To start, my response is to what you are writing. Not who you are. I apologize if I came across as calling you something. I am only calling out what's written!
Which just supports my reasoning that they make more money on any given cruise than we give them credit for. If people think the San Diego cruises aren't lucrative, I think they're mistaken. All of my math is based on only 2 people per room. I admit the math is dirty.
No one is saying that San Diego cruises are unprofitable. We are discussing a lack of profits on the transit cruises.
If a San Diego cruise generates $1 in revenue, it keeps about 25-30 cents in operating profit. Let's use 30 cents as the number. That is, of $1 in revenue, 70 cents are operating costs. Most of these costs are fixed. So, if a transit cruise is going to generate just 70 cents of revenue in the first place, the 70 cents of mostly fixed cost will wipe out any profit.
The only question is, whether these cruises actually incur 70 cents of cost or whether they are more profitable than the overall division. Even if they are - which we don't know - Disney makes materially more money on, say, the San Diego cruises So, their opportunity cost on the transit cruises is very high. We are talking almost a full month out of a year (EBPC + WBPC) of minimal profits, so the premium on another sailing - such as Alaska - must pay for it.
Don't mistake a "sold out" cruise for a profitable cruise. Things sell out when they are attractive to the buyer - not the seller.
iannovich said:
Using your math of $650 per night per room average that is roughly $568k per night or around $8m gross fare revenue for the full 14 day transit. I'll deduct your 10% Placeholder credit for absolutely everyone onboard. That leaves $7.2m in just gross fare revenue per transit. I'm not going to buy that Disney ever feels 'forced' to transit the canal.
To clarify - and respectfully - I hope we understand the difference between revenue and profit. Do you think it's possible to lose money even if you are generating $7 million of revenue?
iannovich said:
We're Platinum and Gold and splurge just as much as first time or Silver cruisers... I could argue that we splurge more because we actually know about all the little extras to spend money on. On my first several sailings Mixology and Palo were not even ever on my radar while I took advantage of and experienced all the free activities and the MDRs. I didn't have any clue about Rainforest Rooms or Couples Retreats. There wasn't any knowledge to say "nah, I'll skip the (free) MDR Pirate Night Menu and book Palo or Remy instead." Now I'm booking every class/tasting/experience that I can grab the literal minute that they become available us and I can't wait to drop $300 each the next time we get a chance to do Be Our Chef. We actually are both hunched over keyboards at midnight Eastern Time with a plan and strategic priorities to book: ("Did you get Palo Brunch???!!" "Got it! Did you get Mojito and Caiprihna?") and we're still finding a lot of those experiences are sold out for pre-booking before we can grab them all. That's not Silver or First Timers causing us to miss something we were hoping to book, that's another Platinum cruiser with faster fingers. That's how it was pre-covid and that held true for the two San Diego sailings we're booked on for 2021.
"Because I did this, everyone must do this" can be used to justify the most unrealistic of the arguments. The entire cruise industry is known for having terrible loyalty benefits. Disney specifically targets the first timers - see the 3-/4-night sailings - because they know they can squeeze more money out of them.
iannovich said:
I specifically didn't include Excursions or Spa expenses as revenue sources, since I think Disney only gets to 'wet their beak a little' for those.
Excursions are big money makers for cruise lines. The transit cruises have very few over the 14 days - when half the cruise is sea days. Disney can do two San Diego cruises in those 7 days and bring home top coin from the excursions. And, make no mistake, that excursion markup is huge.
iannovich said:
But Disney regularly offers 30% fares to Florida residents and on top of that we cannot say that every non Panama Sailing ends up sold out, so is it really so drastic a reduction? We do know that all the last several Panama Canal cruises have been sold out, and fairly quickly. But let's say that it is so drastic: I still maintain that Disney does just fine on those sailings.
Now, this should tell us precisely the maximum discount they are willing to offer. The 30% discount matches the margin I quoted you. Since the transit cruises fare 30%-40% lower in revenue, they are at their rock bottom.
iannovich said:
I do think they operate at a higher margin and I just don't believe that the Panama Canal Cruises are not profitable to them. Based on how the Canal cruises continually sell out, it says to me that if they needed to, they would raise the fares until they found the sweet spot where they were no longer attractive and then back them off a little. That they haven't done this suggests to me that they don't need to and they're happy with them as they are.
Based on what facts? I provided pretty exact numbers. I can't claim to know how precisely profitable each cruise is, but there is a big difference between the two types!
iannovich said:
I do think their operating costs are high, but I don't necessarily think that they're so much higher than any other line. With the exception of fireworks, those are all the same costs you will find on other ships. The DCL Entertainment Cast Members probably work harder though, since they double and triple up the shows, characters and events. Troll Number Three from the Frozen show is helping you get a picture with Mickey and they're not getting paid anything extra to do that, for better or worse, it's part of the gig.
Like I said, Disney's costs are materially higher.
We know the costs for the entire division, which clock considerably higher than those for other operators. (Compare with Six Flags, for example.) At the cruising level, that premium is also apparent in relative cruise fares (Disney's vs other cruise lines), so the cruise costs should follow this logic too.
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To conclude, we don't know what precise profit there is on each cruise. What we
can say, however, is the panama canal/transit cruise brings in much less revenue than the others - as much as 30%-40% less. It's equivalent to the max discount Disney is willing to offer elsewhere.
That said, even if the transit cruises make minimal money (if any), they are necessary because they enable other high-margin cruises - such as Alaska in the summer.