Refloating the global cruise industry with a clear retail refocus was the thrust of the ‘Shaping a New Future for the Cruise & Maritime Sector’, held yesterday (8 April) at the virtual Summit of the Americas.
Attendees were treated to a wealth of channel-specific expertise, with contributions from Lisa Bauer, President & CEO, Starboard Cruise Services; Mark Birne, Deputy Managing Director, Harding; Nadine Heubel, CEO, Heinemann Americas; and Eddie Ferenczi, Executive Vice President, SMT Duty Free.
While pent-up demand augurs well for the world’s cruise lines, the duty free and travel retail community is still navigating choppy waters from what many view as an ‘untenable’ business model and stockpiled inventory to an accelerated digital push to stay competitive.
Starboard Cruise Services’ Bauer dubbed the pandemic effect a black swan event and a ‘powerful lesson’ for businesses.
INNOVATION ‘REQUIRES MORE TIME’
Taking on board what land-based retailers and brands have done in adopting a ‘new customer-centric focus’ will help address the cruise retail challenge, according to Heinemann Americas’ Heubel.
Compared with onboard F&B and entertainment, Heubel believes retail is dragging its heels when it comes to innovation.
“The current financial model used by the cruise lines and retailers [is] not made to encourage innovation and neither is it designed for a customer-centric retail experience,” she remarked.
“Minimum guarantees, high concession fees and short-term contracts will never allow the retailer to plan long term, become customer centric and think outside the box. What we need is a model that is based on sharing success and risk with a much longer time horizon.”
GROWING ORDER BOOK
Despite a ‘devastating’ 12 months, SMT Duty Free’s Ferenzci is optimistic about the recovery but was candid about the timeline.
“It’s going to be a very fast curve [but] it’s still going to take [the industry] a good two years to be able to recover the losses we have experienced,” he noted.
Onboard retail stands to benefit from a growing order book and pent-up guest demand. Mark Birnie, Deputy Managing Director, Harding reminded delegates that 29 million passengers took to the seas in 2019, with 40 million passengers predicted for 2025.
The current order book – 103 new ships, valued at $70 billion – has enjoyed zero cancellations, with 500,000 additional berths to be delivered by 2027.
He noted: “This year, 26 new ships will be launched, including Carnival’s Mardi Gras, its largest to date. [So], cruises still seem to be the best travel retail opportunity to engage with the consumer.”
From a complete global cessation, oceangoing cruises are now upping the nautical knots.
MSC Cruises, Aida Cruises, Costa Cruises and TUI Germany are leading the way in Europe, with high-profile North American cruise giants temporarily swapping home ports for Caribbean waters and the re-emergence of domestic Asia and Australian itineraries.
“Demand is surging,” confirmed Birnie. With 60% of business from repeat travellers, he is confident that there is a “significant base of loyal and committed cruisers waiting to get back on board”. Starboard’s Bauer also added returning casino guests to the loyalty mix.
This is backed up by recent booking data, with Oceania’s 2023 around-the-world voyage reportedly selling out in 24 hours, Carnival bookings for 2022 exceeding 2019 demand, and Crystal Cruises selling more than 4,000 cabins on the opening day of sales for its Bahamas itineraries.
Heinemann is working on initiatives to use its physical retail space as a doorway to digital experiences that fully integrate retail into the cruise ship ecosystem, both pre-arrival and onboard.
Heubel mooted the examples of purchasing an onboard restaurant sushi knife set for home delivery while referencing the imminent launch of the first virtual make-up assistant at sea, in partnership with L’Oréal.
INVENTORY: STRIKING THE RIGHT BALANCE
An element of passion and excitement in being part of the first wave of returning cruisers is where SMT’s Ferenczi sees additional retail revenue opportunities, with specially branded merchandise including slogan t-shirts.
Harding is also upping the Covid-friendly engagement ante with personal shopping, one-on-one consultations and private viewings, and new onboard options supported digitally by a pre-cruise or click-and-collect service at sea.
Birnie said: “A bonus on the retail side is limited opportunities to shop on land, [which] coupled with holiday wallets waiting to be spent can only be good news for sales.”
Picking up on the repeat guest loyalty factor, he noted: “Once they’ve been on board they also have a much higher propensity to spend in some of the more higher end luxury categories [and] they will drive the volumes in the initial period.
New category opportunities may also be in the pipeline, but Ferenczi was quick to point out the un-navigated reality of unsold inventory. “[These products] are still in demand and we’re going to make sure we promote this more actively than before,” he said.
“The engagement is going to be different. Tastings aren’t going to be as easy, the touching and sensing won’t be as prevalent, so we are considering new interactions within the limited amount that can take place.”
Sharing her thoughts on unsold inventory and future opportunities, Bauer said: “We’ve got to deal with the reality of that while really trying to learn from what we’re seeing shoreside and [from] our LVMH brands, and what consumers are responding to. It’s trying to find that balance between inventory and introducing some sense of newness at the same time.”
“It’s a very resilient industry and it’s really up to us to deliver. I would encourage all the brands to think of the cruise industry as a laboratory; People want things with bragging rights that they can’t get in other places. Help us curate that and bring it to life on board.”
The five-day virtual Summit of the Americas is hosted by IAADFS and ASUTIL in association with The Moodie Davitt Report.
To read a lead interview with Starboard President & CEO Lisa Bauer in the TRBusiness interactive April e-zine, a special Americas issue, click here.
Report by Claire Malcolm.