Wednesday, April 15, 2009

Seabourn Reports Record Bookings for The First Quarter of 2009...Because of Consistency of Product

Seabourn Cruise Lines reported yesterday that it recorded record bookings for the first quarter of 2009. 
Remember though, the term is "bookings", not "sales" or "revenue".  There is a significant difference, but...and it is a big "but"...in the longer term, it just might be better news than record sales.
In a world of luxury cruising where Silversea and Regent Seven Seas have had serious problems filling their ships, Seabourn has found a way not only to better fill its ships, but apparently to use the present soft market to attract what are the lifebloods of the more mature luxury cruise industry:  first time guests and first time travel agents booking those guests.  In a world of whispers, a cruise line must be loyal to its most loyal and longtime guests, but it must also look beyond them for age, infirmity and death takes their tolls.  In addition, as more and larger ships come online, there is an obvious need to find new loyal guests just as a result of capacity.

This morning I was listening to a business report on the radio.  The reporter mentioned a tactic he had just heard about.  The salesman cannot make a deal to this recalcitrant buyer. The buyer insists he just doesn't want to buy the product.  The salesman replies, "If I gave it to you for free, would you take it then?"  The buyer obviously replies, "Of course."  The salesman then says, "So the price is the only problem.  Let's make a deal."

In essence this is what Seabourn has been doing.  It has, as is my mantra, insisted on consistency of product.  Seabourn may tweak this or that, but its product remains what it is.  On the Seabourn Odyssey the product is elevated and expanded, but remains consistent.  This sort of stability not only keeps Seabourn's loyal and longtime guests quite happy, it allows the potential new guest (and the novice to Seabourn travel agent) to be comfortable that what they are anticipating is what they are going to be getting.

Silversea has not taken this approach.  First it cut some corners on service (including training) and cuisine.  Then it hyped "butlers for everyone" as if the seasoned cruiser would book because of this.  Now it is going to be announcing a children's program.  The loyal guests see the differences and changes and worry.  The potential new guests see changes that may or may not change the qualities of their cruise.  The travel agents - many of whom just are not seasoned in selling luxury - shy away.  So even with 25% commissions and heavily discounted cruise fares, there is significant resistance.

Regent Seven Seas has taken a slightly different approach.  It tried to maintain - and worse, justify - the highest fares in the cruise industry by adding mass market-type tours as being inclusive...while admitting it has serious issues with crew quality (and longevity) and failing cuisine.  Changes are clearly being made as there is a pretty obvious wholesale clean out of the old guard at Regent, but again changes like this simply do not entice hesitant past passengers nor does it entice new ones.

Seabourn reports a 67% increase in first time guests.  That, obviously, does not mean 67% of its guests are first timers; to be sure, significantly less are.  (Compare that to Silversea's announcement last year, before the economic downturn, that something like 55% of its guests were first timers.)  What it means is that those who could not have afforded, or just wouldn't pay the premium to cruise on Seabourn, are now willing to do so.  (And, to be sure, it will be hard for them to go back!)  More importantly, with Silversea and Regent Seven Seas showing more softness, my question is how many of these first time Seabourn guests are prior Silversea and Regent passengers who are now perceiving the value in Seabourn to be worth more than any particular loyalty to the other lines?

The other interesting statistic is that the number of travel agents booking Seabourn for the first time rose by 36%.  While it is true that a large percentage of sales for any luxury cruise line are driven by a relatively small percentage of travel agents, whenever the base broadens, so do the prospects of engaging more to suggest and offer luxury travel.  It is, in reality, very intimidating for many travel agents because - honestly - they just do not truly understand what luxury is.  So with their first sale of Seabourn they learn...and that is good.

So there is Seabourn, heavily discounting its cruises just as the other two have been doing, but it is doing a far better job filling it ships.  Now, will Seabourn be profitable this year?  My guess is that if it is, it will be by a slim margin. But more importantly, for those many people who are first time Seabourners, I am very confident that they will be hooked and will think a second, third or even a fourth time, before they consider cruising on a line other than Seabourn.

Caveat:  Is this sort of a turning a sow's ear into a silk purse kind of argument?  To a degree it probably is.  But for those that think outside the box...the unconventional...not really.  It is seeing an opportunity and taking it on.