Time To For A Reality Check For Mr. Fain

[Cruiseathoning]

While Royal CEO Richard Fain promises no more last minute discounting, I am reminded of the conversation I once had as a kid with a pitcher about the knuckleball-"I just throw it-it does what it wants to do." Meaning of course that you can only dictate the movement of a pitch so ephemeral that catches wear protection for their fingers.

 

Such is the modern economy. He can't control passenger demand unless he can control passenger salary-until then, they have to deliver value as adjudged by the consumer.

 

It is very cute Mr. Fain says he has a say. If you read his statement carefully, it almost convinces you he believes it-but he doesn't.

 

Two things-one WE CONTROL THE SHOW. Not him. We either book, or we don't. Period. And we will book when we feel the value is there. Period. Second of all, if you book early, and then the cruise is later discounted, reward early bookings with equivalent onboard credit. If you don't want to do that, you can deal with angry passengers or empty rooms-their choice, their problem.

 

But the reason he has no choice in the matter, is no matter what bright notions the board of executives have, empty cabins are a pain not easily tolerated. Sure they may talk a good game, but sunk cost is sunk cost, and nothing depletes share value like lost revenue. These ships can not afford to sail less than 95 percent full-they know it, we know it, and there is no confusion.

 

If the ships book there will be no deals. If they don't they will either deal, or go bankrupt, again, their choice. And the first choice they will make were that to happen is to pink slip Mr. Fain.

 

This is just a dog and pony show for shareholders. They have no ability to tell people to pay through the nose and like it and risk sailing with stock tanking occupancy rates. Supply and demand will always rule the free market economy, and demand based pricing will determine the future of any business.

 

Nobody is forced to take a cruise for a vacation. There are other options. But another thing King Richard is also forgetting, is he decided to put a Freedom class ship in Texas, with Oasis upgrades, the Liberty, just as the oil bust is taking hold. Whoops. He can't afford to get crushed in Galveston-Texas is simply too vital to lose. And one thing Texans will not do, is deal from weakness. Not only that, but Galveston is the epicenter of middle America cruise traveling. Folks from all over the midwest and south often drive to the port, making it more affordable for families otherwise unable to go on a more expensive trip.

 

Big talk may temporarily support a stock value floor, but it does nothing for vacationers who are discerning and careful with their vacation dollar. To suggest that a take it or leave it approach is even feasible is the height of hubris, or judging from Royal's stock price-desperation.

 

Royal is making giant ships with huge overhead, when for my dollars, Freedom class is enough. Past 3, 4 thousand people I start to get uncomfortable with the concept. I believe the jewel of the line are their midsize Voyager class-first class amenities, the ability to put on top level shows, and not overcrowded.

 

Soon enough the novelty of these behemoths will wear out, and the reality of the crowds, expense, and nickel and diming will set in. I personally do cruise for amenities, and entertainment, and of course food-but ultimately, most of us cruise for the beauty of the sea.

 

The desires and tastes of Americans and Canadians are constantly evolving, much like the rotation of a baseball with no spin, caught in a sudden breeze on a three-two count. You never know if the batter will swing wildly, or send your offering into the upper deck. So talk on Mr. Fain, be bold, and overbearing about your pitch, fail to gauge the wind, the count, the runner leading off of first, and see where your next hanger goes.

 

Because in this economic era-it will be a long time before anyone is confident about their fastball.

[marci22]

Yeah I agree. He had to say something but I think he could have phrased it better. The way he said it seemed arrogant and I'm sure he wasn't going for that.

 

I think he is getting carried away with the concept of his 'brand'.

[venicecruiser]

Well said!

 

Claudia

[Clarea]

Interesting read, thank-you.

[CoachT]

Dropping prices brought about cheap cruisers who did not spend once on the ship. They CAN afford to sail with empty staterooms. When the discounting started and the cheap cruisers came, onboard revenue went down as much as 75%.

 

He is a smart man and I for one am glad prices are going up and the discounting will come to an end!

[marci22]

...I for one am glad prices are going up and the discounting will come to an end!

 

Said this one person, ever.

[Big_G]

Yeah I agree. He had to say something but I think he could have phrased it better. The way he said it seemed arrogant and I'm sure he wasn't going for that.

