Since 2010, the cruise industry has enjoyed a boon of passenger growth: up from 18.5M in 2010 to the 26M reported by Cruise Watch for 2018. But the question begs to be asked – are revenues growing at a similar rate?
To assess this question, let’s examine some strategic imperatives impacting revenues
1) Growing Strategically
Cruise companies continue to see huge growth in both industry and passenger capacity. Passenger growth has not equaled revenue growth. Why?
Based upon the 13 new ships launched in 2018 and 15 more scheduled for 2019, cruise companies continue to invest in new ships bringing millions of additional booking opportunities annually.
This ongoing escalation of capacity creates fiercer competition, and the need for companies to continually re-evaluate their capacity strategies to maximize the revenue generation of their cruises.
As an example, the decision to place a ship in Europe for the summer vs. Caribbean vs placing another ship in Alaska can create or destroy millions in annual revenue through repositioning, yields, onboard revenue, foreign exchange rates, along with fuel and other costs. Detailed itinerary planning is also important to determine itineraries and the time to spend in each port. Additionally, measuring the impact of capacity on total revenue optimization and profits to inform strategic deployment is critical to growth and avoiding earnings missteps.
Cruise companies are having to manage the growing numbers of cruise days, as passenger numbers increase, both in the Frequency of existing customers and new cruisers entering the market continue to grow causing cruise companies to manage the growing numbers of cruise days. To effectively handle the growing bookings volume, companies must ensure that their analytical tools are keeping up with this demand. It’s essential to establish sourcing optimization by country and city to ensure the right ship availability, so that cruisers can join when they want to when the ship has capacity.
2) Exploring Areas of Revenue Opportunity
While waning, some cruise companies may still be using quarterly/seasonal pricing strategies, or they rely upon weekly pricing of itineraries with different days of departure. For these organizations, there are significant opportunities to drive higher profitability through both better coordination with Marketing and other departments, plus more tactical, frequent and granular prices changes. Optimized decisions to balance generating additional demand for softer demand areas from a combination of coordinated investment in both marketing and pricing is the next frontier for the cruise industry.
Additionally, opportunities continue to exist in traditional places for increasing revenues in areas such as onboard spending by using key predictors to target passengers with specialized offers that enhance their onboard experience while refocusing their purchases to the cruise line. And as part of this refocusing, once customers have booked, create opportunities for the customer center merchandising to continue offering customer enhancing experiences through a combination of upsell offers, and pre-booking of shore-excursions and other onboard upgrades.
3) Empowering Users to Engage with the Organization
Systems cannot operate within a process vacuum. It behooves cruise companies to offer their decision-makers more tools in one place to access their data, creating one version of the truth. Too often, different groups within an organization create and use information that is siloed. These isolated views lead to less optimal or in extreme cases, conflicting decisions to be made.
Streamlining the processes, so that tools and data are aligned throughout the organization help to increase the efficiency of overall operations and prepare for the inevitable changes that will occur.
Users are then aware of what the systems are designed for and can use them in the correct manner. By doing this, companies allow all parts of the organization to truly integrate into their corporate culture by focusing on these four key aspects of change management: a vision for change, pressure for change, capacity for change, and anchoring the change. The combination of alignment and effective change management will help to drive increased revenues.
Everyone agrees the cruise industry is experiencing explosive growth. It’s a great problem to have, but companies need to ensure that appropriate tools and processes are in place to eliminate the unknowns and maximize revenue growth.
Contact us to learn more about how to solve today’s challenges in the cruise industry.