Cruise suite classes help lure luxury clients

Norwegian Star Suite, photo by Dave Jones

Royal Caribbean International is the latest cruise line to develop a suite class, extending the privileges that come with upper-level stateroom bookings beyond the four walls of the suite itself.

Suite guests now constitute a special class on brands ranging from deluxe Cunard Line and Celebrity Cruises to mass-market players such as Norwegian Cruise Line, MSC Cruises and, soon, Royal Caribbean.

Royal Caribbean president Michael Bayley told travel agents attending the Vacation.com annual conference onboard Oasis of the Seas that Royal is working on a Suite Class package of amenities and will roll it out sometime in 2016.

Bayley said the general idea was to make it an all-inclusive product, though Royal spokesman Harrison Liu said the exact list of all-inclusive elements is still being determined.

Bayley was president of Celebrity Cruises when that line conceived its suite class. The category became operational last month on all Celebrity ships except the Xpedition.

Suites have always been larger, nicer and more expensive than ordinary cruise staterooms. What is new is the effort to make areas outside the suite itself exclusive to suite guests and to generally raise the level of service, value and privilege that go with suites.

Celebrity’s new suite class, for example, includes a 120-seat restaurant, Luminae, reserved exclusively for suite guests.

Those in higher category suites, such as Celebrity suites and above, have exclusive access to Michael’s Club, a lounge that was originally a pub-style venue on Celebrity ships.

And in top quarters — Royal, Penthouse, and Reflection suites — guests get more perks including a free premium beverage package, unlimited specialty dining, free unlimited Internet access and a minibar restocked daily with beer, soda and water.

Suite class on some brands, including Norwegian Cruise Line and MSC Cruises, includes segregation from the rest of the ship in an enclave of cabins behind a key-card access point.

The top suites on Celebrity Cruises’ newest ship, the Reflection, also have this feature.

Beth Butzlaff, managing director of cruise at the Virtuoso luxury consortium, said that the spread of suite class is mainly a result of non-luxury cruise lines trying to retain their top-shelf customers.

“I think it’s a trend because all these premium [lines] aren’t trying to pretend to be luxury, but they all have luxury travelers,” Butzlaff said, referring to passengers who are susceptible to pitches from lines higher on the luxury food chain.

Keeping guests loyal by carving out areas of the ship where they can congregate with other luxury customers is an attempt to forestall such defections.

“It’s been successful, from what we can see,” Butzlaff said.

Another factor has been the growing recognition of the revenue brought in by the highest-value passengers on a ship.

The Loft Suite on Royal Caribbean’s Oasis of the Seas.

“The premiums are finding this type of client is more loyal, they spend more onboard, they obviously book the higher suites and they take more shore excursions, so the investment they’re making is going to pay off,” Butzlaff said.

A third wrinkle is the growth of multi-generational travel and the desire of some customers who would typically go on small, luxury ships to travel with extended families.

Suite classes respond to that. Butzlaff said The Haven or SeaPass, a gold-colored version of a key card now used by Royal Caribbean for suite guests, “accommodates that luxury client [who] is wanting to travel with their families and still have a luxury experience.”

As to whether the addition of suite class perks gives cruise lines cover for raising suite prices, Butzlaff said it wasn’t clear.

“There’s different models for different lines,” she said. “With these suites, there is some comparison with the luxury lines as far as price, but the value is still very strong.”

Travel agents can make lucrative bookings from suite products, so the spread of the suite class concept is a boon for agent commissions. Butzlaff said the suite class idea goes back at least as far as the 2004 introduction of Cunard Line’s Queen Mary 2, which resurrected the liner concept and its formal class structure.

Cunard offers Grill Class on its ships, which gives suite customers access or priority seating at its Queen’s Grill and Princess Grill restaurants and associated lounges. On Queen Elizabeth and Queen Victoria, Cunard offers suite guests an outdoor courtyard area for exclusive al fresco dining.

Around the same time, Norwegian began building a separate suite section on its ships that eventually came to be called the Haven. The concept has been picked up by MSC as the MSC Yacht Club starting in 2008 with the launch of its four Fantasia-class ships.

On MSC, the concept includes a separate lounge, pool area, bar, concierge reception area and restaurant, as well as a private entrance to the ship’s spa. Royal Caribbean has built increasingly elaborate suites as its new ships bulked up and passenger counts rose.

The 5,400-passenger Oasis of the Sea and Allure of the Sea offer Royal Loft Suites, duplex accommodations that are a feature of Cunard and some other luxury lines. Already, Royal offers an exclusive concierge lounge to senior-suite guests on most ships and a private area of the pool deck to suite guests beginning with Voyager-class ships and those built afterward.

It also provides private breakfast and lunch seating in specialty restaurants on Voyager- and Freedom-class ships, as well as a separate restaurant on Quantum-class ships, with plans to add them to Oasis-class ships.

Cruise companies increase focus on pricing discipline

Cruise lines have long been loath to depart from the traditional business model of sailing at 100% occupancy. But recently they have started to test moves away from that paradigm.

In the latest attempt by cruise lines to break the cycle of last-minute discounting to fill ships, Royal Caribbean Cruises Ltd. Chairman Richard Fain said that starting in March, the company had stopped cutting prices on close-in sailing dates for all of its brands, including Celebrity and Royal Caribbean International.

Last-minute pricing discipline has become increasingly important because cruise lines admit that late discounting undermines their marketing assertions that only by booking early will passengers get the best fares.

