Cruise liners are facing a sea of change in sourcing solutions for operational and revenue management, impacted by a dynamic environment of data, devices and service. Over the years it’s become clear to cruises that revenue per passenger ticket was dropping. Cruise Profitability in 2016 was largely contributed to increased passenger capacity – such as the scope of China in cruise bookings – reduced operating and fuel costs, as well as increased passenger onboard spend. For 2017, a number of industry challenges, such as increased fuel prices and digital capabilities, will require advanced technological cruise solutions.
The Cruise Industry with its complex eco-systems of partnerships and inter-dependencies across the world requires quick savings, digital capabilities and automation to drive up profits. In such scenarios, quick turnaround to competition, demand and savings management, and pricing holds the key between profit and loss. One of the top cruise liners recently told investors to expect $50+ million cost savings annually. To meet the demands of cost savings and operational efficiency; automation and analytics become essential cornerstones. McKinsey reports that 85% of a typical company’s 900+ processes can be automated and that in 2014 an estimated 25% had already been automated. Cruise industries among the other verticals of travel will need to adopt and implement it. Let’s look at key cruise industry numbers:
• 25 million people took a cruise in 2016
• 25 million people took a cruise in 2016
• The cruise companies are on course to be a $37.8 billion industry in 2017
• The average revenue per passenger per cruise has fallen from $1,600 in 2007 to approximately $1,500 projected for 2017
• Total estimated capacity 25.2 million passengers in 2017
• Industry revenues are projected to reach $57 billion by 2027
Enabled by global expansion with the rise of sea travel in Asia – China, India and Japan – among other markets, has brought a host of new opportunities and challenges such as exposure to high competition, natural disasters, geo-political events, connected consumers and so forth. The scope of new-age technologies like analytics and automation will go a long way in enabling better profits for cruises.
Riding the digital wave: Connectivity is incentivizing the cruise industry to set sail digitally smart solutions, increasing efficiency and revenue per passenger, with many different players having already implemented digital in their operational processes. Mobile technologies like apps, chatbots etc., enable your cruise line to deliver exceptional experiences that have loyal guests returning. But increase of passengers, operations data and partnerships churns data that can both hinder or improve the cruise revenues.
When cruises invest in analytical technologies that can extract intelligence in clear, transparent models, it brings micro personalization and pinpoints strategic opportunities. Often this begets a partnership with a 3rd party provider to holistically analyze, build and test processes for all kinds of data that come in.
Analytics: Ideally, there are 3 kinds of data generated by cruise companies – historical data, external machine data and third-party data sets from partners. Difficult to handle for conventional applications, they create a powerful source for predictive analytics. Companies need 3rd party to define a process that identifies “blind spots”, to create what describes as a “Hub-and-Spoke” analytics model. Irregular operations, pricing fluctuations can cause interruptions to planned journeys, loss of revenues and potential brand damage.
Analytic tools can help reduce downtime and more crucially avoid disruptions and reduce costs. IGT works with 2 of the top 5 cruise leaders to enable better travel with operational and technology excellence.
Role of analytics in Pricing: Many cruise liners provide round-trip airfares, transfers and hotel rooms for guests for the cruise. Cruise liners arranging travel fares for more and more passengers driving the adoption of such combined packages, but are often outpaced the ability of cruise lines to manage and price them. By having IGT provide up-to-the-minute travel fares insights, helps cruise liners to react in time to fluctuations in the market. It also increases agent productivity and smooths the management of airfare contracts and savings.
IGT cruise solutions automates search and reevaluation of fare pricing, notifies and prioritizes actions to derive the maximum cost savings. Simply put fare pricing analytics helps track competitor prices, GDS airfares and optimizes your response across customer segments prior to final bookings. The solution has so far generated profits of 1-3 percent for cruises.
This capability helps cruises to enable a strategic shift, further reducing costs and increasing savings. Key Benefits of the IGT fare tool are:
- Increase in profit margins due to lowering of associated cost
- Monitor and analyze airline contract performance
- Review agent performance
- Manage, block and charter inventory at corporate level
- Monitor cost associated with schedule changes and crew due to last minute changes
- Track Y-O-Y price variation
The proliferation of technology will be built on the convergence of big data, predictive analytics, and connected devices. What analytics and automation has done, in essence, is to make possible timely data and strategic cost savings a reality. And the notion of using analytics to optimize cost savings with travel fares marked a significant advance in cruise liners revenue strategy.