Just Cruises Plus

Last week’s winner of the photo contest was Joann Westerfer of Lower Gwynedd, PA.  She was the first to correctly identify the photo (below) as the British Museum located in London.

Why London?

Did the Royal Wedding festivities (and associated press coverage) influence our decision to select a London photo for last week’s contest?  Well, perhaps it planted the seed.  But even without the added hype, London is and has always been one of our favorite cities!  It is both cosmopolitan and charming.  It is home to wonderful treasures, such as the Magna Carta in the British Museum and the Tower of London where countless heads rolled. You also can experience some of the world’s best theater here.  Wayne took the photos below during a visit to London.

Photo Contest 4/29/11 - The British Museum in London

The Tower Bridge

Westminster Abbey - main entrance

Westminster Abbey - view from the side

Tower of London

You’re sitting at dinner on your dream cruise.  There are 4 other couples sitting with you.  The price of the cruise comes up (it always does).  You find out that every couple at your table paid a different price.  Why?  The answer is determined by when folks booked their cruise in the  “supply and demand” cycle.

When the cruise lines release their schedules and pricing, they offer early booking rates, which is really the price that they expect most people to pay.  As the ship fills, prices rise.  However, on some sailings, bookings are slow and sparse.  In these cases, the cruise lines offer special promotions — examples are senior promotions and promotions for residents of certain states.  If the ship still doesn’t fill up, last minute deals (some spectacular) are offered to get the ship full.

On many of these cruises, we are paying less than it costs the cruise line to feed and transport us.  They are willing to do this in the hopes that we spend money on the ship.  They also want to keep the service staff busy and receiving gratuities.

Supply and Demand

Let’s think about supply and demand and when each is high and low.

The most demand occurs for East Coast and Caribbean cruises during the summer.  There are 2 reasons.  First, many ships have moved to Europe and Alaska for the summer season.  Therefore the supply of ships for the East Coast and Caribbean is low.  Couple this with the fact that school is out and this is when families take their vacation.  Thus, demand is up.  The result is high prices and low availability.  For example, for cruises from Baltimore or New York you must book early if you want to get a room that accommodates 3 or 4 people.

During the fall, when school is back in session and until the holidays, there is low demand (hurricane season) and all the ships have returned from Europe and Alaska (high supply).  During this period, the cruise lines will practically pay you to cruise and it pays to wait until last minute deals are announced.    An easy way to do this is to check our website each week.  We put the last minute deals there.  These good deals usually extend into January (excluding holiday sailings).

Book early if:

• You are picky about your room location
• You must have a particular time for dining
• You are traveling during summer months or holidays
• You want to cruise on an upscale or small ship cruise line
• You want a land and sea package in Alaska during the peak summer months
• You want a balcony on the land side of an Alaska cruise

Book later if:

• You are traveling in the fall or January
• You are not concerned about room location and dining times.
• Specific dates are not important

Consider….

One of the problems with waiting too long to book a cruise is that airfares are high.  The airlines price airfare the same way the cruise lines do.   Waiting usually results in a high airfare.

Keep in mind that the cruise lines will honor many promotions even if you book early.  For example if you are a senior and have booked a cruise at the early booking rate and a senior promotion is offered, you will be eligible for the lower rate and we will get it for you.

Carnival Still Rules the Waves

       By Chris Baines, Motley Fool Contributor

April 19, 2011

This year has not been all fun and games for Carnival Corp. (NYSE: CCL  ) , which is down 17% on $100+ oil. Turns out the company’s 98 cruise ships (most of which are bigger than the Titanic) are thirstier than a castaway.

But fear not fellow Fools, now is not the time to abandon ship. Carnival’s wonderful business model is still intact.I used to think a cruise ship is where rich retirees spent their twilight days. Turns out that’s not entirely true. Cruising is actually cheap, really cheap, in comparison to land-based vacations. (The average age of a cruise passenger is still 50, although that’s declining as well.) 

