Cruise must provide shareholder value to invest and grow

Cruise must provide shareholder value to invest and grow

By Lee Hayhurst

Shareholder return is a vitally important part of the cruise industry if it is to attract more investment to allow it to grow, says Celebrity Cruises chief executive Michael Bayley.

Bayley told the Clia Columbus Day in Liverpool that profitability was a core component for cruise operators that need to invest billions of dollars to build new vessels.

“It’s incredibly important that we are providing an adequate return to shareholders and investors who put literally billions of dollars into the product. The marketplace for capital is very competitive. It’s not just available anywhere, people want to know that when they invest in whatever sector that they can get the return associated with any risk.

“We need to be able to encourage more investment. We need to introduce new brands and products and certainly need to introduce new ships. To achieve that we must achieve more revenue and reduce costs.”

Bayley, for instance, called for a more collaborative approach to port development in emerging cruise markets, the costs of which are currently passed on to the cruise lines which in turn pass them on to customers. “That’s really something that needs to be worked on,” he said.

Bayley added that the cruise industry must look to develop new sources of passengers like in the fast-growing markets of South East Asia, China and South America.

Carnival exec foresees rebound

Carnival exec foresees rebound

By Tom Stieghorst
Howard FrankSOUTHAMPTON, England — The vice chairman of Carnival Corp., Howard Frank, said smoother seas are ahead for the world’s biggest cruise company.

Carnival has been buffeted by weak demand and negative publicity since February when an engine fire on the Carnival Triumph made headlines.

Prices for Carnival’s flagship brand have since dropped 15-20% in the estimation of some Wall Street analysts.

Interviewed here prior to the naming ceremony of the Royal Princess, the latest Princess Cruises ship, Frank said, “I think we’ve bottomed, from the standpoint of the business.”

Frank said weekly surveys of consumer sentiment commissioned by Carnival are also starting to get better. That is at odds with a recently released Harris Interactive poll that showed continued erosion in consumer sentiment about seven cruise brands.

Frank said Carnival’s survey asks different questions and is more current than the Harris data from May. But he said the recovery will be gradual.

“I don’t think that you turn the Costa situation or the Carnival situation around overnight,” he said.

“Some of it is just time,” he added. “We’ve had a number of incidents.”

The $735 million Royal Princess was named by the Duchess of Cambridge, Kate Middleton, in a pierside ceremony documented by 110 media representatives, Princess officials said.

“We’re pleased to provide a good news story for the industry,” said Jan Swartz, Princess’ executive vice president of marketing.

Carnival shares sink after profits warning

Carnival shares sink after profits warning

By Phil Davies

Carnival shares sink after profits warningCarnival Corporation shares sunk by as much as 13% in the wake of an overnight profits warning on Monday.

The shares were down 8.6% at £22.02 in afternoon trading yesterday, the Financial Timesreported.

Numis analyst Wyn Ellis said the company’s problems had clearly affected consumer confidence and led to deep discounting.

“It is disappointing that management has left it this late in the season to issue its warning and, in our view, it has questions to answer,” he told the FT.

Karl Burns of Panmure Gordon said the decline in yields “bodes ill for the future as we think Carnival will struggle to regain pricing power”.

He added that “the market must begin to appreciate there are structural as well as cyclical challenges to the Carnival business model”.

James Hollins, Investec analyst, said: “The Carnival bull story has taken a major hit and we look for further detail at the time of Q2 results in late June.”

The negative responses followed the cruise giant saying net revenue yields will be down 2% to 3% this year as a result of cruise price cuts employed to boost booking levels.

Earnings will also be cut by 10 cents a share as a result of cruise cancellations following technical faults on a series of Carnival Cruise Lines ships.