The Cruise Industry should start taking a VERY close look at Cruise Affiliate Programs.

Carnival Cruise Lines has…

To spur growth, cruise lines have historically relied on the introduction of new ships to their fleets.  The next twelve months will set an industry record – five of the big cruise lines will introduce their largest ships to date, at a combined estimated cost of $4.47 billion. This massive investment and similarly massive new capacity comes in the face of the global recession, the Swine Flu crisis in Mexico, the deepest price discounting in the industry’s history and a stunning 13% industry-wide decline in yield.

However, in this bleak cruise industry backdrop, Travel Dividends sees a potential silver lining for the cruise affiliate.  We posit that as a result of the confluence of the aforementioned industry investments and environmental forces, many cruise lines will follow Carnival Cruise Lines’ lead and begin using the cruise affiliate marketing channel as an integral element of their distribution strategy.  If we’re right, this ‘sea change’ in cruise line thinking will usher in a new era for the distribution of cruise product, something that was largely unthinkable just a few short years ago.

Why do we think there is a chance that this sea change will occur?  Let’s look a little deeper at the situation facing the cruise industry; according to the industry’s trade association, the Cruise Line International Association (CLIA):

  • From 1980 through 2008, the North American cruise industry experienced CAGR of 7.4%
  • Since 2000, annual passenger volume has increased by a whopping 79%, from about 7.2 million to 13.2 million
  • In 2009, 14 new vessels will join the CLIA fleet, while 3 ships will be transferred to non-CLIA companies, bringing a 6.5% net berth increase in the CLIA fleet, or 18,031 new beds  that must be filled

That’s the ‘good’ news, now for the bad:

  • Robert LaFluer, an analyst with Susquehanna Financial Group commented in an April report that the industry’s ability to price was “miserable,” though he added that “…but at least it seems to be at a miserable level that’s relatively stable.”
  • According to Robin Farley, the well known Wall Street cruise industry analyst with UBS, several cruise lines, including Carnival, have reported strong bookings in recent months, though the volume is coming only because of sharp discounts.
  • Travel Weekly conducted two surveys in April on the state of travel agent cruise bookings among the memberships of two host travel agency networks; the results were not pretty:
  • - The tally from the 100 America’s Vacation Center independent cruise affiliate survey revealed that “…79% of clients cited price as the most important factor in a cruise purchase, while only 7% chose cruise line.”

    - Meanwhile, the results from the second survey, conducted among 200 CruiseOne and Cruises Inc agents, were even grimmer: “…when asked, ‘What is the biggest factor for consumers today in cruise purchases?’ Price was cited by 83.6%, while only 1.8% said it was a specific cruise line.”

  • To the new capacity coming on line this year, additional planned capacity by the end of 2012 (37 new ships, representing 82,000+ two lower berths) will add approximately 2 million new bed nights to the 13.2 million the industry currently fills
  • Booking lead times were historically five to seven months ahead of the cruise departure date; that has shrunk and now is much closer to the time of sailing date (though cruise lines are reluctant to state publicly what this time frame is for each).

What should the cruise lines do?

In our opinion, it would be a smart move for some – if not all – of the other cruise lines to emulate Carnival, the only cruise line today that has a Cruise Affiliate program (see Commission Junction for complete Carnival details).  To put it in the most simple economic terms, cruise lines currently pay anywhere from 10% – 18% commission for bookings made by the travel agents (that’s base and override commissions), while on the cruise affiliate side, Carnival limits commission to a base of 5%.  We think the math speaks volumes as to why using the cruise affiliate sales channel is a good idea for cruise lines.

Further, online cruise affiliates know how to be nimble, fast and successful marketers in uncertain and challenging economic environment such as the one the cruise industry finds itself in today – and by most estimates, will continue to experience for the next several years.  They typically have a strong and loyal customer base, and know how to leverage their customers on behalf of travel suppliers.  They can do the same for cruise lines.

Travel agents will remain as the most important channel for cruise lines, make no mistake about that. However, because there is so much new capacity in the pipeline, and the pressure on the cruise lines to fill those berths will be so enormous, we also believe that the cruise industry will out of necessity explore partnerships with cruise affiliates.

What cruise affiliate marketers and affiliate networks must assure is that they are ready and willing to ‘surf’ the cruise affiliate distribution era when it comes.

What say you, travel affiliates and affiliate network executives – are you ready?  Travel Dividends is very interested in hearing from you on this important issue!

For more information on Carnival Cruise Lines and other Cruise Affiliate Programs, please check out our page of information.  If you know of any other Suppliers with Cruise Affiliate Programs please drop me a note.   Thanks

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