Best Breakdown of How Cruise Lines Make Money I've Seen

[drsel]

Really?  The tour operator makes nothing?

For a shore excursion or tour priced at $100 per person by the cruise line, if the local tour operator gets only $50 per person, then the profit would be 100% for the cruise line. 

 

For the same shore excursion or tour, if the local tour operator received only $40 per person, then the profit would be 150%

 

 

 

 

 

 

 

[drsel]

Shore excursions, alcohol, speciality dining, casino, spa, shops, photos, and future Cruises are sources of revenue and profit for the cruise line

 

 

[chengkp75]

48 minutes ago, drsel said:

For a shore excursion or tour priced at $100 per person by the cruise line, if the local tour operator gets only $50 per person, then the profit would be 100% for the cruise line. 

 

For the same shore excursion or tour, if the local tour operator received only $40 per person, then the profit would be 150%

 

 

 

 

 

 

 

Uh, no.  With revenue of $100, expense of $50, that is a profit of $50, or 50%.  At least that's how I was taught economics.  And they don't make nearly that much.  The major difference in price between a local vendor operating on his own, and a line sponsored one, is insurance, which the local operator typically doesn't have any.

[chengkp75]

27 minutes ago, drsel said:

Shore excursions, alcohol, speciality dining, casino, spa, shops, photos, and future Cruises are sources of revenue and profit for the cruise line

 

 

All quite true, and really the only profit for the lines.  Fares basically cover expenses, onboard revenue is profit.  Profit is not that great, as shown in example above, it is 17% and a 10% is considered average.

[Roger88]

47 minutes ago, drsel said:

Shore excursions, alcohol, speciality dining, casino, spa, shops, photos, and future Cruises are sources of revenue and profit for the cruise line

 

 

I wouldnt say that much about shore excursions, but Bar and Casino are like number one profit thing for them. People spend so much money gambling and drinking ohh God. I once talked to a guy who ran the club. According to him, the Bar in a club makes like 90% of the total revenue. This is insane 

[drsel]

Uh, no.  With revenue of $100, expense of $50, that is a profit of $50, or 50%.  At least that's how I was taught economics.  And they don't make nearly that much.  The major difference in price between a local vendor operating on his own, and a line sponsored one, is insurance, which the local operator typically doesn't have any.

If I buy product at $35, spend an extra $5 for insurance and sell it for $100 then my profit is $60. 

 

Profit % is profit divided by (cost + other expenses)

 

Profit % = 60 ÷ 40 =1.5 or 150%.

 

Cruise lines well deserve their profits from onboard sales.

I actually feel very sorry for them because through no fault of theirs they have to suffer huge losses, because of this virus

 

 

 

 

 

 

 

 

 

 

 

[drsel]

And my Cruise vacations are the best days of my life!

[Roger88]

1 minute ago, drsel said:

And my Cruise vacations are the best days of my life!

Cruise vacation is definitely is one of the best vacations I had in my life as well. Maybe its the all mighty sea that has this effect on me and the cruise liners resembling some ancient Gods or smth. I mean there is so much allegory to it. Huge ships sailing a huge sea visiting different places and different people. Its a fantastic experience  

[mnocket]

39 minutes ago, drsel said:

If I buy product at $35, spend an extra $5 for insurance and sell it for $100 then my profit is $60. 

 

Profit % is profit divided by (cost + other expenses)

 

Profit % = 60 ÷ 40 =1.5 or 150%.

 

Cruise lines well deserve their profits from onboard sales.

I actually feel very sorry for them because through no fault of theirs they have to suffer huge losses, because of this virus

What you have defined is what I know as markup. In you example the product sales price is a 150% markup from the cost of goods.

 

What @chengkp75 has defined is what I know as profit margin. In your case the profit margin is 60%.

 

I think the confusion arises from your use of the term "profit %", which in my experience is not a common business term.

