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Stop waiting for cruise deals — prices are on the rise

Feb. 23, 2021
6 min read
Mariner of the Seas
Stop waiting for cruise deals — prices are on the rise
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Airlines, hotels and resorts have been touting some crazy-low pricing in recent months to lure back travelers. But don't count on similar markdowns from cruise lines.

In fact, if you're in the market for a cruise right now, you should brace yourself for higher prices.

With demand for cruises scheduled to depart later this year surprisingly strong and the supply of available cabins smaller than in the past, cruise lines in recent months have been able to hold the line on pricing and even raise fares in many cases.

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"It's clear that a lot of people want to cruise," Jason Liberty, the CFO of Royal Caribbean Group, said on Monday to explain a recent jump in average fares at the company's brands.

Speaking during a conference call with Wall Street analysts to discuss fourth-quarter earnings, Liberty said the company's brands had seen relatively strong bookings during the fourth quarter at prices that were higher, on average, than in 2019 -- the last "normal" year before the coronavirus pandemic brought cruising to a halt.

Pricing has been on the rise at Royal Caribbean Group brands. (Photo courtesy of Royal Caribbean)

Liberty said bookings had been even stronger since the fourth quarter ended on Dec. 31 -- even as the company's marketing machine remained almost completely shut down.

Royal Caribbean Group has paused most marketing efforts due to the worldwide shutdown of most cruising that began in March 2020. The company's brands have canceled most of their sailings through at least the end of April.

"Despite the lack of marketing spend, we have seen a 30% increase in new bookings since the beginning of the year when compared to November and December," Liberty said.

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Royal Caribbean Group is the parent company of Royal Caribbean -- the world's largest cruise line -- as well as Celebrity Cruises and Silversea. It also owns stakes in German lines Hapag-Lloyd Cruises and TUI Cruises through a joint venture. It's considered one of the bellwethers of the cruise industry.

Related: The best credit cards for booking cruises

Liberty didn't say exactly how much fares for cruises scheduled to take place later this year were up at Royal Caribbean Group's brands. But the fact that pricing is now running ahead of 2019, on average, is notable.

During the company's last conference call with Wall Street analysts, in November, Liberty said pricing for the second half of 2021 was down slightly when including a negative impact of bookings made with future cruise credits and roughly flat when excluding them.

The rise in fares for 2021 cruises as compared to pre-coronavirus times is in sharp contrast to the pricing situation at land-based hotels and resorts. Prices at land-based hotels and resorts have fallen significantly due to an imbalance between supply and demand as fewer people travel.

In January, the average daily rate at U.S. hotels was 27.8% below prices from the year before, according to STR, a company specializing in hotel analytics. Hotel occupancy was down by 28.3%.

The supply-and-demand situation for cruise lines in 2021 is far different.

Unlike many land-based hotels and resorts that have remained open for much of the past year, most cruise ships haven't operated at all since the COVID-19 outbreak was declared a pandemic in March 2020. That's created huge pent-up demand from cruise fans that's pushing up prices.

Many cruisers who saw their 2020 trips canceled already have rebooked for later this year or 2022, scooping up available cabin space.

Also pushing up cruise pricing is the fact that the supply of cabins for cruises later this year is down as compared to a year ago due to the removal of more than two dozen ships from the fleets of the world's biggest cruise lines.

Related: Royal Caribbean to slash fleet size with the departure of older vessels

Cruise lines also have cut capacity for later this year by preemptively canceling voyages on a number of ships -- in some cases due to maintenance requirements. Three of Carnival's 24 vessels, for instance, now aren't scheduled to return to service until November.

Executives at all the major cruise brands have said they'll resume cruising with just a few ships at first and add more vessels over time. Such a strategy will further constrain supply.

In addition, the ships that do return to service are likely to operate at a reduced capacity for some time due to new government rules aimed at slowing the spread of COVID-19, further reducing cabin supply.

Royal Caribbean in December resumed operations with a single ship in Singapore that's been running at just 50% of capacity due to such government rules. During Monday's conference call, a Royal Caribbean executive said the company was in discussions to raise the cap to 65%.

Even if the supply of cruise cabins increases to a point where it outstrips demand over the coming year, cruise lines may resist the urge to slash prices to keep ships full.

In recent years, cruise lines have shifted to a strategy of using promotions that throw in "value add" items such as free drinks or free Wi-Fi with bookings to fill cabins instead of dropping prices.

Some cruise brands, such as Norwegian Cruise Line, also have pursued a "market to fill" strategy that involves spending more on marketing during times when bookings are light. The idea is that the lines won't drop prices but instead spend more on outreach to draw in customers.

Planning a cruise? Start with these stories:

Featured image by Michel Verdure
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
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  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023
Best card for premium perks while traveling
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

10XEarn unlimited 10X miles on hotels and rental cars booked through Capital One Travel
5X5X miles on flights booked through Capital One Travel.
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  • Intro Offer
    Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel

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  • Annual Fee

    $395
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    740-850
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Why We Chose It

The Capital One Venture X card is one of the best all-round travel credit cards ever launched. Not only is it offering a tremendous welcome bonus, but cardholders can earn tons of miles on everyday spending and receive a 10,000-mile anniversary bonus to boot. Its annual fee is $395, but cardholders can count on up to $300 in statement credits toward travel booked through Capital One Travel each year and other valuable benefits like access to Priority Pass lounges and Capital One’s own growing family of airport lounges.

Pros

  • Excellent welcome offer worth 75,000 miles after you spend $4,000 on purchases in the first three months.
  • Up to $300 in annual travel statement credits toward bookings make through Capital One Travel.
  • 10,000 bonus miles (worth $100 toward travel) each account anniversary.

Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
  • Earn unlimited 10X miles on hotels and rental cars booked through Capital One Travel and 5X miles on flights booked through Capital One Travel
  • Earn unlimited 2X miles on all other purchases
  • Unlimited complimentary access for you and two guests to 1,400+ lounges, including Capital One Lounges and our Partner Lounge Network
  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
  • Named editors' choice for "Best New Credit Card of 2021" by The Points Guy
  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023