Posted By Cruise Market Watch / 29th November 2011
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
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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.
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.
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.
Posted By Cruise Market Watch / 22nd February 2011
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.
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.
~Worldwide, the cruise industry has an annual passenger compound annual growth rate (CAGR) of 7.7% from 1990 – 2011.
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.
When you are a researcher, you just can’t help but be analytical. But I must not be the only one to wonder while on a cruise what the revenue is from an average cruiser – and how that income is distributed among cruise line expenses? In case I am not, here is a typical breakdown based on Cruise Market Watch statistics. The average cruise passenger spends a total of $1,454 per cruise. Note this is for all cruise lines, luxury to contemporary. With the typical cruise lasting 7.1 days, this amounts to a per passenger per day (APCD) projected to be $205, with $155 per day ticket price (75.6%) and $50 per day on-board spending (24.4%)
For the cruise line, about 7% of this revenue is spent on fuel, 11% shipboard payroll, 11% agent commission and 6% food. You can find further detais in the chart below.
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 / 29th November 2009
Cruise Market Watch releases 2010 cruise industry market statistics based on current economic conditions and anticipated new ship builds.
Among the 2010 highlights:
Total worldwide cruise passenger capacity will increase 6.9% over 2009.
Annualized total passengers carried worldwide in 2010 are estimated at 18.4 million.
The total worldwide cruise market is estimated at $26.8 billion, a 7.4% increase from 2009.
The majority of the increases are attributed to cruise lines significantly increasing passenger capacity with the addition of new ships. Additionally, pricing pressures to fill them in 2010 will be mitigated due to improved consumer confidence. Ticket prices and onboard spending are expected to improve modestly compared to 2009, although they will still remain below 2008 levels. Average cruise revenue per passenger (APCD) for 2010 for all cruise lines worldwide is projected to be $207.68, with $156.80 ticket price and $50.88 onboard spending. In addition, growth of international passengers will outpace North American cruise passenger growth on a percentage basis, and a weakening U.S. dollar will strengthen overseas earnings.
The combination of an attractive vacation value and marketing buzz surrounding new ship designs will provide opportunity to introduce new cruisers to the cruising experience. This will stimulate market growth for the industry through 2013. The end of 2013 projects passengers carried to reach 21.3 million, a 15.7% increase from 2010.
With cruise line stocks Carnival Corp (NYSE: CCL) and Royal Caribbean (NYSE: RCL) trading over 50% and 150% above their price 52-weeks ago (and even further above March 2009 lows) most of these positives are already baked into current share prices although events are still bullish long term for the industry. 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 visitors to Las Vegas – that single city in the desert. The flexibility to move the ships to match demand and where the best yields can be achieved is a distinct advantage.
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
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