Be warned, cruisers: Cruises aren't as cheap vs. land resorts as they used to be

09.02.2024 - 11:05 / thepointsguy.com / Silversea Cruises / Patrick Scholes / Jason Liberty / Josh Weinstein

Bad news, cruisers: The era of the incredible cruise deal is over — at least for now.

Cruise companies in recent weeks have reported sharply rising yields — a measure of the money they are bringing in per day per passenger — and noted that cruises are no longer as inexpensive as they used to be, compared to land-based resorts.

"Last year we talked around having a 40% to 45% gap [in pricing] to land-based vacations," Jason Liberty, Royal Caribbean Group's CEO, noted last week in a conference call with Wall Street analysts. "Our yields in 2023 rose 13.5% ... so we obviously made a dent into that."

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Speaking with analysts after Royal Caribbean Group reported strong earnings for the fourth quarter of 2023, Liberty said the company expected to close the gap in pricing with land-based resorts even more this year.

"We are obsessed about [it] really," Liberty said. He noted that the company's focus as a business of late is more about competing with land-based resorts than other cruise companies.

"It's more about how do we close that gap — how do we compete with a land-based vacation?" Liberty said.

Royal Caribbean Group is the parent company of Royal Caribbean, the world's largest cruise line, as well as Celebrity Cruises and luxury brand Silversea Cruises. It's also a part owner of Germany's TUI Cruises and Hapag-Lloyd Cruises.

Liberty didn't give an estimate of what he saw as the differential in pricing between cruises and land resorts. However, in a report to investors in mid-January, leisure travel analyst Patrick Scholes of Truist pegged the percentage at around 25% to 30%.

While still notable, the differential is down significantly from just two years ago; back then, some Wall Street analysts estimated that cruises, on average, were priced as much as 50% below the cost of land resorts when comparing similar products.

"We are gaining momentum in our ability to close the unwarranted value gap to land-based alternatives," Josh Weinstein, Carnival Corporation's CEO, recently told Wall Street analysts.

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Weinstein spoke with analysts in late December after Carnival Corporation announced solid quarterly earnings. He suggested the company's success in drawing more first-time cruisers over the past year contributed to closing the differential between cruise pricing and land-based resort pricing.

The increase comes as demand for cruises in general soars.

"In 2023, we captured over 3.5 million new-to-cruise guests and remain well-positioned to continue to take share from land-based alternatives," Weinstein said.

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