Revenue

Celebrity Millennium mechanical issue cost about $13 million in ticket revenue

English: The Celebrity Millennium cruiseship d...

English: The Celebrity Millennium cruiseship docked in Nassau, Bahamas (Photo credit: Wikipedia)

After the recent mechanical issues with the Celebrity Millennium, Royal Caribbean Cruises Ltd., which owns Celebrity Cruises, announced Tuesday the cancellation of the remainder of the ship’s seven-night cruise to Alaska and four additional cruises, when a faulty propulsion caused the return to port in Ketchikan on August 18. At the time, about 2,200 guests and nearly 960 crew members were on-board. The company will offer full refunds to all passengers who have been stuck in Ketchikan and also to guests booked on the other canceled sailings, as well as a certificate for a future cruise.

Lost revenue will show in many forms, including costly repairs of the vessel and lost on-board revenue. Based on actual ticket pricing, Cruise Market Watch estimates lost ticket revenue of $13,851,093:

Sail date

Ticket Revenue

8/16/2013

 $ 3,058,593

8/23/2013

 $ 2,908,601

8/30/2013

 $ 2,555,152

9/6/2013

 $ 2,512,067

9/13/2013

 $ 2,816,680
 Total $ 13,851,093

Only time will tell if the unknown variable of customer sentiment will correlate to an additional effect on incremental sales, but our guess is that even naysayers would have a difficult time saying no to a $31.76 dollar/day 16 day cruise to Southern Europe on board of the Carnival Sunshine, which according to our database is the cheapest inside cabin on a per passenger per day basis that you could book.  Happy sailing!

Is the Carnival Triumph strike three for the Cruise Industry?

Unloading relief supplies on Carnival Splendor...

Unloading relief supplies on Carnival Splendor 2010-11-09 2 (Photo credit: Wikipedia)

The “Pop Tart Cruise” on Carnival Splendor November 2010 was greeted with curiosity and had little impact to bookings or ticket prices.  The Costa Concordia January 2012 incident was greeted with shock.  Bookings and prices did drop and while they have since recovered; public consciousness of the event still hasn’t gone away (and either has Captain Schettino).  I get the sense the “Cruise from Hell” on the Carnival Triumph February 2013 is being greeted with “enough is enough.”

Sure, with over 10,000 annual cruise sailings every year there are little things that can happen to cruise ships (pier bumps, rouge waves etc.,).  And with a seven percent compounded annual growth rate, the likelihood of such events simply continues to be multiplied.  Nevertheless, when a company dusts off the pre-Concordia advertising campaign themed “Land vs. Sea” to run in the subsequent year’s wave season, one is tempted to question good judgment.

I know.  Memories are short.  The media will move on to new stories.  Carnival obviously overcame the fact its first cruise ship, the Mardi Gras, ran aground on a sandbar during its inaugural voyage in 1972.  And don’t expect any instant drop in ticket prices. Prices for close-in sailings (those sold one to three months in advance of departure) took five months after Concordia to bottom in June 2012 .

The direct impact to the bottom line can be quantified by simply accounting for the 14 canceled Triumph sailings scheduled between Feb 11th and April 13th 2013, plus the ill-fated Feb 7th voyage.  The amount totals $20.8 million in revenue according to Cruise Pulse.  Based on the Splendor being off line 101 days, we believe Triumph guidance of 71 days is overly aggressive and the Triumph will likely cancel 7 more cruises up to the May 5th sailing, adding $9.8 million to lost ticket revenue.

But unfortunately the story may not end there.  On the margin, where cash from ticket revenues meet up with corporate expenses this event will continue to be felt.  Not exactly what an industry wants at a time when they are already being squeezed by a slowing European economy and the specter of inflation to costs for fuel and victualing.

When prospective cruisers hear Triumph passengers saying: “The credit, refund and $500 aren’t really important. It’s not about the money.  We will pay Carnival anything just to let us off the ship.”  You have to wonder, will this time be different?

Repeat customers and die-hard cruisers will just get more bargains.  And when prices get low enough, it is amazing how memories fade.  But no spin can turn this publicity into a good thing for the industry.  In order to attract the best talent to work aboard ships, continue to penetrate the large “never before cruised” market and stay the course with investors attracted to exponential passenger growth these events can’t continue.  With 10,000 more “at bats” over the next year, getting wood on the ball 99.99% of the time so 20.9 million cruisers all leave happy and share their positive experiences is critical.  In the interim, Cruise Market Watch will continue monitoring the ticket revenue and pricing trends.

