cruise bulletin - maritime - bermello ajamil-01

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, the restart was successful, but with mixed results by markets and brands. 

What happens next in 2023 with the cruise industry that now has its fleet back in operation? This bulletin explores where the industry is today, compares 2022 metrics with those in 2019, and provides guidance as to what 2023 will look like – its challenges and opportunities.

Capacity – Despite the retirement of many of the older vessels from the fleets, today the industry is larger with more lower berth capacity than in 2019.

Passengers – Given the current trajectory of sailings and capacities, it is all but anticipated that 2023 will see a full year of recovery in terms of passenger numbers (and revenues). In fact, 2023 could even exceed the overall industry passenger numbers of 2019.

Debt – All three major listed cruise companies have more than doubled the amount of total debt. As a result of the debt, operators are executing somewhat different strategies going forward, but among common themes are:

    • A focus on operational profitability by looking at every part of the operations to achieve this target.
    • A reduction in capital spending by reducing or temporarily halting planned capital spending on non-essential projects.
    • Leveraging and partnering by looking for ways to attract capital or partners to achieve certain programs.

While this may negatively impact or delay growth strategies, particularly as it relates to investments in ships (as can be seen with ships on order 2019 v. 2022), technology, and the expansion of land-based developments, these operators have not announced any cancelations to date.

Instead, what is being seen is an evolution in the cruise business streamlining business to maximize profit and reduce cash demand. Investments in infrastructure will need to be carried out more by the destinations or third parties, to fill the gap in infrastructure development while the major cruise lines remain capital constrained.

Below find a comparison of key metrics of 2019 versus 2022 – such as passengers carried, occupancy levels, berths, ships, and more – based on the annual report data published by Carnival Corp (CCL), RCG, and NCLH.

*BA database estimate. Carnival’s year-end report did not include actuals.

Key Takeaways

  • Of these key stats, RCG and CCL show passengers down with a proportional decrease in total revenues in 2019 and 2022. NCLH, however, shows revenues did better and did not decrease to the same level as passenger figures.
  • All lines report strong consumer demand and can resume “full” operations in certain markets. (This has been the subject of a past Bulletin). The percentage of operators’ revenues increased significantly in North America and Europe. According to the CFO of RCG, the company’s North America-based itineraries are showing strong booking trends. Meanwhile, the company’s European itineraries are also showing positive signs, with bookings within historical ranges and catching up.
  • Total debt has doubled or tripled across all operators.
  • Operators have restructured debt and have delayed new ship orders as they focused on restart efforts initially, and at present, on strengthening their balance sheets.
  • Operating expenses affect profitability and resilience in the face of mounting debt payments. In 2022 expense per passenger has increased significantly for Carnival and NCLH. The main factors affecting this were:
    • Fuel prices were a key driver behind the increase in operating expenses for the big three cruise companies.
    • Lower occupancy levels as ships were not sailing at “typical” occupancy levels.
  • As a result, the big three are hard at work to manage their costs and increase profitability. Among actions taken by some of the lines include layoffs, revisions of itineraries to reduce fuel costs, shifting ships from weekly itineraries to shorter itineraries, and many others. Each company commented that higher cruise costs are expected to normalize in 2023.

BA Maritime

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!

cruise bulletin - maritime - bermello ajamil-02

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, the restart was successful, but with mixed results by markets and brands. 

What happens next in 2023 with the cruise industry that now has its fleet back in operation? This bulletin explores where the industry is today, compares 2022 metrics with those in 2019, and provides guidance as to what 2023 will look like – its challenges and opportunities.

Capacity – Despite the retirement of many of the older vessels from the fleets, today the industry is larger with more lower berth capacity than in 2019.

Passengers – Given the current trajectory of sailings and capacities, it is all but anticipated that 2023 will see a full year of recovery in terms of passenger numbers (and revenues). In fact, 2023 could even exceed the overall industry passenger numbers of 2019.

Debt – All three major listed cruise companies have more than doubled the amount of total debt. As a result of the debt, operators are executing somewhat different strategies going forward, but among common themes are:

    • A focus on operational profitability by looking at every part of the operations to achieve this target.
    • A reduction in capital spending by reducing or temporarily halting planned capital spending on non-essential projects.
    • Leveraging and partnering by looking for ways to attract capital or partners to achieve certain programs.

While this may negatively impact or delay growth strategies, particularly as it relates to investments in ships (as can be seen with ships on order 2019 v. 2022), technology, and the expansion of land-based developments, these operators have not announced any cancelations to date.

Instead, what is being seen is an evolution in the cruise business streamlining business to maximize profit and reduce cash demand. Investments in infrastructure will need to be carried out more by the destinations or third parties, to fill the gap in infrastructure development while the major cruise lines remain capital constrained.

Below find a comparison of key metrics of 2019 versus 2022 – such as passengers carried, occupancy levels, berths, ships, and more – based on the annual report data published by Carnival Corp (CCL), RCG, and NCLH.

Key Takeaways

  • Of these key stats, RCG and CCL show passengers down with a proportional decrease in total revenues in 2019 and 2022. NCLH, however, shows revenues did better and did not decrease to the same level as passenger figures.
  • All lines report strong consumer demand and can resume “full” operations in certain markets. (This has been the subject of a past Bulletin). The percentage of operators’ revenues increased significantly in North America and Europe. According to the CFO of RCG, the company’s North America-based itineraries are showing strong booking trends. Meanwhile, the company’s European itineraries are also showing positive signs, with bookings within historical ranges and catching up.
  • Total debt has doubled or tripled across all operators.
  • Operators have restructured debt and have delayed new ship orders as they focused on restart efforts initially, and at present, on strengthening their balance sheets.
  • Operating expenses affect profitability and resilience in the face of mounting debt payments. In 2022 expense per passenger has increased significantly for Carnival and NCLH. The main factors affecting this were:
    • Fuel prices were a key driver behind the increase in operating expenses for the big three cruise companies.
    • Lower occupancy levels as ships were not sailing at “typical” occupancy levels.
  • As a result, the big three are hard at work to manage their costs and increase profitability. Among actions taken by some of the lines include layoffs, revisions of itineraries to reduce fuel costs, shifting ships from weekly itineraries to shorter itineraries, and many others. Each company commented that higher cruise costs are expected to normalize in 2023.

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!

BERMELLOAJAMIL© 2022