Is Dynamic Dining the end of using OBC for gratuities?

[styxfire]

You are truly fortunate to be able to get those kinds of prices. I fully understand why you would be unhappy with the pre-payment. It costs me more to get to the port than you're paying for a cruise.

In finding cruise bargains, port proximity is key. If you are far from a port, then you are probably close to many things I'd love to participate in, but can't due to distance.

[styxfire]

If RCI decides to require prepayment on all bookings that number is accurate.

 

Business operate on cashflow. This gives RCI many more millions of operational dollars, pumps up their cred on Wall Street, and gets them off of having to play accountant Tetris by applying OBC to cover crew costs (which likely are the most valuable thing you could buy with OBC margin wise).

 

It's a $600K pull ahead per DAY. If there is a 75 day float in that account (I really think it would be MORE) you are looking at churning $45M.

 

What does it cost RCI? Substantially less than the interest earned on $45M (nevermind NOT having to credit OBC as stated above). This puts them revenue positive. From a business standpoint it is brilliant. All this pay ahead stuff is brilliant from the business standpoint. It's amazing that they have gotten guests to see this as a convenience when there is practically NO savings (value) to the customer, except in circumstances where spending a bit more gets someone over a points threshold on a credit card.

 

Regardless, this is a net money maker for RCI, this isn't losing them a cent, that's for sure.

Nice LMaxwell, thanks for your input!

[RocketMan275]

If RCI decides to require prepayment on all bookings that number is accurate.

 

Business operate on cashflow. This gives RCI many more millions of operational dollars, pumps up their cred on Wall Street, and gets them off of having to play accountant Tetris by applying OBC to cover crew costs (which likely are the most valuable thing you could buy with OBC margin wise).

 

It's a $600K pull ahead per DAY. If there is a 75 day float in that account (I really think it would be MORE) you are looking at churning $45M.

 

What does it cost RCI? Substantially less than the interest earned on $45M (nevermind NOT having to credit OBC as stated above). This puts them revenue positive. From a business standpoint it is brilliant. All this pay ahead stuff is brilliant from the business standpoint. It's amazing that they have gotten guests to see this as a convenience when there is practically NO savings (value) to the customer, except in circumstances where spending a bit more gets someone over a points threshold on a credit card.

 

Regardless, this is a net money maker for RCI, this isn't losing them a cent, that's for sure.

 

Let's simplify things by considering just one ship. We know DD will be on Quantum/Anthem and Oasis/Allure.

 

Considering only Oasis:

5400 passengers assuming 10% are in suites, then 540 pay the $14.25 suite rate and 4860 pay the regular $12 rate. This results in a single day pull ahead of $68,015.

 

Assuming they can keep the money for 90 days before paying it to their employees means that there is 90 x $68,015 in the pull ahead pot at any given time. Total would be $5,941,350. Sounds impressive but:

 

The highest rate I could find at bankrate.com on a 90 day CD was 0.35% at Fidelity. Net interest to RCI would be $20,794.73.

 

I must apologize for poor wording in my last post when I asked 'how much this is costing RCI'? I wasn't talking about the cost of the pull ahead on the gratuities since that amount would be trivial. I was talking about the cost of switching to DD. There are multiple dining rooms to be remodeled and possibly the galleys too. Then the crew must be retrained too. Not small sums of money. I really doubt RCI would spend several millions on installing DD in Oasis to recoup a paltry $20,794 per year.

 

Even if RCI spent only 500K to install DD on Oasis, the time to recover their investment (not counting interest) would be 24 years. No way RCI would consider that to be sound financially.

 

There are those who love Traditional Dining and see no reason to change since they do not believe it is 'broken'. Therefore they conjure up all sorts of conspiracy theories to explain it. The simple answer is that RCI believes they will obtain a competitive advantage with DD and will attract more customers than traditional dining. Traditional dining will soon be a thing of the past on the newer ships and may expand to the smaller older ships.

[Paulette3028]

Let's simplify things by considering just one ship. We know DD will be on Quantum/Anthem and Oasis/Allure.

 

Considering only Oasis:

5400 passengers assuming 10% are in suites, then 540 pay the $14.25 suite rate and 4860 pay the regular $12 rate. This results in a single day pull ahead of $68,015.

