Carnival’s impact on the public’s perception of cruising
Since the engine fire on the Carnival Triumph in February, the industry has been closely monitoring the public perception of cruising and whether the industry has come under a cloud.
Did the problems experienced by a single Carnival Cruise Lines ship taint perceptions of the entire cruise experience?
There’s more evidence in Carnival Corp.’s second-quarter financial results that the perception of a problem with cruising has mostly affected Carnival’s flagship product.
Carnival said that, excluding Carnival Cruise Lines, bookings for the next three quarters are up, and at higher prices. That means that Princess, Holland America Line, Cunard Line and the rest of the Carnival stable have been more than holding their own since March.
Competitors such as Royal Caribbean International and Norwegian Cruise Line likewise do not appear to be struggling with lower prices, according to Wall Street analysts.
When Carnival Cruise Lines gets thrown into the mix, however, Carnival Corp. bookings are behind last year, and at lower prices. Regrettably for Carnival Corp., and perhaps the industry, if Carnival Cruise Lines isn’t healthy, the conversation about cruising suffers.
It should be noted that two Harris Interactive polls, one in March and a follow-up in May, found that perceptions about quality, trust and intent to purchase for seven cruise brands were down across the board, albeit with Carnival Cruise Lines scoring lowest.
It is hard to square the poll results with the financial results, except to say that the poll is a measure of what people say, and booking data is a measure of what they actually do.
The financial results say that, except for Carnival Cruise Lines, there’s more demand for cruises this year than last. If Carnival Cruise Lines can heal itself, however, the whole industry will undoubtedly benefit.
River cruise lines lose millions of dollars to European flooding
The lines also started to take stock of the millions of dollars in losses they incurred as a result of the flooding.
An uncharacteristic level of rainfall at the start of June caused water levels to surge throughout parts of Germany, the Czech Republic, Slovakia, Hungary and Poland.
The rains forced local populations to evacuate, threatened to submerge cities and created a logistical nightmare for river cruise lines that were forced to cancel cruises and alter itineraries along the Main and Danube rivers as well as along the Main-Danube Canal.
“This is the worst flooding that we have experienced in the 20 years we have been operating river cruises,” said Guy Young, president of Uniworld Boutique River Cruise Collection. “This historical flood and the impact on our cruises has certainly been an anomaly.”
Young estimated that Uniworld will be forced to write off more than $5 million in lost revenue due to the flooding, which he said affected seven Uniworld vessels and 16 departures, with five cruises having to be canceled.
The challenge has been not just dealing with the constantly changing situation on the rivers and the affected vessels and passengers but also with the financial fallout of having to re-accommodate and rebook hundreds of passengers while also offering them refunds and future cruise credits.
As of June 13, Avalon Waterways had canceled eight departures since June 1 and made several additional itinerary changes. Most of Avalon’s European fleet was affected in some way by the flooding, which in turn had an impact on approximately 1,000 Avalon travelers at the height of the flooding, according to Patrick Clark, Avalon’s managing director.
But that’s just the start of the problem. Not only are canceled cruise departures lost revenue (affected passengers were offered a full refund), but all the river cruise lines are offering passengers additional compensation, generally in the form of a $500 future cruise credit.
For cruises that were not canceled but sailed an altered itinerary, the company had to either add more land arrangements or swap in accessible sites for destinations made unreachable by high waters. River cruise companies have said they offered some measure of compensation for passengers on altered itineraries.
Avalon also offered to cover passengers’ air change fees and said it was protecting agents’ 10% commission on the canceled cruises as well as full commissions on re-bookings.
“The accounting is the last piece of our puzzle,” said Clark.
“Our approach is to make the right decision for customers,” he added. “If we made those decisions well, we know that the customers and their agents will come back to us.”
Since Viking River Cruises has the most river cruise ships sailing Europe’s inland waterways, the flooding also caused it to do the most juggling. As of late last week, the company had canceled 13 sailings and modified 25 itineraries.
“There is a financial impact anytime we have to cancel a sailing,” Richard Marnell, senior vice president of marketing at Viking, wrote in an email. “With the 2013 season nearly sold out and vibrant sales already for the 2014 season, Viking’s breadth provides the ability to withstand such an impact.”
Viking might be able to withstand the financial impact, but Marnell’s statement indicates another dilemma: where to put all these passengers who now need to rebook their river cruise.
“The biggest challenge will be re-accommodating passengers on a similar cruise this sailing season,” he said. “We’ve experienced such high demand for the 2013 sailing season that we may not be able to reschedule passengers until November or December, or even until the 2014 season.” He added that for affected passengers, 2014 itineraries will be protected at 2013 prices.
Tauck, too, was concerned about lack of available inventory to re-accommodate affected passengers, according to Tom Armstrong, Tauck’s corporate communications manager. Tauck has canceled five cruises on two ships, which affected approximately 450 passengers.
With hundreds, perhaps thousands, of passengers on the prowl for a new river cruise to take, it’s no wonder that river cruise line A-Rosa, based in Rostock, Germany, sent an email to the trade last week offering up its product as an alternative.
“Some may view it skeptically when a vendor offers assistance, as it may be interpreted as capitalizing on the misfortune of others,” David Morris, president of David Morris International, which represents A-Rosa in North America, wrote in an email. “That being said, one primary reason for sending this is that most river boats this summer in Europe are completely sold out, leaving your clients with little or no alternatives.”
Consequently, A-Rosa is offering river cruise passengers displaced by the floods preferential fares on several departures, is waiving single supplements and is offering a $500-per-cabin credit on any 2014 A-Rosa sailing.
“We sincerely hope that your clients are minimally affected by the current floods and hope you can find suitable alternative plans with the river boat company you booked originally,” Morris wrote. “If you cannot, we are here to help.”
As the flooding appeared to slowly recede last week, the devastated areas of Central Europe have begun planning recovery. At least 21 people were killed in the floods, according to news reports, and the economic toll of the deluge in Germany alone is likely to reach about $16 billion, according to global rating agency Fitch Ratings.
As the cities along the rivers begin to rebuild, the river cruise companies are declaring that the worst is over. At press time, Viking had estimated that most cruises would sail with minimal impact beginning June 15 and expected all cruises after June 21 to operate normally. Avalon, too, said sailings over the next few weeks should see minimal impact.
“The floodwaters have been receding rapidly,” reported Rudi Schreiner, president of AmaWaterways, which did not cancel any sailings but saw seven ships and 14 departures affected by the floods.
Schreiner, too, estimated that water levels and cruises should return to normal within the next week.