Posted on Sun, Dec. 28, 2003 http://www.miami.com/mld/miamiherald/business/7582671.htm
UP FRONT | VACATIONS AT SEA
Extras can drive up cost of cruises
Cruise lines market all-inclusive vacations, but make sure you take
along extra bucks for premium meals, drinks and can't-miss shore
BY DALE K. DuPONT[email protected]
The deals are tantalizing.
An eight-day cruise, for example, can go for $565 (taxes are extra).
That's about $70 a day per person for room, board, a pool, a couple of
Caribbean ports and entertainment.
But take along some spare change for alcoholic beverages -- either the
cute souvenir variety or straight up -- as well as photos, shore
excursions, casinos, art auctions, alternative dining rooms and spas.
All of those extras can add hundreds of dollars or more to the cost of a
vacation at sea.
Cruise lines derive about 20 percent or more of their revenue from
onboard spending, up from 15 percent in the past, leading some to wonder
whether the lines can continue to market the product as all-inclusive.
But, UBS Investment Research analyst Robin Farley said in a recent
report, onboard sales are ``a more significant contributor to
profitability than that would suggest.''
A recent case in point is Princess Cruises' decision to operate the spas
on two ships debuting next year.
''It gives us 100 percent control over our product,'' Princess
spokeswoman Julie Benson said.
It also gives the company another way to make money from passengers who
paid bargain ticket prices to fill the ever-increasing number of ever
larger ships. For some cruises, ''all-exclusive'' would be a better term
than ''all-inclusive,'' cruise authority Douglas Ward says in his new
2004 Berlitz Guide to Ocean Cruising & Cruise Ships.
`AN ACTIVE VACATION'
Carlos Coloma of Coral Gables knew what he was getting into. He took his
family on a weeklong cruise on Royal Caribbean's Explorer of the Seas in
the spring and figures that he spent $1,000 more on shore excursions.
''You're going to want to swim with the stingrays,'' he said of a choice
in the Cayman Islands. Then there's a trip to the falls in Jamaica and
snorkeling in Cozumel. ``We got a really good deal on the cruise price
itself . . . but to go on a cruise and not do excursions is a little
boring. We like to have an active vacation.''
Still, said Art Sbarsky, former cruise-line executive and now a
cruise-industry consultant based in South Florida, ``individual item
prices on board have gone up out of proportion to real inflation.''
A six-by-eight-inch photo can cost $9.95, which Sbarsky estimates is up
50 percent from several years ago. A 50-minute massage is $99. A few
years ago, it cost $1 a minute.
''It's not to say people are not enjoying the cruises,'' but they are
complaining, Sbarsky said. ``They're particularly complaining about the
number of announcements onboard about revenue-producing events.''
The cruise lines say it's possible to go on a seven-day cruise for less
than $600 and not spend much more at all. Everything that used to be
included still is, but they are adding services and amenities to compete
with land-based vacations.
Carnival Cruise Lines alone has hundreds of shore excursions, notes Tim
Gallagher, spokesman for the Miami-based cruise giant. Besides the
traditional city tours, beach visits and snorkeling, the company has
more exotic pursuits.
''They are much more involved excursions than they used to be,''
A four-hour ''Eco-Kayak Jungle Adventure'' on Cozumel, for instance,
costs $79 and includes lunch. Cave tubing and rain-forest exploration in
Belize last seven hours, cost $85 and are geared to the more active in
the crowd. Lunch is included.
In St. Maarten, a Shipwreck Cove snorkel tour lasts 3 ˝ hours and comes
with complimentary rum punch after snorkeling. Cost: $49. And in Alaska,
a Misty Fjord seaplane adventure lasts two hours, includes a lake
landing and costs $219 a person.
All cruise lines have become more stringent in terms of what they
require the tour operators to have, such as insurance, so their costs
are going up.
''You don't have to buy any of this,'' Gallagher said.
True, said Jeffrey Spector of Pembroke Pines, a veteran cruiser. ''If
the boat didn't go to any port, I'd be just as happy driving around the
ocean,'' he said. ``It's the best value for the money. I'm there just to
While the cruise lines are happy to have passengers like Spector, they
anticipate more revenue from others.
Carnival's onboard revenue increased 3 percent last year, and for
Princess it grew 2 percent even while ticket prices declined, analyst
Farley noted in a report.
''And that is high-margin revenue on which the cruise lines don't have
to pay travel agent commissions,'' she said.
''Historically, the cruise industry has seen more growth in passenger
volumes than in ticket price,'' she said in the report. ``Cruise growth
is about getting 10 percent more people to take a cruise, not getting
people to pay 10 percent more for a cruise.''
In its recent conference call with analysts, Carnival noted in a
discussion about onboard revenue that it had renegotiated contracts with
several suppliers, getting a bigger piece of the pie.
Suppliers have noticed.
Princess' spa announcement in late October sent shares of Steiner
Leisure down 24 percent over two days.
The Coral Gables company runs spas and salons on ships, including
Princess, and at resorts.
''I think we are excited about the opportunity that Princess has now
decided to challenge us at this game,'' Steiner Chief Executive Officer
Leonard Fluxman told analysts shortly after the news. ``We are really
puzzled as to how the economics can make sense.''
Princess' Benson said the line wouldn't discuss the financial aspect of
the decision. Princess, owned by Carnival Corp., will decide next year
whether to take the idea fleetwide.
Steiner's contract with the line runs until the end of next year.
Spas aside, the two biggest components of onboard spending are casinos,
which most lines operate themselves, and drinks.
A planter's punch with Myers rum, for instance, costs $9.95 on a recent
Royal Caribbean's Voyager of the Seas cruise; one Johnnie Walker Black
went for $5.50. Ships cut their costs with duty-free liquor.
HIGH DRINK PRICES
''The drink prices are very, very high,'' said Tony Peisley, a
London-based cruise analyst who just wrote Global Changes in the Cruise
Industry 2003-2010. ``At one time, it was a delight to go into a bar on
a cruise ship, because it was cheaper than home.''
In general, he said, ``you're moving to a situation where it's quite
hard to market cruising as all-inclusive.''
But, Peisley said, ``the cruise lines aren't stupid. . . . They're aware
there's a level over which you can't go.''