Charlie Funk
It's about time! The 8,000 or so surviving ARC-appointed agencies in some 13,000 locations and some 40,000-plus home-based and independent contractor agents have for the most part reported sales growth year over year for 2016.
That's not to say it hasn't been a curious few months. I crunch numbers. It's ingrained as part of my career in another life and another industry and focus.
Our bookings started 2016 really strong, and January was up a few percentage points over 2015. February started off with a bang, but toward the end of the month we saw a slowdown in call volume. The Brussels terrorist attacks in March didn't help, either.
By the end of the first quarter, our bookings were flat to down slightly compared with 2015. How could that be? The algorithm I developed some 13 years ago to predict call volume and bookings all pointed to having much stronger bookings. The economy was good, consumer confidence was high, and yet call volume had dropped off.
Then it hit me: Our August 2015 volume had been the highest-booking August in our history, greater than that January and within a few thousand dollars of February. September, October and November were bigger, as well. Maybe the 2016 Wave season had been pulled back into the prior quarter.
When I ran year-over-year reports for the period of August 2015 to March 2016, volume was up 14%. Perhaps of equal importance, the better volume was coming with more passengers and higher pricing.
Then I remembered a similar pattern from the late third quarter and all of the fourth quarter 2003 in which clients were either calling on Mondays for travel on Saturdays or booking out into 2004. On top of that, clients returning from close-in bookings immediately booked their next vacation.
We were coming off what might have been the grimmest period in the history of retail travel. The events of 9/11 punished us (we lost $270,000 in three weeks), and then the nation went to war during peak booking season in 2003.
I don't have the space here to fill out the details, but I knew the nation was ready to travel again when we received calls from two couples, neither of whom had traveled outside their hometown, let alone internationally. We had record sales in 2004 and 2005.
Then things started going south. By 2006, my algorithm was pointing to lower sales for 2007 and 2008. We didn't need an economist to tell us at the end of 2008 that the country was in a recession. It had started in middle Tennessee in early 2007.
The following is an excerpt from the 2007 marketing plan presented to one of our suppliers in October 2006, written in August and September. You'll get a kick out of part of this.
We believe that high fuel costs (anything above $2.15 per gallon national average) will inhibit mass-market cruise purchases until those most affected adjust to the economic changes. Gasoline at or below $2 per gallon, with some semblance of stability, home mortgage rates in the mid- to low 6% range and prospects of a moderate hurricane season bode well for 2007.
It is not our intent to seem alarmist, but we find the percentage decrease of first-time cruise passengers on [supplier name] this year to be VERY unsettling. Based on information contained in the book "Freakonomics," we believe first-time cruise passenger percentages are down for the same reasons the authors believe crime rates dropped in the early to mid-'90s. We believe his data can be time-shifted for these same reasons and further believe the decline in first-time cruise guest percentage may not reverse itself until 2014 or 2015. We believe a greater focus on past guests, whether [supplier name] or on other lines, will do more to grow our [supplier name] sales.
I've written before about the decline in first-time cruisers. The ratio of repeat cruiser to first-time cruiser, which for some lines had historically been 50-50, in one case 40-60, had shifted substantially. The precipitous birthrate decline beginning in 1973 was manifesting itself. It turns out if you were never born, you don't cruise.
The repeat passenger/first-time cruiser ratio for some lines changed to 70-30. Think about this: At the same time the economy was headed south, along with prices, cruise lines had to sell past passengers two cruises for every one they had historically taken in order to fill ships.
On top of that, the entire market was changing. In my April 21, 2014, column, I wrote about consumer perception and sentiment toward cruises, referencing a Facebook thread by a talk-radio host: "We were playing a game last night. The question that all had to answer was, 'What is the first word that comes to your mind when someone mentions cruise ship?'"
In three days (a long-running thread by Facebook standards) there were 784 responses. While not a carefully crafted survey of randomly selected participants using scientific methods, the results cannot be dismissed, given the number of responses.
An analysis of the posts proved interesting. Some responses (12%) had no relevance to the intent of the question but were included nonetheless. That said, here's what I found:
- 58% of the responses were negative.
- 61% of those responses dealt with sickness, using such descriptive phrases as "germ bucket," "dirty," "unsanitary" and some too descriptive to print. Perhaps the most interesting were the 10 responses that mentioned Legionnaires' disease, likely in reference to the outbreak aboard the Celebrity Horizon in 1994.
- 25% were fearful of some disaster, mentioning people going overboard, the Titanic, the Poseidon and even the Achille Lauro hijacking back in 1985.
- 13% were classified as "other," including feeling herded, crowded, bored, too expensive and no security.
- 30% of the responses were positive.
- 45% specifically mentioned fun.
- 44% mentioned specific cruise lines by name or by implication with "The Love Boat," a TV series that ended its weekly run in 1986, leading the way with 61% of those line-specific responses.
- 11% mentioned warmth, relaxation and luxury.
So what is going on with the cruise industry just now?
It's all good.
- First-time cruiser percentages are up. A finer interpretation is that many millennials who two years ago had strongly negative reactions to an oceangoing cruise have changed their collective mind.
- The cruise lines didn't miss the signal this time to increase prices.
- Higher prices have squeezed out a substantial part of the cruise passenger population who had come to expect unsustainable cruise prices.
- They have been replaced by better-quality passengers, many of whom had been put off by the kinds of past passengers who are no longer cruising.
- These first-time cruise passengers spend more onboard.
While we'll likely never see a 50-50 past passenger/first-timer ratio again, cruise line executives to whom I reached out confirmed that there are indeed more first-time cruisers. One provided a very telling analysis: One-third of guests were first-time cruisers with any cruise line, a third were first-time with their line but had cruised with another line and a third were past passengers with their line.
Millennials likely comprise a disproportionate fraction of the new-to-any-cruise segment passengers. Studies show that while millennials indeed use internet resources for research and will likely purchase simple travel online themselves, they show a trend toward seeking professional input to finish the vacation selection process or to validate the choice or choices they have made.
It's like this:
- First-time cruise passenger bookings are on the rise.
- The average cruise passenger is spending more, both for the cruise and onboard the ship.
- Many (most?) first-time cruise passengers are more disposed to using a travel professional.
- The opportunity to grow business substantially is upon us.