Alisa Skulpong considers herself pretty savvy about bargain vacations. So when she started looking for a seven-day cruise to Alaska this summer, she expected to pay around $1,000, the amount she spent two years ago.
Skulpong was in for a surprise; the trip now costs $1,400, even through bargain retailer Costco Wholesale Corp.
"If you're looking for a specific cruise itinerary, you need to book 10 months to a year in advance to get it. It's hard to get what you want at the price you want," said the legal assistant from Los Angeles, who booked the trip anyway.
Cruise prices are climbing, but that's not deterring vacationers who are buying tickets at a rapidly growing pace — extending the industry's rebound from the recession and Sept. 11, 2001, terror attacks that devastated the travel business and forced cruise operators to slash their prices. About halfway through the heaviest booking quarter of the year, cruise lines say they are making reservations even faster than in 2004 despite the higher prices.
Passengers are inching closer to spending as much on tickets and extras on board as they did during the boom times of 1999 and 2000, analysts said. Carnival Corp. & PLC, the world's largest cruise company, had its most profitable year ever in 2004 and expects to do better this year. No. 2 Royal Caribbean Cruises Ltd. and smaller players also report strong demand.
"I think people are generally feeling optimistic about the economy. It's been nice and cold across the country, which always encourages people to take a (cruise) vacation," said Andy Stuart, NCL Corp. Ltd.'s executive vice president of marketing, sales and passenger services. NCL operates Norwegian Cruise Line, NCL America and Orient Lines.
Willing travelers
Travel agent Joe Canino said his clients still seem willing to pay an extra $500 or $1,000 for the same trip they took a year or two ago.
"They question why it's higher, but it doesn't deter them," said Canino, a cruise expert at Hebron Travel in Hebron, Conn.
Cruise.com, one of the largest online cruise travel agencies, has been selling trips at prices averaging about 20 percent higher than last year, managing director Anthony Hamawy said.
After expected increases through the rest of this year, Carnival's average ticket prices should be about 3 percentage points below the peak levels before the terror attacks, said Robin Farley with UBS Investment Research.
Net revenue yields measure the average profit cruise lines get from each passenger per day. Carnival's are expected to rise 4 percent to 6 percent this year. Last year, they were $170.32, up from $156.38 in 2003 and $166.44 in 2001. Carnival did not publish those numbers before 2001, a company spokesman said.
Because fewer new ships will be added this year, prices are also driven higher, analysts said.
Better value
Despite rising prices, many people contend cruises are still a better value than they were 20 years ago as ships get bigger and can take on more passengers.
Elmer Walter said he and his wife paid about $1,700 for their first cruise, a four-day trip in the Caribbean in 1987. The Mesquite, Texas, couple paid $1,428 for a seven-day Caribbean cruise in a similar cabin two years ago, although that trip is up to about $2,000 now.
Traveler Skulpong agreed that cruising is still a good value.
"I still think that it's overall less than I would pay if I had to fly up there, get a hotel room and pay for three meals a day," she said.
Others say bargains can still be found, especially on the Internet.
"There are just so many nuances out there about cruise prices that the experienced cruiser knows how to take advantage of them," said Robert Bluestone, a retired banker from Port St. Lucie who takes a cruise about every three months.
Bluestone usually calls the cruise line first to find out the list price, and then hits discount online travel agencies, such as Cruisequick.com. A recent search on the bare-bones Web site turned up Caribbean trips on the Carnival Cruise Lines brand for as little as $100 a day per person, including a cabin, food and entertainment.
Ray Weiller, an owner of Cruisequick, said that while his company has made fewer bookings so far this year, revenues have been about the same because of higher ticket prices.
"We're now starting to see people booking for 2006 because they can't get anything this year," he said.
Market growth
The Carnival group and Royal Caribbean both said the growth has been across major markets, including the Caribbean, Europe and Alaska. Europe has been particularly strong because of the dollar's weakness against the euro. Americans have been booking European cruises in dollars to avoid the unfavorable exchange rate they would face if they rented hotel rooms and bought meals in euros.
Shares of Carnival, which controls nearly half the global cruise market, are trading in the $53 range. That's off a 52-week high of nearly $60, but well above its low of $40.
To preserve their higher prices, the major cruise lines have made it tougher or impossible for low-cost Web sites to give passengers discounts. The lines didn't want cheapen their brand value and have consumers booking travel based only on the lowest price, a problem experienced by airlines. So Carnival Cruise Lines and Royal Caribbean now require travel agencies to advertise cruises at list price. Carnival still lets agencies give discounts as long as they aren't publicized, but Royal Caribbean doesn't.
"I think the days of cheap cruises that we saw after 9/11 are gone," Canino said.