The 1000% growth figures for online cruise sales are flying thick and fast. Last week, Preview Travel (now Travelocity.com) announced its January 2000 cruise bookings were up more than 1000% over January 1999. A month earlier, Uniglobe.com, which supplies a substantial amount of Expedia’s cruise content, made a similar announcement, saying that the number of its customers booking cruises in December 1999 had increased 1000% over December 1998.
The enormity of these figures illustrates that cruise sales are growing by leaps and bounds - but that they still have a long way to go. Airline ticket sales still dominate the Web, and most of the non-air growth is in hotel and car rental sales. Solid benchmarks are hard to find, but last winter, 80% of what was then Preview Travel’s online ticket sales were airline tickets. Of the other 20 percent, less than three percent were vacations and cruises, the rest were hotel and car rental bookings. However, 1000% growth in a year’s time does make a difference - cruises now make up 35 percent of Uniglobe.com’s online travel sales. Preview Travel is less specific, but it is going so far as to say that its January and February 2000 cruise bookings have already surpassed total cruise bookings for all of 1999.
Not only are the number of cruises sold online increasing, so are the revenues-apparently at an even faster pace. In an interview last fall, Sharlene Wang, vice president, product marketing, of Preview Travel, said that the number of Preview’s cruise transactions increased 120 % between February and June of 1999. And the percentages were even better for revenues, which increased 195%.
But cruises have something else to offer online retailers: full commissions. We’re talking 13% to 15% commissions. Compare that to the paltry commissions airlines pay.
Why such generosity on the high seas? Overcapacity. It is true that the number of people going on cruises is clearly growing-the industry trade group, Cruise Lines International Association, whose members make up the bulk of cruise lines North Americans sail on, just announced that a record 5.85 million North Americans took a cruise in 1999. That was an 8.5% increase over the previous year. And, CLIA estimates that the potential for cruise sales over the next five years ranges from $54 to $97 billion. But cruise line capacity is growing even faster than passenger numbers - cruise lines appear to be ordering new ships with that $97 billion figure in mind. There are now about 120 ships sailing, another 50 plus are contracted for or planned for by the end of 2003.
Cruise lines need to fill those ships and the economics of the cruise business means that they can afford to pay generous commissions in order to do so. It is possible to envision a scenario in which a cruise line could actually lose money on the up front price of a cruise, but still make a profit on the sale by the end of the cruise. That’s because despite the all-inclusive pricing for cruises - a cruise includes all meals (and there are plenty of them), airfare and transfers between the ship and the airport, plus passengers can purchase other add-ons in advance - there are still plenty of other opportunities for passengers to spend money on the cruise. There are boutiques, hair salons, spa services, ice skate rentals, rock climbing walls, casinos-even cyber cafes.
So it’s no wonder that online retailers like Travelocity and Uniglobe.com are trying to build their business by building strong supplier relationships, dramatically increasing the number of cruise departures offered online, pricing aggressively (long a tool of cruise retailers even in the pre-Web era), and effectively promoting special offers to their large customer bases.
Preview Travel offers cruises from leading suppliers including Norwegian Cruise Line, Royal Caribbean International, Carnival Cruise Lines, Celebrity Cruises, Disney Cruise Line, Holland America Line, Renaissance Cruises and Windstar Cruises.
Uniglobe.com, which provides content for Expedia’s cruise travel section - Expedia visitors to the section have a direct link to Uniglobe.com’s customized cruise site - has an equally impressive lineup. It has 14 cruise lines, including Carnival, Celebrity, Costa, Cunard, Disney, Holland American, Norwegian Cruise Line, Princess Cruises, Royal Caribbean, Silversea and others. Online cruise sales unlikely to become an overnight phenomenon. A cruise is a complex, expensive product. At some point, customers want to talk to someone about the money they plan on spending on their precious vacation. But, the Web is already a resource for online consumers and an increasing number are clearly willing to move from looking at cruises online to booking them online.