CEO, Celebrity and Azamara
It’s hard to get out from underneath the bad news.
We’re in an economic crisis, obviously, but we still
have 90% of the population working, and people are
saying that although they’re changing their purchasing patterns, they’re not changing their plans to vacation. We need to be sure that when they do plan their
vacation, we’re prepared to help them make the right
Consumers are ner-
vous and reluctant to buy, and between us [cruise lines
and travel agents], we need to figure out how to get beyond that. Our guests tell us the value of a cruise is second to none. So I think there’s potential for us to have
higher occupancy than some of our land counterparts.
When we look at discounting, it comes down to the
brand. If you go too low, you’re impacting its long-term
health; people might think there must be something
wrong with the product. Having said that, prices right
now are so good that people must realize what incredible values are out there.
I’m not concerned about taking on the new ships
[Celebrity’s Solstice and Equinox]. I’d rather it was a
better revenue environment because we’re not getting
the rates we should be getting. But we’re better off with
them than if we didn’t have them. They’re so much
more efficient than the older hardware. They’re better
yielding than the old ships.
In this environment, some travel agents may choose
not to stay in business. I have no idea how many; I wish
it were zero. It depends on how long and deep the recession is. We’ve laid off people, and we’ve seen reports of
leisure agencies closing their doors. I think a number
of agencies will reduce costs by becoming home based,
and hopefully that will help them with their costs and
they’ll weather the storm.
As consumer spend is going down, we’re more aggressive than in the past in negotiating with suppliers,
and we’re seeing costs-per-item going down.
And we’re being careful about capital expenditures.
We might delay, for example, upgrading an accounting
system or, as long as things are functioning well, replacing something in the engine room that could go another
‘What won’ t
year with an increased maintenance schedule. Nothing
to do with safety, of course.
Here’s what won’t be changing: We won’t be cutting
the marketing budget, or changing anything to do with
the new ship orders.
We don’t have any plans to do anything different regarding NCFs at this time.
But we did launch the Agents Support Action Plan,
which raises commissions and increases co-op funding, among other initiatives. We want to help agents get
through these tough times.
President, Travel Corporation USA
Predictions are very difficult to make. We see and understand very little about what’s going to happen with
the economy. Every news story requalifies every decision we make.
But if we manage
our yields correctly
on the tour opera-
tor side of our business, I don’t see any reason not to
be profitable. A lot of operating costs have come down;
fuel costs have come down massively. And thank goodness for the turnaround of the U.S. dollar.
Tough times force a lot of efficiencies. We’ve re-upped
the ante in terms of online booking capability for travel
agents. There are lots of silver linings, one of which is
that there’s a willingness among travel agents to consider a wider range of products.
The health and sustainability of the travel agent distribution system is incredibly important to us. Most of
our brands depend explicitly on travel agents, and any
break in the link would be very troubling.
In absolute terms, the revenue an agent gets selling
tours vs. cruises is vastly different on a similarly positioned product. We need to be more aggressive in explaining that commissions can be earned on the air,
insurance, pre- and post-hotels, and we don’t have
the noncommissionable fee challenge that cruise lines
The deals that will come out of the cruise industry in
will be an
the first quarter are going to be great for the consumer,
but it’s going to be hard for a travel agent to make any
money out of it.
And we have a very compelling story to tell consumers. Touring can be 40% cheaper than doing it on your
own. That resonates at a time like this.
We’ll all struggle through ’09, but some of our products will do disproportionately well. Contiki will outperform the market average [because] kids graduating
college in 2009 have only that year to take this type of
We expect to see some trading down from luxury to
premium, which will benefit Insight Vacations, and premium to first class, and first class to cost saver, which
will help Trafalgar. And demand for riverboats is high;
Uniworld will do well.
In 2009, you’ll see a later-booking market, driven by
value-adds and discounts. I hope it will be more value-add than discounts, but I expect the first quarter will be
an incredible market for people who have cash.
In 2009, we’ll have several points of focus and opportunity. One of the most significant relates to the
Delta-Northwest merger. Since we run their reservations systems, we’re going to spend time ensuring that
that aspect of the merger goes smoothly.
We’ve also augm e nted
with significant additional investment that will allow us
to put nontraditional content into the GDSs.
The low-cost airlines are having challenges selling
seats, so we’re going to work on increasing content
from them. We currently have Southwest and, in Europe, Easyjet. These are important levels of content in
a down economy.
And I’m very interested in working with the other
GDSs to create industry standards for presenting unbundled aspects of airline fares. It’s better for customers
and for suppliers. It’s a top priority.