Onboard spending keeps flowing

WiFi for keeping up with Instagram and emails. A day zipping down the waterslides on a private island. Splurging for acupuncture at the spa.

The surge in onboard spending has been a bright spot for the cruise industry since its return from the pandemic pause in operations.

As soon as the first ships resumed service in 2021, cruise lines began reporting record per passenger onboard spending levels, citing increased savings and pent-up demand for experiences. 

But while cruise line metrics such as load factors and booking curves have been returning to normal, onboard spend has been exceeding prepandemic levels. And it continues to grow, not only because guests have more money to spend but because cruise lines are getting savvier about bundling those purchases, enabling passengers to buy them earlier and baking them into inclusive cruise fares. 

For travel advisors, these changes have enabled them to get commission for far more onboard spending than previously possible. 

Travel Weekly asked 15 cruise lines for more detailed information about onboard spending trends and commission policies. The cruise lines spanned the contemporary to luxury lines and included Carnival Cruise Line, Norwegian Cruise Line, MSC Cruises, Royal Caribbean International, Princess Cruises, Celebrity Cruises, Virgin Voyages, Lindblad Expeditions, Windstar Cruises, Azamara, Oceania Cruises, Silversea Cruises, Seabourn Cruises, Regent Seven Seas Cruises and Viking. 

Questions ranged from what passenger are buying to the spectrum of packages available and which products are commissionable. 

While not all cruise lines responded to the questionnaire, most that did said travel advisors get commission from onboard products when they are booked in advance, such as beverage and dining packages. If a client books bundled fares that include amenities, they are paid commission on that price. 

The rise in onboard spend 

All of the Big Three cruise companies — Carnival Corp., Royal Caribbean Group and Norwegian Cruise Line Holdings (NCLH) — have reported strong growth in onboard spending since the pandemic restart. 

Leading them is Royal Caribbean Group, which reported on its fourth-quarter 2022 balance sheet that “onboard and other revenue” grew by 35% compared with the same period in 2019.

The Royal Caribbean consumer, said Jason Liberty, CEO of Royal Caribbean Group, “is healthy, is sitting on a lot of savings, is searching for experiences and creating memories with their friends and family.” 

But the main driver of onboard revenue growth, he said, has been developing technology enabling consumers to book onboard activities sooner. 

“Allowing them to effectively get at least a day back of their vacation” by enabling them to plan onboard activities and shore excursions in advance was a “great tail wind” for the company, Liberty said.

About two-thirds of Royal Caribbean Group’s guests booked at least some onboard activities precruise in Q1 2023, up from 48% of cruisers making advance purchases in 2019, he said. 

Precruise bookings translate to even more spending on the ship. Every dollar of precruise spending was worth an incremental 70 cents of spending once onboard, he added. 

Carnival Corp., which has seen “outsized revenue growth,” is working to improve its technology to better capture precruise onboard sales and incremental onboard revenue, CEO Josh Weinstein said during the company’s first-quarter earnings call in March. Carnival Corp. is refining its apps to increase communication and engagement with customers to help capture that incremental onboard revenue. 

Weinstein said concerns about a possible recession have so far not translated into slowing consumer activity. “Despite the fact that there’s some volatility out there, it hasn’t yet,” he said. “It has not shown up in our business.”

Harry Sommer, incoming CEO of NCLH and former president of Norwegian Cruise Line, called the company’s high onboard spend a good indicator of consumer health. Onboard revenue, he said, is the best real-time indicator of how customers are feeling financially. Using that measurement, they are feeling good: Onboard revenue generation was “very robust” in first quarter of this year, with nearly 30% more onboard revenue per passenger cruise day than during the same quarter in 2019. 

Sommer also isn’t worried inflation will squeeze its guests, largely because NCLH cruisers are “upper middle class or maybe higher on the economic scale,” he said in March. “I don’t want to say they’re not impacted by inflation, but they seem to value vacations despite inflationary pressures.”

Several cruise executives attribute the strong onboard spend to the well-documented preference shift since the height of the pandemic to experiences over material goods. That is driving people to take more vacations and also to spend more while on them. 

“People are spending money in restaurants and out and about and seeing the world and realizing that this is their time to do it, and they’re not going miss out on it,” said John Chernesky, the new senior vice president of sales for Norwegian Cruise Line.

Paul Chapple, Azamara’s director of onboard revenue, also attributes the increase in onboard experiences to pent-up demand. “Our guests spent years yearning to explore new and unique destinations, and now that they can get back onboard, they are willing to spend more to get the most out of their voyage,” he said. 

MSC Cruises is the only one of the four largest cruise lines seeing something different, with U.S. operations president Ruben Rodriguez saying that onboard spending has returned to prepandemic levels after an initial spike when ships resumed sailing.

What cruisers are buying 

When asked what categories have grown since the pandemic, cruise lines said basically everything: specialty dining, beverage packages, spending at retail shops, shore excursions.

Several executives specifically pointed to increased sales at their spas.

At Oceania Cruises, passengers have spent money on more than massages since the pandemic restart, said Nikki Upshaw, senior vice president of sales; they’re interested in wellness in general, including spending on acupuncture and personal training classes.

