Royal Caribbean raises gratuity by 8%

Royal Caribbean International plans to raise the suggested daily gratuity amount on its cruises from $12 to $12.95 per person.

Gratuities at the suggested amounts are automatically posted to a passenger’s shipboard account, but can be adjusted at guest services.

The 8% increase on standard cabins is scheduled to go into effect June 1. Booked passengers can lock in the old rate by pre-paying gratuities by that time.

In a post on its agent site, LoyaltoYouAlways.com, Royal Caribbean said the suggested gratuity for suite guests is being raised from $14.25 to $15.95.

Royal Caribbean last raised its suggested tip amount in February 2013, from $11.65 to $12.

Competition for Chinese guests intensifies with Princess ship deployment

Shanghai Cruise Terminal

By sending its next ship to sail from Shanghai, Princess Cruises will vault into the vanguard of Western cruise lines seeking to source passengers from fast-growing China.

Princess said it will use the third ship in its Royal class, set for delivery in 2017, to establish a year-round presence in China, one of only three cruise lines to have done so.

The 3,560-passenger ship will be from the largest class of vessels that Princess sails, one-third larger than the 10-year-old Sapphire Princess, which begins its second season of summer sailings from Shanghai next week.

“Deploying our next new ship in China underscores our strong commitment to growing the China cruise market,” Princess President Jan Swartz said in a statement.

The move echoes the decision in April 2014 by Royal Caribbean International to commit the Quantum of the Seas to Shanghai even before it had been delivered. After six months of interim sailings, the ship left New York on a transit cruise May 2 and will begin year-round cruising in China in June.

At the time, Royal Caribbean CEO Adam Goldstein said the company felt it had an asset in the Quantum that was impossible to match.

The Princess ship, as yet unnamed, will be a follow-up to the Royal Princess and Regal Princess, which will remain on U.S.- and European-based itineraries. When they were introduced in 2013 and 2014, respectively, they made a splash with their protruding SeaWalk platforms, dancing water fountains and a pair of elegant chef’s table restaurants.

In addition to those features, the 2017 ship under construction at the Fincantieri shipyard in Italy will be customized for Chinese guests, using the Princess Class elements pioneered on the Sapphire Princess.

They include the World Leaders Dinner, a traditional English afternoon tea, a Lobster Grill, Ultimate Balcony Dining, an oceanview, hot-pot dinner option, ballroom dancing and expanded duty-free shopping.

“And as this ship is still in the design phase, we are looking forward to creating other new and exciting venues and experiences catering to the Chinese vacationer, which we will reveal in the coming months,” Swartz said.

In announcing the ship, Princess said it will be “the first year-round international luxury vessel designed and built specifically for Chinese guests.”

The announcement comes as competition begins in earnest for the Chinese customer.

On May 15, a joint venture between Royal Caribbean Cruises Ltd. and Chinese online travel agency Ctrip will begin sailing the former Celebrity Century from Shanghai.

The 1,800-passenger ship has undergone a renovation, which included the addition of an ice bar, a trampoline and minigolf as well as a makeover of the restaurants to tailor them to Chinese tastes. It will sail under the name SkySea Golden Era.

On May 21, the Sapphire Princess begins its second summer of sailings from Shanghai, followed by the arrival of the Quantum in June.

Carnival Corp. is also represented in the Chinese market by Costa Cruises, which has been sailing the Costa Serena from Shanghai since April.

In a note to investors issued after the Princess announcement, UBS Securities predicted that 2015 will be the tipping point for China to become a “game-changing force” for the cruise industry.

UBS analyst Robin Farley said China will not only provide a new source of demand but will reduce capacity and strengthen pricing in more mature markets such as North America and Europe.

The international cruise industry’s presence in China has been growing since 2008 when Costa first put a ship there dedicated to the Chinese market. Carnival Corp. sent then-Costa chairman Pier Luigi Foschi to oversee its Asian operations.

After Foschi left Carnival, former Princess Cruises president Alan Buckelew was named chief operations officer and was dispatched to China. Although Costa has two other ships, the Costa Victoria and Costa Atlantica, also sailing from China, the shift of a Princess newbuild to China will significantly step up Princess’ presence there.

After the 2017 delivery, Princess has no new ships on order, although Carnival Corp. recently announced an agreement in principle with two European shipyards to build nine vessels from 2019 to 2022.

Carnival Corp. has also agreed to explore a joint venture with Fincantieri and the China State Shipbuilding Corp. to develop the first “world-class cruise ship” to be built in China.

Norwegian Cruise Line has formed a task force to evaluate whether and how to enter the Chinese market. However, its largest shareholder is Genting Group, a Malaysia-based company that also owns Star Cruises, a line that is focused solely on the Asia market.

The Disney distinction

The Christening of the Disney Dream

Walt Disney Co. and its cruise line are on a roll.

The entertainment and media giant reported earnings rose 10% for the second quarter of this year with the fastest growth at its Parks and Resorts unit (which includes Disney Cruise Line), where operating income grew 24%.

What is Disney doing right?

First and most directly, it is raising prices. Disney said its earnings growth at parks and resorts was “primarily due to increases in average ticket prices at our theme parks and cruise line,” along with more spending on food and merchandise and higher average hotel rates.

Single-day tickets at Walt Disney World in Orlando cracked the $100 barrier last year.  And Disney Cruise Line prices are generally much higher than competitors on similar routes.

Tom Stieghorst
Tom Stieghorst

A random comparison shows a balcony cabin on a 7-day Eastern Caribbean cruise departing Port Canaveral on Dec. 5 listed at $1,814 per person on Disney’s website and $912.50 on Carnival Cruise Line’s site.

Several things that underlie Disney’s pricing power are qualities that other cruise lines are also trying to achieve.

One is brand strength.  On a 2014 ranking compiled by Interbrand, a unit of ad giant Omnicom, Disney held the 13th strongest global brand, just behind Intel and just ahead of Cisco Systems. Interbrand said Disney’s power as a brand stems from its “use of technology and data to understand what customers want and personalize their experiences.”

A second pillar of pricing power is capacity control.  Disney has resisted the temptation to expand its fleet of four ships, the last of which was delivered three years ago. Unlike many lines, Disney has no ships on order.  That helps keep supply scarce and drives demand.

But that doesn’t mean Disney gets stale. It frequently upgrades the experience, especially with new entertainment including shows from hit movies like Frozen and Tangled.

And Disney has a pipeline to first-time cruisers through its theme parks, where much of the programming on a Disney ship can be experienced.  Disney cruise customers know what they’re getting even if they’ve never been on a cruise ship before.Of course, we don’t know exactly how Disney’s higher pricing translates into profits, as those vital numbers are buried in the results of the overall parks and resorts division.
My guess is that Disney Cruise Line makes a solid contribution.