Exhibit A: Carnival is offering a 16-day cruise from Barcelona, Spain, to Galveston, Texas, with day stops in Spain, the Canary Islands, and the Grand Turks, for $699. That’s $43 a day, with food, lodging, regional transportation, and transportation stateside included in the price. 

Try vacationing from land in Europe for $43 a day, I dare you. Heck, try living in New York or D.C. for $43 a day. 

Even the more expensive cruises from Carnival’s Princess Cruises or Royal Caribbean‘s Celebrity Cruises, charge around $150 per day per person. Considering that a Courtyard Marriott can run about $300 a night in the summer in Europe, $150 per person sounds like a bargain for a luxury cruise ship. 

No wonder the number of passengers has grown annually at 5.3% worldwide, and 12.1% outside of North America, since 2005. 

What’s even more amazing — and far more important from an investor’s perspective – is that Carnival makes money doing this. Lots of money. 

In 2010, Carnival made $2 billion, which was more than Marriott International , Host Hotels and Resorts, Hyatt , Wynn Resorts, and Las Vegas Sands (NYSE: LVS  ) combined. These companies stand at the pinnacles of their respective areas of the travel and hospitality industry. With their name-brand recognition and histories of providing customers and shareholders outstanding value, most people would think they would trounce Carnival. The fact that Carnival blows them all out of the water (yes, pun intended) speaks to the sheer scale of Carnival. 

The margins tell the tale: Carnival’s operatiing margin was 16.2% in 2010, whereas Marriott’s was 5.9%, Host Hotels and Resorts’ was 5%, Hyatt’s was 3.1%, and Wynn Resorts and Las Vegas Sands clocked in at 14.9% and 17.2%, respectively. The comparison isn’t exactly equal because Marriott manages/franchises hotels while Las Vegas Sands and Wynn primarily operate on gambling, but if anything I would expect that to benefit them in comparison to Carnival. 

So how is Carnival able to beat hotels on price while earning higher margins? 

Cruisonomics 101
The most likely explanation, for my money, is the ability to price discriminate. That’s the ability to charge what each individual customer is willing to pay. 

You see, hotels are stuck in a difficult dilemma. If they price too high that will scare away leisure travelers. If they price too low, they won’t be able to exploit the business travelers that need to travel. As a result, hotels strike an unhappy compromise: They price higher than the market price to capitalize off business travel, but that leaves them with empty rooms. They turn to Pricelinee to help them with price discrimination, but that only goes so far. 

For example, Hyatt’s occupancy rate in 2010 was 70.9%. So on average, about a third of rooms were empty and not generating any revenue. 

Carnival doesn’t have the same dilemma. Carnival knows that nobody needs to take a cruise. Hence they price their ships for maximum occupancy without regret. In 2010, occupancy was 105%. In the depths of the Great Recession, occupancy was still 105% (more than two to every room). In order to create such high demand, it offers cheap rates for consumers. However, once on the ships, consumers typically buy additional services and goods that the company can sell at a substantial markup. This evening-out effect helps pad the company’s overall margins. 

At the same time, Carnival can still capitalize off of travelers who’d be willing to pay more. Those customers can choose premium Carnival brands like Holland America, Princess, or Seabourn, cruises that charge around $100-$400 a day. Those travelers aren’t likely to trade down because their choice of cruise brand plays an enormous role in their vacation experience. 

Everything from the food they’ll receive, to the places they’ll go, to the people they’ll meet, are enormously different on a Seabourn cruise as opposed to a Carnival-brand cruise. 

By contrast, Marriott and Ritz Carlton both take you to the same Manhattan.

Celebrity Offers Reduced Europe Airfare

For a limited time, Celebrity is offering reduced airfare* on the following sailings:

12 Night Solstice from Barcelona – June 19th, July 1st, 13th and 25th plus August 12th and 24th.

10/11 Night Equinox from Rome (Civitavecchia) – June 27th; July 8th and 29th; August 8th, 19th and 29th.

* $999 from Newark, JFK, Boston and Washington DC.  $1099 from Philadelphia.

