In many ways, cruise is the outlier of the
travel industry. While more travelers are turning to digital sources to book
their travel – Phocuswright’s U.S. Online Travel Overview 2018 predicts
online penetration will increase from 50% in 2018 to 53% in 2022 – in cruise,
distribution is predominantly managed offline. Online bookings account for just
20% of overall cruise revenue, split about half and half between cruise line
websites and intermediary websites.
But the reliance on agents doesn’t seem to be a negative factor. Quite the
While both air and lodging markets are growing, the cruise industry is
outpacing all others. According to Phocuswright’s U.S. Cruise and Packaged Travel 2018 report,
the cruise segment in the United States jumped 10% in 2018, its third
consecutive year of double-digit gains.
And the industry still has substantial headroom for growth.
Cruise Lines International Association says 26.7
million people cruised in 2017 - and that number is expected to reach 30
million in 2019. Compare that to the United Nations World Tourism Organization’s
estimate of the total number of international tourist arrivals in 2017 - 1.32
With that large of an unrealized market and the
fact that most ships operate at nearly 100% capacity, it is clear cruise lines
are confident that if they build it, travelers will come. All major lines are
adding to their fleets, with a steady supply of ships setting sail in the next
few years: In 2019 alone, about two dozen new berths are scheduled.
For this second piece in our series on cruise,
we are digging into the topic of distribution to better understand why the sector
is so agent-dependent and whether - and how - change may come.
Ask anyone doing work related to the cruise
industry - brand executives, travel agents, online travel agencies - about the sector’s reliance
on offline, agent-assisted bookings and you’ll likely hear a similar explanation:
Booking a cruise can be a very complex process, with multiple layers of
decisions necessary. And with each new mega-ship setting sail, the options can
“Years ago, there were four cabin categories: inside, outside, balcony and suite. And the dining option was early or late
seating,” says Jeff Tolkin, co-chairman and CEO of World Travel Holdings, one
of the world’s largest cruise and leisure agencies that owns brands including
CruisesOnly, CruiseOne, LuxuryOnly Cruises and CheapCruises.com.
“Now there are 30 cabin categories, two to three
dozen eating establishments, an enormous increase in the amount of activities
that one can partake in. And so the desire for the consumer to have an agent
assist them continues to be high.”
Those we talked to say comparisons to other travel
sectors are an oversimplification of the issues.
While Phocuswright says 48% of hotel and 59% of air
bookings take place online, those purchases tend to be lower in value and in
time commitment: a two-hour flight for a few hundred dollars versus a
seven-day cruise for several thousand.
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Unlike the relative uniformity among airlines
and even the major hotel brands, cruise lines cultivate specific, unique
personas, some targeted to families, others for a young, party-seeking crowd
and others for couples.
“You are kind of buying a hotel, and potentially
your flights, and your entertainment and your meals all in one decision. So
which ship you pick and which brand you go with can make a dramatic difference,”
says Faraz Qureshi, founder and general manager of Cruiseline, a metasearch and
review site for cruises and a subsidiary of World Travel Holdings.
Complicating the decision process is the fact
that the majority of consumers are not familiar with the cruise products: The
United States accounts for the majority of cruise passengers and yet, according
to Cruise Market Watch, only 24% of the U.S. population has ever taken a cruise.
“There’s a cognitive dissonance that starts to
happen in the cruise purchasing process - am I getting the right vacation?”
says Jeff Anderson, executive vice president of Avoya Travel, a family-owned
and -operated travel technology company and vacation platform with a network of
more than 1,000 independent agencies.
And dissonance is exactly what the cruise lines
want to avoid.
we want is basically an annuity where someone comes on Holland America and they
realize this is exactly the experience I was looking for, and I’m going to come
back again,” says Eva Jenner, vice president of sales for Holland America Line.
To ensure that type of response, Jenner relies on the expertise of travel
agents, which account for about 75% of Holland America’s sales.
“We can provide videos, we can provide written
content, we can provide pictures, but it’s that personal touch that a travel
agent has. They listen to what their clients want, qualify their clients, to
know exactly the type of vacation they are looking for.”
As nearly all the cruise lines prepare to introduce
ships in the coming years, that reliance on agents to attract new-to-cruise
travelers to fill those cabins will remain.
But there are some signs of a change, albeit a much
slower evolution in distribution processes and habits than in other sectors of
Richard Downs is CEO of Planet Cruise, an online travel
agency with about 250 agents.
“The market is changing. We are seeing more self-service,”
There’s a cognitive dissonance that starts to happen in the cruise purchasing process - am I getting the right vacation?
Jeff Anderson - Avoya Travel
“Most customers are using the web to research
When they are ready to book, most of Planet
Cruise’s customers still pick up the phone. But Downs expects that to change.
“I believe more and more over time will be comfortable
booking end-to-end online,” he says.
“It doesn’t mean the death of agents, but agents
might be doing different things in terms of customer care. And certainly as the
market grows, there will be more customers to service and the nature of that
service might change over time.”
digital distribution will also require more coordination, says Anderson.
“There is a lot of opportunity to increase the automation
and incorporate more artificial intelligence into the workflow,” he says.
“The travel sellers are incredibly fragmented as are the
cruise lines themselves. The three big public companies, they are all just
about completely fragmented within themselves - not sharing common platforms,
not sharing databases or sales methodologies, pricing strategy, etc. So a lot
of it has to do with the sheer fragmentation on supplier side and the agent
Mobile is also taking on a bigger role in cruise
Though cruise lags behind other sectors of travel, in recent years
cruise lines and agencies have started to embrace mobile, for now primarily for
information-gathering more than booking.
But that too is slowly changing. The cruise agencies we spoke to all say they are seeing
more bookings come through mobile.
“Mobile is helping the evolution of the industry,” Tolkin
“But most people are still not going to do a complex
transaction and read that kind of detail and book that expensive a proposition
on a small screen.”
Qureshi says it may take an “outlier to come in and disrupt”
“I think we will see a Hopper-like company come into this
space,” he says.
“Mobile hasn’t made a huge impact yet in cruise, but I
believe at some point it has to.”
Along with customer comfort and confidence in
conducting business online, the industry may see a shift to more direct
bookings nudged ahead by Wall Street: Three publicly held companies control the
majority of cruise inventory – Carnival Corporation, Royal Caribbean Cruises
and Norwegian Cruise Line Holdings.
I think we will see a Hopper-like company come into this space.
Faraz Qureshi - Cruiseline
“There’s no secret the cruise lines would love to get more
business direct,” Qureshi says.
“Obviously it’s more profitable for them, and many of these
are public companies, and Wall Street analysts do track this metric. We try
really hard to sell our leads to cruise lines. They actually pay us the most, but
it’s an open auction and an OTA can decide to outbid a cruise line.”
Quereshi says the cruise lines tread lightly in seeking
direct bookings because they don’t want to risk alienating agents, particularly
as they prepare to launch massive new ships.
He also acknowledges agents bring value in the form of higher
revenue per passenger, leading the cruise lines to focus on their core
competency – providing a great vacation experience to their guests.
“Their real skill set is entertaining the guest. When the guest gets on the
ship, making sure they have a great time, making sure the check-in is smooth,
making sure the food is excellent, making sure they are Instagramming so they
are telling their friends and family."