Cruise sellers having stable year so far, but unknowns cloud second half


Cruise sellers emerged from the first half of 2016 with about the same level of business, or slightly more, than they had a year earlier. But many said last week that the outcome for the rest of the year was anything but certain given continued terrorist attacks and Britain’s vote to leave the EU.

“From January until now, it’s been kind of a roller coaster ride, a little bit bumpy,” said Bud Smead, owner of Holiday Cruises and Tours, in Arvada, Colo., outside of Denver. “We’ll have really strong sales for a month or two, and then something happens, like a terrorist attack in Brussels and things like that. That slows down bookings considerably.”

It was a similar story at Expedia CruiseShipCenters, which has 220 outlets in the U.S. and Canada.

“I wouldn’t say it’s been consistent, but I would say we’re pleased with the results,” said president Matthew Eichhorst. “We’re up overall.” Eichhorst said the improvement over the 2015 first half came despite significant foreign-exchange headwinds for the 156 franchises in Canada.

“We had a nearly 30% swing over the last 18 months,” he said. “The Canadian market definitely had some pressures.”

Sales have been supported by strong demand for destinations in or close to North America, such as the Caribbean and Alaska. Carnival Corp., which reported first-half results on June 28, saw ticket yields rise a better-than-forecasted 3.5%, driven by those two regions, chief financial officer David Bernstein said.

Many agents had good sales in early 2015, so significant improvement is hard to achieve.

“Truthfully, we are almost identical last year to this year,” mostly on the strength of mass-market cruises to the Caribbean, said Amy Hobbins, owner of Journeys Unlimited in Green Bay, Wis.

Hobbins said her river cruise numbers would probably decline because of low water levels and terrorism in Europe.

“It’s the perception of terrorism that might be holding those people back,” Hobbins said. “We do not have a big group on the books for next year because of that.”

Several larger cruise sellers said they anticipated that the cruise lines will offer deals in the third quarter because of such uncertainties.

If they do, it will run somewhat counter to what they’ve been trying to achieve for the past year or more: stronger early bookings that leave fewer cabins to sell close to sailing.

Carnival, which was the first of the major cruise companies to report second-quarter results, said that since March, bookings for the remainder of the year are fetching higher prices, with less inventory remaining for sale than at the same time last year.

“The fact that we are well ahead on the book position with less inventory left to sell for the remainder of the year compared to last year, even with our capacity increase, bodes well for pricing over the next few months,” Carnival Corp. CEO Arnold Donald said in a conference call.

The biggest X factor is the upswing in terrorist events in Europe, such as last week’s bombing in Istanbul, which tend to paralyze travel decision-making.

Smead said such events produced not cancellations so much as a dead zone for new business.

“We just don’t get new bookings, new interest,” he said.

At Expedia, Eichhorst said hesitation began as early as last summer when Greece found itself overrun with refugees.

“We definitely saw that in the sales, and then we saw at the end of December some pressure from Paris and then the same thing from Brussels, so there were dips in the market,” Eichhorst said. “When I look at this first half, you’d have a good month, and then a soft month and another good one. It was kind of lumpy.”

Other agents also reported that business has been erratic.

“Last night, I booked four cabins, and I didn’t even make $200,” said Laurie Hristov, of Just Cruises & Tours of Delray Beach, Fla. On the other hand, Hristov said one of her oldest clients recently booked a $32,000 trip to Europe.

Rob Clabbers, president of Q Cruise + Travel, a Virtuoso agency, said he had a good first half.

“We had a couple of weeks [in mid-February] where it was a bit slower than last year,” he said. “Overall, for the first six months, we are ahead of where we were the same time last year in terms of new bookings.”

At, president Anthony Hamawy said, “Overall, it’s been a good market through the summer. Alaska looks like it’s doing well. Hawaii looks like it’s doing well. Australia looks like it’s doing well. Even on the West Coast of the U.S., the Mexican Baja for those lines that service it, they seem to be doing OK.”

Where weakness is being felt is in booking lines that have more European exposure, Hamawy said, citing Celebrity Cruises and MSC Cruises as examples. He said the cruise lines did a good job in the second half of last year filling cabins for 2016, but he was concerned about third-quarter pricing.

“When they turned the year, it was a lot easier to hold the line on Q1 and Q2 pricing when a chunk of business is already on the books,” Hamawy said. “Now, you’re going into Q3 and beyond, and it’s a different story. There’s more inventory to deal with that doesn’t necessarily sell well in advance. Unless you’re dealing with Europe. And Europe, because of the other factors, didn’t sell as well early either.”

An offsetting factor will be the first North American arrival in November of new ships such as Holland America Line’s Koningsdam and Royal Caribbean International’s Harmony of the Seas, events that tend to push people who might be waiting for a deal off the fence.

“They see something like that come out and it excites them to go cruising,” Hamawy said.

Expedia’s Eichhorst said he, too, thinks that cruise lines will be offering second-half deals despite their success in filling ships early.

He said Britain’s unexpected vote to leave the European Union has left everyone a little flummoxed, and there’s a lot of confusion about its economic consequences that won’t be resolved quickly.

“I think Europe is going to have a bit of a stall because consumers don’t understand what’s happening, nor does anybody,” Eichhorst said. “There’s some great uncertainty. I think you’ll see deals all the way through the fall.”


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