Big Three Cruise Corporations Q1 Earnings Summary
The Cruise Industry Continues to Move Forward
Resounding across all the major cruise operators’ quarterly earnings calls this week (CCLs in March), was that the industry (and each of the brands) have all reached “significant milestones” in their restart process that need to be celebrated. While 2022 is undoubtedly a transition year, 2023 appears to be shaping up to reach the industry’s full potential. NCLH’s presentation included the graphic below, which shows how far the industry has come over the last two and a half years of near-complete shutdown. In this newsletter, BA compares and summarizes key performance, financials, and trends across the big three cruise corporations based on their recent quarterly earnings calls.
Source: NCLH Q1 2022 Earnings Conference Call Presentation
Key phrases from corporate leaders that resonated well with BA on the industry’s status and its trajectory include the following:
“We got through it [Omicron] just as we got through Delta. And now, there's lots of momentum and things are clearly pointed in the right direction.” – Arnold Donald, CEO of Carnival Corporation
“We have now moved from scenarios to a forecast… because we can see that visibility and predictability… I think we're like on our 300th scenario since the start of the pandemic.” – Jason Liberty, CEO of Royal Caribbean Group
“[If there are] no more black swan events, the industry is going to progressively get stronger, better, going back to normalcy, reaching the normal high occupancies that we've always enjoyed.” – Frank Del Rio, CEO of Norwegian Cruise Line Holdings
Full Load Factors by Years End (and First Half of 2023), with the Caribbean Region Getting 100%+ Today
On May 7, NCLH, the smallest of the Top # Cruise Corporations, became the first major cruise operator to have its entire fleet (28 ships) return to service. Meanwhile, the larger Carnival and RCG corporations have equally impressive resumption stats. BA summarizes key resumption highlights for each below.
Q1 Key Highlights by Corporation
Both RCG and Carnival report that their ships sailing at 100%+ load factors are deployed in the North American (Caribbean) market. The companies attributed this point to the fact that these are the traditional itineraries that people have been used to and it is a strong market for the drive-to products, which RCG focused ~70% of their capacity on this year.
Booking Trends Higher than at Any Point Since the Restart, with North America Driving All Brands, Europe Demand Brand Dependent
RCG’s commentary was most informative, stating that “for the past eight weeks, bookings have been meaningfully higher than 2019 with particular strength on North American itineraries. North American-based itineraries…have been trending much better, with recent bookings more than 40% ahead of 2019 levels.”
NCLH’s earnings call included a figure for its advance ticket sales. As shown below. Their total ATS balance reached $2.2 billion, up over $400 million versus the prior quarter. This shows they have reached pre-pandemic sales levels.
NCLH Total Advance Ticket Sales Balance ($B)
Source: NCLH Q1 2022 Earnings Conference Call Presentation
RCG stated that even though European demand is above 2019 levels, the expectation for Europe is to have lower load factors and a slower overall recovery. They believe that the American guests are still impacted by the testing requirement to come back into the US.
NCLH, on the other hand, said that for them “Europe has come back very, very nicely… European source business is strong. We can’t believe how strong it is, especially in Europe, and the U.K. is doing well.”
Geopolitical Impacts Cause Minor Hiccup but Redeployed Ships Booking Well
Each brand redeployed vessels sailing in the Baltic region, canceling calls to St. Petersburg, Russia. All reported some level of regional disruption in recent booking patterns, with the Ukraine Conflict adding some volatility to business and impacting consumer confidence. However, all of the three corporations confirmed the new itineraries, whether they be in the Mediterranean, the Caribbean, or other parts of the world, are seeing solid booking trends at good solid pricing. This demonstrates one of the unique strengths of the cruise industry: the ability to quickly redeploy ships within and between markets to where consumer demand remains strongest.
Unfortunately, it is unknown when key cruise brands will return to the Baltic region. NCLH stated, “we probably won’t be going there anytime soon.”
The Rest of the World is Reopening, and Everyone is Ready (with exception of China)
The consensus on this market is to wait and see. There is too much uncertainty currently to make any big and real plans for the China-specific market. Carnival summed up its return to China as follows: “We’ll have to see how things pan out there. Right now, it’s still not practical.” RCG had a similar sentiment but indicated they are ready when the market is ready to welcome them back. “Our current thinking was that in 2023 we would be back in the China market. I’m not sure whether that’ll come true or not as it could be 2024, but we’re ready to go.”
Asia, on the other hand, is a different story. According to NCLH, Asia is booking strong, at “very, very high prices”. But there is still that risk, and they are considering additional redeployments in the coming weeks to balance out that risk factor. The good news is that New Zealand will reopen its borders to cruise ships on July 31, which opens the Australasia region for cruise and will very likely see strong consumer pent-up demand.
Future Recession Concerns?
A resounding “no” from all three companies.
