Understanding Cruise Line Ads

| November 9, 2007

We have all seen amazing cruise prices in ads, here and elsewhere, but how do you estimate the true cost of a cruise based on an advertised price? An educated cruise consumer can immediately recognize when an advertised price is a great deal, if he knows how to interpret it correctly. With today's cruise line pricing policies, it is tempting to say, "If you see a good price, grab it." But it's not always that simple, so let the class begin.

First, understand this: There is NO such thing as a free cruise. If you get an offer for one, toss it out. These shysters (constantly under investigation) are planning to gouge you on other expenses.

Recognizing Great Cruise Bargains When you see a cruise price quoted in a legitimate cruise advertisement from a cruise line or cruise agency, will this rate match the final price you will pay? They are usually close, but not always, and that is one thing we want to talk about. Another thing is that price alone is not the only issue; These days, added-value booking bonuses included in the cruise price are equally important to the bottom line.

First, we'll talk about the policies cruise lines have agreed to with the Federal Trade Commission. Second, we'll review the cruise lines' own policies on what travel agents can publish in their ads. Both affect the advertised price, and they vary by cruise line. By the way, these principles also apply closely to the built-in cruise booking engines that most cruise agency Web sites have.

What's Included in the Price Quote? Years ago, the cruise lines agreed to a determination by the U.S. Federal Trade Commission that fare quotes in ads must contain all "non-commissionable fees" (or NCFs in agent parlance) in the price. These fees, which you are required to pay, but for which travel agents don't receive any commission, include port fees imposed by foreign governments, but not any taxes. Taxes will always be added at the last minute. As a result, it is safe to assume your quote includes the port fee/NCFs (with one exception noted later). And since they make up the bulk of what is added to the basic fare, most price quotes are pretty close to what you will ultimately pay.

A very few agents will quote the basic price and add the port fees in small print. This is a deceptive practice, though not disallowed. If you don't see any separate mention of port fees, assume they are already added in. At CruiseMates, we require sponsors to include port fees in the price.

Brochure Rates and Direct Booking Prices When the cruise lines distribute their yearly brochures, they contain published prices we call the brochure rate. Frankly, the published brochure rate is, practically speaking, never the price you will be paying. Even though the cruise line published the brochure, they will adjust prices on a weekly basis as the market demands. Their goal is to sail full ships, and pricing power is what they use to get people to buy tickets (it is called yield management, same as in the airline business).

The actual price the cruise line is charging at any given time is what we refer to in this article as the "direct booking price." If you see a supplemental ad from a cruise line, like a direct mail piece, it should contain the direct booking price. However, even in cruise line mailer advertisements we have seen prices change between the time they send the mailer out and the time that lapses before you receive it, open it, consider it and pick up the phone. Bottom line, the only thing that counts is the price you are quoted by the cruise line when you are ready to buy the ticket. So, in this article we refer to the real price the cruise line is charging at any specific time as the "direct booking price."

In cruise advertising, many prices you see quoted are based upon the current direct booking price, which is one thing that makes the timeliness of the Internet, especially places like our Cruise Bargains area with our ads updated daily, so effective. As cruise ads age, the prices quoted become obsolete, which is why so much cruise pricing research is done on the web these days, instead of in magazines and newspapers.

Flat Pricing About two years ago, Royal Caribbean, Celebrity, NCL and Carnival adopted a policy the industry calls "flat pricing." It is interpreted differently by each line, but in all cases it means the published price you see in every cruise agency ad for any given cruise will be the same as the direct booking price you see quoted by the cruise line itself. The same principle applies to online agency cruise booking engines; As you go from site to site, the price displayed for any given ship, cabin and sailing date will almost always be the same as at the cruise line web site. But price alone isn't everything. If you shop different cruise agencies, you might find a whole raft of possible bonus booking items thrown in to sweeten the deal, such as free limo transfers, bottles of wine, hotel stays, free travel insurance, and even reduced airfare to and from the ship. Although the price of the cruise itself remains the same.

Before flat pricing, travel agents often discounted prices below the line's direct booking price through "rebating" -- i.e., the agency could advertise a lower cruise price than the line itself was offering because it was figuring in a portion of its future commission as a "rebate" to the consumer. By invoking the flat pricing policy, the lines are trying to stop large-volume agencies from under-pricing the cruise line's own published rates. The flat pricing policy, in theory, returns pricing power back to the cruise lines.

At least, that is the theory. In reality, the cruise lines' policies vary a great deal and the ways agencies implement them - and in many cases avoid them - are just as diverse. Also note that rebating is still allowed for most cruise lines, some openly, some with restrictions, some not at all.

