Cruise companies reducing Mediterranean presence

Ongoing instability in the Mediterranean region is prompting cruise companies to trim capacity there, with the latest example coming from Celebrity Cruises, for summer 2017.

Celebrity said it will keep the 2,850-passenger Celebrity Equinox in Miami next spring after it completes its winter cruise schedule, instead of returning to the Mediterranean, where this summer it will operate cruises out of Athens and Barcelona.

The move will draw down Celebrity’s Europe deployment next summer from five ships to four and give it a year-round ship in the Caribbean for the first time since 2010.

Other companies also plan to move capacity out of the Mediterranean and into the Caribbean.

Carnival Corp. in a June 28 conference call said it expected a 10% capacity reduction in the Mediterranean region next year, and a 5% increase in Caribbean capacity.

“We are rebalancing our portfolio to optimize the current demand environment,” Carnival Corp. CEO Arnold Donald said.

The moves come as the Mediterranean was again rocked, this time by a failed coup attempt in Turkey and the truck massacre in Nice, the third major terrorist attack in France in the past nine months.

Cruise lines had already largely stopped calling in Istanbul after a series of terrorist attacks there this year. After the coup, many cruise lines also suspended calls elsewhere in Turkey, such as Kusadasi.

Most are in a wait-and-see mode, such as Carnival Cruise Line, which replaced the Carnival Vista’s calls in Kusadasi on July 17 and 20 with sea days and said it will evaluate future calls there “in the coming days.”

Some travel agents said client demand for Europe remains healthy.

“For us, our European business is still very strong,” said Jeffrey Bateman, vice president of operations at Crown Cruise Vacations in Princeton, N.J.

Bateman said most of his clients on Equinox cruises that had been scheduled for Europe next summer had rebooked other Celebrity European cruises.

Prices have been softening for Europe, according to a survey by SunTrust Robinson Humphrey analyst Patrick Scholes, who said advertised prices for cruises in southern Europe in June fell 1.3% year over year, compared to a 7.4% increase in May.

Frank Del Rio, CEO of Norwegian Cruise Line Holdings, said cruise lines remain reluctant to drop Europe in the summer.

“Analysts ask me, why don’t you put the ship in the Caribbean in the summer instead?” he said. “Well, because even a bad year in Europe is better than a good year in the Caribbean, especially in the summer.”

In 2014, a mass migration of ships from Europe to the Caribbean led to a pricing bloodbath. Donald said that’s unlikely in 2017, when Carnival’s expected Caribbean capacity growth will be 5%. In 2014, it was 20%.

The Equinox will add to the overall capacity in the Caribbean, but several travel agents liked having more itinerary options for Celebrity in the summer.

“I view the year-round vessels in the Caribbean as a plus,” said Valerie Harris, a CruiseOne franchisee in Atlanta. “They lend a hand with creating and maintaining a cruise line’s presence in the region, which in turn may establish brand loyalty.”

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9 Fun Facts about Cruise Lines

 9 Fun Facts about Cruise Lines

9 Fun Facts about Cruise Lines:

1. An average cruise ship could have six huge diesel engines producing one hundred four horse powers and guzzling three thousand gallons of fuel per hour.

 

2. Cruise ships on modern design can actually cost about six hundred sixty million dollars.

 

3. There are nine brand new ships that entered service around the North America coast line every year.

 

4. A modern luxury cruise vessel is able to be built, fitted out and tested in one-and-a half years though it usually takes about three years.

 

5. On the average, there are one hundred five thousand meals are prepared every single week onboard a cruise ship. The meals include twenty thousand pounds of beef, twelve thousand pounds of chicken and twenty eight thousands of eggs.

 

6. There are about one thousand crew members on board the average ships to cater to passengers every need. These people are experts from engineers to waiter to navigators.

 

7. A modern cruise liner are able to hold three thousand passengers aboard in an absolute luxury.

 

8. Caribbean is the most popular cruising destination in the world with almost every cruise line operator.

 

9. The cruise line industry produces two thousand five hundred fifty five gallons of gray water and thirty thousand gallons of black water every single day. Gray waters are wastes from sinks, showers and bath while black waters is what you flush down the toilets.

