Speculating about why Carnival sent out the free cabin offers

[megmno]

My husband and I have been speculating about why Carnival sent out all the free cabin offers (we were among the lucky recipients). Here's what we came up with, and I'd be interested to hear your speculations as well:

 

Carnival's mission is to maximize profits for its shareholders. Therefore, this was a carefully thought out move whose goal is to either improve profits immediately or to improve them later in time.

 

We're speculating that Carnival found that it its bookings were well below where they should be at this time of year. Why that would be is somewhat of a mystery. Possibly the recent bad press incidents, or the economy (although it seems that the economy is starting to pick up).

 

Carnival needed to get warm bodies in those rooms so that it would not have to either cut cruise fares or admit to the Wall Street analysts that its bookings were below targets. Wall Street would probably punish Carnival pretty severely it that came out.

 

So Carnival, finding that it had a lot of empty rooms, had some choices to make. It could cut the fares until it found a sweet spot. But if it did that, it would have to make a lot of refunds to people booked on Early Saver rates. Also, cutting the prices would signal to future cruisers that they should expect to see deep discounts, making them even less likely to want to pay the normal fares.

 

Carnival could sail with some empty rooms, or it could instead virtually give them away, and hope that the passengers who get the free rooms spend a lot onboard. Really the only variable cost they have is the cost of the food that will be consumed by those passengers. If that's the case, then it makes sense to give away the cabins.

 

Upon deciding to give away cabins, Carnival had several options on how to do it. It could make a big splashy press announcement about how it was giving back to its loyal customers. But if it did that, and it announced how many cabins it was giving away, the Wall Street analysts would probably see through the ploy. And so, there hasn't been a word about this in the media.

 

Carnival could give the cabins to its most loyal cruisers, the Platinums and the Diamonds. But those people will probably cruise whether or not they get a free one. So it's possible that Carnival would just be cannibalizing its own future revenue if it gave the cruises to them.

 

Instead, based on what I've read on other threads, it looks like Carnival decided to give the cabins to a broad range of past guests, from people with just a few cruises, to Platinums. Possibly they are going to be studying the spending patterns of those who accept the offers, so that they can better predict the demographics of cruisers who will maximize their profits.

 

(Personally, I think that last bit doesn't totally make sense. If I were a Carnival bean counter I would be looking for people who spent a lot onboard during their cruises.)

 

So, anyone else care to speculate? I hope the Cruise Critic writers do a column on the free cabin giveaway. There's surely a great story in it -- if they can get Carnival to tell them!

[LittleMissMagic]

I think you make really good points and hit on some things I hadn't even considered. It's important to note that Carnival is keeping these free cruises low-key. There are no commercials, mass emails, or even advertisements on their website. The only people who know to be disappointed that they didn't get a free cruise are the people who have found out about others receiving the offer either through Cruise Critic or their friends. There could be two reasons for this - they want to keep in low-key so that everyone doesn't know they're hurting... or they didn't want to hurt people's feelings.

 

The funny thing is before I received the free cruise offer, I wasn't looking to book a Carnival cruise. I looked at the Breeze and Dream itineraries for my vacation week, but the prices just weren't that awesome. I actually rolled my eyes at the price of the Breeze. The awesome prices were on NCL Epic and NCL Dawn. But once I got the free cruise offer, I booked the Breeze, and I've already spent $440 on excursions, and I rack up a decent on board account.

[jks336]

my thoughts are many different reasons, a lot that you and your husband have touched on. one of which is getting people to cruise and bring their numbers up. some ppl wait to see if the price will drop the closer to the cruise. I'm sure they would rather have those guaranteed bookings prior. and then, as you say as well, see how they spend with that free cruise.

 

I've booked early saver and have had 1 price drop in 3 cruises and lost some of that from when they raised the gratuities (always pre-pay mine) so that s*cked. have had 1 upsell fairy call, but not a deal when I could have booked that same rate back when I booked the cruise.

 

I've read how some ppl get all these great price drops, and now these free cruises. yep, I'm jealous! lol. and also happy for them.

 

guess we'll see what Carnival continues to do to bring in the bodies.

 

*I dont' agree the economy is really improving* my 2nd job, #'s are down. Businesses closing and the stupid insurance crap from the govt

[EZ4]

What Carnival did was akin to lobbing a grenade right into the middle of the CC Carnival board. ;)

[Beave8920]

Your analysis is well thought out....you make some good points.

