BUSINESS INSIDER
Going on a cruise can be one of your cheapest travel options — as long as you don’t sign up for too many of the optional packages and extra amenities.
Over the last 10 to 15 years, mass-market cruise lines have been adopting a model that looks a bit like budget airlines: Charge a low base fare and then offer a bunch of extras — all for an additional price.
So on paper, your cruise vacation may seem super-affordable. After all, transportation, accommodations, food, and access to the pool deck still are all included in the base fare. And at the start of 2023, there were over 400 cruises sailing this year for $60 or less a day.
Broken down, that means a cruise is cheaper than the average rent for a New York City apartment.
But after adding on additional payments for your cruise’s drink packages, excursions, onboard amenities, specialty dining, and WiFi, the cost of your vacation can start to balloon. In fact, cruise lines have told their investors recently that passengers are embracing these add-on costs — and enhancing their bottom lines.
Here’s how cruise lines are more fully embracing a model that offers lots of add ons once you board the ship:
New ships mean more opportunities for onboard spend
Cruise ships typically stay in service for 20 to 25 years. It’s harder to carve out space on older vessels for higher-end amenities that can be offered as add-ons. But as old ships are phased out and replaced with newer ships, “there are going to be more opportunities to upsell,” Patrick Scholes, an analyst at Truist Securities, told Insider recently.
For example, brands like Norwegian Cruise Line and MSC Cruises have been unveiling more ships with family-friendly activities like on-ship go-karting, virtual reality arcades, and robotic rides. These amenities all come at an additional cost to travelers: It’s $10 for MSC’s Robotron robot ride, the Points Guy reported, and $29 for one hour at Norwegian’s VR arcade.
“I don’t think cruises are [thinking] ‘Hey, we’re going to nickel-and-dime our customers,’” Scholes said. “But they realize customers are going to pay the $30 for teppanyaki and … pay a lot of money to be connected to WiFi on vacation. That was not something available 15 years ago.”
Scholes called Royal Caribbean the “leader” in this movement. Over the last nearly 10 years, he says the fares at Royal Caribbean Group — which oversees brands like Royal Caribbean, Celebrity, and Silversea — have generally been “fairly stagnant” despite the brand’s growth in cruise passenger onboard spending over the last 10 years.
“It’s been a real earnings driver for them, as opposed to just the plain old ticket price,” he said.
Royal Caribbean pointed Insider to its most recent earnings call when asked for comment on onboard spending. The company in its release flagged “strong ticket pricing” and “strength in onboard revenue” as boosting Royal’s revenue.
The ‘I already spent it’ attitude helps
Travelers typically book their cruises — and the additional paid packages — six to nine months ahead of sailing. So when it’s finally time to travel and those initial costs have already been paid off, travelers will sometimes board the ship ready to spend as if they hadn’t already shelled out ahead of time.
“Cruise lines are creative to try to make you forget you actually bought some things nine months ago,” Scholes said. And so far, it’s been a good game plan for companies like Carnival Corp.
During its second-quarter earnings call in late June, the company’s CEO, Josh Weinstein, noted its brands’ onboard revenue was “once again off-the-charts,” citing “bundled packages and pre-cruise sales.”
Get ready to spend on WiFi, dining, and drinks
Yet travelers are eating up these premium options: When cruises resumed after COVID-19-related lockdowns were lifted, they eagerly splurged during their first vacation since the pandemic. What’s the harm in a $30 dinner after a year of lockdown? And maybe some WiFi to show your friends you’re on vacation? And another $60 a day for the drink package? It had been a year or two since everyone last traveled, after all.
Surprisingly, this has yet to dwindle — cruise goers are still spending big, even on their subsequent vacations, Scholes said. And as travelers continue spending on these luxuries, cruise lines continue raising prices.
WiFi is a big money maker for cruise brands. A decade ago, travelers weren’t expecting internet on their cruises. Now, it’s a necessity. And an expensive one at that: Daily access to WiFi can range from about $10 to more than $20 a day. And this year, Carnival increased its prices by $5 for premium WiFi.
For premium dining options like teppanyaki — or Japanese-style cooking at a grill — travelers could find themselves paying an additional $20 or $30 for the interactive dining experience. But for more intimate “chef’s table” dinners, travelers might tack on an additional $100 or $150, Scholes said.
“Any [ship] being built and delivered today is going to have something pretty similar to that,” he said.
On newer ships, it can be harder to avoid these premium restaurants: Over half of the dining options aboard Royal Caribbean’s latest mega-ship, the Wonder of the Seas, are specialty restaurants that come at an extra cost.
Like dining, soda and alcoholic beverages come at an additional cost.
As of late, cruise lines have been bumping the cost of these packages. In February, MSC Cruises raised the price of its drink packages by up to 36% depending on the option and number of nights, The Wall Street Journal reported. Norwegian also recently increased the cost of some beverage packages by $10 — the Premium Plus option is now $138 daily — while Carnival tacked on an additional $8 to its pre-reserved “Cheers!” package for a total of almost $60 a day.
Scholes says this is because of both inflation — or the increasing costs to cruise lines themselves — and cruise lines looking to capitalize on the recent trend of rising onboard spending.
Cruise lines are trying to cut costs at the same time
At the same time, cruise companies seem to be cutting operational costs.
Norwegian has decreased its burgers from nine ounces to seven ounces in an effort to restrain costs, according to a UBS note to investors from March. Similarly, guest-beloved unlimited “lobster night” on Royal Caribbean sailings is no longer unlimited, among other dining room changes. Instead, travelers now have to pay for additional lobster tails after the first one, The Street reported.
“Lobster lovers on cruises are pretty upset about this,” Tynan Smith, the founder of cheap cruise aggregator Cruise Sheet, told Insider in late 2022.
And several cruise lines — including Royal Caribbean, Carnival, and Norwegian — are following hotels by cutting back on some housekeeping service for lower-level cabins, the Points Guy reported. However, Kara Wallace, Royal Caribbean’s CMO, told Insider that travelers still have access to stateroom attendants if they need items like new towels.
Still, for many if not most people, the cruise life beckons: After all, cruises are more popular than ever. And with even bigger and bigger ships set to sail in the coming years, travelers can expect bigger and better amenities — and the extra fees that go with them.
Sometimes, it just costs more to have fun.
