Tom Stieghorst
Tom Stieghorst

For Carnival Corp. and its brands, 2020 will be a crucial year in Alaska.

The company's Holland America Line and Princess Cruises brands account for half of all cruise capacity in the Last Frontier, but they underperformed their peers last year, as competitors gained more of a foothold.

Alaska capacity grew 15% last year and is on track to advance 9% in 2020. That led to a rare acknowledgement of overcapacity by Carnival CEO Arnold Donald.  "There is what some people would probably call the temporary overconcentration of supply in Alaska," he said in a conference call with Wall Street analysts in December.

A lot of that capacity comes from bigger ships than have traditionally operated in Alaska. Royal Caribbean International's 4,200-passenger Ovation of the Seas arrived in 2019. And other competitors got aggressive  see Norwegian Cruise Line's deployment of both of its newest ships, the Norwegian Joy and Norwegian Bliss.

So there were lots of choices, and although Alaska continued to do well for Carnival relative to Caribbean cruise yields, the extra capacity had its effect on price, and Carnival was reluctant to fight too much with promotional giveaways.

As a result, it lost market share. And that really threatens brands such as Holland America and Princess, which have both been in Alaska for five decades, have extensive land tour infrastructure there and historically have more invested in permits for Glacier Bay than other lines.

Carnival Corp. can't afford to fritter away the competitive advantage that it has enjoyed over the years. "We make really good money there," Donald said. "The reason why capacity is going in is because it is a strong market with a lot of demand from guests."

In a 2019-20 Travel Leaders Group survey of its advisors, Alaska came out as the "most booked domestic vacation" for the third straight year.

So this Wave Season, Carnival Corp. has come out swinging. Starting in the fourth quarter, the company increased its media spend. It did a "deep dive analysis" of its marketing to Alaska and developed "some new approaches with our travel agent partners, as well as new consumer communications efforts, specifically targeted to Alaska," Donald said.

Perhaps no initiative is more on point than Princess Cruises' Best.Sale.Ever promotion. The broadly inclusive campaign bundles free wifi, staff gratuities, and a beverage package with an attractive lead-in price. A brochure I got offered a seven-night Inside Passage cruise starting at $899 and said the value-add bundle was worth an additional $665.

That kind of promotion is more than a little reminiscent of Norwegian Cruise Line's Free At Sea combination, which was a success in Alaska last year. In the December conference call, Carnival Corp. CFO David Bernstein said that prices on 2020 Alaska cruises booked so far are lower than the previous year, but that occupancy for its North America/Australia brands is higher.

If that's the short-term cost of defending Alaska over the long term, it's a trade-off Carnival is wise to make.

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