Welcome to $100 Oil: Cruise Industry Ups Prices to Defray Fuel Costs

Imagine this: You plan a major family road trip, with the idea of driving your huge SUV cross-country, stopping at all the big attractions: the Grand Canyon ...Mount Rushmore ...Graceland.... You plan out your expenses down to the penny, then on the day you're ready to leave you discover that the price of gas has gone from $2.40 to $3.00 a gallon -- making the price of your trip suddenly 20 per cent more expensive.

That's kinda what the cruise business has been going through in recent months, as the price of fuel has gone through the roof. Suddenly, the bill for topping off the tank on those 2,500-passenger ships -- which get mileage of about 30 feet per gallon -- is taking just a bit too much bite out of the old profit margins. And you know what that means: Joe Citizen's gotta pay.

When the Big Dog Barks ...

In early November, Carnival Corporation (www.carnivalcorp.com) -- parent company of Carnival Cruises Lines, Holland America, Princess, Costa Cruises, Cunard, Seabourn, and several European lines -- announced that all of its North American brands would begin imposing a $5 per person, per day surcharge for all passengers sailing on or after February 1, 2008.

Commenting on the charge, Carnival Corporation & Plc Chairman and CEO Micky Arison said, "Earlier this year, we implemented a supplement for our European brands. We had hoped to avoid a similar supplement for our North American brands but with the price of oil approaching $100 a barrel this is no longer possible."

...Others Howl Along

Following the news from Carnival, virtually every other major cruise line imposed their own surcharges.

Royal Caribbean Cruises Ltd. (www.rclinvestor.com), parent company of Royal Caribbean International, Celebrity Cruises, Azamara Cruises, and the Spanish line Pullmantur, followed almost immediately with its own identical $5 surcharge, to take effect the exact same day as Carnival Corporation's. Principal caveat? If you'd already paid the full cost of your cruise before the surcharge was announced, you're off the hook. Your reward if you decide to go anyway? One complimentary "logo item" per stateroom -- that and your ship won't run out of gas halfway to St. Maarten, of course.

"We know the rising cost of fuel has affected everyone, and, unfortunately, our company is no different," said Brian Rice, Royal Caribbean's CFO and executive VP. "As fuel prices have reached record highs, we are forced to take this extraordinary step to offset those costs."

Other lines have taken slightly different approaches than Carnival and RCCL. Norwegian Cruise Line (www.ncl.com), the smallest of the big three, has implemented a $7 per-person, per-day charge, but it is not retroactive: If you booked your vacation before the surcharge took effect on December 1, you're off the hook. Oceania Cruises (www.oceaniacruises.com) also set their surcharge at $7 per person, per day, applicable to all new reservations and existing reservations that were not paid in full as of the December 1 implementation date.

"At the time that we set our current pricing, oil was trading at approximately $60 per barrel and it is now quickly approaching $100 per barrel," said Bob Binder, Oceania's president. "This is the first time we have implemented a surcharge and I hope our guests will understand the root cause of this necessary action."

Root cause? Think peak oil.

Luxe line Crystal Cruises (www.crystalcruises.com) has had a $5 per-person, per-day supplement in place since June 2006, but as of January 1, 2008, it'll bump up to $7. All reservations made and paid in full before January 1 will not incur the surcharge.

Ultra-luxe line Silversea Cruises (www.silversea.com) will assess a heady $10 per-person, per-day charge on all new 2008 cruise bookings made on or after November 14, 2007. The surcharge is applicable to all guests in the suite, but Silversea's typically wealthy passengers probably won't notice the difference.

Even the small-ship lines are getting into the game: River-cruise company Majestic America Line (www.majesticamerica.com) will be imposing an $8.50 per-person, per-day surcharge on all new bookings made after December 15, 2007, and to existing bookings that are not paid in full by that date. Even European river line Viking River Cruises (www.vikingrivercruises.com) has added a surcharge, tacking $7 per person, per day onto all reservations not paid in full by December 19, 2007.

So what's the answer, wind power? Apparently not, as both of the major sailing ship lines, Windstar Cruises (www.windstarcruises.com) and Star Clippers (www.starclippers.com), will soon be implementing a charge -- $8.50 per-person, per-day at Windstar (applicable to all new bookings made after December 15, 2007, and to existing bookings that are not paid in full by that date) and $8 per person, per day at Star Clippers for all new bookings starting December 17, 2007, up to $100 maximum.

While Star Clippers' ships do operate under sail, they also require fuel to run electric generators, provide climate control on board, and augment the sails in order to stick to their scheduled itineraries. Ditto (though to a lesser extent) for Windstar's ships, whose sails augment their engines.

"We regret having to take this action," said Windstar executive VP Diane Moore, "and hope our guests understand the impact that fuel prices are having in today's economic environment."

Fuel Supplements at a Glance

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