Mutiny?
Fuel surcharges, de rigueur in the travel industry for years, have hit the high seas. Royal Caribbean (NYSE: RCL) announced this morning that it will be tacking on a fee of $5 per day on sailings that start in February. In other words, a couple on a weeklong Caribbean cruise would pay an additional $70 to offset buoyant fuel prices.
The surcharges have become necessary. Everyone from JetBlue (Nasdaq: JBLU) to UPS (NYSE: UPS) has resorted to the additional fees in the past. No one will blame the cruising industry for the move. With the price of a barrel of crude oil barreling toward $100, it just costs more to get around. Sadly, you can't power mammoth cruise ships with sails, solar panels, and midnight buffet emissions.
It's no big deal. As anyone who has gone on a cruise can tell you, an extra $5 a head is a pittance compared to the lavish meals, live stage shows, and onboard activities provided.
So why is this even a story? Well, Royal Caribbean isn't simply going to tack on the fee to new bookings. It is offering travel agents a $12 administrative fee to go after existing reservations with post-January sailings and collect the surcharges.
That just isn't cool. I don't care if it's an industry standard elsewhere, it's going to tick off passengers who feel they're being nickel-and-dimed even before they set foot on the ship.
Cruise travel fans know that tabs can accumulate in a hurry. Whether it's pool-deck cocktails, spa appointments, keepsake photographs, or pricey shore excursions, cruise ships aren't necessarily all-inclusive. However, some guests will now be annoyed even before the first "bon voyage."
The cruise industry doesn't need this. Leaders like Royal Caribbean, Carnival (NYSE: CCL), NCL, and Disney (NYSE: DIS) are aggressively expanding their fleets. Sour passengers are the last thing the industry needs, especially when it will need to expand demand to keep up with the increase in supply.
This also can't be good for a company like Steiner Leisure (Nasdaq: STNR), which runs the onboard spas on the largest Royal Caribbean ships. If guests feel that the cruise ship operator is gouging them, they may hold back on shipboard expenditures as a retaliatory response.
It's a shame, because this remains a growth industry. Shares of Steiner have roughly doubled since I recommended them to Motley Fool Rule Breakers subscribers three years ago. David Gardner recently recommended Royal Caribbean to Motley Fool Stock Advisor readers.
Bumping prices to offset costs is cool, but don't go after the existing bookings that have already paid their way. That is not cool, Royal Caribbean. If you insist on burning those boarding bridges, why stop there? Stop using Iggy Pop's "Lust for Life" for your festive television commercials. Dig deeper into Pop's discography until you pull up "Search and Destroy."
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