Flightseeing tours becoming a lucrative subset of cruise industry

JUNEAU -- Small planes are becoming a cash cow for the cruise industry, including some of the biggest tour companies in the world, such as Holland America Line and Princess Cruises.

Cruise companies sell flight companies access to the million passengers a year they bring to Alaska. The flight companies in turn offer flightseeing rides through the spectacular Misty Fjords National Monument or helicopter hops to sled dog tours on a Juneau glacier. The aircraft tours have joined the whale watching, bus and rail trips they've long offered.

Carnival, the world's biggest cruise company, now reports making about a quarter of its revenue from what it calls the "onboard and other" segment, not from the ticket prices that are its main revenue source.

Competitor Norwegian Cruise Lines reported getting 29 percent of its revenue from its equivalent segment.

The price competition that's driven tickets down has helped to make cruising a mass market vacation option, but it's also launched an aggressive search for new revenues.

That can include onboard sales of alcohol, gourmet food and Internet access, but it also includes something that's almost pure profit for the cruise lines: fees they collect for tours that are booked on their ships.

After a pilot and eight passengers died in a Promech Air crash Thursday, Holland America Line announced that the passengers had all booked their tours onboard its Westerdam, one of the five ships the line has visiting Alaska this year. On Friday, Holland America removed that tour from its website.


Flightseeing has become increasingly popular, with Forest Service permits to land on the Juneau glacier having caps on the number of landings allowed. The Forest Service had to redo its environmental impact statement for guides and outfitters in the Misty Fjords Wilderness Area for fear that the constant overflights were affecting the area's "wilderness" qualities.

The local tour companies like Promech can make good money. Promech's bear viewing trip includes a 25-minute flight to Neets Bay, and the plane can return to Ketchikan to pick up more passengers and keep the expensive aircraft busy.

For cruise passengers, who sometimes spend several thousand dollars on a "bucket list" trip to Alaska, the extra cost of a shore excursion such as Promech Air's $339 three-hour trip into Misty Fjords to see black bears at the Neets Bay Salmon Hatchery can seem like only a small additional expense.

As the national economy has rebounded, cruise passengers have proven to be more willing to spend, but not necessarily on ticket prices.

Earlier this year, Carnival's chief financial officer, David Bernstein, told Wall Street analysts that while net ticket prices were up 1 percent, onboard and other revenues have been up 8 percent, part of a trend he expects to continue.

Even though the local companies wind up forking over a share of their revenue to the cruise ships, it can still be a good deal for them, Bob Janes of Gastineau Guiding, a Juneau tour company, said last summer.

They don't have to incur marketing expenses, since the ships provide their customers, and cruise passengers pre-book before they arrive in port, so the local companies know about how many customers to expect each day.

"Everybody purchases onboard the ships with our tours," he said. "It makes it easier to operate, but it doesn't change things much."

Savvy travelers also know that they can cut their shore excursion costs substantially by booking their tours on their own, either before they depart or right on the dock after arriving in port. Some cruise websites suggest that savings range from 10 percent to 40 percent, while acknowledging less convenience than onboard booking.

But cruise travelers who don't even take shore excursions can wind up providing "onboard and other" profits to the cruise ships.

With a million cruise visitors poised to spend, ports are lined with shops selling Alaska T-shirts, Alaska Native art and Sarah Palin kitsch, along with high-end options such as jewelry and Persian carpets.

Passengers get to hear from "port lecturers" or "shopping experts" who provide advice on where to shop before they arrive in port, even providing maps to recommended stores.

But the shopping seminars have been accused of doing even more, wrongly suggesting that the cruise ship has negotiated "deals" for their passengers at the recommended shops, instead of the shop simply paying a fee to get recommended.

Those fees can be costly. At locally owned Celebrity Jewelers in Juneau, owner Vinni Bathija said he was quoted a price of $25,000 up front and 10 percent of his sales to be "recommended."

And the port lecturers have also been accused of suggesting that those shops that aren't recommended are somehow "risky" to purchase from, said Cindy Drinkwater, an assistant attorney general at the Alaska Department of Law.

In 2013, companies providing port lecturers and shopping recommendations were compelled to sign a consent judgment with the state agreeing to stop deceptive practices. While not admitting wrongdoing, three promotion companies that have lecturers on the cruise ships agreed to also pay a $200,000 judgment to the state.

While none of the cruise ship companies break out specifics about where their "onboard and other" revenue comes from, Carnival Corp. CEO Arnold Donald said at the end of the Alaska cruise season last year that much more money could be made in that segment.

"We are just at the tip of of that in terms of really harvesting what is possible there," he told analysts.