NCLH commented that “We’re relatively better positioned than many of our land-based competitors due to the fixed cost nature of our business. So that gives us an advantage. And again…combined with the value proposition of cruise, consumers look for that. So, we feel like we’re in a great position going forward.”
Carnival confirmed that they have not seen any slowdown in terms of onboard spending, it’s been very strong (and up) everywhere. In fact, they’ve used this as an opportunity to raise prices onboard.
RCG disclosed that the level of booking activity and the spending levels on the ship suggests no consumer concern for any type of recession coming.
Now that COVID is Behind Us, What Are These Companies Focused on Now? Sustainability
A key driver for all these companies is their sustainability paths towards achieving net-zero emission targets. They plan to do this in various ways: through the development of alternative fuels along with the associated critical infrastructure at destinations globally to support the usage of these fuels and to accelerate the use of shore power while in ports.
So What Does This Mean? BA’s Summary
It’s good news for all of us that the major publicly traded cruise corporations, and the privately-held MSC, are continuing to move forward with high levels of enthusiasm for the global market sectors. Each is moving forward on similar paths and taking advantage of the industry’s most critical business advantages – mobility of deployments; flexibility in capturing consumer demand; and control of vessel operational costs through shorter sailings and spreading the costs across a greater passenger load.
Historically, the cruise industry has also been well-positioned to trend upward during economic crises and geopolitical issues due to its overall flexibility, broad consumer appeal, and revenue management programs, to name a few.
As the industry moves into 2023, it will be interesting as to how the separate cruise corporations perceive the potential of the China market and their willingness to participate in a controlled environment. Additionally, it appears that Asia, including Australia & New Zealand, will provide for a greater level of consumer demand from local and international consumer markets during this period. Europe may struggle in the short-term, due to the Ukraine Conflict, lingering North American COVID-related travel policy, and economic issues.
In terms of sustainability, this has taken on greater momentum coming out of the pandemic for the cruise industry, maybe due to government or social pressures, but for the last years, they have been moving toward some types of goals in this area – albeit in many different forms depending upon the brand. The other question is – will this pertain to the environment only or apply to tourism and destination management practices, partnerships, and other activities. Through our port and destination partners, it is clear that there is a chasm that must be breached on the shore power issue and perhaps others related to tourism capacities, etc.
For shore power, destination costs to set up the systems are difficult to manage; the ability to actually provide for a single or multiple ships onshore power simultaneously is a major concern – as many ports due not have the power capacity to sustain a single vessel with some 8 – 12 MW requirements, and having two or more ships on the power grid at the same time with demands ranging from 16 – 48 MW in total is just not feasible; and, finally, what is the actual alternative power source that is generating the shore power in the first place? Is it clean energy, such as hydro, or is it coal-fired? There are a lot of issues to discuss, but it is great that there is a clearer goal set for the industry.
All of us are looking for the light at the end of the tunnel and feel that the cruise tourism industry is making that comeback. Seatrade was a celebration of a new beginning! It was fantastic to see people from around the globe that we have not seen in more than two years. While there are challenges ahead, no doubt we will tackle them with a renewed sense of hope, joy, and tenaciousness moving forward.
BA CRUISE BULLETINS
Q1 2023 Earnings Report Key Themes and Takeaways
With the last of the big three public companies wrapping up their Q1 2023 earnings reports last week, it’s time for BA’s summary of the key takeaways and themes trending today, and what that means for the future of the industry…
How did 2022 end up and what happens next in 2023
2022 was a monumental transition year where operators placed ships back in operation throughout the first half of the year. After almost three years of uncertainty…
Ports should get ready for an increase in shorter itineraries
BA has just completed an analysis of the 2023 cruise capacity placement using its deployment database which has more than 10,000 sailings, 40 brands, and 300 ships worldwide, thus allowing BA to understand capacity placement by the industry…
2023 global passenger volumes will reach and very likely exceed 2019 levels but distributed differently
BA has just completed an analysis of the 2023 cruise capacity placement using its deployment database which has more than 10,000 sailings, 40 brands, and 300 ships worldwide, thus allowing BA to understand capacity placement by the industry…
Summary & Takeaways from Q3 Earnings Reports (CCL, RCG, NCLH)
A Normalizing Environment Paving Way for Strong 2023. The theme for CCL, RCG, and NCLH on this quarter’s earning calls was each company’s focus which has fully shifted from return to service to a relentless focus on return to strong profitability…
BA CRUISE BULLETIN – The Industry’s Quarterly Update from the Big Three (Public) Companies
This quarter’s earnings reports from Carnival Corp. (June 24), Royal Caribbean Group (July 28), and NCLH (August 9) have sent stocks down, up, and back down again, but overall, the business seems to have taken positive turns, including each company’s operating cash flow for the quarter…
Another Global Hurdle for the Cruise Industry? An Industry on the Rise
According to the most recent World Bank’s latest Global Economic Prospects Report, compounding the damage from the pandemic, the Russian invasion of Ukraine has magnified the slowdown in the global economy, which is entering what could become a protracted period of feeble growth and elevated inflation. The U.S. inflation rate passed 8.3%, the highest in more than 40 years, accompanied by the highest nationwide gas prices ever, and amidst the need for workers in many service industries, there have been layoffs in key tech sectors.
