Cruise operators continuously develop new sources of onboard revenue – eateries, lounges, nightclubs, stores, spas, fitness areas, casinos, shore expeditions and even medical treatments – as both profit streams and onboard experience enhancements.
Profits from these form such a large part of overall revenue – they’re so key to profitable operations – that the pressure is on to maximise them. Even more is at stake than at first meets the eye. If facilities such as those listed above can indeed enhance customer satisfaction, they can elicit repeat cruising (which, by the way, means that not every onboard attraction or activity needs strictly to be charged, at least initially in its shipboard life cycle).
Presenting onboard activities in a way that emphasises their variety is a basic approach to promoting them. For example, Greg Purdy, Celebrity Cruises’ VP of operations, notes that Celebrity’s guests “find a wide variety of activities, many of which are complimentary, others for a fee…some of the most enriching activities include the primary pillars of our CelebrityLife Activities – ‘Taste,’ ‘Learn,’ ‘Revive’ and ‘Play’. Other guest favorites are engaging seminars about art, fitness, acupuncture or wine; interactive Celebrity iLounge (Apple Computer) classes; and a variety of tastings.”
Presentation and promotion are quite different at the contemporary-focused Carnival Cruise Lines. Listing a variety of relatively refined pursuits is not the best approach here, according to Mark Tamis, senior VP, guest operations. Rather, constant innovation of, and addition to, the list of existing onboard offerings – in the context of Carnival’s particular, if broad, niche – is the order of the day. “The key is always to constantly augment existing onboard choices with new, exciting features, some free, others nominally charged.”
The free-of-charge categories include formal and casual dining options such as, in Carnival’s case, standalone speciality poolside venues like Guy’s Burger Joint and the BlueIguana Cantina; most clubs, shows, musicals, comedy, karaoke, and lounge acts, including high-tech revues in expansive settings, like Carnival’s Playlist Productions; interactive family-oriented activities such as Carnival’s Hasbro, The Game Show; and on-deck recreational activities, such as water parks and suspended rope courses.
To the list of such free pursuits, cruise lines often add other free, more generic venues such as Celebrity’s iLounge and, on Carnival, exclusive adults-only retreats known as Serenity. Most cruise lines provide adult coffee bars or lounges, business centres and computer training centres.
By contrast, speciality steakhouses and restaurants are among the fee-based amenities on most lines. On Carnival ships, these include its Cucina del Capitano, serving refined Italian fare, and its branded/themed lounges and pubs like the RedFrog Pub and the Alchemy Bar. Other onboard revenue categories requiring nominal or substantial fees for guests include gaming – casinos, gaming areas, even online games; fitness – classes, workouts, personal training, spa treatments (although many onboard spas offer free common areas with steamrooms, saunas and Jacuzzis); and shopping – gift shops, other retail stores, art/collectible auctions, and branded outlets.
Actually, when it comes to gaming, Celebrity may be ahead by a nose. Late last year, it became the first cruise line to offer an onboard, online gaming app. It gives its guests the option, via their smartphones, to play slots, table games like blackjack, and video poker, at a time and place of their choosing. The smartphone app is virtual but the guests’ winnings and, alas, their losses, are real. The app, from Cantor Fitzgerald affiliate Cantor Gaming, is compatible with both Apple iOS and Android software and hardware.
The mobile gaming platform will be deployed on Celebrity’s five Solstice- and four Millennium-class ships. Meanwhile, Purdy explains the app’s rationale: it is meant for those who may simply not be in the mood to visit the casino. They may be relaxing by the pool or waiting for a partner to get dressed for the evening; or may otherwise be disinclined to play casino or other games in situ: “This state-of-the-art technology,” says Purdy, “allows them to play beyond the confines of a typically action-filled, sometimes bustling, casino. Cantor Gaming’s modern app actually helps our guests have, as we intend, a modern luxury experience”. That is with the proviso that the Celebrity ship in question is not in port and is plying international waters – then and only then may passengers register for and populate their virtual account at the ship’s casino. They then proceed to download the app onto their smartphone and play.
As cruise executives well know, onboard revenue ranges from about 22% to 28% of total revenue (ticket revenue plus onboard spending). At first glance, that is not a significant percentage. But, in fact, onboard sales usually make the difference between a cruise line’s profit and loss (tickets sales, widely known as loss leaders to get souls aboard, don’t cover operating expenses). Thus, onboard revenue not only can comprise a cruise firm’s entire operating profit, but covers a portion of fixed costs.
Hence the drive to continuously develop new shipboard attractions and activities. Of course, space limitations challenge interior programmers to develop attractions as freely and creatively as they might like to. Any vessel confronts them with hard limits as to available space. Planners make tradeoffs between, say, an attraction’s currency, practicality and profitability. And they must certainly consider its compatibility with existing onboard design motifs.
There is more flexibility if the entire ship or fleet is undergoing revitalisation, so that space programming is more integrated. That’s been largely the case at Royal Caribbean International – the larger, sister unit of Celebrity under the Royal Caribbean Cruises Ltd umbrella. The parent company’s 2013 fourth quarter financial results highlight healthy single-digit increases in onboard spending, mostly thanks to the revitalisation programme’s new speciality restaurants, casinos and wider areas of (faster) internet coverage.
Royal Caribbean International has also introduced new internet usage packages, unlimited alcohol packages, and new shore excursions, all of which factored into the onboard revenue increases.
This article appeared in the Spring/Summer 2014 edition of International Cruise & Ferry Review. To read the full article, you can subscribe to the magazine in printed or digital formats.