Thus far pricing* for sailings on Costa (all Costa ships, all sailing departure dates) has not changed since the Concordia accident on January 13, 2012. Click on graph below for advertised prices from January 7 to January 21, 2012. Note little or no change to the booking prices. With prices for Costa holding up, wave season for RCL and CCL are likely holding up as well (refer toCruise Pulse for details).
This finding is backed up by responses from several U.S. travel agents in regard to booking demand. Surprisingly, agents have indicated minimal to no demand impact. Nevertheless, on 12/30/2012 Carnival guided loss a booking slow down in the mid teens.
Interestingly, travel agents are currently Carnival’s best marketing resource. While the “Land vs. Sea” campaign is off the air (given its theme the campaign does not “play well” with current events) thousands of travel agents are out in the community engaged in conversations with prospective cruisers on a daily basis. It is these human one-on-one interactions that assure vacationers this tragic event is a “one off“ and in fact, given the renewed focus on safety and procedures, now is the safest time to cruise ever.
I’ve always been fond of the quotation “the law of flotation wasn’t discovered contemplating the sinking of things.” This has certainly held true for the cruise industry – growing the annual number of passengers carried nearly 5 times over the past 20 years. But with over 9,000 sailings worldwide in 2012 the odds of something going wrong somewhere do increase.
Traditionally I have considered the media coverage of cruises ships to be somewhat lopsided. I imagine there are plenty of things going on over the course of a year throughout hotel rooms in Las Vegas for example – but we tend not to hear these stories. By contrast, we do readily hear about the occasional sick cruise ship passenger, bad smell or overboard suicide.
My heart goes out to the passengers and families on Concordia’s sailing. This is a terrible tragedy by any measure. Without diminishing these human experiences, the recent events of the Costa Concordia will at the very least have an impact to Carnival’s near term bottom line, something Cruise Market Watch can measure.
For the Costa Concordia, remaining sailings in Carnival’s First Quarter (Q1) 2012 would have brought in an estimated total of $15.8 million in ticket revenue. For Q2 the impact will be in the order of $47.4 million in ticket revenue, Q3 $63 million and Q4 $45.9 million. Concordia was booking considerably higher prices during the summer (June, July and August). In a “back of the napkin” estimate that assumes the lost ticket revenue falls straight out of the bottom line this would equate to about .02 cents in Q1 earnings per share and .05 cents in Q2. The loss to earnings from the Carnival Splendor incident was .07 cents per share in a single quarter. Things we can’t measure include – what will be costs of raising and repairing the Concordia and when will she sail again? Will those who have already booked future sailings on Concordia transfer their vacations to other ships? What will be the legal actions and operational changes? We will have to wait to hear guidance from Carnival. Update: 12/30/2012 Carnival guided loss be in the range of $155-$175 million after a booking slow down in the mid teens. This news came after initially guiding $85 to $95 million lower (or .11 cents to .12 cents per share) on 12/16/2012.
Fortunately, ship builder Fincantieri has ship yards located right in Italy. Any near term impact to ticket pricing across Costa and other cruise brands will likely correlate with the duration of time in which the story continues to garner news headlines and cruise brands keep their wave season ad campaigns off the television. Pricing impacts will continue to be closely watched.
Posted By Cruise Market Watch / 23rd December 2011
Carnival recently announced an upgrade to its advertising campaign just ahead of the 2012 wave season. Right on the heals of NCL’s “Cruise like a Norwegian” and RCL’s “The Sea Is Calling” Carnival’s “Land Versus Sea” commercials are aimed directly at the yet to be tapped first time cruiser market.
What destinations can cruiser newbies discover aboard Fun Ships in 2012? And from what home ports can they set sail? What could Cruise Market Watch do but count and map the options in the interactive table below.
