Cruise operators to raise prices amid rising costs and increasing demand.
Cruise operators to raise prices amid rising costs and increasing demand.
Cruise Vacations Set to Get Pricier as Demand Rises
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Cruise vacations have gained popularity in the past year as more consumers seek affordable travel options. However, U.S. cruise companies are now signaling that prices will increase in the coming months. After facing years of COVID-era testing requirements and restrictions, cruise operators such as Royal Caribbean Cruises and Carnival Corp are looking to raise prices as occupancy levels approach pre-pandemic levels.
Cruise vacations were typically 15% to 20% cheaper than land-based vacations before the pandemic hit, according to Truist hotel and cruise analyst Patrick Scholes. However, this gap has widened to 50%. Carnival Corp CEO Josh Weinstein expressed his determination to close this value gap to land-based offerings over time.
To lure passengers back onboard, cruise operators heavily discounted prices during the pandemic, counting on passengers’ onboard spending, which has now reached record levels. Norwegian Cruise Lines’ onboard spending in the second quarter rose by 49.9% compared to the same period in 2019, while Royal Caribbean Cruises saw a 36.8% increase, and Carnival witnessed a 17.2% rise.
However, this increase in spending has also brought about more charges for services that were previously free. According to Bob Levinstein, CEO of Cruise Compete, charges for room service and other amenities that used to be complimentary have become more prevalent. Despite these additional charges, Norwegian and Carnival cite rising labor costs, marketing expenses, and port and freight expenses as reasons why the gains from robust demand and higher ticket prices are being offset.
Looking ahead, Carnival’s Weinstein expects prices to continue rising as they look towards 2024, 2025, and 2026 for growth. Royal Caribbean’s CEO Jason Liberty shares this view, stating that closing the value gap to land-based vacations will provide further opportunity to raise ticket prices.
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Cheaper Than Disney World
A seven-night all-inclusive Carnival cruise vacation to the Caribbean costs $3,988.80 for a family of four, according to data from travel agency Premier Custom Travel. In comparison, a seven-night theme park vacation at Walt Disney World in Orlando, Florida costs $5,810.79. This affordability is attracting attention, with around 73% of those who have never cruised expressing interest in considering such a vacation, according to data from Cruise Lines International Association.
Carnival and Royal Caribbean have observed that the percentage of guests who are new to cruising has surpassed 2019 levels, indicating the success of their pricing strategies. Barclays analyst Brandt Montour notes that price increases of 10% to 15% for 2023, compared to 2019 levels, have not faced much resistance from consumers.
As the demand for cruises continues to grow, it’s clear that the days of heavily discounted prices may be coming to an end. While this may make cruises slightly costlier in the near future, it also highlights the value and appeal that cruise vacations offer compared to other popular vacation options like theme parks.
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