Cruise Market Watch Announces 2013 Cruise Trends Forecast

Now in its fifth consecutive year, we are proud to release our 2013 cruise market statistics.  In that short span of time the industry has robustly managed both a “great recession” and a once in a century ship incident.

MS Ryndam in Cozumel. Royal Caribbean and Carn...

MS Ryndam in Cozumel. (Photo credit: Wikipedia)

The Costa Concordia and European sovereign debt crisis impacted all cruise line revenues by about -5.1% from our original 2012 estimate (made two months prior to Concorida in November 2011).  The actual revenue versus forecast difference was largest for Carnival Corporation (-9.2%) compared to -2.5% for Royal Caribbean Cruises Ltd. Passengers carried however continued to climb.  Compared to our original 2012 forecast of 5.6% growth, actual results were very accurate.  Carnival was down just -0.9% while Royal Caribbean was up 0.3% versus original estimates.  All-in-all, 2013 looks to rebound strongly from the year prior on all accounts.

Among the 2013 highlights:

  • - The worldwide cruise market is estimated at $36.2 billion, up 4.8% from 2012.
  • - Cruise passengers carried worldwide in 2013 is forecast at 20.9 million, a 3.3% increase over 2012.
  • - The top two cruise companies Carnival Corporation (NYSE: CCL) and Royal Caribbean Cruises Ltd. Co (NYSE: RCL) account for 71.7% of worldwide share of revenue
  • - Direct spending by passengers and crew at all cruise ports in the world is estimated at $17.5 billion.
  • - The top two ports are Miami, FL for embarkations and Nassau Bahamas as destination.
  • - Total worldwide cruise capacity at the end of 2013 will be 438,595 passengers (a 3.0% increase over 2012) and 283 ships.
  • - The average per passenger per day is projected to be $200.85, with $152.39 ticket price and $48.47 on board spending (average cruise duration 8.5 days, median duration 7.0 days).

A total of six new ships will be added in 2013 with a gain in passenger capacity of 14,074 (including the 3,600 passenger Royal Princess, the 4,010 passenger Norwegian Breakaway, 2,192-guest AIDAstella and 3,502 berth MSC Preziosa).  Looking out further, 13 more new cruise ships will add 39,297 lower births or 8.9% to passenger capacity by the end of 2015 – generating $3.2 billion more in annual revenue for the cruise industry.

By 2017, 23.7 million cruise passengers are expected to be carried worldwide of which 59.1% will originate from North America and 27.4% Europe.


Related articles

Is Royal Caribbean taking market share from Carnival?

Royal Caribbean International

Royal Caribbean International (Photo credit: lewishamdreamer)

Royal Caribbean Cruises Ltd. (NYSE:RCL) stock priced gained as much as 12 percent today after its third quarter earnings announcement, closing up over 8 percent.  The stock hit a new 12 month high.   Carnival Corporation (NYSE:CCL) was also up, and its stock is near the October 18th 12 month high.

The relative stock price gain between the two compared to the year prior (October 25, 2011), however, is what we find interesting.  Over that timeframe Carnival is up 10.0% while Royal Caribbean is now up 36.2%.  The reason is as obvious as a large rock of the coast of Giglio Island.

Which begs the question, is the second largest cruise company in the world taking market share from Carnival?  To answer that question, we took a look at the last two full earnings statements post Concorida.  RCL ticket revenue year over year (YOY) for Q2 and Q3 is down -2.1%, while CCL is down -6.7%.  RCL’s share of ticket revenue increased from 31.2% to 32.2%.  So in regard to revenue, one would have to conclude that yes, Royal Caribbean (while also clearly impacted from the tragedy in Italy) is growing revenue share in the current environment.

On the other hand, passengers carried for RCL is down -0.1% and CCL is up 2.6%.  How can this be?  Well Carnival added three new ships* into its sailings during Q2 and Q3 2012 while Royal Caribbean’s one 2012 entry didn’t set sail until after Q3 (the 3,030-passenger Celebrity Reflection, October 12th).  So despite the removal of the Concordia from its fleet, CCL still gained in share of passengers carried with new build additions.  RCL’s share of passengers carried went from 32.7% to 32.1%.

Dividing ticket revenue by Average Passenger Cruise Days (APCD) provides an approximation of the average ticket price per person per day.  In that case RCL is down -3.0% (from $182.44 last year to $177.02 this year) and CCL -9.0% (from $188.35 last year to $171.33 this year).

