Archive for October 20th, 2010

Cruising’s Dirty Little Secret.

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Cruising’s Dirty Little Secret.

Some of you may know that my wife sells travel, mostly cruises.  She has been trying to educate me that all-in cruises at the luxury level are terrific value. I always looked at the all inclusive cost and opted for pay as you go. Recently I discovered a dirty little secret about cruise line pricing.

The major cruise lines are very very smart.  They know that we are hardwired to avoid costs if we can. Cruising is priced at luxury, premium, mid-market and value price points. When you look at luxury prices (expect; smaller boats, 5 star service, river cruises, perhaps sailing vessels)  they price all-in. All-in  means everything is included in the price. It includes return airfares, meals and accommodation, transfers to and from the vessel, all tours, dinner wine, and suite amenities.  When you look at the all-in cruise price per day, it usually looks big!   For every other types of cruise, your fare just includes your food, accommodation & entertainment, the rest is a la carte.

I, being the suspicious fool that I am, “assumed” that luxury padded the price and so I opted for the other levels.  The luxury lines, and my wife,  argue that once you add it all up  their fares are more than  reasonable.  (This is classic value selling).  I put that down to salesman’s puff.  All the non luxury “levels” constantly trumpet their per day fare sales, to me they just had to be cheaper than luxury. Right?

I could not have been more wrong.

Last year I went on a terrific 22 day Beijing to Bangkok cruise where we took an extra week in Thailand, giving us 29 days in all.  Thailand is a cheap place to live well.  Adding up all the  flights, taxis, tours, food, wine, accommodation, etc., once all the bills came in, the 29 days put me back ~ $15k  for us (2)  ~  $520 per day.  But it was a very great holiday, not to be missed. This cruise was advertised “on special” at $169 per day.  And the all else, my wife used her travel smarts to get discounts everywhere she could – e.g. she found a great price on a round trip airfare, hotel and tour guide in Beijing.

My buddy just booked a different 21 day China riverboat cruise for next April, luxury level, first class, best cabin,  all included for $6000 all in. Netting them (2) a cost of  $285 per day. And he will have a “no surprise” Visa bill at the end of his cruise. No booking of flights, no arranging hotels in China, no worry about airport transport, no paying for tours. He only has to get his wife and himself  back and forth to YVR.  This is a deal.  Even if he paid twice as much ($570 per day),  he still beats my special  “cruise” price.  His total effort ? Read an email, go to the website, pick a cabin and enter a credit card.

I am permanently chastened.  My wife is right, again.  The differences between my buddy and me?  He has a personal net worth 20 times mine.  He always goes luxury. He knows a deal when he sees it. He values his time. And he drives a much nicer car (but he keeps them a long time).  Put him down as older and wiser.

Cruise lines are smart. We consumers think we are such great price conscious shoppers.  Yet  most of us are slaves to a desire to avoid (or delay) costs if given the choice. We go for the unbundled prices so that we can make the choice to spend more later.  And we fix an unrealistic reference price/cost  in our heads as we shop.

This makes the non luxury cruise lines marketing simple.  Advertise the very lowest price you can for even just a few seats. Get folks to buy the cruise ( and rarely at the lowest advertised price – ’cause they are gone) . Let the buyer do all the arranging work; such as finding, booking, paying for hotels, transfers, air etc., or offer these services at exorbitant rates. Once you get them on board, up sell on wine for meals, tours, drinks in the evening, specialty restaurants, laundry, gift shop and boutiques on board, internet, spa services, hair salon, fitness classes, etc.

It’s in our nature to only look at the lowest cost going in and the true cost only becomes visible when we get back  home, if we even look. That lowest cost becomes our “reference” cost which we get anchored to during the selection process. Once we commit, our emotional attachment to a “holiday” makes us much easier targets for continued up-sells.  In for the penny, in for the pound as my mother used to say.

So the lesson learned – think like a rich guy (who keeps his money close), force yourself to look at the all-in benefits of luxury because if left to your human nature, you will select a more expensive a la carte option. My mother also used to say,  There is nothing more expensive than a bargain.

Me?  I am going home to recount my paper clips and listen to my wife more .

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