 

But not rewarding loyal paying customers may backfire. I can't understand why they don't do something like Princess did last year - book a cruise and for every dollar you spend, you get back "money credit" for your next cruise, including what you spent for the cruise. That way those who pay for a cruise may get a free and/or equal cruise as a reward. That way it's a "win-win" for both.

Edited February 25, 2014 by Beave8920

[SadieN]

Not too different than what Princees has done on the few ships sailing the short cruises on the West Coast and the Ruby (which is somewhere else.)

 

Princess offered the full fare of certain 3/4 day cruises to be used as credit on 7day or longer cruises. Know many that used the offer several times to increase their loyalty status and decrease upcoming cruise costs. Also got pax to try Princess.

Because of the Princess credit we cancelled a Cabo/PV/PV 7day itin for a 10 day San Diego/Cabo/LaPaz/Loreto/PV cruise.

Sorry we cancelled the Carnival cruise. It was a great CC group to be traveling with.

[SadieN]

Do these free cruises count towards days/ cruises cruised?

[LittleMissMagic]

Do these free cruises count towards days/ cruises cruised?

 

The speculation is that no, people will not receive VIFP points for their free cruise. There is also discussion that people may receive VIFP points for their free cruise if they paid to upgrade their cabin. I guess we'll find out soon when the first people come back from their free cruise.

[LittleMissMagic]

I can't understand why they don't do something like Princess did last year - book a cruise and for every dollar you spend, you get back "money credit" for your next cruise, including what you spent for the cruise. That way those who pay for a cruise may get a free and/or equal cruise as a reward. That way it's a "win-win" for both.

 

Maybe that method doesn't work as well for Carnival's demographic. Carnival is marketed more as the family line and the affordable line - two cruises may be too much to ask. Families with school-aged children and working parents probably don't have very much flexibility as to when they can take a vacation and may only be able to take one or two vacations a year and may not necessarily want both to be a cruise. I feel like, "Hey, this is FREE!" is more likely to get people to agree to it (that is, if they didn't toss it thinking it was a scam) than saying, "Purchase this cruise and get credit towards your NEXT cruise." People with limited time usually like immediate award.

 

I feel like the promotion Princess ran works best for people with a lot of vacation time who aren't tied down with responsibilities like children and 9 to 5 jobs.... people like retirees and empty-nesters. I'm curious of the demographic of people who took advantage of Princess's promotion. I'm willing to bet that the majority was 45-50+ in age.

[pattimelt]

The speculation is that no, people will not receive VIFP points for their free cruise. There is also discussion that people may receive VIFP points for their free cruise if they paid to upgrade their cabin. I guess we'll find out soon when the first people come back from their free cruise.

 

I was one of those that got the 'first' group of those letters that went out last August for the free cruise. I took it AND got VIFP points, too.. Made Gold that trip..

[LittleMissMagic]

I was one of those that got the 'first' group of those letters that went out last August for the free cruise. I took it AND got VIFP points, too.. Made Gold that trip..

 

Did you pay to upgrade your cabin to an ocean view/balcony/etc.?

[goduckies05]

My guess is carnival isn't hurting for business in socal as they just put another ship there.

 

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[cjknox]

You definitely made some interesting points however I don't think the motivation behind the free cruises are because of low sales; I say this because Carnival recently the set a one month sales record and overall booking trends have been in the upswing too. I think that they are trying to lure back people who have seemingly strayed from cruising. Thanks for your thoughts.:)

[glrounds]

My guess is carnival isn't hurting for business in socal as they just put another ship there.

 

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It's only going to be here for a month, then off to Alaska. Carnival is practically giving away the cruises on the two Fantasy class ships that are here. Have done 3 four day cruises in the last 3 months with NO SINGLE SUPPLEMENT . . . Carnival is definitely hurting for business. They used to do the week long run to the Mexican Riviera Sunday to Sunday 52 weeks out of the year.

[cruizinisthebest]

The free offers ranged from people who hadn't cruised in years to people who just recently cruised and some with one cruised already booked. Different ages, cruise history, location. Just about any ship for any length. There's not been one thing that I can point to (at least by reading the half dozen threads on here) that nails why the offers went out. I also know of no "recent bad press." Maybe they are hurting for business in the West Coast, but I don't agree with that applies to their other port areas of the country. All I know for certain is that I didn't get one!;)

Edited February 25, 2014 by cruizinisthebest

[kneedeep1964]

empty cabins also means that staff that rely on the bulk of their salary coming from tips make less wages.