“Depending on the type of cruise, that last minute may be 10, 20 or 30 days out,” Fain said in a conference call with Wall Street analysts. “But from that point on, we will hold our price at the prior level.”

Fain’s pledge applies only to North American itineraries and excludes the two- to four-day cruises, where last-minute sales are part of the typical booking dynamic.

Fain conceded that in the short term, it would mean that some RCCL ships would depart less than full. But he said that in the long run, price integrity would boost the brand and lead to higher revenue.

“It was really important to strengthen our brand, because in the long run it is our brand that is going to drive our yield improvements,” Fain said.

In the third quarter of 2013, Carnival Cruise Line adopted a strategy of holding firm on pricing even if its ships sail at slightly lower occupancies.

“We believe this will make Carnival’s pricing recovery more achievable as we move through 2014,” Carnival Corp.’s then-vice chairman, Howard Frank, said at the time.

Other lines, while stopping short of a pledge to halt last-minute discounting, said they have been doing everything possible to persuade customers to book cruises earlier.

“We don’t have a specific pricing promise, but I can absolutely tell you that our goal is to raise pricing as we get closer to sailing,” said Andy Stuart, president of Norwegian Cruise Line. “It’s a philosophy that my boss, Frank Del Rio, has lived by — a strategy of marketing to fill rather than pricing to fill.”

The time could be ripe for such a strategy. One factor driving last-minute discounting has been the glut of capacity in the Caribbean over the past 12 to 18 months. But starting this month, industrywide capacity in the region began to shrink year over year. With some berths shifting to other markets, cruise lines might have a better shot at maintaining a no-discounting model going forward.

Fain said last-minute discounts have a disproportionately large impact on sales efforts.

“They upset many of our most loyal customers by creating an uncertainty about the prices they pay,” he said. “They cause headaches for our travel agency partners, who don’t know what price they should rely on, and they undermine our brand image.”

Some travel agents have taken note of the philosophy shift at several lines.

“I think Norwegian and Royal are both trying to discount less,” said Debbie Fiorino, senior vice president of CruiseOne/Cruises Inc.

Fiorino said that agencies doing business under the CruiseOne/Cruises Inc. banner have more business on the books for 2016 than they did for 2015 at this point last year, and efforts to encourage early bookings by the cruise lines was one reason.

Other agents said Royal still has room to improve its policy.

“Almost all of our price-drop issues occur in the 30- to 60-day window before sailing, when everyone who booked early is in penalty because that is when Royal is most aggressive,” said Don Baasch, president of Last Call Cruises in the San Francisco Bay area.

Vicki Freed, Royal Caribbean International’s senior vice president of sales, trade support and services, said that by eliminating last-minute discounts, Royal expected to affect the whole psychology of the purchase decision, encouraging earlier action at every stage of the booking cycle.

Beyond eliminating discounts, several lines said they were taking a variety of steps to encourage early booking. These include announcing itineraries earlier, opening ships for booking further in advance and using yield management to encourage early demand.

Rick Sasso, president of MSC Cruises USA, said a new pricing structure introduced at MSC last year was meant in part to encourage early bookings.

“We came out with very aggressive group pricing, which is typically your most advanced cycle of bookings,” Sasso said. “It allows you to be fuller sooner. Then, you come out with an added-value pricing strategy. That has probably become the basis of what most lines are trying to do. So you’re not discounting the price, you’re giving more added value.”

Fain said it is too early to measure the success of the change in close-in discounting practices. But he indicated that the policy is here to stay.

“We think that getting our customers out of this sort of used-car-salesman type of mentality will be good for the brand, good for their experience and therefore lead to larger yields in the long run,” he said.

Wall Street analysts responded favorably to the idea.

In a note to investors, Susquehanna Financial Group analyst Rachael Rothman wrote: “While holding near-in price will cause near-term pain, given it is too late for [RCCL] to make up the difference by marketing its 2015 itineraries earlier, we believe this is the appropriate strategy to reinforce the brand image and improve profitability over the long term.”

Patrick Scholes, an analyst with SunTrust Robinson Humphries, said benefits from Royal’s move could be widespread.

“Getting rid of the ‘used-car-salesman mentality’ and eliminating last-minute deals dovetails with [Frank Del Rio’s] New Deal at Norwegian Cruise Line Holdings and could buoy the industry at large,” Scholes said.

Qatar to charter cruise ships to host World Cup supporters

By Phil Davies


Cruise ships are to be chartered to help accommodate football supporters at the 2022 World Cup in Qatar.The Qatar Tourism Authority announced at the Cruise Shipping Miami convention that it would be contracting rooms from cruise companies as a “means of additional accommodation”.

The QTA said: “Over the past few years, QTA established a number of strong relationships with international cruise operators as well as with other specialists involved in the industry.

“This has proved to be of great importance especially that Qatar will be extensively benefiting from cruise ships over the 2022 World Cup, as a means of providing additional accommodation supply for fans and visitors over the period.

“QTA will be contracting a minimum of 6,000 rooms on cruise ships for the 2022 tournament, and is building its knowledge base to develop this sector of the maritime industry.”

The Gulf state said it would have 100,000 hotel rooms available for fans, more than the minimum 60,000 required by Fifa, as part of its bid to host the tournament.

Temporary accommodation such as cruise ships could help the QTA hit the 60,000 figure and alleviate the potential for thousands of unoccupied rooms once the tournament comes to a close, City A.M. reported.