So in summary, cruise ships are still sailing filled over 100% occupancy (occupancy of RCL is basically flat and CCL is down – 1.7%).  However, passengers are setting sail at better prices than a year ago.  RCL has benefited from a relatively stronger pricing position and hence improved is share of revenues, while CCL was able to grow share of passengers sailed by adding capacity.  In the end, better pricing power translates to better margins, which translate into increased profits for shareholders – and hence the relative difference in the two cruise company’s stock performance.

One interesting side note, there was an increase in onboard spending for both lines; 2% for RCL and 3.2% for CCL.  Perhaps lower ticket prices and onboard credit incentives are prompting cruisers to free up their wallets a little more – transferring some of the ticket price savings back to the cruise lines.

 * 3,000-passenger Costa Fascinosa, May 2; 2,184-passenger AIDAmar, May 12; 3,690-passenger Carnival Breeze, June 3

Word Cloud: Captain Schettino

A type of boomerang occurs for companies and victims that suffer tragic events.  First is the event itself, which is followed many months later by its reemergence in the news during subsequent trails and lawsuits.  And so it is with Carnival, Concordia passengers, crew and their families while the captain of the cruise ship finished his pre-trial hearings last week.  While no date has been set for the actual court case, we can expect the news flow to continue.

As demonstrated by the word cloud of that news flow below, the Captain remains squarely at the center of the discussion.

 

And the impact has been felt in the industry.  Three weeks ago on September 25th, the word “Costa” was mentioned 67 times in Carnival’s Q3 earnings conference call.  That was more than “Executive” (66 times), but less than “quarter” (96 times).

In summary, earnings were reduced as a result of the Concordia incident by about $500 million, and Costa lost about $100 million in 2012.  In the most recent financial quarter – a quarter that booked revenue for sailings six to eight months after the accident, Costa accounted for over half of Carnival’s decline in net revenue yields.

The Costa brand’s occupancy drop was 5% in 2012, with an 11% decline in the second and a 6% drop in the third quarters.  In the fourth quarter of 2012 Costa’s ships are expected to match the occupancy rates of a year prior, albeit at lower prices.

Going forward, pricing and occupancy for Costa’s bookings in Q1 2013 are tracking lower on a year-over-year basis.  However, these differences will narrow as year over year comparisons versus 2012 become easier.  According to Howard Frank, Carnival’s Vice Chairman and Chief Operating Officer “Based on consumer research, the brand perception in each of Costa’s major markets is gradually improving so we are greatly encouraged by the resiliency of the brand.”

In fact, Carnival has a new build on order for Costa with expected delivery in the Fall 2014  The Costa brand is also helping to develop an emerging cruise market strategy in Australia and Asia.  Carnival has increased capacity by 8.5% in these markets and will be sending the Costa Atlantica to join the Costa Victoria in China in the spring of 2013.  Costa was an early entrant into the Chinese market and has a marketing history there.

More Chinese to Go on Caribbean Cruise? What The Emerging Middle Class in China Means to Global Cruise Industry

Flickr Chinese Dragon Year Statue

Flickr Chinese Dragon Year Statue (Photo credit: epSos.de)

Chinese grooms did not traditionally purchase diamond engagement rings for their prospective brides. It was only 20 years ago that diamonds begin to appear in engagement ceremonies among the Chinese elite. But smart marketing campaigns and the increasing purchasing power of China’s middle class have reshaped luxury spending over the last two decades. While the United States still leads the world in diamond demand they will eventually be replaced by China (not unlike the current Olympic medal count battle). Experts in the diamond industry put that timeframe in less than 10 years.

There is a strong analogy for the cruise industry.  Consider each cruise ship as a diamond, each seeking to discover new lucrative source markets to drive growth.

Most Chinese still think of cruise ships solely as a means of transportation and favor train and airplane. But as more and more Chinese open up to the idea that “a cruise ship is actually a floating five-star resort” (aka getting there is half the fun) their perceptions of cruising are also changing. “Cruise travel is becoming the new form of tourism favored by Chinese.” Last year’s cruise statistics validate this claim (made during a cruise forum in northern China’s Tianjin): International cruise destinations from mainland China in 2011 increased by around 50% compared to 2010. This means the Chinese no longer just take river cruises on Yangtze, but are looking at more exotic and sunny destinations. A Mediterranean or Caribbean cruise is likely to arouse their fancy, if their recent exodus to Maldives and Guam are a leading indicator.

Global statistics show the bulk of cruise travelers come from North America followed in (far) second place by Europe, and then the rest of the world. Between 2008 and 2012, for example, North Americans outnumber Europeans by as much as 120%, and Europeans outnumber passengers from other countries by as much as 200%. But just as Cruise Market Watch brought to readers attention back in 2008, cruise line executives are looking east and the prospects are astonishing.