Posted By Cruise Market Watch / 18th December 2011
Advertising is a form of communication used to persuade, a job made all the easier when that message taps into innate human desires. Life itself emerged from the ocean 500 million years ago and in fact no less than 60% of adult’s bodies are water. European sailors returned to it in search of discovery of new worlds.
What else could we do but answer the question – at what cost? We had to graph Royal Caribbean’s average price per person per day for an inside cabin on sailings to destinations in the Caribbean.
You can answer Royal Caribbean’s calling for as low as $82 per person per day as early as the end of this January – or during peak pricing towards early July for as much as $145 per person per day. Either way, both Royal Caribbean and the ocean will be waiting to greet you.
Cruise Market Watch’s proprietary databases are mined, statistically analyzed and modeled for over 1,100 ports of call from over 9,000 sailings by 190 different cruise ships owned by 25 cruise lines. Cruise Pulse™ and Port Pulse™ reports provide near real time guidance on net revenue yields, capacity and year over year ticket pricing trends as well as port visitations and economic impact estimates.
Ad Age is reporting Norwegian Cruise Line (NCL) is putting its current creative advertising account up for review. The account, valued at $50 million, has been handled by the Austin based Idea City for the last five years.
The Idea City ad campaigns have focused on driving home the message NCL is different in a “freestyling” way. The TV spots showed, tongue in cheek, what it might feel like to dine on a competitor’s cruise ship – one featuring traditional fixed dining times and formal attire.
Speculation is NCL is making the change as part of its planned stock IPO (initial public offering). Increased visibility could help the pricing of an initial offering of its stock. NCL has not shied away from publicity, being featured on CNBC’s Cruise, Inc. “Big Money on the High Seas” and more recently in “Undercover Boss,” a reality show where CEO, Kevin Sheehan worked alongside NCL onboard staff.
According to Ad Age, a pitch has already been delivered by Pile & Co. of Boston. Idea City is expected to defend the account and NCL is shopping other agencies. Regardless of what agency takes over, look for a new ad campaign to be hitting print and broadcast media in approximately six months.
Posted By Cruise Market Watch / 10th February 2010
“On less-wired ships, passengers can avail themselves of a growing number of iPhone apps like Always Be Cruising (free), which allows users to network with one another onboard a ship.”
The new ship is scheduled for delivery in 2012, following the 2011 launch of the Carnival Magic reports Seatrade Insider. This is big news as it ends a near two year drought in new ship orders and helps validate the cruise industries strong position with consumers and continued dedication to growth. The current economic environment also helped Carnival procure an excellent price, at $200,000 per lower berth compared to $202,000 for the Carnival Magic and $259,000 for RCI’s Allure of the Seas (sister ship of the Oasis).
Posted By Cruise Market Watch / 23rd November 2009
Cruise Market Watch appears on PBS’s Nightly Business Report, Friday November 20th, 2009 discussing the cruise industry and launch of the new mega ship, Oasis of the Seas.
Posted By Cruise Market Watch / 19th November 2009
In mass-American culture, bigger hasn’t always meant better to everyone, but it has certainly meant brand buzz.
While some refer to the Mall of America as “Sprawl of America,” it is also the most visited shopping mall in the world. Opening in 1992, it attracts more than 40 million annual visitors and employs over 12,000 people. Complete with indoor theme park, underwater adventures, hotels and shops, the mall is a successful mix of entertainment and consumerism.
Also in 1992, the High Mobility Multipurpose Wheeled Vehicle (HMMWV or Hum-Vee) began selling to the public under the brand name “Hummer.” The Hummer became the world’s most distinctive SUV and an iconic brand. Its main appeal lay in its unique appearance, sheer size and the feeling owners experience driving one.
In 1999 Royal Caribbean launched the first of five Voyager class ships, the Voyager of the Seas. At 3,114-passengers it was a revolution in design and size. With on-board amenities that included an ice-skating rink, inline-skating track, basketball court, mini golf course and rock-climbing wall the ships became a brand signature for Royal Caribbean. The ship and the “Get Out There” advertising campaign opened the cruise market to new, younger and more active vacationers with an “explorer” mind-set.
