Busting a billion-dollar digital myth for cruise lines

Cruise brands have an enviable position: with strong brand equity, a loyal customer base and a superior product, they enjoy massive profitability in the so-called Golden Age for Cruise Lines .

Among the three largest operators worldwide, Carnival earns $31,181 per minute, while Royal Caribbean takes in $16,165 and NCL books $9,273.

Buoyed by massive superships that command a premium, operating profit has nearly doubled in the past four years.

With each new vessel, the industry manages to absorb the new inventory without having to reduce prices or sail with lower-than-desired occupancy. Cruise lines have expertly navigated these waters, welcoming a record 27.2 million passengers in 2018 .

Even so, there’s some choppy water on the horizon. With each new supership - and the show-stopping new features geared towards the "wow" factor - the industry dates itself. Existing ships seem a little less shiny and a little less new.

This leaves older ships with a marketing dilemma:

• How to define the ship’s niche among cruise-going loyalists, while also attracting new cruisers  - all the while maintaining occupancy and revenue targets?
• When should a ship be taken out of service for upgrades, trading short-term revenue loss for long-term competitiveness and growth?

Cruise lines must find a way to maintain existing business while developing new revenue streams in parallel.

The reliance on physical space for revenue means that taking that physical space out of service for upgrades and redesigns presents a significant business risk. And you can hardly renovate floor-by-floor while still welcoming guests, like a hotel.

To deliver a successful digital transformation, cruise lines must expand revenue streams on existing ships by upgrading technology and the passenger experience, all without pulling ships from service.

Busting the billion-dollar myth of a costly digital transformation

Cruise lines are diving head first into digital transformation. Major brands like MSC Cruises and Royal Caribbean have committed billion-dollar budgets to transform into digital-first organizations.

From a digital concierge, mobile apps for guests, and full-ship wifi, to crafting immersive virtual reality experiences, the leading brands now differentiate the guest experience through digital initiatives.

These initiatives have redefined the booking process, made marketing more personalized, streamlined the boarding process, and made it much easier for cruises to engage with passengers during and after the trip by capturing real-time feedback.

Royal Caribbean is taking on this challenge by transforming the once “off the grid” cruise vacation into a connected, tech-enabled experience, according to Forrester .

As the cruise boom continues into 2019 , digital transformation is definitely the need of the hour for cruise liners as it will help them in delivering better customer experience leading to an increase in revenue.

Given the obvious complexity, digital transformations can be intimidating. Most cruise lines have been reluctant to invest too heavily in digital, making certain assumption about how digital fits into the physical experience of a cruise ship. Let’s bust these myths!

Myth #1: My loyal fan base means that I don’t need to consistently attract new customers

To expand the cruise audience to match the growth in new ships, brands must prioritize marketing to the next-generation of cruisers. Small, targeted campaigns can affordably drive significant revenue from new segments.

For new cruisers, the marketing must first convince them to take a cruise. Only once that decision is made does ship selection come into play. Marketers should make a series of small bets to entice new cruisers.

To make these bets, RateGain helps cruise lines leverage historical data, as well as provide future forecasts from events and weather, to help revenue managers make better predictions and identify demand from untapped markets to target new audiences.

As mobile search increases, cruises need to be positioned correctly across all channels, while also managing their reviews to attract audiences.

As per RateGain’s data science lab, more than 50% of people read reviews on Google before making a decision on which travel company to choose. For a more premium priced product like cruises, these reviews really matter.

Cruises should also create the right forum for customers to share their experiences on social media, as this word-of-mouth marketing from cruise loyalists is free and immensely powerful marketing.

By tracking social media feedback through products like RateGain’s BrandGain , cruises can encourage passionate cruisers to share their experiences and expose new segments to the pleasures of cruising.

Myth #2: Digital transformation must be a multi-year overhaul

While it's true that the most effective and long-lasting digital transformations require a company-wide effort, there are small projects that any cruise brand can implement relatively quickly.

One example is part of Royal Caribbean’s digital transformation . To help cruisers choose excursions, as well as entice reluctant cruisers to purchase an on-board excursion, the company has set up immersive virtual reality experiences. These “try before you buy” experiences are also available via its mobile app.

