Cruise looks to recovery in 2013

By Tom Stieghorst
Cruise prices are still behind where they were a year ago, and it might be next spring before they recover.

That’s the forecast delivered by Carnival Corp. Chairman Micky Arison this week in a conference call with Wall Street analysts.

Carnival Corp. said net ticket yields for its North American brands in the third quarter were down 4.8% from a year earlier.

“Broadly speaking, I think it’s fair to say that in order to keep demand going, we have been and will continue to have a fairly heavy spend in promotions and sales,” Carnival Vice Chairman Howard Frank said. “That seems to be driving the business.”

Howard FrankIt can be a frustrating roller coaster for travel agents, who hope better prices lead to increased commissions.

“Prices are inching their way back slowly,” said John Lane, co-owner of Cruise Escape in Dallas. “But the minute you think they’re back, something happens.”

Lane cited a recent bargain-basement fare he saw on a junior suite for a Royal Caribbean International cruise. “I’ve never sold a cruise for a price that low in January,” he said.

It has been nine months since the Costa Concordia accident sent prices into a tailspin. The accident itself is fading from memory, but it takes time to build prices back from the trough, analysts said.

Still, setting aside a $100 million loss at Costa Cruises this year and the effects of a strong dollar, there is an underlying demand for cruises that could be evident next year.

“The further away we get from the crash, the more stable prices tend to be,” said Matthew Jacob, cruise analyst at ITG Investment Research.

The outlook for prices at cruise lines not owned by Carnival is a little brighter than what Carnival reported, Jacob said. “Carnival is going to be most impacted because [the Costa Concordia] was their ship.”

Royal Caribbean Cruises Ltd., the other cruise company that releases fare data to the public, should report better Q3 ticket yields, Jacob said, “because they don’t have the direct impact of one of their ships being lost.”

Some agents say they continue to see ample promotions, especially to sell cruises in Europe. The Concordia accident is not to blame, said Mary Ann Strasheim, owner of Custom Cruises and Travel in Omaha, Neb.

“I think there are still a lot of problems in the Mediterranean, and I don’t think it has anything to do with the Concordia,” she said. “It’s more because of the high airfares. ... When your cruise is less expensive than the airfare to get there, people think twice about flying to Europe.”

Strasheim said she is selling Europe at $1,800 to $2,200 per person.

A big question for pricing is how strong the Caribbean will be this winter. In the last full quarter before the Concordia accident (covering November, December and January), Carnival said ticket yields for its North American brands rose 5%, driven by improvement in the Caribbean.

Agents say fall Caribbean cruises are showing their typical shoulder-season discounts.

“There’s a ton of flyers, a lot of onboard credit options through the fall, all the way up to right before Christmas,” said Jodie Robichaud, owner of Happy Travels of Henniker, N.H.

“We have seen some going into spring,” she said, raising doubts about whether prices can improve for the winter months.

Carnival, in its comments to analysts last week, said that pricing for the first half of 2013 is slightly lower than a year earlier.

“What is encouraging for North American brands,” said Frank, “is that in the last six weeks, bookings and pricing for the first half of 2013 are running higher year over year, so during the last six weeks, we are catching up on bookings at higher price points, a very positive sign.”

Cruise executives hope to firm prices as much as possible before they begin ramping up marketing at the end of Q4 ahead of the Wave season.

Last year’s Wave season ended abruptly with the Concordia accident. “This year, we suspect that it will be a more sustainable Wave, but we’ll have a better picture of it later on in the year,” Frank said.

Follow Tom Stieghorst on Twitter @tstravelweekly. 
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