 

Assuming they can keep the money for 90 days before paying it to their employees means that there is 90 x $68,015 in the pull ahead pot at any given time. Total would be $5,941,350. Sounds impressive but:

 

The highest rate I could find at bankrate.com on a 90 day CD was 0.35% at Fidelity. Net interest to RCI would be $20,794.73.

 

I must apologize for poor wording in my last post when I asked 'how much this is costing RCI'? I wasn't talking about the cost of the pull ahead on the gratuities since that amount would be trivial. I was talking about the cost of switching to DD. There are multiple dining rooms to be remodeled and possibly the galleys too. Then the crew must be retrained too. Not small sums of money. I really doubt RCI would spend several millions on installing DD in Oasis to recoup a paltry $20,794 per year.

 

Even if RCI spent only 500K to install DD on Oasis, the time to recover their investment (not counting interest) would be 24 years. No way RCI would consider that to be sound financially.

 

There are those who love Traditional Dining and see no reason to change since they do not believe it is 'broken'. Therefore they conjure up all sorts of conspiracy theories to explain it. The simple answer is that RCI believes they will obtain a competitive advantage with DD and will attract more customers than traditional dining. Traditional dining will soon be a thing of the past on the newer ships and may expand to the smaller older ships.

 

The mathematical/financial analysis you created is very interesting. I do believe that Royal created DD to obtain some type of competitive advantage -- let's face it, that is what smart companies are trying to do ALL the time, over their competition. If they don't they eventually could fail to garner more profitable customers.

 

Having said that, I hope Royal also keeps in mind that this choice may not be for everyone and that those people should have 'ship' options within the fleet of Royal.

[jticarruthers]

Although I don't believe that RCI implemented DD just to make some interest I don't think your math is right.

 

Starting from your premise of Oasis I get:

540 passengers @ $14.25/day = $7,695

4860 passengers @ $12.00/day = $58,320

Total = $66,015 per day

 

Oasis cruises are 7 days so total prepaid for 1 cruise = $ 462,105

 

Prepay is usually due 90 days before sail date and I have heard it said that the payment to the crew lags by 30 days, so RCI would have that money for 120 days or 1/3 of a year.

 

At an interest rate of 0.75% for 1/3 of a year that would be $9,531 in interest per cruise

 

Oasis cruises 52 times a year = ~$500,000 in interest earned on prepaid gratuities per year

 

Still not enough that I think this would be the only reason but it is nice to have and if interest rates eventually go back up to something measurable it would be even nicer.

Edited October 27, 2014 by jticarruthers

[Paulette3028]

Although I don't believe that RCI implemented DD just to make some interest I don't think your math is right.

 

Starting from your premise of Oasis I get:

540 passengers @ $14.25/day = $7,695

4860 passengers @ $12.00/day = $58,320

Total = $66,015 per day

 

Oasis cruises are 7 days so total prepaid for 1 cruise = $ 462,105

 

Prepay is usually due 90 days before sail date and I have heard it said that the payment to the crew lags by 30 days, so RCI would have that money for 120 days or 1/3 of a year.

 

At an interest rate of 0.75% for 1/3 of a year that would be $9,531 in interest per cruise

 

Oasis cruises 52 times a year = ~$500,000 in interest earned on prepaid gratuities per year

 

Still not enough that I think this would be the only reason but it is nice to have and if interest rates eventually go back up to something measurable it would be even nicer.

 

Offering something different is to get a competitive advantage over the other cruise lines....but the mathematics of the upfront revenue and how it helps cashflow and the bottom line, isn't a bad extra benefit.

 

EVERYONE in business wants better cashflow. It does amaze me that cruisers have been so willing to prepay gratuities in the past in ANY case for ANY type of dining without so much as something in it for the cruiser.

 

So far, I have not had to prepay gratuities and hope not to do it in the near future; if the conversation comes up, it will be -- so now that you want my money to prepay gratuities (even at final payment, that is 90 days prior to actual cruise), what do I get back in return (looking for some type of onboard credit or complimentary specialty dinner or ????).

[RoamingRetirees]

The mathematical/financial analysis you created is very interesting. I do believe that Royal created DD to obtain some type of competitive advantage -- let's face it, that is what smart companies are trying to do ALL the time, over their competition. If they don't they eventually could fail to garner more profitable customers.

