Making money on board

[cruisinquestions]

Kind of off topic- but I wanted to ask the experts- How does the industry make the bulk of its money? Off drinks, casino, excursions? Surely its not just one of these areas, but the combination of expenses Id assume. Many passengers dont drink, but use the spa for various indulgences. Many do drink like fish all week yet never gamble. I imagine it all balances out to a tidy profit.

 

...and according to the experts? :o

 

Also, curious, do you all think the industry will continue to try new "pay as you go" options such as extra charge restaurants, classes, and activities or do you see the all inclusive nature making a return eventually?

[rummenroman]

I really think we haven't seen the beginning of "pay as you go cruising". Cruise companies need to get people on the ship, one way to do that is to be very cheap up front. It also gives people the choice to spend their money on things they want to enjoy, and not on things they don't.

[Paulxyz2004]

I really think we haven't seen the beginning of "pay as you go cruising". Cruise companies need to get people on the ship, one way to do that is to be very cheap up front. It also gives people the choice to spend their money on things they want to enjoy, and not on things they don't.

 

Yes we have seen the pay as you go cruising. Easy cruise tried the concept of very cheap cabins and everything else but a cabin with a bed and bathroom at extra cost. No food, no drinks, no cabin service, nothing was included in the fare. Despite the fact that itineraries where quite good and the ship stayed in port long hours and often late night or even overnight the concept failed.

People soon realized, that they had a no service cruise that cost them more money in the end than a "regular" cruise.

Maybe the concept needed some adjustments or maybe it was too early to offer this kind of cruise, but the concept has been tried and wasn´t a success.

[Paulxyz2004]

Kind of off topic- but I wanted to ask the experts- How does the industry make the bulk of its money?

 

Take a look at the financial reports and you´ll see where they make their profits from.

[Happy ks]

When was cruising all inclusive? At one time soda may have been included, but alcohol has always had a charge, gambling, spa and shopping always cost money. Our very first cruise, in 1998, soda was not included and we purchased our kids a "sticker".

 

The specialty restaurants? That is fairly new in the cruise industry and I don't see it going away. I think it's a great choice for people wanting a more upscale meal in a smaller venue. We'll continue to pay for that priviledge when we want to.

 

There are a few "all inclusive" cruise lines...way out of our budget. The fares are 3 - 4 times what a typical cruise fare on a mass market line would be.

 

We spend less than many on a cruise, but we still do spend. We will purchase one formal night photo, a few cocktails throughout the week, a bottle of good wine with dinner each evening and one nights dinner in a specialty restaurant.

 

I do think the cruise lines depend on the over-spender. Many people love to drink, gamble, shop, go on overpriced ship sponsored excursions and get spa services. To that I say, go for it, it's a vacation and meant to be enjoyed however your wallet can stand it. It keeps the fares down.

[QTBabyNurse]

I watched a show on TV not too long ago about the cruise industry and I think I remember hearing that it is the alcohol that is the big money maker onboard....so much to the point that each cruise day their profits are monitored and the bars are encouraged to "push" drinks if they are not meeting their projected figures for that particular cruise day.

[cruisinquestions]

Take a look at the financial reports and you´ll see where they make their profits from.

 

Great idea. Where do I find them? Thanks.

[setsail]

"

Passenger ticket revenues

accounted for 72.7%, 71.4% and 72.4% of total

revenues in 2010, 2009 and 2008, respectively."

 

Rc's annual report

[Loonbeam]

I'm super over generalizing here, but the target rule of thumb seems to be that fares should cover the operating costs of the cruise (including overhead) and anciliary revenues provide the profits. The lines have not really been able to meet that target as for various reasons they have not been able to raise fares at the same pace as costs in many markets, which is why you are seeing more focus on onboard revenues and cost cutting.

 

The annual statements and shareholder calls usually go into this in more depth...

 

Kind of off topic- but I wanted to ask the experts- How does the industry make the bulk of its money? Off drinks, casino, excursions? Surely its not just one of these areas, but the combination of expenses Id assume. Many passengers dont drink, but use the spa for various indulgences. Many do drink like fish all week yet never gamble. I imagine it all balances out to a tidy profit.

 

...and according to the experts? :o

 

Also, curious, do you all think the industry will continue to try new "pay as you go" options such as extra charge restaurants, classes, and activities or do you see the all inclusive nature making a return eventually?

[GXmanDC]

CNBC produced "Cruise Inc" a few years back, it is a good look at the cruise industry. It focuses on a NCL cruise, but I think many of the facts can be applied to the industry as a whole.

http://video.cnbc.com/gallery/?video=1139954767

[Sequim88]

Cruise companies need to get people on the ship, one way to do that is to be very cheap up front. It also gives people the choice to spend their money on things they want to enjoy, and not on things they don't.

