NEW YORK -- Recent financial statements from cruising's top three
suppliers - Carnival Corp., P&O Princess Cruises and Royal
Caribbean Cruises Ltd. -- confirmed what cruise observers had
contended for months: Cruise rates and net revenue yields (revenues
per available passenger cruise day), slipped markedly in 2000 after
two straight years of incremental improvement.
Still, cruising's largest suppliers are reporting stronger
results for 2001 and expressing optimism that rates and yields will
A combination of factors, the operators said, was responsible
for cruising's rate and yield declines in 2000. Increased capacity
and competition in the Caribbean affected all of the Big Three
Higher fourth-quarter fuel prices were another factor. Also,
pricey millennium cruises in 1999 created artificially high rate
and yield levels that couldn't be matched in the fourth quarter of
2000, suppliers said.
P&O Princess, parent company of Princess Cruises, was the
latest of the industry's Big Three to lament the 2000 pricing
P&O's fourth-quarter 2000 results included an 11% decline in
net revenue yields compared with the same period in 1999.
Fourth-quarter operating profits also fell, to $15.9 million for
2000 compared with $56.9 million for the same period in 1999.
For the year, P&O Princess reported operating profits of
$373.1 million on gross revenues of $2.42 billion for the 12 months
ended Dec. 31, 2000, compared with profits of $388.3 million on
gross revenues of $2.11 billion for the same period in 1999.
P&O's Los Angeles-based Princess Cruises division increased
its capacity by 12% in 2000 with the addition of the
1,950-passenger Ocean Princess, which spent its inaugural season in
the Caribbean. P&O recently announced that Ocean Princess will
be transferred to the company's U.K.-based P&O Cruises division
Peter Ratcliffe, P&O's chief executive officer, blamed
"lower yields and $4 million of additional costs due to higher fuel
prices" for the fourth-quarter yield decline.
"Pricing conditions were challenging for Princess in the
Caribbean and transcanal trades" in the fourth quarter, according
to a P&O statement. The company's declining operating profits,
meanwhile, "[reflected] the lower yields."
At Carnival Corp., chairman Micky Arison cited "continued
pressure on cruise pricing resulting in lower net revenue yields"
and "higher fuel costs" as factors in Carnival's reduced totals for
For the year ended Nov. 30, 2000, Carnival reported net income
of $193.8 million on revenues of $850.3 million, compared with net
income of $251.0 million on revenues of $791.2 million in 1999.
Carnival put four new ships into service in 2000: Costa Cruises'
CostaAtlantica, Carnival Victory and Holland America Line's
Amsterdam and Zaandam. That capacity increase, combined with other
factors, affected pricing and yields for cruising's largest
"We went into last year thinking we'd have increased prices,"
said Gerald Cahill, Carnival's chief financial officer.
"We got more bookings initially, but our passenger growth lagged
behind our capacity increase so we felt the need to reduce prices,"
he continued. "As a result, we wound up with lower yields."
While Royal Caribbean
posted a 16% increase in net income in 2000 (with $445 million on
revenues of $2.9 billion versus income of $384 million on revenues
of $2.5 billion in 1999), "net revenue yields were the same in 2000
as in 1999," according to a company statement.
Moreover, Royal Caribbean's net revenue yields fell 7% in the
fourth quarter of 2000, due at least in part to "the impact of the
millennium, which positively affected both the fourth quarter of
1999 and the first quarter of 2000."
Net income for the quarter was $30 million, compared with $38
million in the fourth quarter of 1999.
Nevertheless, the top three cruise operators say 2001 is off to
a better start. P&O officials said 2001 results are, to this
point, improved over last year.
"Whilst trading conditions for the first quarter of 2001 have
been competitive, they are improved compared to those for the
fourth quarter of 2000," according to a company statement.
"As a result, Princess has experienced a significantly lower
level of yield reduction than in the previous quarter."
In February, midway through cruising's Wave period, Carnival
officials said its ships were filling faster than they were at this
time in 2000, with booking activity up 20% despite a 10% increase
Rates are higher than last year's average price, although below
Carnival's first-quarter 2000 figures. Carnival is expected to hold
firm on pricing this year.
"We tried too hard to ratchet up prices [last year] and we don't
want to make that mistake again," said Arison.
Also in February, Royal Caribbean chief financial officer
Richard Glasier told investors in Norway that booking levels for
2001 will match or exceed 2000 levels.
"We think we will do as well as we did last year, and may do
even better," Glasier said.
An analysts' report from Legg Mason Wood Walker said the
investment firm is "encouraged by the growing evidence of strong
consumer demand for cruises thus far this year, which we believe
supports our view that prices have bottomed."
The same report observed that P&O officials predict "Booking
trends for the industry as a whole are positive and this may make
it possible to obtain price increases as the year progresses."