Group Rates As one exception to the flat pricing rules, agencies can negotiate with the cruise lines for group rates that are lower than the direct booking price and advise cruise buyers these lower rates are available. However, the lines know that too many group discounts defeat the purpose of a flat pricing policy, so they rarely offer a group rate much lower than the direct booking price. If you see a group rate offer below the direct booking price (they are often identified as such, but not always), consider booking that cruise right away, because as time goes on and direct booking prices start to rise, just when that group rate starts to look really good the cruise lines will go to the agent holding the group and snatch back all the unsold cabins so they can sell them at the higher price! One caveat; You should first ask the agency if they have price protection so that if the price does go down (rare), price protection will give you the lowered price.

Royal Caribbean / Celebrity Flat Price and Group Rate Policies The pricing policies at both of these lines are the same because Royal Caribbean owns Celebrity. They were the first to adopt a flat pricing policy (but only after Carnival announced it was planning to create one). The RCI policy says an agency can only advertise and sell a cruise for the same price as the cruise line's direct booking price. The cruise line sets the price and the cruise agencies cannot undercut it. Rebating to the customer is not allowed under any circumstances.

Royal Caribbean and Celebrity also mandate that the cruise agency can't offer any additional customer incentives with a specific dollar value to the line, such as shipboard credits, specific cost shore excursions, etc. But, there is no way for Royal Caribbean or Celebrity to stop an agent from offering incentives that are unrelated to the cruise line -- things like free travel insurance, a tote bag, free bathrobes, maybe a limousine transfer to the airport, or even discounted airfare.

There is one exception to the flat price rule for Royal Caribbean. If an agency has reserved group space lower than brochure price, they can advertise that rate, but they cannot discount it under any circumstances. And group pricing is something of a gray area, as sometimes the cruise lines will tell the agency, "Sorry, your price is too low to advertise." What happens then? The agency is allowed to promote the rate, but it must be done in private communication with shoppers (it cannot be advertised). Private communication includes email newsletters from the cruise agencies and other places, so it DOES pay to sign up for cruise bargain newsletters.

How do you spot the best Royal Caribbean and Celebrity deals? The price will almost always be the same unless it is a group rate, so the real bargains come from the value-added bonuses included by the cruise agents. One thing is certain: The cruise agents can always offer you more than the cruise line itself, because the cruise line will never under-price, or offer more value-added incentives, than the travel agent. If you see an incentive giveaway in any Royal Caribbean advertising, like free dinner in an alternative restaurant, you can bet every travel agency has the same giveaway offer from the cruise line, and possibly have their own "added-value" incentives to further sweeten the pot.

   

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    Carnival Cruise Lines Flat Pricing and Group Rate Policies When the details of Carnival's policy were finally announced and turned out to be different than what the competition apparently expected, a commonly heard phrase in the industry was "Carnival dug the hole, and Royal Caribbean jumped in."

    The Carnival Cruise Lines policy only applies to Carnival ships, (not to other Carnival Corp. umbrella companies: Princess, Cunard, Holland America, Seabourn and Windstar). The policy does not allow travel agencies to advertise a lower price than the "direct booking price" from Carnival unless it is group space. You will see the same price quoted everywhere you go including Carnival's own web site. But Carnival does allow rebating by cruise travel agents, as long as it is done in private. After you check a Carnival price online, call or email an independent cruise agent to see if they can offer you a lower price than the one advertised. This policy accomplishes what the cruise lines want - the ability to control pricing power to the public by stopping large agencies from advertising lower prices - but it still gives the agent the flexibility to compete on price by rebating.

    Business wags see this as an edge for Carnival's bottom line. If the cruise market goes soft and prices drop, Royal Caribbean could be forced to lower prices at the direct price level and still pay full commissions to agents in order to compete. Carnival, on the other hand, can keep direct prices higher and put price competition in the travel agents' hands by allowing them to rebate. Fortunately for Royal Caribbean, pricing for its ships, especially the Voyager class, has such strong demand that they have never had to worry about falling prices.

    If an agency has reserved group space on Carnival, it can advertise that rate, but cannot discount it in public ads. But, unlike the Royal Caribbean policy, the agency is allowed to discount the Carnival group rate in private, i.e. via phone calls, email and even email newsletters. Once again, with Carnival as well this can be something of a gray area. Sometimes the cruise lines will simply tell an agency "I'm sorry, your price is too low," or they will simply take the unsold cabins back and sell them at the higher price (very common). So, once again, if you see a good group rate, think seriously about booking it while you can.

    How do you spot the best Carnival deals? The advertised cruise fares are always going to be the same, unless it is group space, but the agencies still have the right to offer booking incentives like free travel insurance, so look for group space and the offers with the most value-added bonuses. And then take it a step further by calling the agent to see if any discounts are available.

