Cruise lines are big business. Carnival, Norwegian, and Royal Caribbean are public companies all with multi-billion dollar market caps. As public companies, naturally, they’d like to maximize profits. How do they do this? A key way is through price discrimination which is the practice charging customers different prices based on how much they’re willing to pay.
However, as much as firms would like to identify consumers who can pay more and simply charge them more for the exact same product, it’s not that easy. But it is powerful for firms when they can do it. By being able to price discriminate, a firm can still sell to those with lower demand - and make money - but can charge higher prices to those who are willing to pay more - and earn even more money. It’s a good way to price to sell to both those who are looking for a cheap vacation and those willing to spend a lot more, and therefore maximize profits.
So how can cruise lines first identify customers who are willing to pay more and then extract more money from them? People don’t just wear signs saying “I’ll pay more”. There are a number of ways it happens, however. I share ten ways in the video below, but I’ll highlight a couple of them in this article:
Shore excursions. Many times, a person could find a week-long cruise vacation for, say, $100 per night, or $700 total for the week. The pricing on the excursions, however, could easily double the price. I took this screenshot of a Royal Caribbean cruise that’s going to Coco Cay, their private resort.
They offer many nice excursions, but they’re not cheap. Someone who is on a budget avoid these excursions - but if you don’t care as much and just want to maximize your vacation fun regardless of cost, you could
Different prices for different times of the year.
It costs cruise lines basically the exact same amount during the quiet season or during the busiest season. But the prices can be wildly different. As an example, look at the price differences between cruises at different times of December - a $530 difference (per person) for a balcony room that sails over New Years Eve!
Cruise lines charge more in peak times and less during slow times.
For much more, watch the video below!