 

Having said that, I hope Royal also keeps in mind that this choice may not be for everyone and that those people should have 'ship' options within the fleet of Royal.

 

Also, many frequent cruisers have complained about the traditional menus--that they are tired of the same thing. And how many threads have there been complaining about people not dressing appropriately for formal nights. I think one reason Royal created DD is to give us new menu choices, and those who enjoy dressing up can go to the Grande for dinner--every night if they choose.

[dfishner]

Also, many frequent cruisers have complained about the traditional menus--that they are tired of the same thing. And how many threads have there been complaining about people not dressing appropriately for formal nights. I think one reason Royal created DD is to give us new menu choices, and those who enjoy dressing up can go to the Grande for dinner--every night if they choose.

 

Could not of said this better myself but I know after a few cruises people on here will start complaining about the DD Menus as well. It never seems to stop

Edited October 27, 2014 by dfishner

[Paulette3028]

Also, many frequent cruisers have complained about the traditional menus--that they are tired of the same thing. And how many threads have there been complaining about people not dressing appropriately for formal nights. I think one reason Royal created DD is to give us new menu choices, and those who enjoy dressing up can go to the Grande for dinner--every night if they choose.

 

It would have been much easier to fix/change the menus and satisfy the complainers a little bit than totally change to this.....I just hope they don't put DD on every ship, that will force people who really like the traditional dining format, to move to other cruise lines.

 

There needs to be a way to satisfy both cruise customer types.

[Paulette3028]

Could not of said this better myself but I know after a few cruises people on here will start complaining about the DD Menus as well. It never seems to stop

 

Through some interesting channels I have met the VP of Food and Beverages; I joked with him that I don't envy his job....when it comes to food, there is ALWAYS some people who are unhappy.....he laughed....but he did say, when people are happy, they don't forget, even though they remain quiet.

[RoamingRetirees]

Could not of said this better myself but I know after a few cruises people on here will start complaining about the DD Menus as well. It never seems to stop

 

They already are, and the ship hasn't left port yet. :rolleyes:

 

We have always liked traditional dining with set waiters and tablemates, but we are willing to try the new concept before passing judgment. I think the DD menus look very good with a nice variety.

[dfishner]

It would have been much easier to fix/change the menus and satisfy the complainers a little bit than totally change to this.....I just hope they don't put DD on every ship, that will force people who really like the traditional dining format, to move to other cruise lines.

 

There needs to be a way to satisfy both cruise customer types.

 

I think that would be extremely difficult to satisfy those who are not happy with the food in the MDR. We have been cruising with RCL since 2006 and remember how unhappy people were about the food program back then and it continues to be a topic on CC almost every week since. Food is just to subjective a topic and it is hard to please everyone because we all have different likes and dislikes. I do believe DD addresses some of these food issues. I also believe RCL is reacting to their customer wants of more flexible dining.

 

I do think the Grande restaurant addresses some of those concerns of a more formal place to dine which is a throwback to an earlier time where everyone dressed up for dinner.

 

The choices are going on some of the smaller ships that do not have DD and still have traditional dining for now. Or find a cruise line that still supports traditional dining. I

Edited October 27, 2014 by dfishner

[Paulette3028]

I think that would be extremely difficult to satisfy those who are not happy with the food in the MDR. We have been cruising with RCL since 2006 and remember how unhappy people were about the food program back then and it continues to be a topic on CC almost every week since. Food is just to subjective a topic and it is hard to please everyone because we all have different likes and dislikes. I do believe DD addresses some of these food issues. I also believe RCL is reacting to their customer wants of more flexible dining.

 

I do think the Grande restaurant addresses some of those concerns of a more formal place to dine which is a throwback to an earlier time where everyone dressed up for dinner.

 

The choices are going on some of the smaller ships that do not have DD and still have traditional dining for now. Or find a cruise line that still supports traditional dining. I

 

Cruise Critic represents a very small percentage I am sure of overall cruisers. Food is a very personal subject. I have had people complain to me (face to face) that they did not like the way something tasted, and blame a waiter for that....gee, not fair. I say, order something else. I have done it in the MDR. I don't blame Royal for my taste buds not being in agreement with the dinner choice I made, especially if I tried something new for me.

