Industry watchers say lower-than-expected demand for summer
cruises in Europe is behind a rash of unusual last-minute discounts.
The offers, which have begun popping up over the past month, include a "fly and
sail" promotion from Celebrity Cruises that boasts significantly reduced airfare
to reach ships in addition to discounted cabins; and a rare "standby fare"
promotion from Crystal Cruises that includes sharply reduced rates.
"The cruise lines are going into panic mode," says industry watcher Mike
Driscoll, editor of Cruise Week. "They have moved all this hardware over there,
and they need to fill the beds."
A number of lines including Royal Caribbean and Celebrity Cruises boosted
capacity in Europe notably for 2011. Royal Caribbean has assigned 11 of its 22
ships to Europe for the summer season, up from eight in 2010. Celebrity has five
ships in Europe this summer, up from four in 2010.
Driscoll says the lines had been betting that the strengthening U.S. economy
would result in more Americans booking Europe cruises this year. And even if
demand from Americans was soft, the lines figured they could fill the ships in
Europe with Europeans, who are turning to cruising in greater numbers, he says.
But a combination of factors has been working against the industry.
Among the biggest factors in slumping bookings: Soaring airfares between the USA
and Europe, which is turning Americans off to traveling to the region.
"The interest (in Europe cruising) is definitely there, but in many cases the
air from most U.S. gateways is more than the cruise," notes cruise seller Mara
Hargarther of Hargarther, Thaler & Associates, a CruiseOne franchise in Ponte
Vedra Beach, Fla. "Our European bookings are down this summer."
Another CruiseOne franchise owner, Alan Richman of Richman, O'Hare & Associates,
of Hollywood, Fla., also cites spiking airfares as the culprit in slumping
Europe sales, saying his customers are taking a "wait-and-see" attitude toward
the Continent this year. When they do book a Europe trip, they're booking the
lowest priced categories of cabins, he adds.
"The cruise lines are making very attractive offers, but the overall cost of the
trip -- cruise, air, pre-post hotel -- seem to be holding our clients back from
committing right now," Richman says.
The recent unrest across North Africa, which borders the Mediterranean, also has
had a large impact on Europe cruise bookings for the summer. In recent years,
ports in Egypt and Tunisia have popped up on a growing number of Mediterranean
itineraries, and the unrest in the two countries as well as nearby Libya has
some would-be cruisers deciding to skip the region this year.
A top executive at Carnival Corp. -- the parent company of more than half a
dozen lines including Princess, Holland America and Costa -- told Wall Street
analysts last month that there had been a significant slowdown in demand for
itineraries that include calls in North Africa and the Middle East.
Like other lines, Carnival-owned brands have responded to the situation by
altering itineraries, sometimes multiple times, to eliminate calls in Tunisia
and Egypt (in some cases, only to later reinstate them).
Including Red Sea and Persian Gulf itineraries, "over 280 cruises had to be
reset, and we estimate the cost of this disruption to our business will be
approximately $44 million of lost revenue," Carnival Corp. Vice Chairman Howard
Frank told analysts during a conference call to discuss first quarter earnings.
Economic worries across Europe, meanwhile, may be having an impact on the number
of Europeans booking cruises in their home waters, Driscoll says.
"Europe is facing its own set of economic difficulties, and it's not just Greece
and Ireland. It's now Portugal and Belgium," says Driscoll, referring to growing
talk of bailouts for financially troubled eurozone members. "That impacts
consumer confidence in (European) countries that might have to bail out these
other countries."
Driscoll says Royal Caribbean's surprise announcement earlier this month that it
would be pulling the 3,114-passenger Navigator of the Seas out of Europe later
this year is a sign of just how much Mediterranean bookings have fallen below
expectations.
As for the last-minute deals, travel agents say cruise lines are trying to
preserve the integrity of their base pricing by structuring promotions around
subsidized airfare, onboard spending credits and free cabin upgrades.
Celebrity's promotion, for instance, includes flights between the USA and
European ports such as Barcelona starting at $999, roundtrip -- far lower than
the fares of $1,500 or more available in the market for peak summer travel days
from some U.S. gateway cities.
"Carnival has a fantastic (Europe) itinerary on its new Carnival Magic, and it
is offering onboard credits and best available upgrades," Hargarther notes. "The
deals are there for the taking |
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