Carnival Cruise Line makes its pricing strategy very clear

If you frequent cruise line message boards, you see a lot of talk about how prices have gone up. Many passengers blame inflation and talk about how cruise lines are simply passing on higher prices to passengers.

It’s also common to see people talk about the debt cruise lines have taken on during the pandemic. This debt often takes the blame for perceived declines in service and food quality.

Related: Carnival Cruise Line Offers Top Tips for All Cruisers

In reality, none of these oft-cited arguments are at the heart of how cruise lines set prices or provide service.

David Bernstein, CFO of Carnival Cruise Line (CCI) shared some information about both pricing and service during the cruise line’s second quarter earnings call.

“We’re still tremendous value compared to land-based alternatives. And so as we continue to close that value gap and increase the price, we should be able to continue to make progress over time,” he said.

Service decisions, he noted, are made based on the feedback it receives from passengers.

“Service levels at land-based resorts have deteriorated. And on our ships, we do a great job keeping our guest satisfaction high,” he added. “It’s a hassle-free vacation, and people love to cruise. And so, we expect to keep demand generation efforts high. And hopefully we can continue to see price improvements.”

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Carnival has invested heavily in new ships.

Image Source: Carnival Cruise Line

Carnival shares how it manages the booking curve

Consumers often believe that fairness plays a role in pricing. In reality, most prices are set by what the market will bear. There may be some concern about long-term goodwill, but the price differential between land and cruise travel gives cruise lines plenty of wiggle room.

Theme park tickets alone for a Disney World or Universal Studios vacation can often cost more than a base cruise fare. Add in the cost of room and board, and cruises—even very expensive ones—look like good value.

Carnival CEO Josh Weinstein explained that his cruise line takes an aggressive and granular approach to pricing and the booking curve. A reservation curve, it should be noted, shows the pace cabins are reserved at, as well as the prices for which they are reserved.

The challenge for cruise lines is that they have two goals – filling the ship and maximizing revenue. The high demand to book ships earlier than they have traditionally been booked solves the first problem, but could lead to rooms being sold at lower prices.

If a cruise line starts marketing a sailing at too high a price, then the rooms may not sell. This leads to lower prices. This means refunds or on-board credit will go to people who booked at higher prices.

Weinstein shared some insight into the balancing act his company must pull off.

“Keep in mind that we’re giving you a very cumulative number when we say our occupancy is X and our booking curve is the farthest we’ve ever been,” he said. “When we go through it with our teams and what they do every day, it’s ship-by-ship, sail-by-sail, brand-by-brand to figure out what that sweet spot is.”

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Carnaval explains its pricing policy

A longer reservation curve eliminates flexibility. It’s a bad thing if prices keep going up. Because of this, Carnival will not necessarily continue to push bookings further.

“And you may very well, over time, for many reasons, not hear me generally say that we’re increasing the booking curve. And that’s okay,” Weinstein added.

However, the CEO has made the company’s pricing goals incredibly clear.

“Our goal is not to get it as long as possible. It is to generate as much human income as possible until the ship sails,” he said.

READ ALSO: The best travel agents tell you how to get the best price on your cruise

This is a challenging balancing act when you don’t know what the economy might look like in a year or two. Weinstein acknowledged that pricing is a challenge.

“There are a lot of things that go into that mix. It’s not just baseload, but what price are you baseload? How do you handle your metas against each other, balconies versus inside? I mean, so many variables come into play on a detailed basis, and the outcome is what we’re talking about on this call,” he added.

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