Stronger-than-expected net revenue yields on close-in bookings helped push cruise giant Carnival Corp. to a $260 million profit in the first quarter, besting its previous year's Q1 performance by 10%, even as overall revenue declined.
But although the demand is strong, pricing is still low.
Booking rates in the past few weeks, CEO Micky Arison told analysts last week, "are very strong."
"I have to repeat," he added. "It was very strong volumes against very lousy rates."
The company said it expected full-year net revenue yields to decrease 10% to 12%, compared with earlier guidance of a 6% to 10% drop.
COO Howard Frank said that booking volume in 2009 had been running almost 10% higher than the same period last year. However, for North American brands, pricing during the Wave season was down about 10% to 15% for Caribbean cruises and down about 30% to 40% for Europe and Alaska cruises. Europe brands were holding prices about 10% lower than in 2008.
Still, Carnival executives said they were pleased with the company's performance.
"We're pleased to see that ... by stimulating the market with lower ticket pricing we can produce a strong booking response," Frank said. "It's for this reason our business model enables us to continue to fill our ships and produce good levels of profitability and cash flow, even in the most challenging global economic slowdown we've experienced in our lifetimes."
Later, he said that as soon as demand picked up, pricing could bounce back quickly.
Frank said that the company's brands were about two-thirds booked for the remainder of 2009. However, he added that the third quarter, which includes the industry's typically strong-yielding markets in Europe and Alaska, was "shaping up to be an extremely challenging one for our North American brands." Even with a strong Wave season, he said, occupancy was running behind last year's levels.
The Caribbean was a bright spot, and Frank said that for the second quarter, the "shorter and less expensive Caribbean and Mexican Riviera cruises with lower price points have been relatively stronger."
Carnival's earnings were buoyed by cheaper fuel prices and a "continued focus" on costs.
During the call with analysts, Arison broke from the call's standard format to make a pointed statement about the company's plan to withdraw some capacity from the Alaska market in 2010, sparking a few questions from analysts about the move (see report, "Carnival Corp. says it plans to cut capacity in Alaska").
In response to a question about first-time cruisers, he said that, anecdotally, brands were getting a "significant" number of first-timers. "I think that's based on the pricing."