Record month for Carnival
Carnival Cruise Lines said it booked 17% more reservations in January
than in the same month in 2013, setting a new single-month record. Read More
Cruise retailers said last week that sales appeared to be off to a promising start in 2014, following two years of disappointment during the Wave season that ushers in each new year’s bookings.
The only cruise company that has reported earnings so far this year took a more cautious approach. Executives at Royal Caribbean Cruises Ltd. (RCCL) used words like “typical” and “normal” to describe the first month of cruise sales in a conference call with Wall Street analysts last week.
All three of the major cruise companies are publicly traded and can only release sales figures that have been submitted to the U.S. Securities and Exchange Commission.
But several travel agents were decidedly upbeat.
“It’s been fantastic for us,” reported Joseph Giampietro, president of Cruise Brothers, a large retailer based in East Providence, R.I.
Matthew Jacob, an analyst at ITG Investment Research, suggested that RCCL might be portraying its bookings conservatively.
“The data we have up until now is probably stronger than what their guidance indicates,” Jacob said. “They are leaving some cushion for softness in close-in bookings.”
But even just a “normal” year might sit well with the industry and agents after two seasons running in which a negative event collapsed the momentum that Wave season is designed to generate.
The most memorable thing about the 2014 Wave season so far is the bone-chilling cold weather that gripped the northern areas of the country after New Year’s and extended into much of the South last week.
The first week of 2014 cruise sales at RCCL was somewhat softer than last year, CFO Jason Liberty said.
“The severity of the weather kept people indoors and clearly resulted in lower bookings for several days,” he said.
Demand was weakest in the Northeast and Midwest but stronger in the warmer markets, he said.
By last week, another front had pushed through the Deep South, badly snarling traffic in Atlanta and other Southern areas.
Adam Goldstein, president of Royal Caribbean International, said the frigid conditions worked in the industry’s favor.
“Obviously, we are continuing to root for cold weather, and we are seeing what is more or less an endless stretch of it,” he told analysts on RCCL’s earnings call.
That could be a stroke of luck for an industry that has emphasized the Caribbean this year. Caribbean capacity, both industrywide and for RCCL, is up 13% over last year, raising questions about how much discounting will be needed to fill all of the ships.
Cruise Brothers’ Giampietro said that at a recent consumer show, many of the cruise sales it booked were for Caribbean sailings in March, April and May. He said that was unusual because in other years inventory that close in would not be available.
“A lot of those ships have redeployed from Europe,” he said. “That’s why you’re seeing that [availability].”
Cruise Brothers’ higher sales are being driven by “price points,” he said. “It’s the best value. It’s within people’s reach, and they realize it now more than ever.”
Most cruise lines are staging promotions during Wave season, featuring low deposits, onboard credits, complimentary beverage packages, reduced airfares and other incentives as well as favorable ticket prices.
Goldstein said that the level of promotions is vigorous but not exceptional.
“I think all of the industry is working very hard to get load on the ships at the desirable rate,” he said.
Giampietro said add-ons like the 123Go! offer from RCCL’s Celebrity Cruises brand make a difference on the margin.
“Does it get the phones ringing? I’m not so sure,” he said. “But it does help to close [the sale], I can tell you that.”
Other agents said cruise inquiries have been steady through January.
“What’s hot is Norway,” said JoAnne Davis, a Cruise Planners franchisee in Coral Springs, Fla.
Davis said demand is strong for river cruises and Europe in general. “And they’re not letting the airfares stop them.”
Air to Europe still costs $1,200 to $1,500 per person, but Davis said her clients have resigned themselves to paying it. She said cruise fares in Europe are also higher, citing a $4,500 price on a 12-night Baltic cruise she recently booked.
ITG’s Jacob said the lines have been pleasantly surprised by demand and pricing in Europe and Asia.
“The cruise industry has taken capacity out, and the supply is more reasonable compared to demand,” he said. “And that has led to better pricing and better booking patterns for Europe than many in the industry were expecting in 2014.”
He said pricing improvement will be a multiyear process that will depend in part on avoiding external shocks, such as the Costa Concordia accident in 2012 and the Carnival Triumph fire in 2013.
“Without those occurring, you probably would have seen some real cruise ticket growth, and maybe I think this year we’ll see some rebound in ticket pricing,” Jacob said.
Cruise executives are keeping their fingers crossed that the outbreak of gastrointestinal illness that prompted Royal Caribbean International to shorten a cruise on the Explorer of the Seas last week won’t become this year’s Wave season spoiler.
More than 20% of the passengers on the Explorer were hit by the outbreak, which was heavily covered by news media when the ship returned to port for “barrier” sanitizing before its next cruise.
In 2006, a similar number of passengers and crew were affected by norovirus on a Carnival Liberty sailing in November. The impact on 2007 bookings isn’t known, but a generally strong economy at the time seemed to be the foundation for a year of higher revenues at both RCCL and Carnival Corp.
Pricing this year remains a key question for both cruise lines and travel agents.
Katrina May, owner of YamaGogo Travel in Apopka, Fla., said she booked a five-night cruise on the Brilliance of the Seas from Tampa recently for $600. “For the close-in sailings, the price has almost been cheap,” she said.
May said cruise lines have been quietly extending promotions that were set to expire at the end of last year.
Though her agency is in Florida, May said the polar vortex that threw much of the country into a deep freeze was helping her sales. May said she’s completed three or four bookings in January for departures as close as two weeks.
“Cold weather has a lot to do with it,” she said.
Photo of cruise ship deck courtesy of Shutterstock.com.