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Cruise fares to Alaska have reached rock bottom and are unlikely to sink this low again. At least, that’s the view of almost everyone who runs or follows cruise lines for a living including financial analysts and industry executives.

A report from UBS Securities in March confirmed that cruise prices to Alaska were down from the previous year and represented some of the greatest vacation values in the market. The UBS Cruise Pricing Survey tracks pricing across various itineraries and brands, and analyzes pricing year-over-year on a week-to-week basis.

More recently, a report published this month from Raymond James Securities concluded the weakness in pricing continues across all major cruise destinations.

“While it appears that year over year booking declines have moderated
slightly compared to the 1st quarter for European and Alaska itineraries,
it is likely due to the continued pricing declines in the face of an already weakened cruise environment,” reported Raymond James analyst Joe Hovorka.

The Raymond James report concluded that pricing for both Alaska and Europe itineraries has continued to decline: “Alaska is continuing to set a new all-time low in our survey, while Europe is currently at levels not seen since May 2003 (when the ongoing invasion of Iraq kept cruisers away and pricing soft).”

According to Stuart MacDonald, the CEO of Tripharbour.ca / Triphabor.com, Alaska cruise fares on average are down by 35% to 40% over 2008. Some of this reduction is tied to the elimination of fuel surcharges which were in effect last year. But much of it has come from the lowering of base cruise fares to fill empty berths.

“The challenge for cruise lines is that too few people have been chasing too many cruise berths,” says MacDonald. “Americans represent the bulk of cruise passengers in Alaska, and they have cut back significantly on their travel because of the recession. However, cruise lines did not reduce their inventory, and the result has been some of the largest price reductions in the history of the Alaska cruise business.”

In contrast, most cruise lines have announced reductions in the number of sailings they will be offering in Alaska next year, so inventories will be greatly reduced. This will make it possible for cruise lines to avoid the deep level of discounting required this year. In fact, cruise fares released for the 2010 Alaska season show that prices will be higher and much closer to brochure rates.

As Micky Arison, the CEO of Carnival Cruises said last week during a conference call with financial analysts, cruise fares may have finally bottomed out. Almost everyone in the cruise industry agrees, so the only remaining question is how much longer will it be before rates start creeping up again?

It’s too early to say for sure, but with 7-day Alaska cruises recently selling for as low as C$224 per person for an inside cabin (double occupancy, excluding taxes and fees), it’s unlikely we’ll ever see deals this good again.

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