Arnie Weissmann
The "Grass is Greener" promotion launched by Celebrity Cruises last week puts forward the reasons why the line believes it's better to sell, work on or sail with Celebrity ships.
But it isn't entirely disconnected from the grass that seems to be growing only on the other side of the fence for the cruise industry: the rich, vibrant, supersaturated hue of green represented by the revenue spread between last-minute discounting and disciplined price integrity.
They can see that grass growing greener in commercial aviation. They see it in sales of Apple products. But since 2008, they have not seen it in the cruise sector.
About six weeks ago, Celebrity's parent, Royal Caribbean Cruises Ltd., announced a strategy to forego the industry mantra "sail full," at any price, in favor of a focus on raising passengers' average-per-diems (APDs). It's a metric that places a premium on yield over market share but potentially sacrifices some economies of scale.
Celebrity Cruises CEO Lisa Lutoff-Perlo offers a picnic blanket to Norm Kondelis, Vacations to Go team manager, cruises, at its Houston headquarters. Photo Credit: Arnie Weissmann
Last week, Celebrity leased a private jet for CEO Lisa Lutoff-Perlo and Dondra Ritzenthaler, senior vice president for sales, trade sales and service. Over five days, the two flew to eight cities in North America, called on eight major accounts and hosted three "lawn" events -- picnic-themed parties reminiscent of the Lawn Club feature on Solstice Class ships -- each of which were attended by 60 to 70 medium-size agencies.
Michael Delgado, Celebrity's vice president of digital marketing, accompanied them, coordinating social media as well as monitoring "Grass is Greener" posts showing off concurrent shipboard events designed to engage guests and crew throughout the fleet.
Over the weekend, surprised consumers in parks and at events in New York, Chicago and Menlo Park, Calif., found themselves suddenly swarmed by as many as 200 uniformed butlers branded with Celebrity logos. The butlers presented them with Celebrity-branded picnic baskets containing a blanket, plates, silverware, meats and cheese, wine glasses, a bottle of wine and wine charms.
A couple of lucky consumers also found certificates for a free cruise.
News media had been invited to these popup parties, but they were conceived with social media in mind and were custom-made to populate Instagram, Facebook, Pinterest and Twitter posts with "I've got a butler! #GrassIsGreener" selfies.
Throughout the month of June, Celebrity staff are scheduled to make more than 12,000 phone and 4,000 in-person sales calls to the trade.
The "Grass is Greener" promotion is Lutoff-Perlo's first campaign since becoming CEO in December, and there's a lot riding on it. Even so, the agenda for each major account visited last week focused not only on the campaign but also on the current "123 Go!" promotion (which runs through July 5).
And at every stop, there was a discussion about the need to preserve the new APD strategy.
Pressing the flesh
On Tuesday morning, day two of the blitz, Lutoff-Perlo walked to a Cambridge, Mass., restaurant for her first meeting of the day. An umbrella sporting the logo of her beloved Patriots shielded her from the rain, but the weather would later force "Plan B" into effect: The day's rooftop "lawn" event was moved into the building's lobby.
Celebrity Cruises Senior Vice President Dondra Ritzenthaler, in black-and-white dress, and Celebrity Cruises CEO Lisa Lutoff-Perlo, in black dress, arrive in rainy Boston to meet with representatives of World Travel Holdings. Photo Credit: Arnie Weissmann
A few minutes after she shook the rain off her umbrella, she was shaking the hand of Brad Tolkin, co-chairman and CEO of World Travel Holding, described by Celebrity's vice president of sales, Keith Lane, who was present that day, as a top account.
Shortly after settling into a chair across from Tolkin, Lutoff-Perlo reassured him that when it came to the anti-discounting strategy, there was no Plan B.
"We have nine fabulous ships to sell, and a reasonable amount of capacity" Lutoff-Perlo said. "We should be able to say, 'Here's the price, here's what we want to do to fill it, here's what we need to do to raise prices.'" She added that 2016 "is crucial for us. It has to be our year."
Tolkin told her that he supported the policy change and that, at this point, 2016 was looking very strong. But he noted that pivoting suddenly to a no-discount policy was a "foundational change."
"Everybody is trying to get APDs up," he said, "but you can't change the consumer mindset overnight. People either love cruising or dismiss it, and I've got repeat cruisers who are calling me with sticker shock. They are conditioned to wait. We have to train consumers that prices will not go down."
He noted that for the time being, price was compensating for reduced load, but later in 2015, he said, he might have to do "some surgical things." Still, he emphasized, the worst thing that could happen would be if Lutoff-Perlo woke up one morning and thought "Holy Moses, there's no one on Deck 8, we'll have to discount the heck out of it."
