Over the past several years, cruise lines have been slowly adding in ala carte pricing for even the most basic items. First, the cruise lines added charges for sodas in the dining room, once considered to be part of the cruise’s “all-inclusive” pricing. Then they added upscale dining options at specialty restaurants with fees of $10 – $35. Next there were ice cream and coffee bars with more and better tasting choices, charges for freshly squeezed orange juice and fees for after hours room service deliveries. The all-inclusive pricing structure of a cruise are nearly gone. Don’t get me wrong, the value associated with cruise ship travel still gives you “the most bang for your buck” however, it is clearly not an “all-inclusive” price anymore.
Carnival Cruise Lines last week announced its most recent addition to the cost of a cruise. They are “testing” the concept charging an extra $18 for steak or lobster entrees in the regular dining rooms on three of its big cruise ships. Royal Caribbean began charging for upgraded steak selections in their main dining rooms several months ago. This is a trend that has begun and I suspect will be picked up by every major mass-market cruise line, as always happens when one segment of the industry finds a way to make additional income.
According to Ed Perkins in his article, “Ala Carte Pricing Coming to Cruises,” he says, For most of their modern existence, cruise lines have touted “inclusive” pricing as a major advantage over most vacation alternatives. With the exception of tipping—and usually alcoholic beverages—once you bought into the cruise, you really didn’t have to spend anything extra for the duration. Of course, you paid extra for port excursions and some specialty recreation activities, but those were strictly options. Meals, snacks, regular beverages, entertainment, and most onboard activities were “free” once you got onboard.
What’s changing? Basically, the way you buy cruises is changing. An executive at a travel company was recently quoted as saying that, with the giant online travel agencies, the travel industry has created a business model “specifically designed to bring our prices down” as much as possible. Those various agencies and their search engines permit instant price comparisons among essentially all the suppliers in any given marketplace. They don’t just facilitate, they emphasize searches for the “lowest” price or fare.
The big airlines recognized this new marketing reality a few years ago: That showing up as the “lowest” option in any search is a huge competitive advantage. In response, most have started to charge extra for many of the facilities and services that were once bundled into the fare, primarily so they could keep that base fare figure as low as possible. In fact, their behavior clearly shows that, absent diligent government oversight, they would engage in wholesale price-splitting: Carving out an arbitrary portion of the real fare, giving it a plausible label—think “fuel surcharge” here—and excluding it from the base fare display. This “lowest fare” focus is especially important with airlines, because you, the consumers, have shown that low fares easily trump any minor product differences.
My take is that the mass-market cruise lines are facing the same sort of problem. With the advent of modern megaships, product differentiation is decreasing. More and more, you will buy a cruise on the basis of an online search, for example, for the line and ship with the best price for a balcony cabin from South Florida to the Caribbean in March. Like the coach/economy airline seat, the mass-market cruise cabin will become a commodity.
Clearly, if I’m right, cruise lines will chip away at their total service packages by adding extra charges for food, beverages, and activities. How fast they will chip depends on market response. But the ability to come out “lowest” in any sort of price comparison is far too important for any mass-market line to ignore. If the only way to show lowest in a search is to charge extra for what used to be “free,” they’ll charge extra.
What are your thoughts on a la carte pricing coming to cruises? Will you continue to cruise? Do you still think it offers value for your vacation dollar above land-based vacations? Share your thoughts by adding a comment below.