Carnival and Costa see improvement in Q1

By Jerry Limone
Carnival_BreezeCarnival Cruise Lines and Costa Cruises are doing better, according to Carnival Corp.’s first-quarter financial report this week (see bottom of this report), but the company’s largest brands in the U.S. and Europe still have a steep hill to climb.

How steep? CFO David Bernstein said that based on the guidance of Carnival Corp.’s competitors, those companies are at or near 2008 levels for net revenue yield, a key cruise industry metric similar to revenue per available room (RevPAR) in the hotel industry.

Conversely, Carnival Corp.’s yield is down about 11% from 2008, Bernstein said.

Delving further, Bernstein said the company took a 10% hit from the global financial crisis of 2009, gained about half of that back by 2011, but lost those gains after the Costa Concordia accident in 2012 and the much-publicized stranding of the Carnival Triumph in 2013.

“Hopefully, as our brands recover, both Carnival Cruise Lines and Costa, we can recoup, getting back to 2008 yields,” Bernstein said. “Hotel RevPARs are also back to those levels, so we have every reason to believe we can get back there, as well.”

There were good signs from Costa and Carnival in Carnival Corp.’s first quarter, the three months ended on Feb. 28. Costa’s yield was up, Carnival Corp. CEO Arnold Donald said, aided by a 50% increase in booking volume.

However, Costa’s gain was more than offset by a yield decrease for the company’s other European brands, which struggled largely due to a stagnant economy in Europe. Carnival Corp. said that net ticket yield fell 3% for all European cruise lines.

Carnival, too, had strong booking volume. Donald referenced the brand’s single-month record for bookings in January, when 565,000 people reserved space on a Carnival cruise. Attractive promotions and increased advertising spending helped make that happen.

ArnoldDonaldDonald said the company will spend $600 million on advertising in 2014, a 20% increase over 2012. He said Carnival’s TV ads during the Sochi Winter Olympics and Princess’ first TV ad campaign in 10 years were vehicles to attract first-time cruisers.

But because of discounting, particularly in the Caribbean where most of Carnival Cruise Lines’ ships operate, Carnival Corp.’s yield fell 2.1% in Q1. The company forecasts that yield will fall 3% to 4% in Q2, compared with a year earlier.

The improved performance of Carnival and Costa “builds confidence that we are tracking to turn the corner beginning in the second half of 2014,” Donald said.

But until that corner is turned, discounting will continue. Donald said that increased capacity in the Caribbean industrywide puts pressure on pricing.

The company is “behind on both price and occupancy” in the Caribbean, Bernstein said, despite the Carnival brand’s record-breaking January.

The North America brands are best performing in Europe for their seasonal program, where they are “well ahead on price and occupancy,” Bernstein said.

Carnival Corp. beats expectations, reports Q1 loss

By Jerry Limone
Royal Princess shipCarnival Corp. said Tuesday that the company had a $15 million net loss for its fiscal first quarter, the three months ended Feb. 28.

The results beat the company’s December guidance, thanks to ticket prices that were better than expected.

The loss compares with a $37 million net profit in the previous year’s first quarter.

Revenue was essentially flat at $3.59 billion. Carnival Corp.’s net revenue yield, a key metric for cruise companies that measures revenue generated per unit of available accommodations, fell 2.1%.

At the same time, operating expenses rose 1.9%, to $3.51 billion, driven by increased spending on advertising. Fuel prices declined 3.4%, to $654 per metric ton.

CEO Arnold Donald said first-quarter results exceeded the company’s December guidance because ticket prices were higherArnoldDonald than expected for Carnival Cruise Lines and the company’s European cruise brands, and due to the timing of certain expenses.

Looking ahead to the second quarter, Carnival Corp. expects that net revenue yield will fall 3% to 4% compared with the prior year.

The company also anticipates an increase in net cruise costs per available lower berth day (excluding fuel) of up to 3.5% because of higher selling and administrative costs.