Big Three Cruise Corporations Q1 Earnings Summary
Resounding across all the major cruise operators’ quarterly earnings calls this week (CCLs in March), was that the industry (and each of the brands) have all reached “significant milestones” in their restart process that need to be celebrated. While 2022 is undoubtedly a transition year, 2023 appears to be shaping up to reach the industry’s full potential. NCLH’s presentation included the graphic below, which shows how far the industry has come over the last two and a half years of near-complete shutdown. In this newsletter, BA compares and summarizes key performance, financials, and trends across the big three cruise corporations based on their recent quarterly earnings calls.
The Pathway Forward Anticipates Substantial Cruise Growth, Are you Ready?
It has now been more than two years since the entire worldwide cruise tourism industry ground to a halt due to the Covid-19 pandemic and the subsequent government interventions that impacted all facets of our lives. For the past year, the industry has been slowly and meticulously resetting the onboard and shoreside guest experience through the development of protocols and procedures to get back to the business of cruising and providing people worldwide with great holidays!
BA Cruise Bulletin – Future of the Cruise Industry is Bright, According to the Major Cruise Lines
Protocols are Working, and Restoring Consumer Confidence in the Sector Many people have said in recent times that…
Big Three Cruise Corporations Q1 Earnings Summary
The Cruise Industry Continues to Move Forward
Resounding across all the major cruise operators’ quarterly earnings calls this week (CCLs in March), was that the industry (and each of the brands) have all reached “significant milestones” in their restart process that need to be celebrated. While 2022 is undoubtedly a transition year, 2023 appears to be shaping up to reach the industry’s full potential. NCLH’s presentation included the graphic below, which shows how far the industry has come over the last two and a half years of near-complete shutdown. In this newsletter, BA compares and summarizes key performance, financials, and trends across the big three cruise corporations based on their recent quarterly earnings calls.
Source: NCLH Q1 2022 Earnings Conference Call Presentation
Key phrases from corporate leaders that resonated well with BA on the industry’s status and its trajectory include the following:
“We got through it [Omicron] just as we got through Delta. And now, there's lots of momentum and things are clearly pointed in the right direction.” – Arnold Donald, CEO of Carnival Corporation
“We have now moved from scenarios to a forecast… because we can see that visibility and predictability… I think we're like on our 300th scenario since the start of the pandemic.” – Jason Liberty, CEO of Royal Caribbean Group
“[If there are] no more black swan events, the industry is going to progressively get stronger, better, going back to normalcy, reaching the normal high occupancies that we've always enjoyed.” – Frank Del Rio, CEO of Norwegian Cruise Line Holdings
Full Load Factors by Years End (and First Half of 2023), with the Caribbean Region Getting 100%+ Today
On May 7, NCLH, the smallest of the Top # Cruise Corporations, became the first major cruise operator to have its entire fleet (28 ships) return to service. Meanwhile, the larger Carnival and RCG corporations have equally impressive resumption stats. BA summarizes key resumption highlights for each below.
Q1 Key Highlights by Corporation
Both RCG and Carnival report that their ships sailing at 100%+ load factors are deployed in the North American (Caribbean) market. The companies attributed this point to the fact that these are the traditional itineraries that people have been used to and it is a strong market for the drive-to products, which RCG focused ~70% of their capacity on this year.
Booking Trends Higher than at Any Point Since the Restart, with North America Driving All Brands, Europe Demand Brand Dependent
RCG’s commentary was most informative, stating that “for the past eight weeks, bookings have been meaningfully higher than 2019 with particular strength on North American itineraries. North American-based itineraries…have been trending much better, with recent bookings more than 40% ahead of 2019 levels.”
NCLH’s earnings call included a figure for its advance ticket sales. As shown below. Their total ATS balance reached $2.2 billion, up over $400 million versus the prior quarter. This shows they have reached pre-pandemic sales levels.
NCLH Total Advance Ticket Sales Balance ($B)
Source: NCLH Q1 2022 Earnings Conference Call Presentation
RCG stated that even though European demand is above 2019 levels, the expectation for Europe is to have lower load factors and a slower overall recovery. They believe that the American guests are still impacted by the testing requirement to come back into the US.
NCLH, on the other hand, said that for them “Europe has come back very, very nicely… European source business is strong. We can’t believe how strong it is, especially in Europe, and the U.K. is doing well.”
