It’s been a good month for fans of the cruise line industry.
U.S. ports were docked for most of 2020 due to the COVID-19 pandemic and slowly started opening up back last summer.
But many cruise fans believe that the Centers for Disease Control (CDC) was being unfair to the industry by labeling it a level 4 “high risk” activity, despite the tens, maybe even hundreds, of millions that cruise line leaders Royal Caribbean (RCL), Carnival Cruise Lines (CCL) and Norwegian Cruise Line (NCLH) spent to make passenger feel safe on board again.
But earlier this month, the CDC lowered the risk level to 2, which is "moderate risk.” And this week, the CDC went ahead and eliminated its pandemic-related Cruise Travel Health Notices, and also eliminated all risk warnings.
Now masks are optional for anyone who wants to travel. But all three of the major cruise lines will require proof of vaccination, for anyone old enough to be vaccinated, and a negative test no more than two days before sailing.
So great news for cruise fans, right?
But while we hate to rain on anyone’s parade, Carnival has announced a change that might dampen some of that enthusiasm.
Image source: Carnival Cruise Line
What Did Carnival Do?
In its most recent earnings call, Carnival Corporation’s CFO David Bernstein announced that the company would be raising prices.
“We have been raising prices onboard,” said CFO David Bernstein on the company’s first-quarter earnings call. “There is strong demand. And obviously, with the environment being what it is, there's been an opportunity to raise price, and we've been capturing that opportunity.”
The increase is partly due to a bump in the popularity of bundled packages, which will include secondary costs such as airfare, pre-cruise hotels, shore excursions, and ship credit. Some all-inclusive bundles include onboard specialty restaurants and, in some cases, alcohol (drink packages). These bundles have proven to be quite popular with cruise line fans (people generally prefer to know how much they’ll be paying for anything upfront).
Of course, everything is more expensive these days, from fuel to food, and businesses are adjusting their prices accordingly.
“It's certainly not the first time we've seen a dramatic spike in fuel prices,” said Carnival CEO Arnold Donald, who also noted that the company had been doing its best to “maintain price as we said we would,” while also continuing to work to increase its fuel efficiency and further cut its carbon footprint, with a further “10% reduction in unit fuel consumption and 9% reduction in carbon intensity as compared to 2019.”
Bernstein and other executives did not indicate how much they were raising prices by.
Packages will vary by factors ranging from how long your trip is, the number of people in your party, where you are going and what you are bundling. Cruise lines are very protective of the formula they use to decide how to price onboard extras. A drink package, specialty dining, and internet, for example, can vary widely based on whatever criteria the cruise lines use.
Image source:Carnival Cruise Line
Will Royal Caribbean Also Raise Prices?
Will Royal Caribbean follow in Carnival’s lead and also raise prices?
Royal Caribbean’s last earnings call was at the start of February, and obviously quite a lot has changed in the industry since then.
But CEO Jason Liberty did give an insight into what we might expect with the company’s plans with regards to price increases.
Like Carnival, the company has seen a healthy return, with Liberty citing a return of 85% of the company’s capacity and “approximately 1.3 million guests” last year.
Liberty said that the company will have to wait until “we're in a little bit more of a predictable state and our quarters are predictable before providing that guidance,” in terms of price increases, but he also gave an indication that they will be coming at some point this year, once things get a bit more back to normal, as demand has been strong.
When asked about “improvement in revenue,” he said “you see it in ticket, you see it in onboard. I think the part of this is us just getting to a consistent operating environment... and I think we're now getting there.”
That's not a confirmation of price increases -- people may be spending more onboard, but it does hint at the possibility. Royal Caribbean, like Carnival, has widely varying pre-cruise pricing for onboard extras.