Celebrity Cruises CEO Lisa Lutoff-Perlo, center, discusses pricing strategy with World Travel Holdings co-CEO/Chairman Brad Tolkin, right. Photo Credit: Arnie Weissmann
"We are not going to do that," Lutoff-Perlo responded. "I would not walk in and tell [RCCL CEO] Richard [Fain] that. We could not be clearer in our company about this. We don't want to later say, 'Oops, we made a mistake.' We have a huge opportunity if we get the consumer to understand what we offer. We need to shift the paradigm."
To cushion the blow of some of the sticker shock that Tolkin described, RCCL is using promotions such as "123 Go!," which offers guests the choice of two amenities among the following three: free beverage package, prepaid gratuities or onboard credits up to $300 per stateroom (the last depending upon the length of the cruise). It will apply to cruises booked until July 5 for itineraries departing August through April.
Those dates were not set arbitrarily, as became clear during the discussion with Tolkin and others. June, she told agents, is the last month in which the majority of sailings booked will depart in 2015. Which is to say it's the last month during which the majority of the business hits not only the 2015 calendar but the fiscal year's books.
About a third of the line's capacity is currently in Europe, and Lutoff-Perlo admitted, "We got caught a little in Europe because capacity increased [there] so much. Last year, Europe was a shining star; today, it's a slugfest every morning."
The timing of "123 Go!" is such that it will have the greatest impact on the Europe season, which ends in November, and on the all-important holiday season bookings that close out the year.
Local girl makes good
While the session with Tolkin was primarily a business review/sounding board meeting, the focus for the lobby lawn party was much more on the "Grass is Greener" campaign.
From left, Chuck Nardozza, Director of Regional Sales, AAA Northeast; Joanne Monahan, Director of Branch Sales and Product, AAA Northeast; Bill King, owner, Cruise Holidays of Lakeville; and Joe Giampietro, president of Cruise Brothers, East Providence, R.I., and others listen to Celebrity Cruises CEO Lisa Lutoff-Perlo speak at the indoor lawn party in Cambridge, Mass. Photo Credit: Jillian Maynard
The agents, who came from Massachusetts, Rhode Island and New Hampshire, didn't seem bothered by the weather; they were amused by the oversized lawn chair that came close to the lobby ceiling and the cornhole boards set up along one wall.
They greeted Lutoff-Perlo warmly. Many remembered that she was a native of the region who started her career as a travel agent in Boston and moved to the supplier side as a district sales manager for Royal Caribbean International in the 1980s. She returned as a regional manager in the 1990s, overseeing the work of 12 district sales managers for Royal in New England.
She spoke to the group about decisions made in the wake of the new APD strategy.
"We had the money to turn things around," she said. "We needed to get out of where we were to something that's reasonable. And we decided that the majority [of resources] would go to the trade."
Bob Newman of Cruise Brothers in East Providence, R.I., applauded the new direction but wasn't fully convinced it would stick in all circumstances.
"We've got to get prices up and get out of last-minute sales, last-minute thinking," Newman said. "I hope they stick with it. But when a big group cancels, they have to do something."
Courting discounters
Less than five hours after saying goodbye to her hometown agents, Lutoff-Perlo had traded the cool and drizzle of Boston for the heat and humidity of Houston, where she was devoting herself and her team's time to one agency: Vacation to Go, which bills itself as "the world's largest cruise agency."
Celebrity Cruises CEO Lisa Lutoff-Perlo and Expedia CruiseShipCenters President Matthew Eichhorst with a picnic basket given to executives at the line’s top accounts. Celebrity Associate Vice President Carol Cabezas looks on. Photo Credit: Arnie Weissmann
Vacations to Go occupies several floors with call-center cubicles, manned by agents who sell solely on commission. The Celebrity team presented the company's executives with picnic baskets, addressed assembled agents and walked the aisles of the call center, distributing picnic blankets.
Ritzenthaler, Lutoff-Perlo and Carol Cabezas, associate vice president of national and strategic accounts, then took the agency's president and COO, Emerson Hankamer, and director of pricing, Bill Lester, out to dinner. The agenda was the same as with World Travel Holding, though the discussion varied.
Most of Emerson's business originates on the Web, and Vacations to Go's home page promises "a cruise at an unbelievably low price," and a "complete listing of last-minute cruises." The site also touts a "Find a Bargain" feature.
But he said he was impressed by the strong, proactive stance Celebrity took with the trade and its APD strategy.
World Travel Holding, which Lutoff-Perlo had met with earlier in the day in Boston, is the engine behind multiple business models, from franchises to airline and hotel white-labeling to supplying inventory to major OTAs. Among its brands is a site called CheapCruises.com, whose homepage hook, "Save up to 80% on top cruise lines' unsold cabins," seemed to compete for the same customers as Vacations to Go.