Branding Royal Caribbean
The Oasis is a further extension of Royal Caribbean’s brand differentiation. In the Nation of Why Not, the Oasis seeks to continue to fulfill the brand promise of cruise innovator and “tell-your-friends you have been there” experiences.
As large as it is, only 5,400 people in the world can experience it each week. That creates scarcity, and as long as the buzz continues to create demand, that creates pricing power. Within the contemporary cruise segment, Disney has been the best by far at creating a brand consumers want to be associated with so much they are willing to pay 100% premiums. Pricing power gained through branding is the Holy Grail Royal Caribbean investors are risking their $1.4 billion dollars on.
Currently, ticket prices for a seven-day cruise aboard the Oasis start at $1,049. The Oasis features 37 different cabin types to maximize revenues by finding the right fit to various traveler budgets. This compares to a seven-day on the Norwegian Jewel for as low as $249, and eight days on the new Carnival Dream start at $599.
Maintaining higher ticket prices will be essential for shareholders. Royal Caribbean’s new ship builds have run at a cost 20% higher per berth than the Voyager, Radiance and Millennium class ships and 14% more expensive than peers. Royal Caribbean ships have been 7% more expensive to build than Carnival historically, but net yields have been 7% lower. So far, higher capital expenditures per berth have not paid off. While the higher barrier to entry makes it harder for competitors to match, it is also not a proven model others are yet willing to chase.
Onboard Revenues
For all cruise lines, onboard spending has risen 25% over the past decade while ticket prices have actually declined. Moreover, onboard spending has been historically less volatile than ticket prices. So, with approximately 28% of cruise line revenues already coming from onboard spending, Oasis certainly creates the “right environment” for increased onboard spending. With the port of call faded into the background in importance, cruisers seek out the variety of onboard activities and shopping experiences. On the Oasis, these can include botox treatments, teeth whitening, and dozens of shops (including a tattoo parlor), boutiques, cafés, casinos, bars and restaurants.
The Oasis also offers opportunity for improving returns through improved fuel efficiency and other fixed costs of operation, such as payroll and victualing may be lower on a per passenger basis.
Something for everyone
Cruisers who want exotic, quaint and remote ports of call seek out luxury lines such as Seabourn and Regent. On my cruises aboard Carnival, I am genuinely chagrinned by cruisers who are willing to go different islands, yet visit essentially the same Margaritaville’s and Hard Rock Café’s that aren’t that dissimilar to bars in their home towns. I prefer to seek out the uniqueness of each island. Others prefer the comfort of something familiar, while at the same time being able to say “they were there.”
If it is truly about brand differentiation, the onboard experience vs. the island destination argument is not relevant. So the Oasis is limited to ports of call that can handle 5,400 passengers debarking at the same time and dock a 220,000-ton ship. If the Oasis attracts new cruisers, ones seeking the Oasis experience and what it uniquely has to offer, then it strengthens the brand and grows the market. If the strength of that experience is such that it can continue to generate higher ticket prices, then it will reward shareholders as well.
The Oasis, however, is not an experiment. Allure of the Seas, its twin sister, is due for delivery in Port Everglades in a year.
Sources: DVB Research & Strategic Planning; Pareto Securities
Posted By Cruise Market Watch / 17th September 2009
Travel agents report an average increase of 14% in cruise ticket prices during June, July and August of 2009 compared to April 2009, according to the quarterly Cruise Pulse survey.Pricing, while still below the same period the year prior, indicates stabilization in the cruise market.
There is also evidence of stronger pricing for cruises booked for 2010 departures, driven by interest in the new ship builds, more favorable demand in the European market and re-surging interest with luxury cruise lines.
Data was gathered August 25 to September 8, 2009 from 349 travel agents from around the world. Margin of error +/- 5.2%.
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