 

 

 

I think he is getting carried away with the concept of his 'brand'.

 

 

You couldn't have read the last quarterly call if you consider that as arrogance. Pleas read it and you may have a different take away. As for the OP's 'big talk' comment, how about pot calling kettle. Your whole diatribe is big talk.

 

 

Sent from my iPad using Tapatalk

[Cruiseathoning]

Except none of that is going to happen CoachT. The Texas economy is going to struggle, and Florida's is worse.

 

The discounting is not coming to an end. If anything prices are about to drop. By the way, are you a Feudalism fan? You seem to like to denigrate "serfs."

 

In other words, you come off like an unpleasant elitist. BTW, onboard revenue can't drop for filling otherwise empty rooms, unless you are making some kind of claim that the "cheap cruisers" are forcing the big spenders to be hesitant about spending.

 

You probably like your gated communities, your "good schools" and your lack of diversity too. I think I know exactly what you are.

 

But middle class and minorites will still cruise, like it or not. And yes, you deserve that comment. There is only one reason people are willing to pay higher pricing when it comes to avoiding "class" of people.

Edited April 21, 2015 by Cruiseathoning

[Cruiseathoning]

My "diatribe" is reality. The consumer controls the price through demand. You can only charge what the market supports. We are the market.

 

The way economics works Gregg is that a producer creates a service or product and charges a price point that will ensure profit, but can only charge what his target market will pay.

 

Moving a price even 2 percent has been known to tank year over year sales growth-try a Capstone model if you can get a hold of one. Very informative and instructive.

Edited April 21, 2015 by Cruiseathoning

[whitecap]

Dropping prices brought about cheap cruisers who did not spend once on the ship. They CAN afford to sail with empty staterooms. When the discounting started and the cheap cruisers came, onboard revenue went down as much as 75%.

 

He is a smart man and I for one am glad prices are going up and the discounting will come to an end!

 

I have read your comments, then re-read them and still can't believe that your are so arrogant. "Cheap Cruisers", that is how you designate those that may have saved for years to enjoy something others can do often, as if they are beneath you! I am about to take my very first RCCL cruise and pray that the majority of the regular RCCL cruisers are not like you.

[whitecap]

My "diatribe" is reality. The consumer controls the price through demand. You can only charge what the market supports. We are the market.

 

The way economics works Gregg is that a producer creates a service or product and charges a price point that will ensure profit, but can only charge what his target market will pay.

 

Moving a price even 2 percent has been known to tank year over year sales growth-try a Capstone model if you can get a hold of one. Very informative and instructive.

 

Couldn't agree with you more. We are the market, not the CEO, CFO, or any other executive. The cruise line will charge what the people will agree to pay. If the people don't like the $39 pp for a specialty restaurant then they should stop paying it; don't like the price for photos simply don't buy, if the cost of a cruise is too high for the number of days/port visited, check out other cruise lines and the cost will eventually come down.

[Cruiseathoning]

Hi Whitecap in my experience RCCL cruisers are nothing like this person.

 

And he is probably a poser anyway-if you have real jack you are on Crystal or Regent, right?

 

The rich arrogant people I deal with I am ok with because they have legit bank. The deluded arrogant "upper middle class guy" in a mountain of debt annoys me to extremes.

 

He will put down a fellow who works as a tow truck driver who saves for eons to do something special never being smart enough to realize his entire financial well-being is dependent on a three digit score arbitrarily calculated by people he will never meet. He needs to be cool to that tow truck driver because they are closer in need and class than he realizes, but the ego simply won't allow it.

 

Enjoy your cruise and welcome to the RCCL cruiser family.

[CoachT]

The economic reality is FACT. When the prices dropped and the discount seekers and cheap cruisers came, onboard revenue dropped. It makes more sense to keep prices higher where people will and do spend money on board.

 

Those who bought at a discount, were not prepared and did not spend as before. This is a verifiable fact. It is not elitist to state reality. Richard Fain has been stating for years that cruise prices across the lines were artificially far too low for the value offered. As a shareholder, this is a brilliant strategy to end this discounting nonsense.

[Cruiseathoning]

Prices would not have dropped in the first place if enough "spenders" were booking in the first place genius.