Geopolitical Impacts Cause Minor Hiccup but Redeployed Ships Booking Well
Each brand redeployed vessels sailing in the Baltic region, canceling calls to St. Petersburg, Russia. All reported some level of regional disruption in recent booking patterns, with the Ukraine Conflict adding some volatility to business and impacting consumer confidence. However, all of the three corporations confirmed the new itineraries, whether they be in the Mediterranean, the Caribbean, or other parts of the world, are seeing solid booking trends at good solid pricing. This demonstrates one of the unique strengths of the cruise industry: the ability to quickly redeploy ships within and between markets to where consumer demand remains strongest.
Unfortunately, it is unknown when key cruise brands will return to the Baltic region. NCLH stated, “we probably won’t be going there anytime soon.”
The Rest of the World is Reopening, and Everyone is Ready (with exception of China)
The consensus on this market is to wait and see. There is too much uncertainty currently to make any big and real plans for the China-specific market. Carnival summed up its return to China as follows: “We’ll have to see how things pan out there. Right now, it’s still not practical.” RCG had a similar sentiment but indicated they are ready when the market is ready to welcome them back. “Our current thinking was that in 2023 we would be back in the China market. I’m not sure whether that’ll come true or not as it could be 2024, but we’re ready to go.”
Asia, on the other hand, is a different story. According to NCLH, Asia is booking strong, at “very, very high prices”. But there is still that risk, and they are considering additional redeployments in the coming weeks to balance out that risk factor. The good news is that New Zealand will reopen its borders to cruise ships on July 31, which opens the Australasia region for cruise and will very likely see strong consumer pent-up demand.
Future Recession Concerns?
A resounding “no” from all three companies.
NCLH commented that “We’re relatively better positioned than many of our land-based competitors due to the fixed cost nature of our business. So that gives us an advantage. And again…combined with the value proposition of cruise, consumers look for that. So, we feel like we’re in a great position going forward.”
Carnival confirmed that they have not seen any slowdown in terms of onboard spending, it’s been very strong (and up) everywhere. In fact, they’ve used this as an opportunity to raise prices onboard.
RCG disclosed that the level of booking activity and the spending levels on the ship suggests no consumer concern for any type of recession coming.
Now that COVID is Behind Us, What Are These Companies Focused on Now? Sustainability
A key driver for all these companies is their sustainability paths towards achieving net-zero emission targets. They plan to do this in various ways: through the development of alternative fuels along with the associated critical infrastructure at destinations globally to support the usage of these fuels and to accelerate the use of shore power while in ports.
So What Does This Mean? BA’s Summary
It’s good news for all of us that the major publicly traded cruise corporations, and the privately-held MSC, are continuing to move forward with high levels of enthusiasm for the global market sectors. Each is moving forward on similar paths and taking advantage of the industry’s most critical business advantages – mobility of deployments; flexibility in capturing consumer demand; and control of vessel operational costs through shorter sailings and spreading the costs across a greater passenger load.
Historically, the cruise industry has also been well-positioned to trend upward during economic crises and geopolitical issues due to its overall flexibility, broad consumer appeal, and revenue management programs, to name a few.
As the industry moves into 2023, it will be interesting as to how the separate cruise corporations perceive the potential of the China market and their willingness to participate in a controlled environment. Additionally, it appears that Asia, including Australia & New Zealand, will provide for a greater level of consumer demand from local and international consumer markets during this period. Europe may struggle in the short-term, due to the Ukraine Conflict, lingering North American COVID-related travel policy, and economic issues.
In terms of sustainability, this has taken on greater momentum coming out of the pandemic for the cruise industry, maybe due to government or social pressures, but for the last years, they have been moving toward some types of goals in this area – albeit in many different forms depending upon the brand. The other question is – will this pertain to the environment only or apply to tourism and destination management practices, partnerships, and other activities. Through our port and destination partners, it is clear that there is a chasm that must be breached on the shore power issue and perhaps others related to tourism capacities, etc.
For shore power, destination costs to set up the systems are difficult to manage; the ability to actually provide for a single or multiple ships onshore power simultaneously is a major concern – as many ports due not have the power capacity to sustain a single vessel with some 8 – 12 MW requirements, and having two or more ships on the power grid at the same time with demands ranging from 16 – 48 MW in total is just not feasible; and, finally, what is the actual alternative power source that is generating the shore power in the first place? Is it clean energy, such as hydro, or is it coal-fired? There are a lot of issues to discuss, but it is great that there is a clearer goal set for the industry.
All of us are looking for the light at the end of the tunnel and feel that the cruise tourism industry is making that comeback. Seatrade was a celebration of a new beginning! It was fantastic to see people from around the globe that we have not seen in more than two years. While there are challenges ahead, no doubt we will tackle them with a renewed sense of hope, joy, and tenaciousness moving forward.
