Travel and Cruise

Optimal bundling of shore excursions and on-board products

Optimal Bundling of Shore Excursions and On-board Products

In its steady evolution as a mainstream vacation alternative, the cruise industry has gone through several perspective shifts. Per CLIA's latest state of the cruise industry report, guests are increasingly expecting cruise lines to provide transformational experiences. By providing a ken of experiences from cultural immersion and "volun-tourism" to extreme adventures, those returning from a cruise are expecting a shift in perspective and a profound sense of accomplishment.

In an earnest bid to help guests push the envelope on their vacations and to create unique encounters to take back home to share with family and friends,various cruise lines are developing its shore excursions and on-board products with remarkable sense of urgency as well as ingenuity. Sedentary tours have given way to more adventure themed activities. Culinary programs have been included as they are thought to represent more authentic cultural barometers of a locality. On its cruises to India, Azamara takes passengers on an excursion titled "Cook with a Parsi Family" in their residence. At the recently concluded Seatrade Med 2018 in Lisbon, I chanced to meet a reputed industry veteran who articulated how his cruise line was focused on providing a "rejuvenating" experience for guests through its newly developed exclusive range of spa offerings. 

Cruise lines have been pushing the sales of shore excursions and on-board products upstream (at the time of finalizing the cruise) for quite some time now. However, with the increased demographic diversity booking a particular cruise, increased supply in the market and the wide range of shore excursions and on-board products at its disposal, there is a need for cruise lines to be very sophisticated in how to bundle these products along with the cruise for optimal outcome.

Let's look at some of the benefits the cruise lines are expecting from upstream sales of shore excursions and on-board products: 

  1. Increase in perceived value of the offering and consequently improved conversions
  2. Achieve greater revenue and operations predictability
  3. Free up cruise lines to focus more on building excitement during the lead-in time between booking and date of travel in the knowledge that a certain amount of ancillary revenues is already secured
  4. Improved guest satisfaction 

In a bid to sell ancillaries upfront, the cruise line must also ensure that despite the plethora of options presented, at a minimum the cruise needs to be secured. Hence, while adopting a bundling strategy for its various sales channels, especially the high touch ones, the cruise lines must present sufficient & relevant options with flexibility built-in to ensure that it stands the best chance of attaining the above objectives without scaring the passengers and thereby losing out on the opportunity to secure the cruise.

In this regard, the cruise lines can learn a lot from tour operators who have mastered the art of bundling products. One of the emerging ways of bundling is to create different experiences or "fare bundles" to use an airline terminology around a particular cabin category or class.

E.g. for an Emerald Suite, there could be several associated experience levels and consequently different prices. The "Vanilla" experience comes with just the cabin. The "Bella" experience may have certain number of shore excursions and spa treatments bundled as a part of the fare. The "Infinity" experience comes with even more inclusions and other benefits including more relaxed cancellation policies & deposit requirements, ability for guests to select their own cabin etc., the latter options serving to improve the perceived value without incurring "real cost". Taking further cues from tour operators, these experience levels can come with certain ancillaries that are mandatory (included in the price), optional (applied by default but can be opted out), add-ons (not applied by default but can be added) or substitutable (an equivalent product can be chosen in its place). When presented the right way, travel agents or call centre staff can discern the guest disposition and purchase propensity early in the sales process and quickly steer the guest to the best product. Revenue managers can improve yields further by introducing the concept of dynamic pricing for various ancillaries whereby the price changes based on the number of people adopting a particular offering. 

All of this is easier said than done. Managing increased number of product options without access to specialized technology can be extremely painful and leads to slower response time and consequently guest dissatisfaction. Bundling is a specialization in itself and a bandaid approach to bolt on this capability to existing technology seldom work.

Next generation digital platforms such as iTravel-Cruise are conceptualized with packaging needs of the cruise industry whether it be bundling of pre-post products or on-board products and shore excursions. It also presents the various options in the optimum way during the shopping and booking process with the necessary flexibility to move back and forth between various options and further tailor the offerings based on guest needs. It is certainly exciting times for the cruise industry and technology will yet again be a key determinant on whether cruise lines are able to take advantage of the new opportunities and ultimately remain relevant amidst increasingly changing industry dynamics. 

Asish Z Koshy is the Head of Travel & Cruise business at IBS. He is an accomplished & passionate leader with more than 20 years of experience in the travel industry and comes with significant experience in enabling business transformation through use of technology.

He has conceptualized a number of game changing products for the travel industry that have been successfully adopted by major global brands. He enjoys travelling, reading non-fiction books and a game of badminton. Asish is a founding member of IBS. 

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Saturday, 20 April 2024

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