[marci22]

. Richard Fain has been stating for years that cruise prices across the lines were artificially far too low for the value offered. As a shareholder, this is a brilliant strategy to end this discounting nonsense.

 

Sometimes I wonder if his own wealth makes him tone deaf to his customer base. This is not a premium cruiseline. It's mass market. You need a broad range of customers just to be able to fill your ships. You're not filling them with a bunch of Loft Suiters.

 

Someone has to sail in the cheaper cabins. And that someone is not going to be purchasing $65 drink packages and paying an extra $39 pp for a meal that is already paid for.

 

So it could be an absolutely brilliant strategy if you can fill your ships with wealthier people who don't budget and love to spend extra. Maybe going to China solves that capacity problem.

[whitecap]

The economic reality is FACT. When the prices dropped and the discount seekers and cheap cruisers came, onboard revenue dropped. It makes more sense to keep prices higher where people will and do spend money on board.

 

Those who bought at a discount, were not prepared and did not spend as before. This is a verifiable fact. It is not elitist to state reality. Richard Fain has been stating for years that cruise prices across the lines were artificially far too low for the value offered. As a shareholder, this is a brilliant strategy to end this discounting nonsense.

 

So you subscribe to the "class warfare" method of economics. Those with their noses in the air can sail on one cruise line that by high cost, excludes others. If you buy your meat from a butcher and his price is double what a local grocery store charges are you saying that someone who saves up to afford a trip to the butcher should not be allowed because while there to buy a steak, he won't also buy some ground beef? My guess, based on your comments, is that you spend more time looking down at people than getting to know people.

[jeslimin]

The economic reality is FACT. When the prices dropped and the discount seekers and cheap cruisers came, onboard revenue dropped. It makes more sense to keep prices higher where people will and do spend money on board.

 

Those who bought at a discount, were not prepared and did not spend as before. This is a verifiable fact. It is not elitist to state reality. Richard Fain has been stating for years that cruise prices across the lines were artificially far too low for the value offered. As a shareholder, this is a brilliant strategy to end this discounting nonsense.

 

When I vacation I have a certain budget that I set for every trip. If Mr Fain decides to raise the price of a cruise, I will decrease my on board spending accordingly to stay within my budget. If he decides to discount a cruise, then my budget will dictate how much onboard spending money I have for casino play, excursions, drinks etc. His idea of branding, in my case, means I will do the former instead of the latter.

[alfaeric]

Couple of things...

 

First, the big ships- while everyone is very welcome to have their opinions, one fact does remain- the ships have been sailing since 2008 and 2009, and both the Allure and Oasis are generally very full. So much so that RCI saw the need to build a third. So while many, many proclaim how much they dispise those ships, many, many more keep filling them. Notably at prices that are higher than all the rest of the ships- that should tell you something.

 

On the other hand, it does say something that the newest design is roughly the capcity of a Freedom class ship. So you have something there.

 

Then the cost- there's such a long and continued and very vocal debate going on- for every thread complaining about prices, there's another thread complaining about cutbacks. Which is more important?

 

The reality is that a balance needs to be found- offering the best value- where the consumer is happy to pay X and the company is comfortably making Y profits.

 

And that's a difficult balance to make- I work in an industry where similar thinking could happen- go with massive volumes at minescule margins vs. less volumes at higher margins. After a while, our company needed to adjust our market to the higher margin one, as chasing the massive volumes was not profitbale enough- especially in a non steady economy.

 

Right now, it's pretty logical to think that these price rises will not be accompanied by better experience on board. But one can't say that it's not a possibility.

 

The long term answer is really- we'll see.

[Mikew0805]

The economic reality is FACT. When the prices dropped and the discount seekers and cheap cruisers came, onboard revenue dropped. It makes more sense to keep prices higher where people will and do spend money on board.

 

Those who bought at a discount, were not prepared and did not spend as before. This is a verifiable fact. It is not elitist to state reality. Richard Fain has been stating for years that cruise prices across the lines were artificially far too low for the value offered. As a shareholder, this is a brilliant strategy to end this discounting nonsense.