 

To see where cruises "could" go apply the above to airlines. They have been pioneering this transition for quite some time. No more freee meals, charges for checked luggage (and now some for carry-on), micro seating (cram them in), no more free sodas, attempts to charge for lavatory... and more. All in the name of reducing "base" fare and the theory of not making people pay for services they don't use (like checking luggage).

 

Some cruise lines, like some airlines, are still all inclusive - including alcohol. But they are very expensive. Most cruise lines will still be very value minded (in terms of what customers perceive of what they get for the price and there is probably some equilibrium point they can't go below.

[aurelius180]

Great idea. Where do I find them? Thanks.

 

 

You can find them on the "Investor Relations" website for each company.

 

Over the past 7 quarters RCI's ticket revenues have made up about 72-75% of their business related revenue. During that time ticket revenue has covered their operating expenses.

 

Going back into 2009, ticket revenue did not cover operating expenses in all but the third quarter

[molly361]

I watched a show on TV not too long ago about the cruise industry and I think I remember hearing that it is the alcohol that is the big money maker onboard....so much to the point that each cruise day their profits are monitored and the bars are encouraged to "push" drinks if they are not meeting their projected figures for that particular cruise day.

 

 

I saw that same show but don't remember the numbers they put out.

[babymaxie]

I watched a show on TV not too long ago about the cruise industry and I think I remember hearing that it is the alcohol that is the big money maker onboard....so much to the point that each cruise day their profits are monitored and the bars are encouraged to "push" drinks if they are not meeting their projected figures for that particular cruise day.

 

 

I saw that show. They do push drinks if not meeting their projected figures for that day. But they also make money from those sitting at the slot machines all day.

[smoosh21]

To see where cruises "could" go apply the above to airlines. They have been pioneering this transition for quite some time. No more freee meals, charges for checked luggage (and now some for carry-on), micro seating (cram them in), no more free sodas, attempts to charge for lavatory... and more. All in the name of reducing "base" fare and the theory of not making people pay for services they don't use (like checking luggage).

 

Some cruise lines, like some airlines, are still all inclusive - including alcohol. But they are very expensive. Most cruise lines will still be very value minded (in terms of what customers perceive of what they get for the price and there is probably some equilibrium point they can't go below.

 

 

But airlines are not the destination, they are simply a means to get to the destination. You can also drive, take a bus, take a train, etc.

 

For the cruise, that is the vacation. If the cruise fare were to only cover the hotel room, I would (and I suspect most others would) choose a different method of vacation.

 

As an early poster mentioned, even EasyCruise didn't work, and that was very straightforward as a moving Hotel room that spent all the day time in ports.

[gcuecruise]

Wishful thinking...I thought from the thread topic I would learn how I could make money on board. :)

[sail7seas]

I've been led to believe the cruise fares pay the overhead and the on-board spending is the profit.

 

Art Auctions used to turn a very nice profit but many ships no longer have them for various reasons.

 

Photos, shops, bars, casino, shore excursions, exercise classes, spas, hair salon, alternative restaurants/dining etc are all sources of on board revenue and very important to the health of the cruise industry.

 

I believe they are constantly looking for new ways to raise on board spending.

 

[sail7seas]

Wishful thinking...I thought from the thread topic I would learn how I could make money on board. :)

 

 

:) I read it twice and thought the same thing. :D

[John Bull]

Wishful thinking...I thought from the thread topic I would learn how I could make money on board. :)

 

 

Same goes for me. :(

OP, you're a teaser. :D

 

To those who've supplied much info on this thread, many thanks.

 

A captive audience is always an opportunity to make money in any scenario, not just cruises.

I've plenty of experience of that from both sides of the fence, including free tickets which create good crowds from whom to extract money.

And I consider it simply good business.:cool:

 

To get best value out of a cruise,

Don't ask the cruiseline to organise your flights.

Don't use ship's excursions.

Don't use the spa or the dining upgrades or other pay-facilities.

Don't ask the ship to exchange currency or use their ATMs.

Don't buy from ship's shops or photographer or art etc auctions.

Drink only tea or coffee or water.

Swim to the nearest shore when you want a beer.

And have a great time :rolleyes:

 

JB :)

[rmurray847]

"

Passenger ticket revenues

accounted for 72.7%, 71.4% and 72.4% of total

revenues in 2010, 2009 and 2008, respectively."

 

Rc's annual report

I appreciate the info above...but it doesn't quite tell the story. REVENUE is the $$$$ the cruise line brings in. I'm not suprised that the fares are by far the largest single bucket of money. However, how much of that revenue actually turns to PROFIT? VERY, VERY little...I would imagine. The profit comes from the other 28.6% of the revenue. What is the cost to the ship for an $8 bottle of beer? About 25 cents. Even if you add labor, dishwashing, maintenance of the bar area, replacing broken glasses, the coaster the glass goes on, etc. etc...you're probably still at less than 50 cents. That's a hefty profit margin.

 

Other service lines are similar, of course...although in virtually any industry, ALCOHOL is astonishingly profitable. Whether a hotel, restaurant, Broadway theater, etc. etc...almost all booze revenue goes to the bottom line.