 

I won't miss the formal nights, although my hubby enjoys one formal night on a weeklong cruise. In the end, it will all work out.

 

But I love what Royal has to offer on the entertainment and activity side and should not be made to feel that my enjoyment of dinner has to be compromised (we do like traditional dining) because DD may not be to our liking.

 

From what I read of the menus, I could not find one menu that had a shrimp cocktail on it. That is sad to me.

[RocketMan275]

Although I don't believe that RCI implemented DD just to make some interest I don't think your math is right.

 

Starting from your premise of Oasis I get:

540 passengers @ $14.25/day = $7,695

4860 passengers @ $12.00/day = $58,320

Total = $66,015 per day

 

Oasis cruises are 7 days so total prepaid for 1 cruise = $ 462,105

 

Prepay is usually due 90 days before sail date and I have heard it said that the payment to the crew lags by 30 days, so RCI would have that money for 120 days or 1/3 of a year.

 

At an interest rate of 0.75% for 1/3 of a year that would be $9,531 in interest per cruise

 

Oasis cruises 52 times a year = ~$500,000 in interest earned on prepaid gratuities per year

 

Still not enough that I think this would be the only reason but it is nice to have and if interest rates eventually go back up to something measurable it would be even nicer.

 

Basic math errors.

 

1. You indicate your earning $9531 interest on $462,105 in less than 120 days. That would be an interest rate of slightly over 2% earned in 120 days. The effective annual interest rate would be about 6%. The best short term CD rate I could find (90 days) was 0.35%. Would really like to know where you can get those kinds of interest rates.

 

2. The maximum amount that is earning interest is the amount in the prepaid account. This amount is equal to the gratuities paid per day times the number of days between final payment and payout to the crew. You can never earn interest on more since you have to pay the crew.

 

Final payment is 75 days prior not 90. For example, I'm on Allure leaving 13 Mar 16. Final payment is due 29 Dec 15. That's 75 days.

 

There really is no way to know how soon the crew would get paid. I used 15 days as an average.

Edited October 27, 2014 by RocketMan275
Correction of my math errors.

[LMaxwell]

Although I don't believe that RCI implemented DD just to make some interest I don't think your math is right.

 

Starting from your premise of Oasis I get:

540 passengers @ $14.25/day = $7,695

4860 passengers @ $12.00/day = $58,320

Total = $66,015 per day

 

Oasis cruises are 7 days so total prepaid for 1 cruise = $ 462,105

 

Prepay is usually due 90 days before sail date and I have heard it said that the payment to the crew lags by 30 days, so RCI would have that money for 120 days or 1/3 of a year.

 

At an interest rate of 0.75% for 1/3 of a year that would be $9,531 in interest per cruise

 

Oasis cruises 52 times a year = ~$500,000 in interest earned on prepaid gratuities per year

 

Still not enough that I think this would be the only reason but it is nice to have and if interest rates eventually go back up to something measurable it would be even nicer.

 

I also agree with you that RCI didn't implement DD just to have a way to prepay gratuities. I think they are coincidental things. DD was coming, and prepay has many benefits...but how could RCI have explained to guests that even traditional seatings must prepay gratuities. I think that would have went over like a lead balloon.

 

So the introduction of DD allows the further rollout of compulsory pre-paid gratuities. That means that if gratuities are required to be prepaid with DD that is the de facto end of using OBC for gratuities.

 

Not only are we talking about the interest earned off of the additional cash in hand; we are also talking about the removal of certain liabilities from the books. And even though $100 OBC may be $100 OBC is $100 OBC, it makes a difference what it is spent on. If I spend $100 OBC on buying bottles of liquor, that probably costs RCI $25 - $40. If I spend $100 on OBC, that costs RCI $100 they have to kick into the pot.

 

Like I said, I don't for a second think they devised DD as a way to get prepaid gratuities. I do think it gives a great opportunity to require them.

 

Operationally, cream skimming $500K a year off deferred crew payment, for one ship, isn't really small stuff. It all adds up...

[LMaxwell]

Basic math errors.

 

1. You indicate your earning $9531 interest on $66,015 in less than 120 days. That would be an interest rate of almost 15% earned in 120 days. The effective interest rate would be about 45%. The best short term CD rate I could find (90 days) was 0.35%. Would really like to know where you can get those kinds of interest rates.

