Posts Tagged ‘italy’

Costa Concordia impact

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.

GIGLIO PORTO, ITALY - JANUARY 21:  People look...

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.


 

 

Luxurious growth in the cruise segment

The Seabourn Spirit, Sydney Cove, Sydney, Aust...

The Seabourn Spirit, Sydney Cove, Sydney, Australia. (Photo credit: Wikipedia)

In 2008, there were about 10 million U.S. households with a net worth above $1 million (excluding home equity).  This is almost double the number from 2002, just six years earlier.  This growth has led to a boon for retailers who can appeal to the luxury market.

In fact, over the past ten years luxury has seen the most growth of perhaps any market sector. During this time, revenue growth in the regular retail mass-market has been in around 4%-6% annually.  Comparatively, growth in the luxury category has been from 20% - 32% annually.   Estimates are the luxury segment will continue to grow at a rate of 15% a year to 2010.

It is no wonder cruise lines have been scrambling to fill the increased demand for luxury.  From now until 2011 luxury cruise line capacity will increase 30%.  The rest of the cruise industry’s capacity will increase 17% over the same time period.

The bulk of this increased luxury capacity is with Carnival’s Yachts of Seabourn.  It alone is growing passenger capacity 216% over the next 3 years - from a current three-ship total of 624 passengers to a six-ship total of 1,974 passengers.

Over an entire year this amounts to a considerable amount of new customers to win.  Approximately 50% of Yachts of Seabourn’s current consumer base is a repeat customer.  Therefore, Seabourn will need to generate significant interest within the luxury niche to find and expand its customer base.

It is interesting to play with the numbers.  Assume each of three new ships (the first named Odyssey, with its maiden voyage scheduled to depart Venice, Italy, on June 24, 2009) are at sea for a total of 48 weeks per year with a trip duration average of 17 days.  That’s roughly 20 trips per year per ship, or 60 total sailings per year.  With 450 passengers per ship, that equates to 27,000 new passengers annually.

How to win them

To win them, Seabourn will communicate its unique experience: industry’s best crew-to-guest ratio, “of coarse” attitude, engaging social environment, well-appointed suites and privileged access to the world’s most desirable ports of call.

According to Greg Furman, Founder and Chairman of the Luxury Marketing Council “In addition to the search for the memorable, the unique and services that have high value, is what I call the rise of connoisseurship and the hunger to know. Never before has the luxury market seen buyers as interested in learning what constitutes the best of the best.”   In addition, the luxury consumer has become “more and more demanding of superior service, intelligent communication and a personalized understanding of their wants, likes and desires.”

Seabourn will use marketing to generate positive social conversations about Seabourn within the most discerning ultra luxury travel segment in the world. Conversations that will lead to increased agent, friend and family referrals.  Again, Furman: “They want sophisticated marketing, marketing intimacy, one-to-one marketing, what I call intelligent coddling by brands.”

Not to be left out, Regent Seven Seas Cruises recently announced that it will invest approximately $40 million dollars to implement an extensive refurbishment and enhancement of the line’s all-suite vessels.  "We are not only refurbishing the ships, we are adding many new luxury features that will enhance the guest experience,” said Mark Conroy, President of Regent Seven Seas Cruises. “This comprehensive enhancement program will see each of the ships emerge essentially brand new and positions our fleet as the standard-bearer in the luxury cruise category.”