Fred Olsen Cruise Lines hopes to see an 8% increase in yields next year to return to where it was pre-recession and if it is to ever consider further increases in capacity.
However, fuel continues to be a major cost for the cruise line at $85 a barrel, which is $5 above the upper limit Fred Olsen based its business plan on.
Speaking at an agent breakfast at the Travel Convention in Malta Fred Olsen marketing director Nigel Lingard said ideally oil would be at about the $70 mark.
The current inflated price means the line will have to add fuel surcharges for 2011. A decision will be made within the next week.
Lingard said Fred Olsen was recovering well since the low of 2008 when the introduction of new ship Balmoral and the stretching of Braemar coincided with the recession.
“We are having challenging times. If we look back, the recession, coming when it did, hurt us quite a bit. But we have fought our way back and this year we are running at record occupancy levels.
“The hardest part is getting the revenues back. Next year we are going to have to achieve revenue increases of 8%, which is well ahead of inflation.
“Those are the levels we need to make the company profitable and invest in new tonnage.”
With few second-hand ships available, any further capacity would have to come from new builds but the poor euro sterling exchange rate has made this more expensive.
Lingard said a number of recent innovations like its Suite Dreams upgrade package, its ArtsClub educational programme and targeting agents to achieve yield rather than volume had worked.
He estimated about 2% of recent yield uplift could be attributed to the yield targeting programme, now being followed by about 30 agents.
Lingard said he was not concerned about the additional capacity being added by rivals such as Cunard.
He said: “There is a lot of talk about this huge cruise capacity, but globally, it’s not that much. There are no new ships scheduled to be based in the UK in 2011, so there is a good chance to achieve better pricing.
“We do not want to be in a battle with the likes of Cunard and P&O Cruises because we want their ships to be full, because as soon as they are full, they will push up their prices.”
Lingard revealed Fred Olsen had to charge about 15% more than rivals with large new ships but that enhancements to its offering such as the ArtsClub and Suite Dreams made sure that premium was worth it.
“It’s important for us to get our product to a level where it’s just a little more cultured and more stylish than our large-scale competitors.”
- More from the Travel Convention at travelweekly.co.uk/tc2010