       

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    Norwegian Cruise Lines Flat Pricing and Group Rate Policies Norwegian Cruise Line has a policy similar to Carnival's: You will see the same price quoted almost everywhere, but it is possible to get a lower (rebated) price from a cruise agency. However, there is one caveat about NCL price quotes when checking booking engines. One popular online booking engine (Revelex) that several cruise agencies use cannot seem to get NCL prices to show the complete, FTC mandated price that we mentioned earlier.

    To be specific, the Revelex booking engines inadvertently omit the non-commissionable fees (NCFs) so the initial price you see for an NCL cruise will be shockingly low (a 7-day Caribbean cruise on Norwegian Dawn for $284?). To see the FTC mandated price ($449; cruise fare + NCFs) you must continue through the booking process. Meanwhile, other booking engines have managed to figure out how to get NCL prices to show up with NCFs on the first screen so price comparison with other cruise lines is much easier.

    These online agencies using Revelex include 7BlueSeas, Best Price Cruises, Cruise411, Cruise Brothers, Cruise Deals, Cruise Direct, Cruises-n-More, Cruise Travel Outlet, Cruise Value Center, eCruises, Smart Cruiser Cruise Rewards and Vacations to Go. The Revelex glitch is not their fault; These are fine cruise agents where you will find some of the best deals on the Internet. You just have to remember that the first NCL quote the booking engine gives you is incomplete. Plus, you want to call them for the discount anyway, as private discounting is allowed by NCL.

    Some sites that do not have a problem displaying the correct NCL prices: CruisesOnly, Cruise.com, America's Vacation Center, Expedia, Travelocity and of course NCL.com.

    So, a good way to see how much an NCL cruise will really cost is to go to www.ncl.com and look up the cruise you want. The NCL web site will always show you the correct direct booking price, including all mandatory fees and optional insurance. (But not always the best deal.) The trick is to make note of the individual components (cruise fare, NCFs, insurance, taxes) and then do your price comparison shopping. Here is how NCL.com breaks down their cruise fares:
    Invoice Item Cost
    GOVERNMENT TAX $69.36
    +INSURANCE $59.00
    NCF $165.00
    VOYAGE FARE $284.00
    Guest Total $577.36
    The NCL.com final price is $577.36. Insurance is optional and can be taken off at the web site (some online agencies offer free travel insurance on almost every cruise they book). And this shows the price with government taxes, which are not usually included in cruise advertising.

    How do you spot the best Norwegian Cruise Lines deals? As we said, the advertised price of any cruise should include the basic cruise fare plus the NCFs. That means in the example above the advertised price should be $449, which is the price we found on the non-Revelex booking engines. Once you figure out which NCL cruise you want, look for any agencies offering lower group rates and added-value incentives such as free insurance or shore excursions, then call and ask for a quote. You may have to call a lot of agencies before you get the best price, because rebating is all done in private.

    If an agency has reserved group space on NCL, it can advertise that rate, but cannot discount it in public ads. As with the Carnival policy, the agency is allowed to discount the group rate in private, including phone calls, private email and email newsletters.

       

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    What Have We Learned? If you happen to see a rate lower than the direct booking price (which is actually pretty rare these days), it is a group rate, which you should consider booking while it lasts. In addition, the agency offering the most "value-added" extras is a good place to start. For NCL, remember to obtain the "real" price (meaning all the fees are added in) before you start price comparison. Once you have decided, pick up the phone or email the agent, tell him or her exactly what you want, and ask for a price quote. The main thing to remember is that with some cruise lines and agencies it is possible to bargain, and when you see the words "Prices too Low to Print, Call Us!" -- it is probably true. Either they really have prices too low to print - or that cruise is sold out.

    For Royal Caribbean and Celebrity, the price you see everywhere is the price you will pay. So the only thing that counts is whatever value-added perks the agent can provide. Free travel insurance is a common one, but even more elaborate things will appear, like reduced airfare, free gifts and hotel stays.

    Almost all other cruise lines - including the boutique and luxury lines, European lines and Princess, Holland America and others under the Carnival Corp. umbrella - have not yet instituted flat pricing policies. So, when you see ads from cruise agencies touting "75 percent off" pricing, there is a good chance they are referring to those cruise lines without flat-pricing policies. But, where does that "75% off" discount come from? Well, remember that original brochure rate that no one pays?

    Note: this article was researched by consulting with several cruise agencies. There is a fair amount of varying interpretation about these policies which the cruise lines are not too concerned about. Suffice it to say they don't mind having a little gray area.

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