tourism, the cruise industry continues to enjoy high occupancy and growing demand. According to information compiled by the Cruise Line International Association (CLIA), the economic storm that struck last fall has yet to keep consumers from sailing.

“In 2008, our members carried about 13 million guests,” said Bob Sharak, CLIA’s vice president of marketing and distribution. “The year prior to that, we carried 12.5 million guests, so we continue to grow in terms of the number of people we’ve carried.”

CLIA’s statistics show that in the first quarter of 2009, the association’s members carried some 3.1 million guests. Collectively, the industry sailed at 102 percent occupancy, meaning that many 2-person cabins actually carried 3 or more people.

Occupancy rates have stayed high, even as new ships are introduced into the marketplace. In 2008, seven new large ships were launched, and plans are in place to launch 13 new ships this year.

Priced to sell

Though many factors contribute to the high occupancy levels, it’s no secret that cruise lines have deeply discounted their prices to keep cabins full, with some markets seeing price reductions of up to 15 percent or 20 percent.

“Cruise lines are offering incredible value,” Sharak said. “The prices are at a level that people haven’t seen for years, and may not see again for years. We’re seeing pure price incentives, and seeing it bundled with things like two-for-one offers or on-board credits.”

Companies have also repositioned ships and retooled their itineraries to meet customer demand in a way that is still profitable. Holland America Line, Royal Caribbean and other companies have moved some inventory out of Alaska, a relatively expensive cruise destination, and increased their offerings in the value-friendly Caribbean.

Holland America Line has been increasing the number of ports it uses in the United States, to make it easier for people from different parts of the country to drive to their point of embarkation. They’re also returning to tried and true itineraries.
“We’re returning to Bermuda after quite a long time, due to its easy access from the East Coast,” said Paul Allen, Holland America’s vice president of sales.

“We’re returning there with our midsize ships. You have to gauge whether it’s going to be easier to sell a cruise from New York if the economy becomes more uncertain than if that ship is sailing round trip to the Baltic.”

Success with groups

For travel groups, the value of cruising has made it an attractive offering, and companies that package trips for groups are enjoying continued success.

“2008 was a record year for us, and 2009 is looking a little stronger,” said Russ Rosenberry, who owns and operates Islands In the Sun Cruises with his wife Susan. “But we’re working twice as hard, and it has required a lot of creative energy on our part.”
Cruise companies have been offering attractive rates and booking terms for groups, Rosenberry said. Islands in the Sun also instituted a “cruise stimulus package” this year, reducing the advance deposits it collects from passengers to $100. Most cruise lines require deposits of around $750, so Rosenberry’s company is covering the difference until they collect final payments from customers.

These measures and other initiatives have made it easier for groups to continue sailing, even on luxury vessels to exotic locations.

“Groups might not have considered some of the luxury and premium-plus lines in the past, but now the companies are making it easier for groups to try,” Rosenberry said. “We have a lot of clubs sailing with companies like Oceana Cruises for next year.”

Industry experts are betting that once travelers experience their first cruise, the high value and personal satisfaction will keep them coming back.

“We have high demand and an under-penetrated market,” Sharak said. “So we can bring these five ships on a year, and have a lot of people who are going to come to us fresh and new. We have a high base of potential cruisers.”

Brian Jewell

Brian Jewell is the executive editor of The Group Travel Leader. In more than a decade of travel journalism he has visited 48 states and 25 foreign countries.