“What we’re seeing is spend on wellness techniques,” she said, adding that the growing interest led the line to expand the size of the spa with larger rooms and more treatment areas when the it built the Oceania Vista, which debuted in May as its first new ship in 10 years. 

Windstar has also seen growth in spa spending, largely due to new spa and fitness centers on its three Star Plus-class ships, said Betsy O’Rourke, the line’s chief commercial officer. Shore excursions are also on the uptick, she said.

“We think people are so happy to be back traveling and missed it so much that they’re determined to make the most out of their vacation time,” she said.

WiFi has become increasingly important to consumers, and cruise lines have responded with upgraded Internet access that provides faster speeds and more reliability and by offering packages that range from the ability to just surf the web to uploading video content and streaming movies. Windstar said that about half of its customers are electing to purchase the line’s bundled packages that include WiFi, beverages and gratuities. 

Others, including MSC, said they have seen a boost in cruisers opting for WiFi and drink packages when they book.

Virgin Voyages, which launched just before the 2020 pause in operations, doesn’t have a prepandemic record to compare onboard spending to. But since the restart, it has experienced strong demand for onboard classes, such as a mixology class that includes lessons on snapping the best pictures of drinks for social media and has the cheeky name of Shot for Shot. Classes have sold out so quickly that the development team is adding new ones, said Jessica Fleisher, vice president of revenue for Virgin Voyages.

The line also noticed more guests cruising to celebrate a milestone birthday or a bachelor or bachelorette trip. To ring in a celebration on the ship, the line developed a Splash for Your Bash party that brings everyone in the party together at one table and includes beverages, a cake and a bottomless brunch the following morning. “Post-pandemic, it’s about being with friends and experiencing things together again,” Fleisher said.

Royal Caribbean International CEO Michael Bayley, who said he was initially shocked when he saw how much onboard spending increased after the cruise line’s return to sailing in 2021, now says that strength looks to remain high into 2024. 

He attributes it in part to more plentiful options being offered by contemporary lines. At Royal, that includes activities at the line’s private island, Perfect Day at CocoCay, such as rides at the Thrill Waterpark and overwater cabanas at Coco Beach Club. The island alone is expected to see as many as 3 million guests in 2023, and there are plans to add a section called Hideaway Beach later this year. 

Travel agent share

Thanks to the ability to prepurchase, and the growth of bundled cruise fares, travel advisors have greater ability than ever to make commission on ship activities and amenities. 

Several cruise lines said that their use of bundled packages and all-inclusive cruise fares have helped travel agents reap the benefits of guests’ willingness to spend more money on their cruises.

Since 2020, more-inclusive fares have grown increasingly common in the premium cruise segment, with lines such as Celebrity, Princess and Holland America newly offering varied fare levels that bundle amenities such as WiFi, beverage packages and gratuities. 

When selling standard fares, Geoff Cox, vice president of sales at KHM Travel Group, which sells a lot of Carnival and Royal, encourages his agents to use a “warm” sales strategy to make clients aware of various onboard experiences and to sell them before the sail date. “Once they’re onboard, we’re out of the loop,” he said.

Danny Genung, CEO of Harr Travel in Redlands, Calif., said a travel agent’s ability to advise clients about onboard spending selections reduces their stress levels while onboard. What guests want, he said, is a more inclusive product so they can focus on being with their friends and family.

“They value that time even more than they did before,” he said. 

Most cruise lines require that extras like WiFi, beverage packages and excursions be booked in advance for travel agents to earn commission. They capture more of those precruise sales on items passengers can be sure in advance that they want, such as WiFi, for which many lines offer a range of speed and price points. 

Spa and wellness packages tend not to pay commissions to advisors, according to most of the lines that responded to the questionnaire. But in some cases, there are workarounds. For instance, Viking was the only responding line that said agents can prepurchase a commissionable shipboard credit that a guest can use for a spa treatment.

Anthony Hamawy, president of Cruise.com, said that is not common. 

“You can buy [onboard credit], but it’s rare to get commission,” he said. 

Shore excursions have long been a point of contention between cruise lines and travel advisors. Some lines pay commission on shore excursions when they are booked before a sailing, including MSC Cruises, Viking, Virgin Voyages and Windstar Cruises. Others include some excursions as part of their cruise packages, such as at Regent and Oceania, said Hamawy.

But most cruise lines don’t pay commissions on excursions, according to questionnaire responses. Hamawy said excursions are easy sells for the lines, and they “don’t pay you on something they can sell themselves.” The same goes for cabanas on private islands, he said, which can cost more than a client might have spent on cruise fare. 

Cruise Planners founder Michelle Fee is among the industry voices who want agents to more consistently make commission on excursions. 

“We traveled the world. We’ve got a lot of experience, and it’s hard to sit down with a cruise couple and sell them a destination and then share with them what type of excursions they should take,” she said. 

Travel advisors for years have turned to third-party excursion providers in order to earn commissions.

“There are workarounds,” she said. “Most of us better agents will use a third party and so we do get paid commission on it, but we’d like to see more of a commission split” with the cruise lines.