For functions such as revenue, social media marketing, rate shopping, guest reputation, and data intelligence projects, new technology and processes can be implemented within anywhere from a week to within one year.

It all comes down to prioritizing specific outcomes, matching the technology to the objective, creating a realistic timetable for rollout.

Myth #3: Emerging technologies are still not relevant for cruises

Cruises have a powerful ally when it comes to the utility of machine learning and New Age data.

Across the cruise operation, there are many points where capturing and analyzing large sets of data can deliver an improved passenger experience, as well as a more profitable operation overall through reduced costs and increased efficiency.

For example, Royal Caribbean already uses artificial intelligence to suggest schedules and events personalized based on passengers’ disclosed preferences.

This type of application is an efficient and impactful way to deploy emerging technology to achieve a specific outcome: in this case, a more personalized guest experience which translates into greater satisfaction and more potential on-board revenues.

The ideal approach is to avoid getting overwhelmed by the big picture and overspending on futuristic-but-unproven technology. Successful digital transformations solve daily challenges that help companies make faster and more accurate decisions.

Myth #4: Smaller cruise lines cannot match up to digital efforts of major cruise lines

Smaller brands are well-positioned to thrive In the digital space. With a more intimate connection with cruisers, small brands can bring a personal touch that sets them apart.

When it comes to technology, it's about translating this personalized approach into the right digital tools. Smaller cruise lines can work with SaaS partners to automate and transform their middle and back office operations.

These improvements increase staff productivity and reduce customer acquisition costs through better intelligence, rate distribution, and reputation management.

Another example of a achievable digital effort is rate intelligence.

By tracking competitor rates through tools like RateGain Rate Shopping, cruises can map each ship to craft apples-to-apples product comparisons that help refine pricing strategy.

For these projects, look for straightforward implementations that require less upfront effort yet deliver outsized results.

Myth #5: Digital for cruise require substantial infrastructure upgrade

With the advent of cloud computing, most data now is stored in a data lake. This centralized source substantially reduces cost and time to market, especially for digital initiatives that focus on increasing efficiency of marketing and pre-trip communications.

The time and cost savings free up smaller teams to focus on specific audiences and channels to squeeze more demand from smaller marketing budgets.

It all comes down to prioritizing the technologies that deliver impact in the short-term, which then fuels greater long-term investment as revenues grow, costs drop, and guest satisfaction rises.

RateGain’s own data lake for cruises has data from cruise lines all across the world consisting of historical competitive prices, events, weather which cruise lines can leverage to build applications on top of the data lake for faster insights.

The first steps in a digital transformation

Now that we've busted a few myths, here are the first steps to take when starting on the digital transformation journey:

1. Identify bottlenecks

Qualify the key pain point/performance indicator you want to improve for your cruise line between attracting demand, customer experience, and overall operations, and then break down the program into smaller projects

2. Know your cruiser

Prioritize external data that influences your customer in the decision making journey. Targeted marketing with personalized offers ensures a higher conversion on marketing spend.

Knowing what customer is searching for and their preferences and then targeting them with relevant offers and promotions will help in getting higher ROI on marketing spend.

Capture the passion of cruise loyalists with strong loyalty programs that use data and analytics to target repeat cruisers with relevant offers at frequent intervals.

3. Identify digital opportunities

Don’t rule out the need for new technologies to improve processes and get better intelligence, such as targeting customers with relevant onboard offers during pre-boarding.

Capture, store and analyze customer onboard data and connect it with pre-board data to create micro-segments and finding segment level patterns. Insights from segmentation can inform better product design.

4. Leverage your data

Use New Age data for better forecasting, planning, marketing, and pricing. By merging historical booking and pricing data, along with holidays, weather, competition, you get accurate forecasts to set optimal rates.

Choose a data partner with cruise expertise, like RateGain , to track competition and respond quickly with appropriate measures.

5. Focus on flexibility and scalability

Look at a multi-vendor setup with the natural choice for specific departments being SaaS-based quickly implementable solutions.

And don’t forget social: having the right social media software for cruises ensures that customers are able tag and post their pictures and write about their positive experience in social media.