 

2. The maximum amount that is earning interest is the amount in the prepaid account. This amount is equal to the gratuities paid per day times the number of days between final payment and payout to the crew. You can never earn interest on more since you have to pay the crew.

 

Final payment is 75 days prior not 90. For example, I'm on Allure leaving 13 Mar 16. Final payment is due 29 Dec 15. That's 75 days.

 

There really is no way to know how soon the crew would get paid. I used 15 days as an average.

 

But you don't only have $66K in the account.

 

If it is 120 days you have 7,921,800 principal.

 

If it is 90 days you have 5,941,350 principal.

 

And that is based on one ship (that does represent nearly 10% of the berths in the fleet, if the 50K number is accurate).

 

The interest is money for nothing. Why would they NOT take it?

[RocketMan275]

I also agree with you that RCI didn't implement DD just to have a way to prepay gratuities. I think they are coincidental things. DD was coming, and prepay has many benefits...but how could RCI have explained to guests that even traditional seatings must prepay gratuities. I think that would have went over like a lead balloon.

 

So the introduction of DD allows the further rollout of compulsory pre-paid gratuities. That means that if gratuities are required to be prepaid with DD that is the de facto end of using OBC for gratuities.

 

Not only are we talking about the interest earned off of the additional cash in hand; we are also talking about the removal of certain liabilities from the books. And even though $100 OBC may be $100 OBC is $100 OBC, it makes a difference what it is spent on. If I spend $100 OBC on buying bottles of liquor, that probably costs RCI $25 - $40. If I spend $100 on OBC, that costs RCI $100 they have to kick into the pot.

 

Like I said, I don't for a second think they devised DD as a way to get prepaid gratuities. I do think it gives a great opportunity to require them.

 

Operationally, cream skimming $500K a year off deferred crew payment, for one ship, isn't really small stuff. It all adds up...

 

All this may be just a tempest in a teapot since there are reports that RCI may not require gratuities at final payment.

[RocketMan275]

But you don't only have $66K in the account.

 

If it is 120 days you have 7,921,800 principal.

 

If it is 90 days you have 5,941,350 principal.

 

And that is based on one ship (that does represent nearly 10% of the berths in the fleet, if the 50K number is accurate).

 

The interest is money for nothing. Why would they NOT take it?

 

No, the interest is not 'money for nothing'. You have to invest the funds on replacing the dining rooms, training the staff, etc., in order to get that money.

 

Use 120 days if you like, Really doesn't change the overall picture.

 

My analysis is really just a back of the envelope thing but the numbers are robust enough to demonstrate that RCI has other reasons than prepaid gratuities to implement DD.

 

You can extend the analysis to every ship in the fleet if you like but you also have to increase the amounts invested in replacing the dining rooms, training, etc. Besides, at this time, it is very speculative to say DD will be extended to anything other than the Quantum and Oasis class ships. It's not at all clear that the smaller ships will have the space. That's why I choose to do this on a single ship basis, one we knew would get DD.

[LMaxwell]

 

My analysis is really just a back of the envelope thing but the numbers are robust enough to demonstrate that RCI has other reasons than prepaid gratuities to implement DD.

 

 

We are in agreement and I've stated as such multiple times. DD was not created in order to have a reason to pull ahead gratuities. DD was created to have a new offering in the marketplace.

 

Who do you think RCI wants to attract to the Quantum?

 

Traditional Cruisers from Cunard or HAL; or even Princess or long time RCI cruisers?

 

New cruisers who are looking at the ship as an alternative to a land based resort or trip to Disney World?

 

(not the first)

 

It hasn't cost anything for RCI to say prepaid gratuities are due with MTD. That's their policy they have chosen. Okay. But it doesn't need to be that. Royal could change the policy, but it would be detrimental to their bottom line. They are certainly earning money off MTD prepaid gratuities already. It's not just sitting in a 0% interest account.

 

You're right, it may all come to nothing; no prepayment required. We'll see. The loss of use of OBC for gratuities would have to factor into overall higher costs (out of pocket) expense when comparing to other cruise lines. Let's see which line jumps first.

