Cruise booking volume at the world’s two largest cruise companies dropped substantially in the wake of the mid-January Costa Concordia accident.
At Carnival Corp., which owns Genoa, Italy-based Costa, booking volume at the company, excluding Costa, declined “in the midteens” following the Jan. 13 accident, the company said in a regulatory filing Jan. 30.
It stated that across its other nine brands, bookings “bottomed out” on Jan. 16.
Costa’s booking activity since the accident is “down significantly,” it said.
Royal Caribbean Cruises Ltd. on Feb. 2 said that, while cruise bookings have picked up in recent days, they dropped by about 20% in the immediate aftermath of the Concordia disaster.
A modest recovery in the decline, “to the midteens,” was seen later in January, indicating that the fallout is likely to be short-lived, RCCL executives told industry analysts during a conference call to discuss quarterly results.
The drop in bookings for RCCL brands Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises appeared to mirror the booking decline that Carnival Corp. experienced.
“Given the magnitude of the tragic events in Italy, it’s not surprising we have seen an impact,“ said RCCL Chairman and CEO Richard Fain.
The Concordia on Jan. 13 hit rocks and began taking on water just hours after leaving Civitavecchia. As of last week, 16 people have been confirmed dead, and 16 more are still missing.
Images of the ship, half-submerged just off the coast of the Italian island of Giglio, were beamed around the world.
Because the Concordia accident happened at the start of Wave season, a period of traditionally heavy booking from early January through mid-March, Fain said it was possible that Wave could be extended by a few weeks.
A reassuring factor, he added, was that cancellations have not been a big factor, indicating that experienced cruisers have faith in the product. But new booking activity has been affected, Fain said. Across its brands, the company said, first-time cruisers make up about a third of all customers.
Fain made his remarks during the company’s Q4 and full-year 2011 earnings report Feb. 2. Both showed positive results and, before the Concordia accident, 2012 was getting off to a “powerful start.”
For 2011, the company’s net income rose 17.8%, to $607.4 million, and revenues rose 10.3%, to $7.5 billion. Net yields were up by 2.4%, it said.
For Q4 2011, net income jumped 14.7%, to $36.6 million, and revenue increased 12.5%, to $1.8 billion. Net yields increased by 3.5%.
No long-term effect anticipated
In its statement, Carnival said it did not believe the Concordia incident would have a significant long-term impact on business. It did, however, “anticipate other financial impacts to our business, including lower net revenue yields, that are not possible to reasonably determine at this time.”
At RCCL, Fain said that the Concordia incident has put the cruise industry “into uncharted territory” and that there’s “tremendous uncertainty” for the future, but he also said the recovery in bookings during the latter part of January is an indication that there won’t be long-term effects on bookings.
The short-term outlook is another story.
The company said that the second and third quarters of 2012 are feeling the brunt of the bookings slump; the first quarter already was solidly booked before the Concordia incident.
Without providing a specific percentage drop, company CFO Brian Rice said bookings sourced from Europe are “depressed” but are starting to recover.
“There are a couple reasons” why Europe bookings fell, he said, including “greater media coverage of the Concordia, the proximity [of the shipwreck] and a weaker economy.”
Pricing, he said, has held steady in the wake of the accident, but the company provided an exceptionally wide range for yield improvement in 2012, between 1% and 5%.
Peppered with questions from analysts about whether the brands would reduce fares to fill their ships, Royal Caribbean International President and CEO Adam Goldstein said that the company has not taken any significant pricing action.
“We’re looking across countries and our products, and we’ll apply promotional techniques that make the most sense, such as onboard credits,” Goldstein said. “But we’re holding our ground on pricing,” except for certain tactical reductions close-in to departures.
If bookings out of Europe remain soft, he added, the company would attempt to source more cruisers from North America, with appropriate incentives. Goldstein said that typically on Europe cruises, 75% of passengers are sourced from outside North America.
Dan Hanrahan, president and CEO of Celebrity Cruises, added that cruise fares are the same now as they were during the first week of Wave season.
Rice said that RCCL has 16% less capacity in the Eastern Mediterranean this year than in 2011.
“That’s helping, and the geopolitical tensions are not as escalated this year,” he said. Strong destinations for 2012, he said, appear to be Alaska, the Baltic and other Northern European areas. Hanrahan said that Caribbean pricing was holding up well for Celebrity.
Fain said he believed that agents, along with the trade associations and the cruise lines, were doing a good job explaining cruise ship safety and reassuring the public.
“The public gets it,” he said. “This is a safe and secure industry. They can separate the headlines from the [reality]. There’s no such thing as perfect safety, but perfect dedication to safety.
“It’s a matter of how well we get that message out. We’re working to do that.”
Follow Donna Tunney on Twitter @dttravelweekly.