A Letter From Dan Yates About Landing Fees, Demand Pricing, and Cost Concerns:
Book Early and Save
The Portland Spirit fleet has gone through many changes over the years, but 2016 had the greatest amount of change for us. Our fleet of vessels serve two primary markets. Historically, our largest market has been group business (15 to 500 passengers) that is comprised of tour groups, convention groups, company celebrations, reunions and weddings. This market has long range needs as their planning cycle can be anything from a couple of days to two years into the future. This places a great deal of stress on our operation as predicting costs two years out is extremely difficult (some would argue it is impossible).
Our other market is our public cruise (under 15 passengers) segment. The public wants value, flexibility, and ability to customize their cruise. The public expects to be able to walk on to the boat without a reservation and getting a table and also wants to be able to book six plus months into the future. These expectations place a great deal of stress on our operation as we want to provide a quality experience to everyone one of our guests.
The major costs that directly impact the cost of a cruise include: Labor, Fuel, Food, Bar, Vessel Insurance, Medical Insurance, and Regulations. Labor is our biggest cost and the one that has had the largest increases in the last two years. Oregon has passed significant minimum wage increase (about 50% increase spread over 4 years), paid sick leave (one week per year) for all employees, and soaring health care costs. In 2017 the State of Oregon may institute “Two Week Schedules” for all employees with potential penalties for employers that reduce or add hours to an employee's schedule.
Food and Fuel prices have been all over the place the last year. We try and contract out long term suppliers, but vendors are less open to long term arrangements as price volatility becomes the new norm.
Vessel and Medical insurance are two of the great unknown. In the marine insurance world one large accident anywhere in the industry can increase the entire Industry&squo;s annual insurance cost. Medical costs are well know for being out of control, but mandated for employers to provide. The amount of management time health care consumes is incredible, increasing and expensive.
Regulations have dramatically increased costs for small business the last few years. Accounting fees have tripled in the last three years. The Federal government continues to add more layers of security to our industry and that drives up cost. Government fees continue to climb at a pace far exceeding inflation. “Banning the Box” eliminates the requirement for people with a felony to inform employers, which now forces employers to pay for background checks prior to hiring new employees.
What is the Portland Spirit doing to handle these new costs? We have considered changing our service by replacing people with technology. We have decided to not change the customer experience which we could by reducing the quality of the food, number of staff on the vessel, and fewer service representatives. The only option left is to increase the cost of cruises, but how do you do that fairly? We have spent 2016 investing in a state of the art reservations program that will give customers our lowest fares if they book early and as the date of the cruise approaches the cost of the cruise could go up. If the cruise is very popular the cruise price can vary significantly from the first ticket purchased. So booking early can get you the lowest available price and waiting could cost more. This model is called “demand pricing” and is in effect on most of our cruises. Hotels and an airlines have used demand pricing for years, but is very new to the cruise industry.
The Landing Fee is something we implemented several years ago. I do not see it changing in the future (2017), but it may if Demand Pricing is not enough to cover unexpected costs. In the recent past the Landing Fee was our only way to protect the company from surges in costs. Our new software program will provide some fairness to our system as we allow people that book early to save on their cruise.
About half of our bookings are through our website and we anticipate that the percentage will continue to grow for years to come. Portland Spirit friends on facebook and those that sign up for specials offers on via email get exposed to special discounts. We offer very few general, public discounts, but we do have “daily deals” on facebook nearly every week. The only sure fire way to save is to book early.
Dan Yates, President