RCCL Sticks with No Last-Minute Discount Policy
Royal Caribbean Cruises Ltd.’s decision to stop last-minute price slashing is showing promise, Chairman and CEO Richard Fain said.
“We began in March and we’re sticking to it,” Fain said. “It’s still early days, but the impact we’ve seen from the load factor perspective is relatively small and aligned with our expectations. We’re trying to achieve happier guests, happier travel agents and better branding. It does seem we’re on the right track.”
The policy eliminates last-minute price cutting at 10, 20 or 30 days out, and has in fact been expanded to 40 days out on some departures. It has stopped some discount-seekers from booking a cruise on an RCCL brand, but Fain said he believes pricing integrity will be a success in the long run.
“We recognize this policy is costing us some money in the short term, but we believe in the long term it will pay handsome benefits,” he said. “Our price integrity policy addressed deep last-minute discounts that are so frustrating to our guests and travel partners and ultimately so damaging to our brands,” Fain said. “Our policy is to hold our price. … It’s really very important to the branding. It’s hard to set yourself out as a brand that is high quality and highly respected in the industry but say you can have it for half-price. The ability to maintain your image as a higher quality product has to permeate everything you do.”
Fain made the comments during a conference call with analysts about second-quarter earnings, which rose 34 percent to $185 million, or 84 cents per share, compared to $137.7 million and 62 cents in the same period last year. The positive financial news sent the company stock soaring to a 52-week high by late morning.
The positive results were attributed to better foreign exchange and fuel rates, as well as better-than-expected performance in the Caribbean and China.
“We remain in the best booked position in our company’s history,” Fain said.
Bookings since the April earnings call have been healthy and the company continues to be booked ahead of last year, the company press release said.
“Momentum in the Caribbean continues at a solid pace, and our strong booked position in the third and fourth quarters gives us confidence as we move through the second half of 2015,” CFO Jason T. Liberty said. “The trajectory of our brands is firmly on course for another record year of earnings, with healthy trends extending into the first quarter of 2016.”
Fain also said he expects to see more bundling of extras, such as a beverage package or prepaid gratuities, into the upfront cruise fare. RCCL’s premium brand Celebrity Cruises recently introduced the permanent value-added pricing structure called “Go Big, Go Better, Go Best!” The program lets guests choose extra amenities — prepaid gratuities, $150 onboard credit, a Classic Beverage Package, and unlimited Internet.
“Philosophically speaking that is a growing trend, and we’re doing more of that,” Fain said. “We really are seeing a desire for this on the part of our guests and very much on the part of travel agents who find it is a much better way to present something and sell it if it’s all included in the package. Last year we saw ‘1-2-3 Go,’ and this year we’re seeing probably one of more dramatic shifts to ‘Go Big.’ These are in fact moving us to an even more inclusive package, and we think that gets us more net revenue and happier guests and travel agents. I think we’ll probably see more of that as we go forward.”
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