And on the day before, Lutoff-Perlo and Ritzenthaler had called on CruCon Cruise Outlet, another agency that leads with price. I later asked Ritzenthaler to reconcile what seemed counterintuitive: Why had Celebrity, with its focus on raising APDs, flown so far and spent so much time with agencies whose model seemed to be pushing discounted cruises? And, just as surprising, why were these same agencies appearing to applaud pricing integrity?
"From a marketing standpoint, we don't love that they're so deal-centric," Ritzenthaler said. "But their strategy works for them because they get the consumer who has a value mindset to respond. There are a lot of affluent customers who are into getting value, and [these agencies'] strategy is to get those consumers' attention. Once they get them on the phone -- and all sales are over the phone -- they can explain the value of an upsold product. So we are all united in getting yields up. The model works for them and for us."
North by Northwest
The next morning, the Celebrity team was out of their hotel by 6:30 for a flight to Vancouver and the headquarters of Expedia CruiseShipCenters (ECSC).
Celebrity Cruises CEO Lisa Lutoff-Perlo, second from left, met with Expedia CruiseShipCenters’ Senior Vice President of Sales and Marketing Geraldine Ree, left; Eric Tan, president of consumer sales; senior vacation consultant Christine Fox; and vacation consultant Shawna Noble. Photo Credit: Leanne Padgett
Although its brand is associated with the world's largest online travel agency (in fact, the largest travel agency of any kind), ECSC's model is almost a throwback to the traditional travel agencies of decades past. It insists its franchisees have a brick-and-mortar presence, and a significant percentage of them are, as many now-defunct travel agencies once were, in strip malls.
In fact, none of the other major accounts that Celebrity visited -- Travel Leaders, AAA Southern California, Signature or Avoya -- lead with discounts, marketing instead on product value.
As she had at Vacations to Go, Lutoff-Perlo and company greeted top executives with picnic baskets, walked among cubicles distributing blankets and addressed assembled agents.
Afterward, ECSC's executive team gathered in its board room for an information swap with Celebrity. The agency's president, Matthew Eichhorst, presented a deep dive on its model and plans. Of particular interest to the cruise executives was why ECSC skewed higher in getting first-timers to cruise.
Eichhorst said he believed it was, in part, because ECSC targeted people with no previous industry experience as potential franchisees.
"They sell through their circle of influence, and because they may not have been cruisers before, neither were their friends," he said.
Although ECSC does sell some land travel, the agency's focus, as its name implies, is strongly on cruise. Last year, it moved more than 20% of all cruises sold in Canada, while land represents only about 12% of company sales.
"We're not looking for 'landers,'" Eichhorst said, "but we don't want to send them somewhere else to buy it, somewhere where they might end up buying their next cruise as well."
Delgado, Celebrity's digital marketing vice president, inquired about the way John Mast, ECSC's vice president for marketing, scrubbed and deployed its consumer database to get what appeared to be very impressive response rates to the agency's promotions.
Next stop: Oakland
The day was not yet over; the Celebrity group reboarded the plane and flew to San Francisco to attend a rooftop lawn party in Oakland. Lutoff-Perlo experienced the sentiment behind a quote often attributed to Mark Twain: "The coldest winter I ever spent was a summer in San Francisco." She spent the better part of the party wrapped in one of the blankets that had been draped over some of the lawn chairs.
Waiting for the Oakland, Calif., lawn party to begin, Celebrity Cruises CEO Lisa Lutoff-Perlo and Celebrity Cruises Senior Vice President Dondra Ritzenthaler discovered that Bay area summers can have a chill. Photo Credit: Arnie Weissmann
Although the tour was to go on for another two days, the lawn party was my last event. As I said my goodbyes, Celebrity's Delgado told me he had enjoyed our travels over the past three days. I reminded him I was only there 36 hours, though we had covered so much ground, his comment was understandable.
On the taxi to the airport, I considered the likelihood for the pricing integrity push to succeed. It certainly seems a desirable outcome not only for RCCL, but for the entire industry and for travel sellers. And the reality is that consumers have enjoyed cruises at prices that reflected incredible value since the recession.
Pricing discipline is tough to implement and maintain because, generally speaking, market forces are undisciplined. One needs either a unique and attractive proposition, like Apple's, or a consolidated industry where a small number of mature players choose, individually, to act in a manner that benefits both the industry and themselves.
The cruise industry could realistically have a shot at either path. It has a small number of companies that dominate the industry and a unique product that has a high-enough barrier to entry to discourage a maverick from sabotaging discipline. Although the companies cannot legally coordinate their strategies, there is a long history of one cruise line mimicking successful marketing, pricing and operational approaches by competitors.
Celebrity might have the trademark and hashtag on it, but every cruise line wants to settle into that place where the grass is greener. Will they? As Lutoff-Perlo said, "2016 is crucial."