Why Olsen has to charge a premium

The four ships of the Fred Olsen fleet are not the newest, the entertainment on board is not the glitziest. But they do provide a supremely comfortable, thoroughly British cruise experience – and until today, I thought, some of the best value.
But I will have to start doing my sums again after hearing what marketing director Nigel Lingard told a group of travel agents at the ABTA Convention in Malta. His company has to charge about 15 per cent more than bigger rivals like P&O and Cunard, and adds enhancements such as the Arts Club lectures in order to compete.
“It’s important for us to get our product to a level where it’s just a little more cultured and more stylish than our large-scale competitors,” he said.
But on top of that, Lingard says he needs to achieve an 8 per cent increase in revenue to make the company profitable, and with the price of oil still above the level in Olsen’s budget, a decision will have to be made next week on fuel surcharges for 2011.
In another surprising admission, Lingard said he was happy when P&O and Cunard ships sailed full, because that helped increase fares across the board.
The second edition of Olsen’s 2011/12 brochure will be published on October 22, and prices for many cruises will be increased from the levels in the first edition.
According to Travel Weekly, Lingard told the agents that the company was recovering well from the low-point of 2008 when a huge investment in new tonnage – the introduction of Balmoral and the stretching of Braemar – coincided with the start of the recession.
“We are having challenging times. If we look back, the recession, coming when it did, hurt us quite a bit. But we have fought our way back and this year we are running at record occupancy levels.
“The hardest part is getting the revenues back. Next year we are going to have to achieve revenue increases of 8 per cent, which is well ahead of inflation.Those are the levels we need to make the company profitable and invest in new tonnage.”
It may be some time before the Olsen fleet expands again – although I would be delighted to be proved wrong.
There are few opportunities to purchase second hand ships these days, and I can’t recall the company ever operating a new-build. Black Watch and Boudicca were originally the Royal Viking Star and the Royal Viking Sky, built in 1972 and 1973. Balmoral started life in 1988 as Crown Odyssey, and Braemar in 1993 as Crown Dynasty.
Even now, the entire fleet – whose growth has matched the rise in popularity of cruising among UK passengers over the past 15 years – has a smaller capacity than Royal Caribbean’s Allure of the Seas, which will make its debut next month.
However, the experience they provide is pitched perfectly for a significant sector of the British market, and they must be getting it right if this week’s list of top-selling cruises by leading travel agent Reader Offers Ltd is anything to go by – two voyages on Braemar are up there alongside the newly-launched and heavily-hyped Queen Elizabeth.