Friday, August 15, 2008

An Interesting Trend - More Last Minute and Higher Quality Cruises. Why?

I have seen over the past couple of weeks - the usual time for the summer doldrums -  a very interesting trend:  People are tending to book cruises for the latter part of this year and on longer itineraries and in higher categories.

While the trend of cruise lines offering lower fares closer in seems to be reemerging...apparently as a result of the softening economy (possibly both in the U.S. and Europe), I am finding my clients, rather than booking their initially selected category, are using their travel budget to improve their cabins/suites and/or length of their cruise, rather than to pocket the funds for other purposes.  This is an interesting trend that would seem, at first, counterintuitive.  I think, however, it actually makes a lot of sense and may actually be a sign of something other than doomsday approaching.

Going to basic economics, one must first look at the mortgage meltdown.  Most of the mortgages that are being foreclosed upon were for people that could not actually afford their homes or were living off of equity they really didn't have...tapping the last 20% of the home's worth.  Those souls may have gone on a cruise or two, but probably were not a major force in the cruise market.  But the impact was more than the chilling effect on those who had a responsible adjustable rate mortgage rather than a 1% interest that adjusted.  A larger impact was on the top end...the investors...that ran up the value of these mortgages in the financial markets; but those also represent a very small portion of those that cruise. 

The real impact for the cruise industry was on those how just had the stuffing scared out of them:  The vast majority of the population. 

But then there was more scary stuff:  When the mortgage securities market began failing, those same investors had to put there money somewhere...and it was oil.  Without getting into politics, the same mortgage speculators became oil speculators...and the media ran with various politicians and politically active financial "talking heads" claiming it was all demand. 

While we can thank them for the now probably permanent "fuel supplements" on our cruises and the havoc they have caused in the airline industry, their irrational cries that a leaking pipe in Nigeria a legitimate reason for a $5 a barrel rise in oil (when such a thing never had any effect in the past) because demand was so huge was just accepted.  How that .001% change in supply was a supposed two-headed monster always baffled me.  [Compare:  Russia invades Georgia under the cover of the Olympics, three oil supply lines were shutdown as a precaution, there are ominous "Cold War" trends appearing...and oil prices are dropping like a rock.  Hummm?????]

But two things have happened:  The European economies started to soften - causing the dollar to increase in value - and Congress said, "We want to stop oil speculators"...despite others steadfastly claiming it was merely demand.

Well, those mortgage securities investors...I'm sorry, I meant oil specutors...decided they didn't want the same regulatory prosecutions happening to them as a result of their oil activities and they began dumping their oil futures contracts.  (One amazing thing is that I heard today that home heating oil may actually be less expensive this winter than last!)

With oil now at less than $111 a barrel, down from a $150+ high, and it being done in just a few short weeks, I think people are starting to breath.

And with the cruise lines suffering from lower (not "low" by any means) demand both in the U.S. and Europe, there is more inventory to sell closer in.  Combine that with the prospects for lower gas and heating oil prices, a bit of stabilization in the stock market in most sectors (if not banking!) coupled with most people having actually cut back spending in anticipation of the worst...but still committed to taking a vacation, and there you have it.

So, if you are one that is now "taking a breath", seeing it isn't going to cost you $100 to fill up your car, and realizing that your mortgage isn't going to automatically explode, take a look at some of the incredible offers being given by the cruise lines.  Remember many people have to plan their vacations quite a few months in advance.  They are already committed, so the close in inventory is their for you to grab...and enjoy.

But, possibly, say to yourself:  That oceanview is $1,000 less than it said in the brochure, why not upgrade to a balcony?  Or from a balcony to a suite...though suite sales have remained strong all along, so there are not as many of those opportunities. Or rather than taking a 7 day Caribbean cruise, how about a Panama Canal cruise?  Or back-to-back a Mediterranean cruise?

So whether you want to board "My Yacht", "Get Out There", "Be Treated Famously" or whatever, now is a great time to consider an autumn cruise.