Carnival Corporation sees Q2 profits treble

Posted on 25 June, 2014 by Spacejunkie2

By Phil Davies

Carnival Corporation delivered an improved set of second quarter year on year financial figures and revealed that bookings for the remainder of 2014 are ahead of last year.

The world’s largest cruise conglomerate admitted yields in the current quarter – covering the main summer months – would be affected by a “significant” industry capacity increases in the Caribbean but raised its forecast for full year trading amid falling costs and an improved economic picture.

The group saw profits almost treble in the three months to May 31 to $106 million from $4 million in the second quarter of 2013, based on revenue up to $3.6 billion from $3.5 billion.

Carnival Corporation president and chief executive Arnold Donald said the company had been helped by better than expected revenue and lower cruise costs.

“We benefited from effective marketing initiatives, which combined with a gradually improving economic environment, led to revenue yield improvement for our continental European brands in the quarter compared to the prior year and is expected to continue through the remainder of the year,” he said.

“In addition, we achieved a six percent improvement in fuel consumption.”

Donald said Carnival expects revenue for 2014 to surpass last year’s level.

Advance bookings for the rest of 2014 are slightly ahead of last year and at higher prices, even though bookings for the next three quarters are slightly behind last year.

Donald said: “Collectively our brands are gaining momentum in our efforts to drive higher ticket prices and we continue to expect sequential improvement in revenue yields, despite a more competitive environment in the Caribbean this summer.

“We remain focused on further understanding our guests and refining the exceptional customer experience we provide.

“We have also made significant strides in our efforts to identify opportunities for cross-brand operational efficiencies. This work is still in the early stages, but we are making progress and beginning to see encouraging signs.”

The company hopes to have recovered from multiple cruise ship incidents last year involving Carnival Cruise Lines.

Several ships had power problems, including Carnival Triumph, which stranded passengers for days at sea in squalid conditions in February 2013.

“We believe we have reached a positive inflection point for our company as we return to earnings growth in 2014 and work hard to ensure that growth accelerates in the years to come,” Donald said.

The third quarter saw the introduction of Princess Cruises’ Regal Princess in the Mediterranean and the brand’s first programme of sailings from China on Sapphire Princess.

Costa Cruises announced that it will position Costa Serena in China next year, bringing the company’s total to four ships based in the world’s fastest growing cruise market.

The corporation said it believes it is the largest provider of cruise holidays home-ported in China.

Carnival Corp. CEO: Competitors’ newbuilds may hurt pricing

Posted on 9 June, 2014 by Spacejunkie2

By Tom Stieghorst

MSC Cruises’ order book of four big new ships is an example of a trend that could spell trouble for an industry struggling to raise prices, Carnival Corp. CEO Arnold Donald said.

“We’ll have to see how it all plays out,” Donald said in a recent teleconference with reporters. “In an ideal world, you wish it wasn’t happening.”

Arnold Donald Donald was not singling out MSC’s expansion for criticism, but he happened to be making his comments on the day the line ordered two 4,170-passenger ships. That came on the heels of an order for two 4,500-passenger ships, part of a plan to double MSC’s capacity by 2022.

Asked how prices can rise if Carnival Corp. restrains its own brands’ capacity growth while other lines don’t, Donald said he was confident that Carnival’s strategy was sound. It includes incremental growth in onboard revenue and ticket prices spread over 78 million passenger days, coupled with shrinking expenses by employing best practices culled from its 10 brands.

But, he said, if any competitor resorts to “super-aggressive pricing” to fill its ships, “then it can become a problem for the industry.”

Donald said travelers come to view the industry’s lowest prices as a gauge of how much they should pay for any cruise.

“People say, ‘I’m not going to go on that ship, but cruises only cost this much, and I don’t want to pay more than that because I don’t want to get ripped off.'”

On the other hand, he said, the upside of new capacity is more attention being paid to cruise products.

“It just allows them the opportunity to put cruise front and center, to help all of us close on [those] new to cruise,” he said.

MSC Cruises USA President Rick Sasso said that the real pricing stress this year has been in the Caribbean and that MSC wasn’t the initiator of the fare discounting there.

“It should not be a surprise to anybody that we’ve been successful and we’re going to continue to invest in our brand,” he said.

Cruise line consultant Bob Dickinson

Posted on 2 June, 2014 by Spacejunkie2

Cruise line consultant Bob Dickinson

By Tom Stieghorst

Former Carnival Cruise Lines CEO Bob Dickinson has spent the past year consulting for Carnival Corp.’s four North American brands. His assignment ends May 31. Dickinson took time out from a hiking trip in California’s Napa region to speak with cruise editor Tom Stieghorst about how cruises need to be marketed and how crucial agents are to capturing the first-time cruiser.

Q: What’s your overall opinion of the current state of cruise line marketing?

A: For the last number of years — six, seven, eight years — cruise lines have been undermarketed. When the fuel prices went up, the first thing to go was the TV advertising budget.

Social media is fine, but social media doesn’t reach first-time cruisers. It’s sort of like Al Gore’s inconvenient truth — or in this case, an inconvenient falsehood, that we can substitute one for the other.

Q: Is anyone doing better than the rest?

A: Look at Viking River Cruises and what they’ve been able to do with Masterpiece Theater.

It’s not a huge TV buy, but the visual of whatever it is that is in the commercial fully explains that riverboat experience, makes it aspirational, makes it achievable, makes it so that I see myself in that picture, certainly in the over-50 set, which is who they’re marketing to.

Q: What role do travel agents play in connecting the majority of people who have no experience with a cruise to the insiders who run the industry?

A: Travel agents are the biggest gateway to first-time cruisers, and the cruise industry in the last couple of years has not always been friendly to the travel agent — and in some cases tied their hands. When you’re selling three-, four-, five-day cruises where the noncommissionable fare is as much as the cruise ticket and you’re getting 15% of $149, why would they sell that? Let them sell Sandals, let them sell river cruises, things where there’s a lot of money.

Q: What changes should the cruise lines make?

A: I think some cruise lines have already changed back and have realized that the industry has overplayed its hand. In general, I think all of the brands, certainly the brands I worked with for the past year, are more agent-friendly this year than they were a year ago in terms of their policies and their procedures: pricing, co-op advertising. Every one of the four Carnival North America brands has better policies in place now than they did a year ago.

Q: Did you end your consulting agreement with Carnival or did management?

A: Very candidly, that was their choice. A consulting agreement is like a marriage; if one partner doesn’t want it, the other doesn’t either, if you know what I mean. If there is a willing audience at some point, I would like to do some [other] marketing or management consulting.

Q: Are you still working with the Camillus House homeless shelter in Miami? What else are you up to?

A: On Aug. 1, we’re going take another 100 of the most hard-core, chronic homeless in the city and start them on the process of getting their lives back together. [But] I’ve cut back my time commitment, from 30 to 40 hours a week after I retired to 10 to 20 hours a week now. [My wife] Jodi and I are kind of on a second honeymoon. [In Napa] we’re walking about two hours a day on average, enjoying the restaurants and just hanging out. On June 4, we’ll be going to [our] home in North Carolina. We’ll be there throughout the summer.