Even with conservative forecasts, the implications are far-reaching. In 2009, there were only 365,000 Chinese who went cruising (compared to 110,000 in 2008), a mere fraction of North America’s 12 million plus. But the world totals are likely to begin to skew in favor of the Chinese in coming decades if their luxury spending trends and evolving perception of cruise travel is any indication.

Forecasts on the high end have placed China’s outbound tourists to 300 million (all modes of travel).  This is roughly equivalent to an entire continent’s (North America or Western Europe) population.

Despite the glimmerings of economic recovery felt in leading source markets, the cruise industry as a whole will only see a relatively modest jump in cruise passengers in the next five years. Analysts predict that the economies of North America and Europe are likely to remain sluggish, and this translates to slower growth in consumer spending, especially on non-essential goods and services.

Looking at present statistics (20,135,000), the compound annual growth rate (just a little below 8%) will only result in about 28 million passengers in 2018, a mere 9.3% of China’s potential cruise passengers of 300 million.

The rough stone is ready to be cut into a faceted gem.  Cruise traffic going to China, which was only 750,000 in 2011, is also likely to increase. The Seatrade All Asia Cruise Convention descended on Shanghai in 2010 for the second time to open up Asia to international itineraries. China tops the list because of its touristic appeal: It has varied geography, a 4,000-thousand-year-old history, staggering archaeological discoveries and a huge population with immensely diverse regional customs and beliefs.

All these exciting developments mean one thing: China’s dragon is ready to breathe new fire into the cruise industry. All the cruise industry has to do is fan the flames.


References:

Cruise Market Watch Announces 2012 Cruise Trends Forecast

Among the 2012 highlights:

  • ~ The worldwide cruise market is estimated at $34.1 billion
  • ~ Cruise passengers carried worldwide in 2012 is estimated at 20.3 million, a 5.6% increase over 2011
  • ~ The top two cruise companies Carnival Corporation (NYSE: CCL) and Royal Caribbean Cruises Ltd. Co (NYSE: RCL) account for 73% of worldwide share of revenue
  • ~ The 2012 Port PulseTM rankings place Miami Florida as the #1 cruise embarkation port in the world and Nassau Bahamas the #1 port of call
  • ~ Direct spending by passengers and crew at all cruise ports in the world is estimated at $15.5 billion

A panoramic view of Prince George Wharf, the f...

Image via Wikipedia

 While cruise lines have grown annual passengers traveled at a compound annual growth rate of 7.4% since 1990 – all the cruise ships in the entire world filled at capacity all year long still only amount to less than ½ of the total number of annual visitors to Las Vegas.  Cruise passengers carried worldwide in 2012 is estimated at 20.3 million, an increase of 5.6% over 2011.

On the heals of the several new ships to be added to the market in 2012 (including the 3,690 passenger Carnival Breeze, the 3,013 passenger MSC Divina,  3,012-guest Costa Fascinosca and 2,500 berth Disney Fantasy) eight more new cruise ships will launch by 2015. These ships will generate another $2.3 billion in annual revenue for the cruise industry. By 2015, 22.3 million cruise passengers are expected to be carried worldwide.

This is not only good for the cruise industry (of which two cruise companies dominate – Carnival Corporation (NYSE: CCL) and Royal Caribbean Cruises Ltd. Co (NYSE: RCL) with a combined 73% of worldwide market share) but also for the local economies of ports visited by cruise passengers.  Direct spending by passengers and crew at all cruise ports around the world is estimated at $15.5 billion.  The 2012 Port PulseTM rankings place Miami, Florida as the #1 embarkation port and Nassau Bahamas the #1 port of call.  North America and Europe serve as the source markets for 85.9% of worldwide passengers, but other regions of the world such as Asia are growing significantly.

The new ships continue to bring attention to cruising, creating interest, additional pricing power, economies of scale and bookings of first time cruisers.  Average cruise revenue per passenger per day for 2012 is projected to be $240.13.


Have cruise prices and revenues softened for European sailings?

Cruise stocks have been on some ride over last few weeks.  Both Royal Caribbean (RCL) and Carnival (CCL) touched new 52-week lows early this week, only to rebound with the overall market as stock prices whipsaw in reaction to the daily cycle of news out of Europe.

Headlines jump between “Greek Default Unavoidable” to “Greek Aid Likely,” and ”Eurozone Contagion” to “Banks are Stress Tested.”

Trying to predict and trade the swings boarders on madness, but one can predict the impact on cruise cabin prices for sailings with European itineraries.