[RainbowsMist]

I agree. I think they just want to fill the cabins. This time last year we had a $700 OBC, this year (so far) $0. I also noticed while checking for my daily price drops, the available cabins for a 4 person is the exact same room number for a 2 person. We have a 4 person balcony 8B and a 2 person balcony 8B. The same cabins numbers pop up as available. This wasn't the case earlier and just started the last couple of months in our situation. My theory to this is, they don't care how they sell it as long as they sell it. Makes it that much harder for OBC.

 

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[kyleandjenna]

I wonder if many of the recipients of the free cruise normally cruise in small groups of family/friends and this was a way to try and get the entire group on board by giving away a freebie to a random member. My parents got a free cruise and they have never cruised by themselves before. It makes good business sense.

 

I also wonder if Celebrity is hurting carnival. Their rates are really competitive lately and the 1-2-3 go package they are offering is a really good incentive to get cruisers that might normally pick carnival. We're going to be taking a hard look at celebrity cruises after our trip on the sunshine this fall.

 

Just my $.02

 

 

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[Davey Wavey]

You definitely made some interesting points however I don't think the motivation behind the free cruises are because of low sales; I say this because Carnival recently the set a one month sales record and overall booking trends have been in the upswing too. I think that they are trying to lure back people who have seemingly strayed from cruising. Thanks for your thoughts.:)

 

I think enough people have said they had just been on a cruise as recently as a few weeks ago to dispel it was targeted at long lost customers. I tend to think they were underbooked. Think about it. If record sales had filled the ships, they would have none to give away for free. Further, Carnival's annual statements have said that each trip has a fixed cost whether it is full or not. Crew, fuel, maintenance, and perishable food items are a fixed cost. The only "savings" from having fewer people onboard is in unprepared frozen food items, which only account for 3-5% of total expenses, and port charges for those ports that charge "per passenger" instead of the negotiated "per ship" charges.

 

In short, it is better to give away an empty room where the "free" passenger at least pays the port charges (and possibly spends money onboard) than to have an empty ship.

[Rosethorn40]

I think you and your husband are close to 100% right. I was a business major in college (But I did not specialize in marketing) and I know that Carnival is NOT giving away cruises in the spirit of goodwill.

 

My understanding from what little I gleaned from my friend that got an offer was there was a list of sailings to choose from, most likely sailings that had a number of empty cabins. I think you are spot on; Carnival couldn't slash prices any more because of all the OBC they would be giving out, and that people would "Expect" super low prices in the future.

 

If you have ever checked out pricing on a river cruise you will notice that the fares rarely are cut significantly. Yes, they do offer promo's (Usually free or reduced airfare), but they don't cut the price of the cabin. Those boats do sail half empty at times.

[Midwestgal]

Do these free cruises count towards days/ cruises cruised?

 

Yes they do, my boarding pass now says gold.

[martinchem]

Curious if they only sent out offers to those that didn't have a future cruise booked.

[ibcnusoon]

My understanding from what little I gleaned from my friend that got an offer was there was a list of sailings to choose from, most likely sailings that had a number of empty cabins. I think you are spot on; Carnival couldn't slash prices any more because of all the OBC they would be giving out, and that people would "Expect" super low prices in the future.

 

There was no "list" for the free cabins. Once you entered your VIFP number any and all cruises were $0 interior, that included Hawaii and Alaska cruises - so I would say that any cruise sailing before 6/30 was included.

 

There was a "list" on the free cruise letter, but that was just an example of some of the cruises Carnival offers, but by no means were we limited to just a few sailings.

 

If your friend logged on to Carnival, they would have seen that any and all cruises were open for booking.

[PAPERBKWRITER]

As a frequent Carnival cruiser I don't expect the offer. As a stock holder giving free rooms to people who cruise with you anyway would be a poor business decision.

[jazm2011]

The speculation is that no, people will not receive VIFP points for their free cruise. There is also discussion that people may receive VIFP points for their free cruise if they paid to upgrade their cabin. I guess we'll find out soon when the first people come back from their free cruise.

 

We received a free cruise last May and were very surprised to find we 'did' receive VIFP points for the cruise.

 

The offer last year wasn't specific to Interior cabins. We were offered Ocean View and never asked about upgrading to balcony.

Edited February 25, 2014 by jazm2011