Price Integrity Policy

Royal Caribbean talks fleet changes, marketing shifts, Caribbean recovery and more

In:
24Jan2018

Royal Caribbean held a conference call with investors to review the fourth quarter 2017 results, and within the discussion, we picked out some interesting anecdotes that cruise fans would enjoy.

Fleet wide refurbishment

Of particular interest to cruisers, Royal Caribbean Chairman and CEO Richard Fain alluded to a "transformational fleet upgrading program" which will kick off this year.

Royal Caribbean International ships will be part of what the company is calling Royal Amplified.  This program aims to extend the appeal of the brand with new cruisers and returning cruisers.  

Mr. Fain summed up Royal Amplified as, "We're redefining the experiences that drive, choice, guest satisfaction, and ultimately revenue."

If you are wondering what exactly Royal Amplified entails, there does not appear to be much information on that yet. Royal Caribbean International CEO Michael Bayley alluded to Royal Amplified in November 2017, when he mentioned the program as part of a way the cruise line is rethinking some of its onboard venues.

Caribbean recovery after the hurricanes

Photo by TheTwangster

Following the hurricanes of 2017, Royal Caribbean saw soft bookings in the six weeks that followed these storms.

Royal Caribbean Chief Financial Officer Jason Liberty noted that trends normalized in November, and have been in-line with the cruise line's expectations since then.

"First quarter Caribbean sailings were in a very strong booked position before the storms, recovered relatively quickly afterwards, and are currently booked ahead."

Project Excalibur potential

Royal Caribbean's next-gen technology initiative, codenamed Project Excalibur, has Richard Fain very excited for the prospects of the future.

"I really think it is going to transform. I think it is going to be fantastic.  I think it will take a little while for it roll out and for the public to see just how exciting it is."

No change in reducing last minute discounts

When questioned about the possibility of Royal Caribbean revisiting its Price Integrity Policy that curbs last-minute cruise discounts, Richard Fain was quite firm in his answer.

"Absolutely not."

"The Price Integrity Program was a part of [the Double Double Program], and we think the benefit keeps growing over time.  The Price Integrity Program has been a big success for us.  We have been fairly religious about executing against it, and we continue to expect to do that."

Michael Bayley added another point, "We introduced several months ago a non-refundable deposit pricing program for the Royal brand, and that has proven to be very successful for us. So we have a significant percentage of our '18 bookings are in this non-refundable category, which means that we will see significantly less churn in our bookings as we move through the calendar year for '18 and into '19."

Emphasis on digital over traditional marketing

Michael Bayley also talked about the emphasis the cruise line has placed in digital marketing over traditional marketing, primarily for cost savings and for better tracking ability.

"What we are seeing is an improvement in the efficiency of that marketing investment over time, because of digital - because it is a lot easier to track and understand the results that you are generating through digital versus traditional.  Yes, we are investing more in our marketing, and yes we are investing more as we look into the future, but, we're also seeing an improvement in the efficiency of that investment."

Royal Caribbean expands and simplifies no last minute discount on cruises policy

In:
02Feb2016

During its fourth quarter earnings call today, Royal Caribbean announced it was expanding its price integrity policy to not offer any new discounts within 30 days of a sailing, on all Royal Caribbean cruises (excluding 3 and 4 night sailings).

The price integrity policy has been in place for about a year in the U.S., Canada, U.K. and Ireland markets and protects against last minute discounts in the weeks leading up to a cruise.  Up until now, the exact time of when the policy became effective depended on the sailing, and could be within the last 10, 30 or 40 days.

In December 2015, Royal Caribbean decided to alter the policy, as a means of simplifying it, by stating there will be no price drops 30 days before any Royal Caribbean cruise, not including 3 or 4 night cruises.

Royal Caribbean Ltd Chairman and CEO Richard Fain explained that the price integrity policy is easier in the public's point of view, as well as the revenue managers and that it is important to have a clear policy that everyone can understand.

"All of this makes the policy easier to understand and to implement. We are a strong believer that clarity and specificity in a program like this is important because otherwise, the exceptions undermine the integrity of the program, even if they are in fact very rare. "

"During this time, we have granted no exceptions to the policy since its adoption, and we have no intention of doing so now. Nevertheless, we have seen a double digit percentage improvement in the booking window over this period, and we believe that the policy helps solidify brand preference. "

"An unforeseen benefit we have found is the reduced number of bookings taken at a discount before we get to the focus period. Living the spirit of the policy has helped our revenue managers make better pricing decisions and it has been roundly applauded by the travel agents that are so central to our success."

"When we introduced the policy, we were transparent with you all that an upfront cost would result in some cabins going empty rather than being filled at deep last minute discounts. We know that in 2016 we will still see some residual impact relating to these empty cabins, but by 2017, we feel comfortable  that the impact will be positive."

Fain also added that they feel they have the policy right, and they do not expect to make any further changes to the policy in the near future.

Royal Caribbean sticking with no last minute discounts and extending the program to the UK and Ireland

In:
23Oct2015

Royal Caribbean is sticking with its policy of offering no last-minute discounts to protect its price integrity and expanding it to new markets.

During Royal Caribbean's third quarter financial results call with investors, Royal Caribbean Chairman and CEO Richard Fain highlighted the gains made by the company's "Price Integrity Policy", which promise not to drop prices in the days leading up to a ship sailing, even if it means unsold staterooms.

The rationale behind the program is two fold: First, it promotes higher guest satisfaction with the notion they do not have to worry that after they book a cruise, the price will drop and they will end up paying more.  Second, it has lead to higher revenue for Royal Caribbean.

Fain commented the policy gives,"our guests and our travel partners more comfort that when they book a cruise with us, we wont be dropping the price of that same cruise during the last few days before the ship sails."

"Depending on the itinerary, we have internally banned any new discounts in the U.S. and Canada in the last 10, 20, 30 or 40 days before the cruise starts.  The program has been in place for seven months or so and we have not granted a single exception to the policy."

The Price Integrity Policy is still progressing and that has cost Royal Caribbean money in the short term, "I acknowledge that is has cost us a bit, and is costing us a bit this year in revenue. And some cabins have gone empty, which could have been filled with dramatic last minute deals. But we stood firm and we have made zero exceptions."

"We believe our guests and our travel partners are beginning to respond as we had hoped they would and we are sticking with the program."

Fain also mentioned that Royal Caribbean has expanded the Price Integrity Policy to other the cruise markets of the United Kingdom and Ireland.  These policies extend the same policies about no new last minute discounts in Britian and Ireland that we have been applying in the U.S. and Canada.