Carnival, Royal Caribbean, Norwegian Face a Fees Problem
Cruise lines aren’t exempt from inflation, rising labor costs, and the fact that gas/oil prices have generally been high.
Royal Caribbean (RCL) – Get Royal Caribbean Group Report, Carnival (CCL) – Get Carnival Corporation Report, and Norwegian Cruise Line (NCLH) – Get Norwegian Cruise Line Holdings Ltd. Report. Unlike other parts of the travel, however, they’re not as easily able to pass cost onto customers because nobody has to take a cruise.
Sometimes people have to get on an airplane or stay in a hotel. You may not want to attend your cousin’s wedding or go to your partner’s high school reunion, but you might have no choice as to whether you go.
Something like a Walt Disney (DIS) – Get Walt Disney Company Report theme park trip might also be negotiable, but Disney has a lot of levers to pull when it comes to cutting costs or passing them onto customers that don’t involve raising ticket or hotel prices.
Disney World and Disneyland can make food portions smaller, or raise prices for non-ticket, non-hotel items.
The cruise lines, however, offer a semi-all-inclusive experience. Your ticket gets you access to not just your room but many dining options, and all sorts of entertainment.
Royal Caribbean, Carnival and Norwegian could raise drink prices or charge more in specialty restaurants, but casual customers would simply cut back on drinks and stick to free dining options.
That puts the cruise industry’s big three in a tough position in the face of rising fuel costs. There’s a move they could make, but it won’t go over well with customers.
How Can the Cruise Lines Deal With High Fuel Prices?
Cruise lines have the option of hedging their fuel bets in the same way airlines do. Royal Caribbean locked in its 2022 fuel prices for more than half of its needs while Norwegian has hedged 42% of its fuel at lower-than-current prices, according to Gene Sloan at The Points Guy.
Carnival has not hedged any of its fuel needs for 2022.
Fuel costs are a fluid thing. Oil prices rise and fall, so cruise lines tend to be slow to pass on added costs to customers. If prices remain high, however, Royal Caribbean, Carnival and Norwegian could pass those costs onto customers via a fuel surcharge.
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They generally don’t want to because while their contracts allow them do it, no business wants to add to its final price after the fact.
That could mean any of the three cruise lines could decide to add a fuel surcharge to new bookings, but that drives up the overall price, and it could lead to some people opting to not book a cruise.
Will Carnival, Royal Caribbean, or Norwegian Add a Fuel Surcharge?
None of the big three cruise lines want to add a fuel surcharge.
The entire industry has just begun to return to normal after its pandemic-related shutdown and the various restrictions that were forced on people taking cruises.
The price of a barrel of oil on an adjusted basis still remains about 40% lower than it was in 2007 and 2008 when fuel surcharges were last used. That explains why Royal Caribbean, Carnival and Norwegian have not added them yet, but it does not rule them out for the future.
“We won’t be imposing fuel surcharges,” Royal Caribbean Group spokesperson Jonathon Fishman told The Points Guy in an emailed response to questions about the topic.
Carnival, the only cruise line that did not hedge fuel prices, would not directly answer the question. That does not mean the cruise line plans to introduce fuel surcharges, but it does not close the door on the possibility of them.
Norwegian did not provide The Points Guy with any answer at all.
The price of oil remains volatile and there’s likely a point where all three cruise lines could add these added fees, which are usually paid per day, per person for the first two people staying in a room.
Carnival could be the first domino to fall, but it’s also possible that fuel prices stabilize, or even drop, and none of the three major cruise lines have to implement this fairly drastic, customer-unfriendly move.
