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Cruise lines rocked by Carnival profit alert
By Tom Bawden
May 17, 2006

CARNIVAL CORPORATION raised fears that the boom in cruise ship holidays could be running out of steam after the world’s biggest operator issued a surprise profits warning.

Shares of Carnival, which owns P&O Cruises, dropped 12 per cent yesterday after the company blamed Hurricane Katrina, oil prices, a ship fire and a change in accounting procedures for knocking about $170 million (£90 million) off its profit forecast for the year.

Elizabeth Osur, a Citigroup analyst, said: “The magnitude of the impact was a surprise and, as the industry brand leader, Carnival has to have repercussions for the other players. There are relatively few players in the market and no one acts in a vacuum.”

Shares of Royal Caribbean Cruises, the world’s secondbiggest luxury cruise operator, fell about 5 per cent on concern that its arch-rival’s announcement could signal difficulties across the industry.

Micky Arison, the chief executive of Carnival, admitted that he had been forced to cut prices on his Caribbean cruises as he looked to sell empty cabins.

Carnival reduced its net income forecast for 2006 from about $2.90 a share to about $2.70 a share, or $2.25 billion, which is the same level as its profit for last year.

Bookings for Carnival’s cruises in the Caribbean have slumped as potential passengers feared a repeat of Hurricane Katrina, which hit the area last August.

Rising oil prices are expected to add $265 million to the company’s fuel bill for the year, although analysts had already factored in much of that.

Analysts said that Carnival could also be suffering from a shift in sentiment towards cruising in North America. In addition to a fire on one of its ships in March, which killed one passenger and injured 11 others, Carnival is one of 15 cruise lines involved in a US Congress investigation into sexual assaults on cruises.

In a submission to Congress in March, the International Council of Cruise Lines, an industry body, detailed 178 reports of sexual assault among the 15 shipping groups in 2002-04. Although that equates to a tiny proportion of passengers, the report has caused concern among some Americans, analysts said. The report also detailed 24 cases of missing people.

Mr Arison said: “Although we are disappointed at having to lower our guidance for the year, we believe the fundamentals of our business remain sound and our long-term strategies position us well to grow our business in 2007 and beyond.”

Carnival’s other brands include Princess Cruises, Cunard Line and Costa Cruises.

The Times

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"Micky Arison, the chief executive of Carnival, admitted that he had been forced to cut prices on his Caribbean cruises as he looked to sell empty cabins.
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Bookings for Carnival’s cruises in the Caribbean have slumped as potential passengers feared a repeat of Hurricane Katrina, which hit the area last August".

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Micky Arison, the chief executive of Carnival, admitted that he had been forced to cut prices on his Caribbean cruises as he looked to sell empty cabins.

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Well i hope that he is not starting to sell FULL cabins!

Maybe simple thinking:
One day this must happen. The industry build bigger and bigger ships. they have to fill theme with life stock. One natural dissaster and life stock stays ashore. To cut prices is on the long run no option. I believe there must come an end to building larger and larger cruise ships. Maybe it's time to jump on the smaller cruise vessel market. I cannot believe there is no market fore such vessel (10.000/40.000 grt) there are lot of people wich loved to sail on such vessels.

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Originally posted by Maasdam:

I cannot believe there is no market fore such vessel (10.000/40.000 grt) there are lot of people wich loved to sail on such vessels.

Greetings Ben.

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Carnival plans to cut cruise fares
Carnival hopes to stimulate demand by cutting prices for its Caribbean cruises.
BY AMY MARTINEZ
May 17, 2006

Concerns about hurricanes and rising prices at the gas pump apparently are keeping many Americans from booking Caribbean cruise vacations.

But they may be persuaded to push those concerns aside.

Miami-based Carnival Corp., the world's largest cruise ship operator, said Tuesday it's lowering fares for its Caribbean itineraries in hopes of making them forget about last year's unusually active hurricane season and the dent that gas prices are making in their wallets.

Namesake brand Carnival Cruise Lines said rates for Caribbean cruises aboard 16 of its ships are down as much as 20 percent from a year ago -- with some week-long itineraries selling for $449.

