It’s not a great time to woo first-time cruisers

Cruise ships in Costa Maya, Mexico.
Cruise ships in Costa Maya, Mexico. Photo Credit: Byvalet/Shutterstock

In January, Jessica Fricchione and 10 of her family members booked what would have been her first cruise, a Bermuda sailing out of Baltimore leaving on May 31.

Due to the coronavirus crisis, the group’s sailing was cancelled — and they have no interest in taking a future cruise credit.

“No one in the family wants to book a cruise again,” she said, adding that they were looking into a stay at an all-inclusive resort instead. “I don’t ever, ever want to be stuck on a cruise ship.”

Justified or not, the cruise industry’s reputation took a hit from the high-profile Covid-19 outbreaks on a handful of ships in March and April.

Industry stakeholders acknowledge that media coverage of those ships being turned away from ports and, in some cases, of passengers being quarantined in their cabins for weeks on end is most likely to have an impact on the potential-cruiser set.

In a media call last month, Carnival Corp. CEO Arnold Donald said there was “no question” that the media attention would have an impact on that market segment.

“There have been people who may have been considering [a cruise] who would be having second thoughts at this point in time,” he said.

The first-time cruiser has always been considered critical to the growth of cruising. Despite CLIA lines’ global passenger growth of about 60% since 2009, to 30 million in 2019, cruising is still vastly underpenetrated compared with other vacations: 11.9 million Americans cruised in 2019, only about 3% of the population.

Travel advisors expect that the crisis will cause a decline in the new-to-cruise market.

“When you’re dealing with first-time cruisers, you typically have to overcome some fear of the unknown with cruising, such as seasickness, boredom, claustrophobia,” said Anthony Hamawy, President of Cruise.com. “The current negative press around cruising will add to those fears.”

Signature Travel Network CEO Alex Sharpe said that those who’ve never been on a cruise can’t draw upon personal experience to put into perspective what they are seeing and hearing from the media.

“If you’ve been watching the news and you’re not a cruiser and you can’t put what [ships with Covid-19 outbreaks] have been through in any context with your own family’s great times on a ship, it’s hard to reconcile that and say, ‘That’s my next vacation,’” Sharpe said. “I think new-to-cruise will take a hit in the short term. That will take some time.”

Some cruise lines have found that booked passengers who were new to cruise have been more likely to cancel cruises they had booked during the current operations pause.

Mark Conroy, Silversea Cruises’ managing director of the Americas, said that new cruisers have been more likely than past passengers to cancel and take a refund versus a future cruise credit because they are “more nervous.”

Loyalty program members “will come back first,” he said. “They’re the people that know us and love us and travel with us every year or every other year. They’re the ones that are eager to go.”

Repeat cruisers will lead the way

Many think that those who were once potential cruisers and are now on the fence can be swayed back once cruise lines are up and running.

Charles Sylvia, CLIA’s vice president of membership and trade relations, said that there will be “more challenges ahead with regard to the first-time cruisers” but that people returning from cruises with positive stories will put them at ease.

“Once they see the resumption of operations and once they see friends and family members and co-workers going on cruises and coming home with that same level of enthusiasm and satisfaction, then they will be back — the first-time cruisers will come to us,” Sylvia said.

Donald also said that returning cruise passengers, as well as travel advisors, will be the most important messengers in overcoming the additional concerns non-cruisers have. He added that this is something the industry is accustomed to dealing with.

“We were busy knocking down myths before, and we’ll have to return to that,” he said, adding that the two “most powerful ways” to do that is through travel advisors, “with their knowledge and experience and personal relations with their clients,” and the passengers, who will “provide the kind of testimonials and credibility with their friends and colleagues and relatives.”

And as has always been true for travel coming out of every crisis, for some people, the right price is a big persuader.

“I think, with time, this will be overcome because the vacation value will ultimately win out,” Hamawy said.

Royal Caribbean reveals numbers seeking refunds

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Royal Caribbean Cruises has revealed just under half of its customers have requested cash refunds for cancelled cruises, with its operations currently suspended through to June 11.

In a business update, Royal Caribbean revealed it was holding $2.4 billion in customer deposits at the end of March and said, as of April 30, “approximately 45% of guests have requested cash refunds”.

The cruise giant is offering clients with cancelled bookings credits for future cruises worth 125% of the price they paid in lieu of cash refunds.

Royal Caribbean reported it started the year “in a strong booked position and at higher prices” than the previous year, but said: “Booking volumes for the remainder of 2020 are meaningfully lower than the same time last year at prices that are down [in] low-single digits.”

However, the company described booking trends for 2021 and beyond as at “more typical levels”, reporting: “The booked position for 2021 is within historical ranges . . . with 2021 prices up [in] mid-single digits compared to 2020.”

Royal Caribbean confirmed it continues to take future bookings for later this year, 2021 and 2022 and to “receive new customer deposits and final payments on these”.

Richard Fain, Royal Caribbean chairman and chief executive, said: “Travel restrictions and stay-at-home orders have severely impacted our operations.

“We are taking decisive actions to prioritise the safety of our guests and crew while protecting our fleet and bolstering liquidity.”

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He reported: “The company’s fleet is now either in port or at anchor and we have developed strict protocols to protect our crew still on board ships.”

Royal Caribbean said it was developing “a comprehensive and multi-faceted programme” to address the public health challenges posed by Covid-19, including “enhanced screening, upgraded cleaning and disinfection protocols and plans for social distancing”.

Chief financial officer Jason Liberty reported the company had also undertaken “significant cost-cutting, capital spend reductions and other cash conservation measures” and said: “We continue to evaluate all options available to us to further enhance liquidity.”

The company had $2.3 billion in cash and cash equivalents available to it at the end of April and increased its secured credit facility on May 4.

Royal Caribbean’s ships “are currently transitioning into various levels of layup, with several ships transitioning into a cold layup, further reducing operating expenses”, he said.

The company has laid-off about one-quarter of its 5,000 US onshore employees and identified $4.4 billion in savings on capital expenditure this year and next.

This will see the deferral and delay of planned ship deliveries.

However, these measures have still left Royal Caribbean with operating expenses of $150 million to $170 million a month and total monthly expenses, including interest and debt payments, of up to $275 million.