[BruceMuzz]

Ask any boat owner about costs.

Buying and operating any boat - or ship - is terribly expensive.

The bigger the boat/ship, the more expensive it gets.

 

Most boat owners will agree that the second happiest day in their lives was when they purchased the boat.

The happiest day in their lives was when they sold it.

 

It's fairly obvious that none of the posters on this thread have never been involved in cruise ship operations, and all/most have never been involved in land-based hospitality operations.

 

The American Hotel/Motel Association estimates that it costs an American Restaurant nearly $1.50 to serve you a free glass of water. That's with all costs added in.

Serving you a soda or a beer in that same glass costs them even more.

 

When a cruise line serves you a glass of water or soda, their costs are double or triple what the land-based restaurant pays. You can forget all the grandma stories about duty free and large quantity purchases for ships. With all the extra costs we face, we still end up paying substantially more.

 

Most cruise lines, airlines, and Walmart all operate on the same concepts; mass market, economy of scale, large volumes, and razor thin profit margins.

 

Making money and making a profit are usually two very different things.

 

Cruise fares are the single biggest chunk of cash in our business. They are completely eaten up paying the mortgage, fuel costs, operating costs, food, and payroll.

 

Shore excursions generate - by far - the most money onboard a ship. But the bulk of that money is paid out, the same day, to the tour operators. Much of what is left goes to pay the massive liability insurance policies we are forced to carry on shore tours.

 

Beverage sales are next. The beverage costs on ships are higher than most land-based operations. When I managed land-based hotels and restaurants, we were happy if beverage costs averaged 13%. On ships we are happy with 23%. But we still do well there.

 

Duty Free Shops revenues are next in the hierarchy But bear in mind that nearly every cruise line has contractors operating the shops. We split the profits nearly 50-50 with them.

 

Spa is next. But once again, a contractor operates it. We split profits nearly 50-50 again.

 

Casino, photo, and internet normally come in last. In the good old days, there were very few land-based casinos competing with us. Passengers really went crazy in the casino on a cruise. Today there are casinos everywhere. We end up with retirees playing penny slots all week.

When we win big, we win very little. Most casinos are concessions. We split the profits nearly 50-50 with them.

 

Photo operations have gotten very expensive with all the new hazardous waste regulatins and costs. There are some cruises where costs exceed total revenues. Most photo operations on ships are concessions. We split profits nearly 50-50 with them.

 

Satellite time and equipment is very costly. Everybody wants internet on a ship, but nobody wants to pay for it. Frequent outages and crashes result in many refunds. Revenues are climbing, but costs are eating them up. Internet is a concession. We split profits nearly 50-50 with them.

 

A cruise line CEO told me recently that with all the recent financial turmoil, he could have sold off every asset of the company, fired all his employees, put all the proceeds of the sale into government bonds, and the ridiculously low interest he would receive on the money would still be more than the profit his company made last year.

[rvsullivan]

Lot's of folks watched the Love Boat, and those to young talked to someone that watched the Love Boat. Others cruised in the 70's and 80's. That leads to the tales of all you can eat prime rib and lobster, a parade of flambe and staff to cater to your every whim. They forget that in 1984, I paid $3600 for my wife and I to honeymoon in an inside, the cheapest we could book. Today you can see the same inside for 7 days under $400 each if you shop around. People want prime rib on a hamburger diet and 4 staff members waiting outside their door in case they need them.

I believe the booking pays the freight and the extra's are the profit.

[Gail & Marty sailing away]

I was once told they try to make the same price as you paid for the cruise

[Aquahound]

Kind of off topic- but I wanted to ask the experts- How does the industry make the bulk of its money? Off drinks, casino, excursions? Surely its not just one of these areas, but the combination of expenses Id assume. Many passengers dont drink, but use the spa for various indulgences. Many do drink like fish all week yet never gamble. I imagine it all balances out to a tidy profit.

 

...and according to the experts? :o

 

Also, curious, do you all think the industry will continue to try new "pay as you go" options such as extra charge restaurants, classes, and activities or do you see the all inclusive nature making a return eventually?

 

You might want to try and track down the CNBC airing called Cruise Inc. They spent a week on a NCL ship and this was the subject. They never did reveal the bottom line, but they followed along as the ship tried to meet it.

 

Edit - Sorry GXmanDC. I missed your post.

[kitty9]

You might want to try and track down the CNBC airing called Cruise Inc. They spent a week on a NCL ship and this was the subject. They never did reveal the bottom line, but they followed along as the ship tried to meet it.

 

Edit - Sorry GXmanDC. I missed your post.

 

 

I saw that show and it was quite interesting. The big wigs were not happy that one of their ports of call was inundated with rain, and subsequently many of their tours were canceled. The comment was that they made a ton of money from those tours and because they had so many cancelations, they would not come close to making their quota for that cruise.