Travel agents hailed that as good news for working Americans in need of a summer vacation. But Wall Street clearly was disappointed by a change in Carnival's 2006 outlook, sending its stock to lows not seen in more than a year.

Carnival estimated that the price reductions -- combined with an increase in the costs of fueling its ships -- will take a chunk out of its 2006 profit. Carnival now expects profit to be in the range of $2.65 to $2.75 a share, down 25 cents, or about $200 million, from what it predicted in March.

Carnival also said a change in the way it accounts for ships' dry-dock costs will reduce its profit for the year by 8 cents a share. The company said the accounting change lowered its first-quarter profit to 30 cents a share, down 4 cents from March's report.

Travel agents said the price reductions aren't just limited to Carnival. Other cruise lines, including Miami-based Royal Caribbean International, are offering incentives such as free room upgrades to stimulate demand, they said. Cruise lines used a similar strategy after the Sept. 11, 2001 terror attacks.

''Price overcomes everything. The question is how low do you have to go,'' said Carnival spokesman Tim Gallagher. ``We went lower than this after 9/11, and we filled our ships.''

Cruise lines reversed course and began raising prices several months after the attacks, but it wasn't until 2005 that prices returned to pre-Sept. 11 levels. This time around, demand for more-expensive European and Alaskan cruises remains strong, while the weakness is entirely in the Caribbean.

''We're booking into 2007 for Alaska and Europe,'' said Vivian Ewart, senior vice president of CruiseOne and Cruises Inc. in Fort Lauderdale. ``The only thing we can pinpoint in the Caribbean is the hell we went through last summer with all the hurricanes.''

Cruise line executives have long maintained that because cruise ships can move out of the way of hurricanes, they're some of the safest vacation destinations. But Carnival Vice Chairman Howard Frank said Tuesday in a conference call with analysts and investors that the company underestimated the ''psychological'' effect of last year's hurricanes.

''It appears that last year's hurricane season had a fairly profound effect on bookings, far more than we expected,'' Frank said.

''I believe there's a real bifurcation occurring in the economy. Our premium, higher-priced brands are doing quite well. People in that particular segment of the market are taking vacations,'' Frank added. ``On the other hand, when you look at the middle segment of the market [the Caribbean cruise market], I think those people are feeling the impact of higher fuel prices.''

Carnival shares tumbled $3.94 to $42.60, the lowest level in more than a year. Shares of Royal Caribbean Cruises, the world's second-largest cruise operator, fell from $40.20 to $37.54. Royal Caribbean officials declined comment.

Tuesday marked the second time in just over a month that Carnival downgraded its outlook. The company in late March reduced its earnings estimate for the second quarter by 4 cents to 5 cents a share, or $34 million to $42 million, because of a fire aboard its Star Princess ship near Jamaica. The March 23 fire killed one passenger and injured 13 others, while damaging more than 280 cabins.

Scott Barry, an analyst at Credit-Suisse in New York, said Carnival's ``loss of pricing power is disturbing.''

''Demand weakness begets demand weakness. Travel agents are aware of the weakness, so they're not as inclined to get people to book early,'' Barry said. ``The cruise lines will have to implement initiatives to counteract that. They've had to do that before, but it takes time, and it can be painful from a stock perspective.''

Miami Herald

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Originally posted by Pascal:

I wonder if it's just a Caribbean problem or if other other destinations suffer as well.

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The problem is mainly in the Caribbean, accoriding to a host of other articles currently in the news. Cruising areas in Alaska and Europe, which command much higher fares, are doing very well.

Analysts say that hurricanes are one main reason people are reluctant to book the Caribbean, but economics are another factor. With much higher gas prices, the typical lower-income cruiser who would go to the Caribbean is much more price-sensitive. These people are postponing their cruise vacations, perhaps waiting to see if prices will drop.

The people who have the means to travel further abroad are not as affected by pricing, and hence those destinations are doing nicely.

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i believe it is the negative
experience of a cruise plus
going back to the same island
destinations.
embarkation: 2000 to 3000 people waiting to board a ship
can take a long time.
problems with ship and changing or missing ports and
be a negative.
the been there done that experiance.
poor quality of service and its in the contract to protect
the company and not the passenger additude.

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