Insider Secrets of the Cruise Industry (1991 hits)
With unprecedented access to a week in the life of the Norwegian Pearl, Peter Greenberg explains how cruise lines aim to boost their bottom lines by selling you everything from drinks to shore excursions. By Peter Greenberg of MSN Travel
You’ve probably seen the online ads, commercials and billboards in recent months: Cruise to Alaska this summer and get $200 onboard credit! Cross the Atlantic for under $600! Sail seven nights to the Western Caribbean for $249!
Cruising is the fastest-growing segment of the travel industry, and cruise lines are pushing out deals like never before. In the face of huge financial challenges, they’re unveiling practically suicidal discounts. But why? How can the cruise industry survive when passengers are paying less than $40/day to eat, sleep and play?
Along with four CNBC camera-crew members, shooting almost nonstop, I gained unprecedented access to Norwegian Cruise Line’s Norwegian Pearl to experience a week onboard. We wanted to find not only the inner workings of a cruise ship — the stuff that passengers never get to see — but also learn what the cruise lines are doing to keep themselves afloat, and how their tactics impact the customer.
Here’s the bottom line: Cruise lines can drop the price of their cabins to rock bottom because that’s not how they make their money. Their profits come from cruisers spending money on and off the ship. And that means they’ll do whatever it takes to get passengers in the cabin, and then once they’re onboard, push them to spend, spend, spend.
The break-even point
The metric is almost absurd. For a hotel to make a profit, it needs to fill about 68 percent of its rooms at any given time. For an airline, assuming it can fill its business- or first-class sections, that break-even number is about 61 percent. But in the cruise industry, the number will surprise you: Ships have to be filled to 104 percent capacity for the cruise line to break even! That means that every last cabin has to be filled with two adults, and others with parents and children — and then those passengers have to spend additional money.
On my cruise, Norwegian was hoping for each passenger to spend at least $7.25 per person per day on beverages alone, for the bar to break even. That’s more than $50 per person on a seven-day cruise.
That means from early morning to late at night, the staff peddles everything from cans of soda to specialty drinks of the day, desperate to hit that magic number.
The tricks of the trade are growing increasingly sophisticated. Ever wanted to learn how to make the perfect mojito, or understand the difference between a lager and an ale? You can now do that on a cruise ship, for about $15/class — and the cruise lines hope that your new skill will inspire you to consume even more. As some people in the industry like to say: The more you booze, the better you cruise.
And don’t even think about BYOB. Onboard the Pearl, there’s a little-known 20-person crew called the “liquor retention team.” They scan all bags coming onboard and confiscate any outside alcohol until the night before passengers disembark.
A sales pitch on every deck
Other than entertainment, almost every other activity on a cruise ship is a revenue generator. Gone are the days of sweet Julie McCoy, the cruise ship director played by Lauren Tewes on "The Love Boat," greeting guests with clipboard in hand, directing them to all their all-inclusive free experiences. Today, on every deck, around every corner, there’s another sales pitch: everything from rock-climbing sessions to sushi-making classes, Botox specials to bingo games.
On any given sea day, you can expect about 100 different moneymaking activities to take place — and the cruise line is going to pull out all the stops to make sure you know about each one. The cruise director’s job isn’t just to provide entertainment — it’s to sell the experience.
Even after you step off the ship, the cruise line continues to make money. When you embark on a shore excursion — whether it’s dog sledding in Alaska or zip-lining in Jamaica — those merchants are handing a substantial portion of their earnings right back to the cruise line. And when you receive a guide to shops in each port, you’ll notice that each one is “guaranteed” by the cruise line. What do you think that means? The cruise line is also guaranteed a large piece of the pie on anything you spend.
A cast of thousands
It’s not that cruise lines are trying to fleece passengers; they’re simply trying to survive, in an environment in which most of your food and entertainment doesn’t come at a cost. It literally takes a village to run a cruise ship. It wasn’t until I went behind the scenes that the volume and scope of this became clear.
For one thing, did you know that there are 1,100 surveillance cameras watching every square inch of public space on the ship 24/7? Or that the galleys turn out 12,000 meals a day? With the exception of specialty restaurants, that food is included in your fare. Then there’s the free entertainment; cruise lines have been known to spend up to $1 million on their productions.
When I boarded the Pearl on a Sunday, known within the line as “turnaround day,” it was an experience in organized chaos. The hotel director oversees a crew of 1,000, moving one group of passengers off, and preparing the ship for the next group to board in less than six hours.
Turning around a ship this size is no easy feat: There are 1,200 cabins to clean, 2,200 passengers to board, and more than $300,000 worth of provisions to load.
The process involves one of the most efficient systems that passengers will never see: It’s called I-95, an inside deck that runs the entire length of the ship, where the crew moves all the supplies and luggage — and where the action is nonstop. As passengers load, 4,000 bags come onboard; all of these bags must be successfully returned to their rightful owners seven days later.
It takes nearly six hours to move a week’s worth of supplies, handle luggage, offload garbage and unload food. We’re talking 26,000 pounds of vegetables, 22,000 pounds of fresh fruit, 5,000 pounds of flour, 5,000 pounds of rice and 4,600 pounds of seafood.
Meanwhile, a fuel barge pumps almost $500,000 of heavy fuel into the ship, for four straight hours.
There’s no time to waste, because wasted time means wasted opportunities to earn revenue. Once the next batch of passengers is settled onboard, the party begins — and the cash register is open for business.
The cruise industry is facing never-before-seen struggles, as the economy threatens to sink even the major players in the game. And for the moment, the law of supply and demand is firmly in your favor. It’s an unprecedented buyers market, and for first-time cruisers and repeaters alike, the economic crisis has created a great silver lining, in the form of cut-rate deals.
Translation: If you can manage your onboard spending wisely, the time to book a cruise is now.
