Archive for October, 2012

Cruise sailing disruptions from Hurricane Sandy

List of possible cruise sailing disruptions from Hurricane Sandy:

Scheduled Departure Dates
Departure Port/Ship Name 10/28/2012 10/29/2012 10/31/2012
Baltimore MD
Carnival Pride            2,251
Bayonne NJ
Explorer of the Seas            3,301
Boston MA
Jewel of the Seas            2,234
New York NY
Caribbean Princess            3,301
Carnival Miracle            2,251
Crystal Symphony            1,018
Norwegian Gem            2,529
Norwegian Jewel            2,544
Queen Mary 2            5,554
Norfolk VA
Carnival Glory            3,152
Sum Of Passengers         19,038            4,781            4,318


 

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

Best time to purchase a European cruise

Cruise prices vary not only based on destination, number of nights booked, cabin type and ship segment but are also dependent on the season you set sail and how far in advance you buy. The same cruise itinerary can cost you a lot less per person per day if you book your ticket for the right season and the right number of months in advance. This infographic* can help you figure out the best time of year to go on a European cruise by highlighting prices by season and how far in advance you should book to get the best deal. The "rule of thumb for a European cruise" graphic requires little additional editorial comment. The only question that remains is what you will do with the money you save?

* Cruise Market Watch total weighted average price (per day per person) across all cabin categories from 30 cruise lines and 163 ships representing over 8,500 sailings in northern and southern Europe between September 1, 2010 to November 30, 2013.


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.