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Where Do Cruises Make the Most Money?
Cruise lines operate in a lucrative industry and their revenues come from a variety of sources. They make the most money from onboard spending, they gain from vacation packages that include airfare and land extensions, and profit from their alliances with travel agencies. Cruise lines generate a significant portion of their income from ticket sales, but you may be surprised to know that this is not their only, or even their primary, source of revenue.
Here’s how it works: A first-time cruiser might be astonished by the initially high cost of the cruise ticket. However, inside the cruising world, the ticket price is just the beginning. The real income of cruise lines in fact, is made from the extra charges of onboard activities, services, food and beverage sales – the most common sources of onboard spending. In fact, according to a study done by Cruise Market Watch, onboard spending represented a whopping 27% of total cruise industry revenue in 2018.
What Is Onboard Spending?
Onboard spending refers to the many opportunities passengers have to part with their money while on a ship. This includes drinks, specialty restaurants, exotic excursions, internet access, onboard shops, casino plays, spa treatments and so forth.
These money-making channels open from the minute the guests step onto the ship. The key here is the convenience factor – when you are confined within a space, the likelihood of someone spending on goods and services increases. It’s a business model pioneered by Las Vegas casinos and successfully applied by cruise companies worldwide. According to Cruise Lines International Association (CLIA), a cruiser spent an average of $101 per day on onboard expenditures in 2018.
How Do Vacation Packages Contribute to Revenue?
The majority of cruise lines offer vacation packages that bundle cruising with airfare and land tours. These are generally advertised as more convenient for travelers as everything is pre-arranged at one fixed price, and are a significant source of revenue for cruise lines.
Cruise lines can earn a good margin from vacation packages as they save money by bulk purchasing flights and accommodation, then add on their handling charges. Beside the profits from the packages, the add-ons also increase the appeal to potential cruisers because the hassle-free approach to holiday planning adds value.
Contributions of Travel Agency Alliances
Travel agencies are also an important part of the cruise industry’s revenue. Cruise lines often form alliances with travel agencies and other travel businesses, which bring them a steady stream of customers. These businesses are paid a commission on the ticket sales, but the majority of the ticket price goes to the cruise line.
Frequently Asked Questions
How much do cruise lines make per passenger?
On average, cruise lines earn around $1,000 per passenger for a seven-day cruise. This figure includes the ticket price as well as onboard spending and is an estimate that varies widely based on multiple factors, including the cruise line, the itinerary, and the time of year.
What are some lucrative routes for cruise lines?
Routes with major tourist appeal, such as the Caribbean, Alaska, and the Mediterranean, are typically the most lucrative ones for cruise lines. Cruisers are willing to pay more for these iconic locations due to the stunning landscapes and unique cultures they offer.
Why are drink packages profitable for cruise lines?
Despite appearing as a good deal for passengers, drink packages are a significant source of income for cruise lines. They involve a high markup price and often result in consumers purchasing more than they would if they were paying per drink.
How do casinos on cruise ships contribute to revenue?
Casinos onboard cruise ships can be a substantial revenue source. This is because once out at sea, there are few regulations on gambling, allowing the cruise line to keep a larger percentage of the winnings.
So, to conclude, cruise lines find lucrative strategies within different areas of their operation, be it onboard services or strategic alliances with travel agencies. These well-planned revenue streams enable them to continue offering exciting cruise vacations to millions of travelers worldwide.
