No one doubts that lower price stimulates demand, and the belief is substantiated by recent numbers reported by Crystal Cruises. Record booking days or weeks are usually reported by lines in January, not October, but Crystal reported record bookings on the heels of its latest promotions.
These extreme deals aren’t going away either. Last week Seabourn announced free roundtrip air for 20 Med voyages next year.
However, a growing number of agents see a downside to time sensitive deals. One used the World’s Largest Cruise Night promotion as an example. In his view, this year’s event mainly took numbers away from the week before and the week after, since clients have been conditioned to wait for the deal.
"The numbers CLIA will release will sound impressive, but, basically, it was business that would have been had anyway without the event," he says. "For us, there was no new business."
Veteran agents are not the only ones expressing concerns about rates continuing to drive sales. Back in January, when cruise stocks were at a nadir, several analysts downgraded them further. Goldman Sachs basically said the model was broken, while Barclays Capital predicted Royal Caribbean’s stock would drop to $1. Both were wrong.
There were several analysts, like Credit Suisse, which correctly predicted significant gains for cruise stocks. But now Credit Suisse analyst Scott Barry is sounding sceptical of a further surge. Late last month, Credit Suisse downgraded Carnival Corp. to neutral because of uncertainty over the future direction of pricing.
"I’ve been through a bunch of these pricing cycles," explains Barry. "I’ve never come out of a negative pricing cycle where in September investors are assuming pricing is going to turn positive."
His point resembles that of agents who tell Cruise Week that volume is encouraging, but it’s all driven by price. As fourth quarter pricing indicates, the recovery appears fragile. "If something comes up, what then?" notes Barry. "I like the cruise category. I like the company (Carnival Corp.), but at this point, no one knows how steep the trajectory for the pricing improvement is going to be."