 

Except it won't happen! LOL. Just booked the Navigator in a D1 for less than $950 total for two with taxes included. Yeah right, no discounting. Cabins that leave empty are lost revenue.. This is not a hard concept.

 

Keep believing everything Fain says... I have been listening to the earnings calls for years, and he has been saying the same thing since 2009.

[irishgal432]

As an example of last minute deals I will give you this.

 

Last September, I went on a 4 day cruise with My DH, DD, DS DS friend and another family Of DGrandmother, DD, DGD for September break. I purchased a little a head of time and got a reasonable at the time price. 599 for the JS and 289 for the OV Not the lowest, but reasonable.

 

I had a JS and an Oceanview with other family had a OV. 2 weeks before sailing the RFS opened up and they were doing the Kids sail free and we "upgraded" to the RFS for my group for $189.00.

 

While on board, I bought 1 soda package, a few drinks and 1 spa service for my daughters birthday present.

 

The other family bought a few drinks, a spa service for their daughter and a sweatshirt.

 

While sitting on the ship, I saw my neighbor who was supposed to be filling in for me at tennis that week. She and her husband and two kids 6 and 4 saw a deal for 199.00 per person and booked 2 rooms 2 days prior. They bought the alcohol package, the internet package, the photo package, babysitting services, spa services, casino chips and a speciality restaurant for all 4.

They had only cruised on Disney before and were very happy with Royal and may book again.

 

So in the end who added to the bottom line?

[setsail]

If Mr Fain needs a reality check he certainly won't get it reading CC. He has a big smile on his face as he looks through the meet & mingle threads and sees a ton of CC posters booked on anthem that is getting ready to sail and the biggest and newest, Harmony, already has a full page of threads for a ship that is not built yet. Can you feel the excitement, he sure can and this is just a very small % of cruisers:D

[londonben]

The economic reality is FACT. When the prices dropped and the discount seekers and cheap cruisers came, onboard revenue dropped. It makes more sense to keep prices higher where people will and do spend money on board.

 

Those who bought at a discount, were not prepared and did not spend as before. This is a verifiable fact. It is not elitist to state reality. Richard Fain has been stating for years that cruise prices across the lines were artificially far too low for the value offered. As a shareholder, this is a brilliant strategy to end this discounting nonsense.

 

Hi CoachT, I wonder if you could provide some links to these verifiable facts about the discount seekers being lower spenders.

Not disputing, but interested to see how it is being worked out.

 

From my own personal perspective, I think some of it depends upon the type of things you like to do.

I am a very low spender on cruises and always have been, as most of what I enjoy is provided free, but my partner can run up quite a spend with the things she enjoys.

What we both are though is value for money type of people, just the things we value may differ.

 

Anyway interesting to see if they manage to shake of the reputation of discounting close to sailing.

 

Ben.

[WhenIsLobsterNight]

The economic reality is FACT. When the prices dropped and the discount seekers and cheap cruisers came, onboard revenue dropped. It makes more sense to keep prices higher where people will and do spend money on board.

 

Those who bought at a discount, were not prepared and did not spend as before. This is a verifiable fact. It is not elitist to state reality. Richard Fain has been stating for years that cruise prices across the lines were artificially far too low for the value offered. As a shareholder, this is a brilliant strategy to end this discounting nonsense.

 

By all means, please verify this fact for the rest of us. I too am a shareholder until yesterday when I unloaded my shares after many years. Many spent onboard per person has gone up yearly for many years in a row now which directly contradicts your position. I look forward to reading your verifiable fact that lower cruise prices brought lower per person spending on board RCCL.

[CoachT]

By all means, please verify this fact for the rest of us.

You can do your own research on earning reports and onboard spending from 2006-forward.

[Big_G]

My "diatribe" is reality. The consumer controls the price through demand. You can only charge what the market supports. We are the market.

 

The way economics works Gregg is that a producer creates a service or product and charges a price point that will ensure profit, but can only charge what his target market will pay.

 

Moving a price even 2 percent has been known to tank year over year sales growth-try a Capstone model if you can get a hold of one. Very informative and instructive.

 

Thanks for the lesson gleaned from Investopedia :rolleyes: but you're ignoring one very important fact...prices are going up and they're still sailing full. Quantum is 80 percent booked for the entire summer.