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