Anyone who takes a cruise understands that the ticket price never quite reflects everything you pay. Your ticket covers your room and meals in the main dining room, the buffet, and usually a few other restaurants, but lots of additional ways to spend money exist.
You can, of course, opt out of extras, but most people end up dipping into their wallets for everything from adult beverages to premium coffee, shore excursions, premium dining, and onboard purchases.
Yes, you get a lot for the basic price of your ticket, but the cruise lines put a lot of temptations in front of you, all designed to get you to spend more money.
Now, Royal Caribbean (RCL) – Get Royal Caribbean Group Report, Carnival Cruise Line (CCL) – Get Carnival Corporation Report, and Norwegian Cruise Line (NCLH) – Get Norwegian Cruise Line Holdings Ltd. Report face a situation where they may have to add a new fee that customers would not be able to opt out of. It’s an unfortunate situation caused by world events and it’s one that could be around for a while.
Image source: Royal Caribbean.
Rising Oil Prices Hurt Cruise Lines
Oil prices have been rising, and they’re likely to push higher due to Russia’s invasion of Ukraine. Traditionally, when fuel prices push beyond planned-for levels, the major cruise lines pass on the extra cost to their customers via a fuel surcharge. That’s something that’s in the fine print of your cruise contract (the part very few people ever actually read).
When this may actually happen will vary among Royal Caribbean, Carnival, and Norwegian because each cruise line makes different choices in how it buys fuel. It’s not like the captain just pulls a ship into some sort of floating gas station and pays the given price. Royal Caribbean Chief Financial Officer Naftali Holtz explained his cruise line’s situation during its fourth-quarter earnings call.
“[So] for us, it’s obviously fuel prices are up from 2019. And just as a reminder, we also hedged a little bit over half of our fuel at what would be below-market prices over the last couple of months, so we’re benefiting from that — from these actions,” he said.
Norwegian Cruise Line CFO Mark Kempa made similar comments during his company’s Q4 earnings call.
“Approximately 40% of our total consumption for 2022 and approximately 25% of our consumption for 2023 is hedged and affords us partial protection from the recent spike in prices,” he said.
Carnival has likely done the same thing, but eventually sustained higher oil prices will force the cruise lines to pass on the increase to customers via a fuel surcharge.
What Does This Mean for Cruise Line Prices?
Royal Caribbean, Carnival, and Norwegian all retain the right to implement a fuel surcharge, but there’s no hard line as to when each might implement one.
“Some cruise lines lay out a price per barrel of oil, above which the charge can be implemented. For example, Carnival says that when the price of oil is more than $70 per barrel according to the New York Mercantile Exchange [Nymex] Index, then it can charge the fee. Norwegian Cruise Line uses a price of $65 per barrel,” wrote Cruzely.
Could does not mean will. Oil prices have been above that level, but Norwegian, along with Carnival and Royal Caribbean, has yet to implement a fuel surcharge.
Exactly how much each cruise line might charge varies. Carnival names a $9 per day charge while Norwegian lays out a $10 per day added fee in its cruise contract. Royal Caribbean does not name a specific number either for the surcharge or for what oil price might cause it to kick in.
It’s important to note that all three major cruise lines reserve the right to add a fuel surcharge even after you have finished paying for your cruise. Being able to do something and actually doing it are very different.
With all three cruise lines still working on their post-pandemic comeback, you have to assume that cruise line executives are wary of making a move that consumers would generally not receive well. If the move were to happen, it’s likely to come from all three cruise lines, and while it could be implemented immediately, there will probably be a warning period.
At the moment, Royal Caribbean, Carnival, and Norwegian have not added a fuel surcharge nor have any of them said they will. Should oil prices remain elevated, however, it’s likely that all three will eventually have to pass these costs on to consumers.
