I Think Cruises Suck, But Their Business Model Is Brilliant

I do not want to spend my vacation trapped on a boat with 5,000 people, a buffet, and a magician. But some of you may be reading this from a boat right now… if the Wi-Fi is working.

And that’s totally fine. You’d be one of 30+ million people who go on cruises annually.

In fact, 37.2 million people went on cruises in 2025, a new record. And nearly 90% of people who have cruised say they intend to go again. I recently lost a bet, and now owe my family a Disney cruise, so I have been reading a lot about the industry the past few days as I mentally prep for my voyage ahead.

Cruise line OG Carnival reported $8.44 billion in revenue for the quarter that ended in August. It has $7.6 billion in customer deposits, and its occupancy and prices already booked for 2027 are at record levels. Even the rising cost of fuel has not broken the demand.

I’m not gonna pretend I understand the allure of dancing the cha-cha-slide on the Lido deck.

But you can’t deny -- cruise lines are masters at capturing revenue and earning repeat customers. Every business out there wants both of those too, and that’s what I’m interested in. So let’s look at how the sausage is made, and what your business could learn from it.

The first is how much a passenger spends with the line. The second is how many times that passenger comes back.

A cabin is unusual inventory. If Saturday’s sailing leaves with one empty room, there is no way to sell that room on Sunday. So cruise operators manage prices and bookings months ahead, then look for ways to earn more from every occupied cabin.

Some of that spending is committed before the guest sees the ship. Royal Caribbean says nearly half its 2025 onboard revenue was booked before sailing, and 90% of those advance purchases happened digitally. People are already planning the vacation, and the line is there with drink packages, Wi-Fi, and excursions.

Once aboard, purchases go onto a guest account. Carnival does not even run every shop and service itself. Some are operated by concessionaires that pay it a share of revenue or a fee.

Here is what all those decisions add up to… Carnival sold $17.4 billion in passenger tickets in 2025 and earned another $9.2 billion in onboard and other revenue. More than one out of every three revenue dollars came from beyond the ticket.

That is a second revenue engine attached to a ship full of customers. The line does not collect every dollar a passenger spends, but it has built ways to earn money at many more points in the trip than the original cabin booking.

From the outside, the upsells look exhausting. From inside the customer’s vacation, some of them remove work. The family that wants somebody else to handle meals, entertainment, and a beach day sees value in the structure that makes me feel trapped.

I would start with 20 recent customers and follow the money past the first sale. What did each customer need next? Who got paid for it? Did they come back?

Then I would look for four things:

1. A purchase that predictably follows the first one. A dealership customer needs service after buying the car. A marketing agency client needs distribution after the video is finished. And a software customer needs to get its team using the product before additional seats or a renewal will make sense. Pick a need you can serve well, rather than assembling a menu of 40 things to upsell.

2. When the customer is already making plans. Book the first service visit at vehicle delivery. Scope distribution while planning the campaign. Agree on a software customer’s activation plan when the contract is signed. Cruise lines sell Wi-Fi before departure because nobody has to be talked into needing internet later.

3. One record of what was promised, delivered, and paid for. Carnival can give a guest a statement of onboard purchases. Could you explain the full relationship with one customer? An agency should know when work went beyond scope but never reached an invoice. A software company should know if a paid feature was turned on for free, or if a customer downgraded and was charged the old price. Give temporary discounts and free add-ons an owner, a value, and an end date. Correct mistakes in either direction.

4. A reason for the next purchase. Do not wait until the customer has forgotten you. The service appointment, campaign results review, and software renewal plan should all lead naturally from work you have already done. Track both the share of customers who buy the next useful thing and the share who actually return. One number rising while the other falls is a problem.

Bottom line -- find the next need, make a good offer at the right moment, account for what you delivered, and see whether the customer chooses you again.

A captive customer can be profitable right up until they feel trapped. Cruises have made an art of the extra charge, and there is a reason the phrase “floating mall” has stuck around.

You do not need hidden fees, forced bundles, or a private island to apply the economics. You need to understand the customer’s whole job, offer the next useful thing before they go looking elsewhere, keep an accurate account of what you delivered, and make the experience good enough to repeat.

That is the cruise industry’s trick. It earns more from the trip it already sold and then sells the next trip. I still do not want to get on the boat. But I would like my business to be that good at knowing its customers.

Our friend and colleague Adam Gaedke was in a cycling accident near his home in Kohler, Wisconsin, and suffered a critical spinal injury. He underwent major surgery and is now at one of the best facilities in the country for intense physical therapy and recovery.

Adam means a lot to me. He came to Freddy Media after a long career as the COO of the Van Horn Automotive Group. Adam built our dealer services team and will continue to lead it for years to come. He has become one of my closest friends.

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