 

By the way; this is an enjoyable discussion of what ifs and facts and figures.

Edited October 27, 2014 by LMaxwell

[steveru621]

What am I missing here? I searched the RCI frequently asked questions and could not find a requirement for prepaid gratuities with DD. We were not charged or paid any gratuities for our 12/12/2014 cruise on Quantum.

[RocketMan275]

We are in agreement and I've stated as such multiple times. DD was not created in order to have a reason to pull ahead gratuities. DD was created to have a new offering in the marketplace.

 

Who do you think RCI wants to attract to the Quantum?

 

Traditional Cruisers from Cunard or HAL; or even Princess or long time RCI cruisers?

 

New cruisers who are looking at the ship as an alternative to a land based resort or trip to Disney World?

 

(not the first)

 

It hasn't cost anything for RCI to say prepaid gratuities are due with MTD. That's their policy they have chosen. Okay. But it doesn't need to be that. Royal could change the policy, but it would be detrimental to their bottom line. They are certainly earning money off MTD prepaid gratuities already. It's not just sitting in a 0% interest account.

 

You're right, it may all come to nothing; no prepayment required. We'll see. The loss of use of OBC for gratuities would have to factor into overall higher costs (out of pocket) expense when comparing to other cruise lines. Let's see which line jumps first.

 

By the way; this is an enjoyable discussion of what ifs and facts and figures.

 

We're very much in agreement. I especially like you comment about the types of cruisers RCI is trying to attract. You can look at the technology involved in Quantum and you can see the faces of the cruisers RCI wants to attract. And, you're certainly correct that it is not those who prefer the same table, same table mates, etc., etc.

 

I've enjoyed this conversation as well. I'm sure we'll talk again.

[RocketMan275]

What am I missing here? I searched the RCI frequently asked questions and could not find a requirement for prepaid gratuities with DD. We were not charged or paid any gratuities for our 12/12/2014 cruise on Quantum.

 

Some have said they were and others have said they were not. Appears to be a 'roll out' thing that is evolving. For example, by all accounts, Allure will have DD when sail in Mar 2016. We opted for MTD and were told we would have to pay gratuities at Final Payment. At the time we booked that cruise, it had not been announced that Allure would have DD so, of course, our invoice shows that we will have to prepay.

 

Personally, I think they will be removed prior to Final Payment Date in Dec 2015. But it doesn't really matter one way or the other. If I'm given the option of prepaying, I will. Just more OBC to spend on the ship.

[SherriZ366]

Yes, that's what I have been saying throughout this thread. No need to be rude.

 

http://www.boards.cruisecritic.com/showpost.php?p=44544993&postcount=118

 

I am trying the Quantum 3 day sampler cruise because I made the booking on the day it opened up, a year before dynamic dining was announced.

 

But if you look in my signature, my last two cruises were on Celebrity and we have also enjoyed cruising with Princess. As much as we've enjoyed RCI in the past, I will certainly book all my future cruises on ships that offer traditional dining, even if that means moving to other lines.

Glad you called out John and LaLa for being rude. There's no reason to post rude comments but there's been a lot of DD enthusiasts posting similar comments.

 

I agree with you about less choices and the enjoyment of having the same wait staff and table. We are going to try to book RCI ships that have traditional dining. Although if OA or a sister is moved to Port Canaveral, we will end up trying the new dining system. At least the menus change twice per week in each dining room and they will have an Always Available menu.

 

Interested to see your reactions when you come back from the 3 day QU sampler cruise.

[styxfire]

So far, I have not had to prepay gratuities and hope not to do it in the near future; if the conversation comes up, it will be -- so now that you want my money to prepay gratuities (even at final payment, that is 90 days prior to actual cruise), what do I get back in return (looking for some type of onboard credit or complimentary specialty dinner or ????).

Good point Paulette. Good point!

 

However, I still don't think buyers should concede about pre-payment of tips. It is a REWARD, and needs to be given after-the-fact. I believe cruisers should INSIST on this when they book. Simply refuse to pre-pay.

 

I regret that I didn't refuse when I booked on Allure. I was desperate and just wanted to get the reservation done. RCCL made a sucker out of me. If everyone is as much of a sucker as me, RCCL will make it a policy.

Edited October 28, 2014 by styxfire