Princess Three Day Europe Sale

Princess will be offering low fares plus cash back on a large variety of Europe sailings.  The sale begins next Wednesday and ends Friday.

Rocky Wins Again

Last week’s winner of the photo contest was Rocky Cestroni.  This is the second week in a row that Rocky has won.  He correctly named the Celerain Lighthouse.  This lighthouse is located on the southern end of Cozumel in a national park named “Parque Punta Sur”.

Many of you have been to Cozumel a number of times and are looking to do something different.  The last  time we were there, we rented a car and drove out to Parque Punta Sur.  It is only 18 miles from San Miguel.  Not only can you see (and climb) the lighthouse but there is a small museum at the base of the lighthouse.  Perhaps more thrilling is viewing the crocodiles.  But be careful.  We nearly came face to face with one.  Check out the photos.

After our visit to the Parque, we drove along the eastern side of Cozumel.  There were some beautful (uncrowded) beaches and a few fun places to eat lunch.

Crocodile at Punta Sur

Iguana at Punta Sur

Ruins at Punta Sur

Beach at Punta Sur

Celebrity Going to Asia

For the first time ever, Celebrity Cruises will cruise to the exotic ports of the Far East. The cruises will begin in the winter of 2012.  China, Vietnam, Thailand , Singapore and Hong Kong will be some of the spots visited.

Celebrity Reflection Open for Captain’s Club Bookings

Captain’s Club members will have an exclusive booking period from April 7th to April 19th when they can book space on the Celebrity Reflection, scheduled to be complted in  2012.

Last week’s photo contest winner was Rocky Cestroni of Huntingdon Valley, PA.  Of the 6 people who had the correct answer, Rocky was the first to respond.  The name of the beach in last week’s photo (shown below along with other photos) was Maho Beach.  Maho Beach is located on the Dutch side of St. Maarten.  The beach is about 20 yards from the runway of the Queen Juliana airport.  This is the premier plane watching spot in the world.  It is the only place where you can legally stand less than 50 feet from an airborne 747.  Queen Juliana Airport is rated as the 4th most extreme airport in the world.  Next time you’re  in St. Maarten, try “riding the fence”.  By the way, there is a sign indicating that this can result in extreme injury or death.  The Sunset Beach Bar is a cool beach bar and is at the end of the beach.  Have a cold drink while you await the arrival of the next plane.  The bar lists the arrival time of big planes on a surfboard. Wayne is standing under the jet in this great photo taken by Rachelle.

Photo Contest 3/25/11 - Winair at Maho

Watch Out!

Air France A380 Landing at Queen Juliana Airport

Are Ships Safe During a Tsunami?

Yesterday’s huge earthquake (the 5th  largest in the past 110 years) created a monster tsuanmi which will be felt to some degree (very slight to devastating) all around the world. What effect does a tsunami have on ships?  If the ship is at sea, there is virtually no effect. Even if the ship is close to the epicenter of the earthquake, the tsunami would be hardly noticed.

Things would be much different for folks near shorelines, even if they are thousands of miles from the quake’s center. The ocean could come on shore for several miles in low lying areas.   When an earthquake happens,  an enormous volume of water is displaced by the sudden movement of plates deep below the ocean.   This huge amount of water (used to be called a tidal wave) leaves the spot of the quake  As the water  leaves the spot of the quake,  it is very long and deep but not high (only a few feet above normal)  and would hardy be noticeable on a ship.

However, as the volume of water approaches the shore, the ocean becomes shallow.  All that water has to go somewhere and the only place it can go is up.   What was only a few feet rise in the ocean may become a wall of water upwards of 50 feet as it goes ashore.  This is why ships leave port when a tsunami is expected.

You may be certain that the Poseidon (Poseidon Adventure) did not turn turtle as a result of a tsunami.  It turned turtle as a result of Hollywood fantasy.

Royal Caribben has announced a new class of ships which they call their “Sunshine Project”.   The new ships, at 158,000 tons are about the size of the Freedom Class and are much smaller than the Oasis Class.  The first ship of the class will be delivered from the builder in 2014.