Sunday, March 15, 2009

Are the Cruise Lines (and Retailers, in General) Sinking Their Own Ships? Just Get On One!

A few months ago (and I know it seems like an eternity for some) the bookings on cruise lines, from mass market to luxury, came to an almost screeching halt.  There were bookings, but not as many.  In typical retail fashion, the answer was "SALES". 

That one word, "SALE", is for American's as the bell ring is for Pavlov's dogs.  (Train a dog that it will be fed right after a bell rings and you can get a dog to salivate just by ringing a bell.)  I was really against the luxury lines putting everything on sale and commented on this to a degree on my blog.  I thought it was setting a really bad precedent and that it just might cause pricing and luxury to start down that slippery slope of degradation.  (And you know I let the cruise lines know I felt it was a bad idea.)

You saw this at high end retailers like Saks and Neiman Marcus and in the cruise industry on lines from Silversea to Seabourn.  And then you saw the bookings were going up...way up...and lines from Princess to Carnival were declaring that January was their busiest months ever.  Was it the right thing to do?  People were starting to fill the cabins and suites that were previously empty.  But, alas, was this the right thing to do?

I must confess that a few weeks ago I admitted to Seabourn that I just might have been wrong; you know, protesting against the deep discounts.  Heck, the ships were filling up.  But I am afraid I was too quick to cave in to the new "conventional" wisdom.  I now think, more than ever, that I actually had it right.

The fact is that now everyone is looking for the bigger discounts...and last minute sales.  We have all been trained:  "Just wait and that price will drop.  In fact, if you buy now you probably are paying too much."  So now that the initial flood of sales have hit the cruise market and passengers on the ships (even if the ships are not selling out) the cruise lines, even the luxury cruise lines, are finding that the bull rush isn't happening.  And it is not because people do not want to, or cannot afford to, go on a cruise. 

It is because the cruise lines and retailers have - in very short order - created a monster:  They have caused their buyers to put a "Let's Make A Deal" strategy into place.  Now, the buyer's mentality is that whatever the price is it is not good enough; there will always be something better.  Just wait!

Well, guess what?  That is not true.  There is a point where "the getting isn't going to get any better".  Saks has essentially admitted it created a monster.  It has tried to re-establish firm pricing by limiting supply.  The problem is Bloomingdale's may not be employing that same strategy...or at least not on that same item.  So what does the consumer do?  Shop around and see who flinches; who drops the price; who is going to "make a deal".

Related to that, there are non-luxury news outlets claiming that "Luxury is no longer acceptable."  That is absurd.  What the heck is that based on?  The reality is that people are just afraid to show their luxury...but I think it is for a very different reason than actual fear of the economy.  It is because the luxury client has a friend who was wiped out by Madoff, or has lost his hedge fund job, or who was going to retire in 2 years and now cannot because his retirement account was wiped out.  That is, without question, far different from not being able to afford luxury or looking for a better price.

On a recent flight I was sitting next to a director for Ferragamo.  We were talking about this subject and that they were discussing the possible use of plain paper bags, so people would not be seen as flaunting their purchase.  My suggestion to him was to put the branding on the inside of their bags because that person just purchased a $500 pair of shoes and feels just fine about it...and will enjoy seeing their brand name when the slip the shoes on.  Their concern is what other people will think.  Let them feel good! JMHO.

Now, let's take a breath...

Where do we go from here?  First, everyone needs to decide if they, personally, want to take a cruise or other vacation.  Second, decide what you - not your neighbor or what your friend - believe is the amount you - not your neighbor or your friend - can afford.  Third, determine the cruise you want to take.  Fourth, Go For It.

Does this sound callous?  Actually it is just logical.  There are people that go on trophy vacations.  Heck, it was marketed to upsell clients by emphasizing "bragging rights."  (I always was offended by that pitch.)  But most people, and the vast majority of my clients, are just too smart to get into the "Keeping up with the Joneses" (or now "Not offending the Joneses"?).  Most people are independent and need to readjust their thinking so they go on "their cruise".  Remember these are the very same people (yes, reader that is probably you) that insist their cruise is a very personal experience.

Related to that, stop waiting for the "best discount" because you are turning that wonderful vacation into a game of cat and mouse...and you are just waiting for that bell to ring.  I know of a number of people waiting who are finding their strategy is a failure on an emotion and financial basis.  The joy is gone because it now not about the experience, but the money.  (Tell me how that makes sense!)  The money is also not saved because that lower category suite is gone and the higher discount on the more expensive suite is the only option...if there even was a higher discount.

Now, coming full circle, you are starting to see at automobile dealerships and some cruise lines that they are now willing to make less sales to stabilize the prices. (With lower or fixed inventory, the need to offload or get quick cash reduces.  Saks, as noted is having a problem because of the wealth of retailers offering the same goods.  But, for example, Seabourn is..well, Seabourn...and there is not a whole lot of competition.  So if the Seabourn Odyssey is going to sail at 75% of capacity (rather than, say the recently reported - though not verified - 35% of capacity on Silversea and 50% on Regent) that may well be what it is. 

You enjoy cruising.  You enjoy luxury.  You earned it.  If you can afford it, do it.  It is, in the end, what you want to do...troubled retail and purchasing strategies aside.