 

In the case of a shore excursion that costs the cruise line $50 and is sold for $100.....

The markup is 100%

The profit margin is 50%

Using these business terms, you are both correct.😀 

[sparks1093]

On 8/21/2020 at 6:08 PM, Sue Do-Over said:

I think they make MORE with the all-inclusive beverage packages than they did selling drinks by the glass.  Some justify it planning to drink their fill, most of us can't keep up that pace over the duration of the cruise, especially a port-heavy schedule.  (Some will, but they won't remember the trip!)

 

Fountain soda costs pennies per serving, but we pay $8-12 a day (including debark day!), plus 20% auto-tips (and often an extra tip for an attentive server or a heavy pour)... 

 

The casino is a profit center... we almost always get a free cabin based on our play history.  "We always pay for our free cruise!".  It's a subcontracted business that pays the ship/line plenty to be there.

As I've said in many of the threads that I've participated in the cruise lines sell the packages in order to make money, not to save the passenger money (although some passengers do save). It is their hope that the cruiser will overestimate the value of the package and their ability to break even, or that if one of the passengers drinks heavily the other one won't. The law of averages is on their side. 

[sparks1093]

On 8/30/2020 at 2:16 AM, mnocket said:

What you have defined is what I know as markup. In you example the product sales price is a 150% markup from the cost of goods.

 

What @chengkp75 has defined is what I know as profit margin. In your case the profit margin is 60%.

 

I think the confusion arises from your use of the term "profit %", which in my experience is not a common business term.

 

In the case of a shore excursion that costs the cruise line $50 and is sold for $100.....

The markup is 100%

The profit margin is 50%

Using these business terms, you are both correct.😀 

And while the profit margin in this case may be 50% it doesn't take into account the other overhead involved (such as the shore excursion department onboard).

[Luckiestmanonearth]

Thanks for posting but no one is making any money now and into the near future, that’s for sure

[drsel]

What you have defined is what I know as markup. In you example the product sales price is a 150% markup from the cost of goods.   What @chengkp75 has defined is what I know as profit margin. In your case the profit margin is 60%.   I think the confusion arises from your use of the term "profit %", which in my experience is not a common business term.   In the case of a shore excursion that costs the cruise line $50 and is sold for $100.....

The markup is 100%

The profit margin is 50%

Using these business terms, you are both correct.[emoji3] 

 

 

 

 

 

 

Look at it from the investment point of view.

 

If I buy Royal Caribbean stock at $50 and sell it at $100, my profit is 100%

Of course there will be overheads like brokerage, transaction charges, stock exchange fees, Internet charges, etc

 

The same logic applies if I buy a tour from a local tour operator for $50 and sell it to another passenger for $100

Of course they will be overheads like salaries to the the shore excursions employees, insurance, etc

 

 

 

 

 

 

 

 

 

 

 

 

[neverbeenhere]

I was not aware the standard was for the cruise lines distributed only one half of the cruise ship charged tour price to the operator of the tour.

 

(I avoid "profit", markup and the like)

[chengkp75]

1 hour ago, neverbeenhere said:

I was not aware the standard was for the cruise lines distributed only one half of the cruise ship charged tour price to the operator of the tour.

 

(I avoid "profit", markup and the like)

It's not, it's that poster's perception.  It's supply and demand.  If the line charged twice as much as the actual operator, without any other expenses, then they wouldn't be selling that many tours.

Edited August 31, 2020 by chengkp75

[drsel]

 

 

 

 

 

I was not aware the standard was for the cruise lines distributed only one half of the cruise ship charged tour price to the operator of the tour.

I only gave 2 examples to explain profit %.

 

It is possible the cruise line would have to pay more to the local tour operator.

 

As another example, if cruise line paid the local operator $65 per person and if salaries, insurance and other overheads were another $10 per person, the total cost would be $75 per person.

 

If they then sold this tour at $100 per person, then the profit would be 33% and not 25%