More Price Cuts in the High End Market

We have been talking a great deal about how different industries are being affected by the current economic mire, especially industries driven by consumer spending. Another industry is beginning to cave quickly, following in the footsteps of consumer electronics and other non-essential commodities:

"Luxury handbag maker Coach Inc. is bowing to consumers’ stubborn refusal to spend, lowering its prices 10 percent to 15 percent and offering more handbags under $300, executives said Wednesday.

"The lower pricing has already begun and should be fully implemented by fiscal 2010, when Coach will also cut the number of new stores it plans to open in North America to 20 from 40 and halt retail store expansion.

"The moves show just how much luxury retailers are suffering after the weakest holiday season in decades."

Read the full article from the Associated Press: "Coach trims prices, new stores". Cruise lines are also slashing prices and introducing larger, grander ships in an effort to fill bookings and attract would be travelers. Despite the abysmal year many retailers are facing, the cruise line industry is actually optimistic about its prognosis for the year:

"Vacationers who hit the high seas this year will find a treasure-trove of bargains -- and that's not all. At least 14 new ships, including the world's biggest behemoth and two intimate luxury vessels, plus innovative facilities and more U.S. departures, are on the way."

"Unlike your stock portfolio and many businesses these days, cruising is a growing enterprise. Cruise Lines International Assn., the industry's largest North American organization, says its members expect to carry 13.5 million passengers this year, up from 13.2 million in 2008 and 12.6 million in 2007."

Read the full article: "Cruise lines introduce ships big and small, and drop prices". Although the article reports that cruisers may face higher prices in some areas, such as on-board activities, the cruise lines are introducing new pricing packages and models to keep the industry growing in 2009:

"Besides fare discounts, some sailings come with free airfare, cabin upgrades, onboard credit and other money-saving extras. Many lines have relaxed deposit and cancellation rules, making it easier to get a refund if you decide not to go.

"For the best deals, steer your shopping to older vessels, longer itineraries and distant destinations. New ships and departures from some U.S. ports can still command top dollar, said Mike Driscoll, editor of Cruise Week, an industry newsletter based in Brookfield, Ill."

Will consumers continue to spend money on vacations even though they are cutting spending in virtually every other area? We will watch as the year unfolds. Cruise lines, despite dropping prices, are making up for some of the costs in other areas, such as increased fees or by charging for on-board activities that would have previously been no charge. We will see how the year progresses for some of these travel powerhouses. More soon, EM