Preserving cruise line liquidity through wallet technology
Typically, reimbursements via FCCs were offered when sporadic or localized service disruptions occurred. However, with the unprecedented nature of the current crisis and continued uncertainty around the industry´s recovery, cruise lines had to improvise. In a bid to retain cash, some resorted to offering credits up to 150% more than the value paid by their guests and agreeing to cash refunds if guests are unable to redeem FCCs before expiry. FCCs are also being offered to guests whose trips have not yet been canceled but prefer to postpone them. Throughout the pandemic, FCCs have been a cash retention lifeline for the industry, saving cruise lines up to USD 5-6 million per month.
As the crisis continues, cruise line call centers are under pressure trying to convince large numbers of guests to agree to FCCs instead of cash refunds. Given the manual processes often used for FCC issuance and redemption, cruise lines also face incremental costs. But there are several ways technology can help increase the likelihood of guests accepting FCCs over refunds, reduce costs and generate efficiencies, and boost revenues.
Increasing the likelihood of guests choosing FCCs
"Guest wallets" or "guest banks" provide visibility on credits, balances, refunds, and redemptions of a particular guest. Wallet transparency builds confidence in the value and legitimacy of FCCs. The ability to transfer FCCs to family members or other individuals adds value and flexibility, encouraging wallet adoption. What´s more, by allowing call center agents to issue discretionary and incremental credits (subject to governance), they can make the FCC option more attractive and rewarding than a refund. As most cruise bookings still come through travel agencies, e-wallets can also be extended to that channel with trade incentives providing further opportunities to push FCCs.
Reducing costs and generating efficiencies
There are two main costs associated with FCCs: the opportunity cost of the FCC bonus (i.e., when the reward is greater than the amount initially paid by the guest) and administration costs. Instead of applying a universal policy to FCC rewards, cruise lines can segment entitlements based on loyalty tier and spend. This approach leads to greater savings.
Furthermore, wallet technology can fully automate FCC processes. For example, FCCs can be granted upon voyage suspension or refunded at expiry automatically. By removing heavy manual intervention, cruise lines can generate efficiencies that lead to savings on repetitive tasks related to accounting, finance, and call center operations.
Cruise lines can create new and incremental revenue opportunities through FCC purchases. Guest wallets can be used to incentivize guests to part purchase future cruises – even when the itinerary is not yet finalized. Corporates or groups can also be encouraged to bulk purchase FCCs as rewards for their staff. Transparent and automated incentives can help drive upsell and cross-sell of other services, such as onboard credits. These can constitute additional credit currencies in the guest wallet.
Technology as an enabler to liquidity
Investing in smart technology allows cruise lines to pull several levers to preserve and increase cash. Just a 2-3% increase in FCCs for medium to large cruise lines can significantly impact total cash availability through curtailed revenue leakage, increased cost savings, and new incremental revenue sources. And that´s not to mention innovative guest experiences.It is often said that the strong get stronger during crises. As we have seen in our recent eBook, cruise lines that adopt innovative technology and practices to deepen relationships and trust with their stakeholders already show the adage to be true.
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.