AlamyThe Carnival Cruise ship Costa Concordia lying on its side next to Giglio Island, Tuscan Archipelago, Italy, prior to its being righted Tuesday. It took 19 hours, but salvage crews finally turned Carnival’s (CCL) Costa Concordia upright on Tuesday. It’s going to take quite a bit longer than that to turn Carnival itself around.
Last week, Carnival rolled out the Great Vacation Guarantee, offering travelers a 110 percent refund and free transportation home if they are not satisfied within the first 24 hours of a cruise. Naturally the unhappy passengers will have to wait until the next port of call to leave the vessel. And Carnival will also offer those customers a $100 credit for a future sailing if they ever want to give the company a second chance.
Yes, it’s that bad apparently.
Not So Bon Voyage
The world’s largest cruise ship operator just hasn’t been able to raise steam since a few unfortunate incidents at sea over the past two years have tarnished its reputation.
The Concordia accident was the worst, of course. That disaster killed 32 people last January when the ship ran aground along the Tuscan coastline. Closer to the cruise line’s Florida home, an engine fire earlier this year stalled Carnival’s Triumph at sea for days.
Remember late-night shows poking fun at the ship that was rendered partially powerless with backed up toilets and stories of passengers scrambling for cold food? That was Triumph. A month later, Carnival’s Dream turned into a nightmare when its backup emergency diesel generator acted up. There were some brief interruptions to power to elevators and restrooms. At least that boat was already docked in St. Maarten on the final leg of a week-long cruise. Carnival decided to fly passengers home from there instead of chancing another Triumph-style defeat.
Smaller incidents have also hit other sailings, but those are the ones that stand out vividly in the minds of potential passengers. These are the events that travelers consider when they weigh the decision to take a road trip, fly off to a single destination, or hit the open seas.
Carnival has a lot of sprucing up to do with its brand, hence the extreme guarantee.
A cruise vacation should be an easy sell. The ability to pack once and explore several exotic destinations is unmatched by other travel methods. The abundance of dining and entertainment options when a ship’s at sea put air, rail, and car travel to shame.
Pack some Dramamine or Sea-Bands for the landlubbers and you’re all set.
However, Carnival’s miscues are making too many potential passengers rethink the advantages of boarding a ship. It’s not just about the ill-fated trips. Booking a cruise also leaves you at the mercy of last-minute cancellations when things go wrong on a prior sailing.
Triumph’s failure forced months of weekly bookings to be cancelled. Refunds were offered, of course, but these bumped passengers had to scramble to draw up new getaway plans.
The Great Vacation Guarantee seems to have you covered once you’re on the boat, but what if you never get the chance to board in the first place?
Carnival for Carnivores
Will this new desperate guarantee be exploited? Probably. You can already picture some folks booking their trips with every intention of asking to get off the next day after an evening of dining and entertainment. Carnival will have to be lenient here. The last thing it needs is to have folks trying to game the system complain that they weren’t allowed to leave the vessel in under the terms of the guarantee.
However, the brand does have an image that needs to be restored.
In its latest quarterly conference call, Carnival pointed out that bookings were up at higher price points on its non-Carnival lines, but it was the exact opposite on Carnival ships, and it’s not just the Triumph and Dream liners carrying the stigma.
Carnival warned that pricing on its bookings is lower on all of its major itineraries on the Carnival brand for sailings this quarter relative to last year. In a gradually improving economy, one would expect passengers to pay more. They aren’t.
Carnival earlier noted that it may take two to three years to truly restore the brand to where it was before. It’s done its part, spending hundreds of millions to add amenities and upgrade its fleet to prevent future fires from taking out both engine rooms.
The product has improved, but the consumers’ view of it has not. The Great Vacation Guarantee is an extreme offer, but it’s what Carnival needs to do in order to prove that it has finally got it right.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our newsletter services free for 30 days.