March 17, 2009
How have luxury cruise lines reacted to the worst economic downturn in at least 25 years? That was the guiding question for a panel of luxury cruise executives from Seabourn, Crystal Cruises, Silversea Cruises, Sea Cloud Cruises and America Cruise Lines at the annual Cruise Shipping Miami convention. The answer: By cutting prices and offering value-added perks, such as free shore excursions, onboard credit and free airfare. A vigorous debate ensued over which method was best.
Pamela Conover, President and CEO of Seabourn Cruise Line, still believes that the greatest appeal of a cruise -- value -- is the same, regardless of level of affluence. But, to continue to offer that value in these times, "regrettably," said Ms. Conover, "Seabourn is offering pricing that has never been seen before" in order to fill its ships. So, people who may not have been able to experience Seabourn cruises before are now able to do so. Conover was quick to add, however, that the lowest prices are roughly $2,800 for seven-day Mediterranean cruises -- still $800 per night for a couple.
While not to the same extent as Seabourn, Crystal Cruises has also cut fares. According to President Gregg Michel, pricing for Europe cruises in 2009 (Crystal Symphony in Northern Europe and Crystal Serenity in the Mediterranean) has been reduced between 8 to 12 percent from last year's levels. And, in addition to the rate cuts, the line has relied on added-value perks, such as onboard credits -- sometimes in the thousands of dollars. (Unlike many other luxury lines, gratuities and booze are not included in Crystal's fares.)
But, while many lines are offering dramatic discounts, others are sticking to their guns.
Execs from Sea Cloud, Silversea and American Cruise Lines argued that, unlike big-ship cruise lines (Carnival, Royal Caribbean), luxury operators have another consideration when determining prices: brand integrity. Konstantin Bissias, President of Hamburg-based Sea Cloud -- which offers luxury, tall-ship and river voyages -- stated it bluntly: Discounting too heavily "will destroy the brand." Sea Cloud, he went on, publishes pricing two years in advance and sticks with it.
In some countries -- Switzerland was mentioned -- reducing prices to increase demand is an "oxymoron for a luxury product, even in today's environment," suggested Amerigo Perasso, President of Silversea Cruises. He continued, if a line is doing whatever it takes to fill the ship, including lowering prices significantly, it may be difficult to restore the original rates when the economy finally bounces back. At that point, the passengers will have new expectations about pricing. But, the potential cost to preserve a reputation may result in ships sailing well under capacity.
Charles Robertson, president of American Cruise Lines and Pearl Seas Cruises -- a new luxury line debuting this summer -- noted that, like Sea Cloud, ACL has offered practically no discounting (except for early birds, who book at least seven months in advance). Robertson argued that they don't want to build the passenger mindst that, if they wait, they'll get the discount in the end.
Ms. Conover disagreed. By lowering prices significantly, Seabourn will fill its ships and attract a new array of first-time (and perhaps repeat) passengers in the process. As she stated with a smile, "When you've flown first-class, you don't want to ride on the bus, if you can avoid it."
-- by Dan Askin, Associate Editor
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