Wave Season Analysis: Some Challenges, But Positive Overall

CruiseWeek

As the second half of January kicks in, reports from cruise sellers on Wave Season performance range from ho hum to a solid start. "We're riding out the Wave," said one travel advisor, adding that business on the books remains strong, even if new business is a little slow to come in.

Big-picture elements are emerging that reveal some challenges being experienced by travel advisors.

Said one industry veteran: "I don't like making excuses -- I don't like saying it's the political climate or that people are reading that lines are getting long at airports due to security slowing down due to the shutdown -- you can take those for excuses. All I know is this isn't a normal Wave."

One non-anecdotal factor is consumer confidence is definitely heading down. A widely respected monthly survey on consumer confidence released last Friday cited a sharp decline in consumer confidence, and many small businesses took notice.

The University of Michigan survey reports U.S. consumer confidence has plunged to its lowest level since the month before President Trump's election. Canadian consumer confidence doesn’t necessarily follow that of the U.S. exactly, but there is overlap. And we also have a daunting exchange rate to deal with.

The Michigan consumer sentiment index fell to 90.7, a drop of 7.7 percentage points from December 2018 and the lowest level since October 2016.

Promotional levels often increase in Wave Season, when lines put their most attractive promotions in the marketplace, as it's a critical buying period. So far the dealing is not extraordinary, but several retailers expect that will change shortly. One complaint is that the offers are complicated.

"The offers are so confusing to agents,” said one agency owner. “How can we try to stay on top of the best offer when the offer is confusing?"

Another cruise advisor commented, "The deals are so complex because so many lines are trying to lead with a catchy hook -- pick 5, pick 6, pick 7, whatever. Now consumers are looking more closely to find out if there are strings attached to the deals."

No one is saying the sky is falling; indeed, rates themselves are firm. This time of year is seen as the best time to book a cruise, and as of this week some retailers are praising the lines for being aggressive with promotions without giving away the store. They just wish they were easier to understand.

On the positive side, for those who believe bad weather boosts Wave Season sales, mid-January's low temperatures and some harsh winter storms could bring some cheer. There's usually a slight lag till after the bad weather event--historically, people don't book right during the harshest weather.

All that said, many of those following the business see much to cheer about this Wave Season, and numbers are in line with that sentiment.

For instance, in Citi's latest cruise note out this week, analyst Gregory Badishkanian wrote to investors, "Our latest cruise checks indicate a fairly healthy outlook for 2019. Early Wave Season booking trends appear a bit sluggish, but promotional activity is low and pricing is very strong, which suggests cruise lines are comfortable with where things stand today."

Citi reported that North American-sourced bookings over the last 30 days were flat year-over-year, but that actual pricing is up more than 7% over the same period last year.

"While booking trends slowed a bit, cruise lines entered the year with record backlogs, and the recent acceleration in pricing suggests that operators remain comfortable with the booked position," concluded Badishkanian.



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