Click on the interactive chart below.  One can see with each “Priced on Month” closer to a European sailing departure, the Total Weighted Average* price has come down – more so for the nearer term sailing dates.

Indeed, European pricing trends were confirmed by Carnival’s most recent 3rd quarter earnings conference call

 “In Europe, the sovereign debt issues and the related concerns about the strength of the European banks contributed to the slowdown in EAA brand bookings. These issues, together with related declines in consumer confidence in the various markets in which we operate, seem to have contributed to the softened booking activity during this August and early September period.”

Insights into how the cruise lines are performing in other regions of the world, and how pricing changes impact forward earnings can be accessed from our proprietary database.  It tracks daily ticket prices and passenger sailings to port destinations for over 8,000 annual cruises.  With an exclusive window into the pricing of virtually every sailing, every day, world wide (including Carnival Cruise Lines (CCL), Royal Caribbean Cruises Lines (RCL) and Norwegian Cruise Lines (NCL)) our subscribers can view cruise revenue and passenger trends in near real time.

* Cruise Market Watch’s proprietary weighted average of the daily advertised price for each ships cruise sailing for each cabin category (on a per sailing day basis).  Weighting based on the total number of cabins on each ship in each category.

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Curacao ranks 115th on Cruise Port Pulse

Willemstad Curacao Neth. Ant.

Many cruise lines have made the island of Curaçao a customary destination while sailing the Caribbean.  This has helped to distinguish the island as 115th out of 625 ports on the PortPulse ranking system.  Curacao hosted 1.9% of all passengers sailing during the 4th quarter of 2010.

 

4th Quarter 2010:

The cruise port in Curaçao Netherlands Antilles hosted 39 cruise ship stops carrying a total of 86,158 passengers from October 1, 2010 to December 31, 2010.[1] Stops were made by 13 different cruise ships owned by 8 different cruise brands.

The direct economic impact for the quarter from passenger and crew spending on transportation, food and other retail spending is estimated at $13.6 million.[2]

2011 Forecast:

Based on published cruise itineraries for next year (January 1, 2011 to December 31, 2011) the cruise port in Curaçao Netherlands Antilles will host 120 cruise ship stops carrying a total of 271,115 passengers.  These stops will be from 21 different ships representing 9 different cruse brands.

The total direct economic impact for 2011 is estimated at $42.9 million.

Trending:

In the next comparable quarter (October 1, 2011 to December 31, 2011) passenger arrivals at the Curaçao Netherlands Antilles cruise port are expected to decline 17.4% to 71,194.

Learn more about the PortPulse reports and read the entire Curacao sample report.

Our proprietary database tracks daily ticket prices and passenger sailings to port destinations from over 8,000 annual cruises. With an exclusive window into virtually every sailing, every day, world wide (including Carnival Cruise Lines (CCL), Royal Caribbean Cruises Lines (RCL) and Norwegian Cruise Lines (NCL)) our subscribers can view cruise revenue and passenger trends in near real time.


[1] Date range based on sail date from cruise ship embarkation ports. Estimates based on proprietary database tracking 171 cruise ships.


[2] Cruise passenger and crew spending in ports of call on a variety of goods and services including ground transportation, clothing, food and shore excursions.  For embarkation/debarkation ports estimates also include lodging as part of a pre- or post-cruise stay, air transportation and port and cruise line services.  Source: Business Research & Economic Advisors, Florida-Caribbean Cruise Association and Cruise Lines International Association.




Cruise Market Watch Announces 2011 Cruise Line Market Share and Revenue Projections

Among the 2011 highlights:

On the heals of the 3,650 passenger Carnival Dream, the 5,400 passenger Royal Caribbean Oasis and Allure and the 4,200-guest Norwegian Epic a total of 14 additional cruise ships will come online by 2014. These new ships will add another $1.6 billion in annual revenue to the cruise industry. By 2014, 21.6 million cruise passengers are expected to be carried worldwide.

The new ships bring attention to cruising, creating interest, additional pricing power, economies of scale and bookings of first time cruisers.  Average cruise revenue per passenger (APCD) for 2011 is projected to be $218.57, a 5.2% increase over 2010.

Moreover, the addition of the new ships allow older ships to be spun off to other overseas brands, generating additional revenues and further penetration of less mature overseas markets.  International markets are now growing passengers faster, percentage wise, than the core North American market.

The new ships are the Apple iPhone’s of the sea.  They generate excitement, helping to get cruising back to front and center so vacationers are thinking “that would be fun.” This helps chip away at the edges of the “hard core” resistors, those 55% of the U.S core market who have never cruised.