In the past year, cruise vacations have become a popular choice for people looking for less expensive forms of transportation, but American cruise companies are indicating that itineraries may become more expensive in the near future.

As occupancy levels approach pre-pandemic levels, cruise companies like Royal Caribbean Cruises and Carnival Corp. are trying to increase pricing after aggressively discounting following years of Covid-era testing requirements and restrictions.

According to Patrick Scholes, an analyst at Truist hotels and cruises, cruise holidays were typically 15% to 20% less expensive than land-based vacations prior to the start of the epidemic. He noted that the difference had grown to 50%.

“(We are) working hard to close the outrageous and unwarranted 25% to 50% value gap to land-based offerings over time,” Carnival Corp CEO Josh Weinstein said on a post-earnings call in June.

Following the pandemic, cruise companies reduced their rates to entice travellers, counting on the record-high levels of onboard spending in recent years.

In the second quarter of 2019, before the epidemic, Norwegian Cruise Lines’ onboard expenditure increased by 49.9%. In the same time frame, onboard spending increased by around 36.8% for Royal Caribbean Cruises and 17.2% for Carnival.

“There’s a lot more nickel-and-diming than there used to be,” said Bob Levinstein, CEO of Cruise Compete, a marketplace for cruise quotes, noting charges for room service and other amenities used to be free.

However, businesses like Norwegian and Carnival claim that rising labour, marketing, port, and freight costs have outweighed the benefits of strong demand and higher ticket prices.

“We’re looking at growth with respect to price increases as we get to 2024, 2025 and 2026,” Carnival’s Weinstein said.

On a post-earnings teleconference in late July, Royal Caribbean’s CEO Jason Liberty backed Weinstein’s assessment of the value gap between cruises and land-based vacations and said that it will help the company increase ticket prices even higher.

According to information provided by travel service Premier Custom Travel, a seven-night all-inclusive Carnival cruise trip to the Caribbean costs $3,988.80 for a family of four, while a seven-night theme park holiday at Walt Disney World in Orlando, Florida costs $5,810.79.

According to information from the Cruise Lines International Association, people are taking advantage of the savings opportunity, with over 73% of those who have never taken a cruise stating they would be open to the idea.

Carnival and Royal Caribbean said that more visitors than in 2019 were first-time cruisers.

“There doesn’t appear to be any problems with the price raises taken so far,” said Barclays analyst Brandt Montour. They’ve raised prices 10% to 15% for 2023, compared with 2019 levels, and it doesn’t seem like the consumer is pushing back on that latest price hike, he said.

(Adapted from Reuters.com)

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