Feb
17
While the cruise industry enjoyed strong occupancy levels in 2009, many of those passengers were induced up the gangplank 
with discounts and incentives that brought cruise fares to historically low levels. That was great for the travelling public, but tough for cruise lines whose meager profits left shareholders looking for a life preserver.
Fast forward to the beginning of 2010. The economy is on the mend, interest rates are still low, there is pent up demand for travel, and this year’s Wave Season (the peak selling period for cruises from early January to mid-February) delivered strong sales for most cruise lines. In fact, several cruise lines reported that they enjoyed their best Wave Season ever this year.
As a result, some travel industry experts are now predicting that we’ve seen the end of the deep discounting in cruise fares that were available in 
2009 and for the first two months of 2010. According to these experts, since sales for 2010 are off to a strong start and some cruises even have waiting lists why should they continue to discount their fares?
While there’s no question that 2010 sales have gotten off to a fast start, much of this demand has been fueled by discount and incentive programs put in place at the end of last year. For example, programs promising two-for one cruise fares, free cabin upgrades, generous shipboard credits, free air, incredibly low lead in prices, complimentary shore excursions, children cruise for free, and other incentives have continued to drive 
passengers up the gangplank.
The question is whether the travelling public will continue to snap up cabins once these incentives disappear, and whether there is anyone in the cruise industry willing to take that chance before the end of 2010. In my view, the answer is “no.”
I expect we may see a small increase in prices for cruises at the bottom of the market that have been selling for ridiculously low prices like $35 to $40 per day. These types of lead-in prices are difficult to sustain for long, do not build brand loyalty, and usually represent a last-minute response to slow bookings.
However, I think it is unlikely we will see much in the way of price increases for premium and luxury cruise lines for the remainder of this year. In fact, I’m still receiving cruise line flyers promoting various 
incentives – the latest this week from Crystal, Regent, Princess, Seabourn, MSC, Cunard and Costa.
The reasons for the continuing soft cruise market are as follows:
- Cruise ship capacity will continue to increase in 2010 as new ships are launched, yet the pace of passenger growth has slowed considerably, particularly in the US.
- Airline capacity has decreased, making it more expensive and difficult for passengers to take advantage of last-minute discounts that cruise lines once used to fill empty ships. As a result, passengers have to be sold on 
taking the cruise much earlier.
- In order to generate reasonable returns, cruise lines need to fill their ships to at least 115% occupancy (100% occupancy is two people in each cabin). So demand needs to increase significantly before cruise lines can increase fares or drop incentives.
- Some cruise lines have already announced and locked in deeply discounted fares and generous incentives for the entire 2010 season in order to get their share of passengers.
- People are now used to getting some kind of discount fare or incentive in order to book a cruise well in advance of sailing. That’s not going to change overnight. In fact, it’s been years since it was 
necessary for anyone to pay the brochure rate for a cruise.
As a result, I think it’s premature to predict cruise line fares will return to normal anytime soon. However, I do think we have reached the absolute bottom of the market when it comes to pricing, and that there is only one direction for fares to go in 2011 – up. So if do you have a special cruise in mind, it may pay to start looking for it soon.
