The biggest cruise company in the world views Europe as the largest leisure travel vacation market in the
world, and that’s why Carnival Corp.'s 10
cruise brands will continue to introduce new ships to the Europe source
market over the next several years, the company said in its annual report.
In the report, filed last month with the U.S. Securities and Exchange Commission, Carnival said the number of Europe-sourced cruise passengers has increased at a compound annual growth rate of approximately 10% between 2006 and 2011, as passenger capacity has been added.
But it noted that cruising still has a much lower level of market penetration in Europe than in North America and represents a relatively small percentage of the overall European vacation market. “We estimate that about 5.8 million European-sourced passengers took a cruise in 2011, which was approximately the same size as the cruise segment of the North America vacation market in 1999,” the filing said.
“Based on industry data or our internal estimates, approximately 24% and 13% of the U.S. and U.K. populations, respectively, and lower percentages of continental European and Australian populations, have ever taken a cruise,” Carnival said.
The company's Europe brands currently represent 35% of its total passenger capacity (excluding the Costa Concordia, which is out of service indefinitely following its Jan. 13 accident).
Company revenues generated from passengers sourced outside the U.S., meanwhile, have grown to 56%, up from 40% in 2006.
Carnival Corp. also has high hopes for Brazil and Argentina, which the company noted have “a combined population of approximately 245 million.”
“We believe that their discretionary incomes will continue to grow in the future,” the report predicted. More than 6 million Brazilian and Argentine tourists traveled abroad last year, and the company said it expects this to increase to about 7.5 million in 2012.
Carnival estimates that 850,000 Brazilians and Argentines took a cruise vacation in 2011, with nearly 30% sailing on one of Carnival's brands, but that reflects a market penetration level of less than 1%.
The report also reaffirmed Carnival’s commitment to the retail trade.
“We sell our cruises mainly through travel agents, including wholesalers and tour operators that serve our guests in their local areas," it said. "We believe travel agents are an integral part of our long-term cruise distribution network."
Each brand’s relationship with their travel agents are generally independent of other brands, it noted, and during fiscal 2011, “no controlled group of travel agencies accounted for 10% or more of our revenues.”
Carnival’s report provided some information about Costa Cruises and addressed the Costa Concordia disaster.
Costa, it said, is “Italy's and Europe's largest cruise line based on guests carried and passenger capacity,” and has operated for over 63 years. Costa's 1.5 million guests in 2011 were sourced from 181 countries.
The report said that a damage assessment review of the ship, which capsized after hitting a reef, is being undertaken to determine whether it can be repaired and what the total cost would be. The company said earlier that if the ship is repairable, it is expected to be out of service for the remainder of fiscal 2012, if not longer.
Carnival acknowledged in its report that media coverage of cruise ship accidents and incidents “could impact demand.”
“Maintaining a good reputation is critical to our business,” said Carnival.
In the same filing, the company reported that its brands experienced double-digit booking declines in the immediate aftermath of the Concordia accident, and said that Costa’s bookings were down significantly.