Saga CEO Robin Shaw tells Sam Ballard how the line is altering perceptions, to great effect.
When it comes to making announcements in the cruise industry, it takes a lot to turn heads. The industry is fast moving, with new ships being launched every year that push the boundaries ever further – whether that’s biggest-ship records being broken, innovations rewriting the rulebook or suites getting more opulent.
Saga – which is about to launch the first newbuild ship in its history – arguably made a bigger splash than any of them.
The company, which has operated older tonnage since it started its cruise business in 1997, now has two ships on order: Spirit of Discovery, which launches this month, and Spirit of Adventure, which launches in 2020. Both vessels will have capacity for 999 guests and will cement Saga’s position as one of the UK’s most luxurious ex-UK operators.
“Older tonnage is sometimes associated with lower per diems and maybe a less upmarket on-board experience,” says Robin Shaw, CEO of Saga Travel. “What we have managed to do with our two existing ships is to significantly change that trend. The per diems reflect the great value you get, but they’re quite high in the market because of the all-inclusive, high service and great itineraries.”
That higher per diem is down to a number of factors. Book a Saga holiday and you will typically get a VIP car service from home as well as travel insurance – something that goes down particularly well with Saga’s over-50 clientele. However, older tonnage coupled with an older passenger has meant that perceptions do still exist about Saga in the marketplace, particularly among the trade, who only began selling Saga in 2014. The new ships will help change those perceptions. However, the company has had to embark on a big re-education piece to get the ball rolling.
“The trade may have had perceptions with the older tonnage, for whatever reason,” Shaw says. “Now, they’re engaging because the new ship looks wonderful – we joke that by 2020 we’ll have the youngest fleet in the world.”
The new ships do indeed look wonderful. Interiors resemble a smart London hotel and every cabin will have its own balcony. It’s also the only small ship being built for the British market, too, with venues on board including The Club by Jools, where Jools Holland and his band are scheduled to play on special occasions.
The new ships represent a massive investment on behalf of Saga, during tough market conditions. Even though the company’s fleet will not increase – the two new ships will replace the two older ones – the move represents a 74 per cent increase in capacity in just over a year. This means that those trade relationships will become even more important.
“We have to grow, but the good news is that we are growing,” Shaw says. “We have great uptake from the trade. We now see them as being the most important factor in growing Saga Cruises, particularly with the new ships. They have so far delivered.”
The job of developing Saga’s all-important agent bookings falls to Iain Powell, the company’s head of trade sales. For Powell, it is those perceptions about Saga that needed to be addressed in order for engagement to increase.
“Saga has brand recognition that most companies could only dream of – everyone has heard of it and it’s well respected – but it carries misconceptions,” he explains. “When I started with the company those myths were prevalent with travel agents. We have done a good job at dispelling them over the past year and a half. The new ships have helped, but in truth, the major change will happen when we get them on board.
“It’s all well and good saying that ‘Saga isn’t what you think’, but you have to put a product in front of them that proves that.”
The numbers back that up. In 2018 Saga’s cruise business through the trade grew by 105 per cent – testament to both the hardware and the efforts of Powell’s team. However, he isn’t one to sit back.
“Our ambition for bookings for 2019 is to double it again,” he says. “We’re on track, too.”
While cruise has been grabbing much of the headlines, it only represents a portion of Saga’s overall travel operation, which includes a diverse land holidays business, Titan and Destinology. In trading figures released last April, the company revealed that “tour operations booked revenue” was down 3.4 per cent – the 12 weeks to 23 March 2019 were down 7.6 per cent. Shaw puts the decrease primarily down to one factor: Brexit.
“The ongoing Brexit discussions and the situation we find ourselves in are having a significant impact,” he explains. “People booking holidays in EU countries in the first three months of the year were down 8-9 per cent. In April it was down 20 per cent. How much of that was down to Brexit? No one knows, but it is certainly a factor.”
With Brexit showing no sign of being resolved, how does Shaw mitigate against that risk? Strategy for cruise is clear, he says, as the company transitions from one that operates older tonnage to one that builds its own ships. However, changes with its land-based business are inevitable.
“We have performed particularly well in the areas where we can differentiate,” Shaw says. “Escorted touring and river cruise for instance. However, with fly-and-flop beach holidays in Europe there is little room for us to differentiate. You often have very big players with their vertically integrated models – own airlines and so on – and there’s not much competitive advantage we can give.
“With Saga Holidays we will focus on areas that have higher margins and rationalise the short-haul product. It will ultimately be lower volume.”
This scaling back of short-haul product will mean that Saga will operate in hotels where it has more of a stake, and is therefore better able to develop its offering. As Shaw puts it: “It’s about stable revenues but increasing margins, which is where Titan Travel is already.
“With higher margins you can invest back into the product for the customer, trade relationships, above-the-line marketing, which then drives demand and awareness. We have proved we can do that. Our river business has grown, our escorted tour business has grown. What hasn’t grown is our packaged, commoditised short-haul market, which has gone down quite significantly.”
One of the areas Shaw highlights as being valuable to Saga is its river cruise business. Now that the company has undertaken the mammoth task of building its own ocean ships, could that be a logical next step?
“We are always looking at opportunities like that,” answers Shaw. “We have a good share of the UK river cruise market through Titan and Saga Holidays and it is fair to say that we are looking at quite a few options in that space to enhance our overall proposition and enhance differentiation of what we can offer.
“I have rarely worked within an organisation where there is so much excitement about the new ship. We are not a company that pops these things out at three or four a year. We have never built a ship before. And designing one from scratch for our marketplace is an incredible journey. As we get towards delivery, Saga is a great place to be.”