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.
The launch follows by only a few days Carnival’s new campaign – interestingly with former Royal Caribbean agency Arnold.
Royal Caribbean is sailing away from the successful 9-year-old "Get Out There." The new campaign is dubbed "The Nation of Why Not." The Nation of Why Not kicks off with two television commercials (30-second and 60- second versions) inviting vacationers to secede from land and become citizens of “the nation.” The tongue-in-cheek spots - a combination of live action and animation - begin November 10, during morning show programming on ABC and NBC television networks, and during primetime programming on ABC and CBS. The commercials highlight Royal Caribbean’s global destinations.
The reason given by the Wall Street Journal is RCL is going after more revenues from European and Asian consumers. WSJ cites Royal Caribbean’s third-quarter earnings call last week when it was stated that more than 40% of revenues will come from outside of North America in 2009 , up from 30% last year.
While that may be true, I think the strategy is larger than that. After all, 60% of revenues will still be from North America. “The Nation of Why Not” may also be a smart, timely play off the recent historic election and current forward-looking mentality towards economic recovery. In addition, research shows destinations play an important role in consumer cruise choices, so RCL may be promoting its depth of destination alternatives to U.S. consumers.
The ads creatively challenge viewers to do things at sea that they could not do on land, such as “Why not ice skate on the equator and climb mountains at sea?” Additionally, print ads will launch in forty newspapers nationwide on Sunday, November 16, 2008.
Travel and cruise industry professionals will be introduced to The Nation of Why Not on Monday, November 17, with the first edition of “The Why Not Herald,” an insert in key travel trade publications across the United States and Canada. Subsequent editions will feature the new brand campaign’s print advertisements.
Ad agency and media bible Brandweek magazine is reporting Carnival Cruise Lines will soon debut a new ad campaign under the tagline "Fun For All. All For Fun." This has been highly anticipated, since Carnival dropped CooperDDB for Arnold in June 2008. Arnold was the agency of record for Royal Caribbean until December 2007.
The new campaign will start Oct. 26 in Dallas with a World Record attempt to create the biggest beach ball followed by the largest pinata Nov. 2 in Philadelphia (details below). According to Brandweek, footage from the events will be used to create national TV spots.
Other advertising includes a series of online videos based on Carnival's "get your pod chirping" in-room activity - the towel animals (pictured here with a soft toy friend who apparently wants to get in on the act). The online clips are at www.carnival.com/funville undoubtedly with the hope of going viral on the likes of YouTube and other social networks.
Further event details:
The first event is Sunday, October 26th at 12 noon at Pegasus Park in downtown Dallas. The World's Largest Beach Ball is 35 feet tall or about 3 stories. Senior Cruise Director John Heald will be in attendance tossing around the humongous beach ball.
The second event is in Philadelphia's City Center at North 20th and Market streets on November 2. The World’s Largest Piñata is 62 feet tall and 55 feet long or about six stories - and filled with 8,000 pounds of candy. Click here for an on-the-spot account or here for an ad age video wrap up.
Posted By Cruise Market Watch / 13th September 2008
Our monthly Cruise Search reflects change in demand and onlinemarket share. U.S. online cruise search is currently estimated at 9.4 million monthly unique individuals. Cruise Search shrank vs. both the previous month and August of last year. This indicates continued tempering in online activity likely based on the economic conditions faced by travelers.