Close

Not a member yet? Register now and get started.

lock and key

Sign in to your account.

Account Login

Forgot your password?

Cruise Lines Idea Proposal (CCL, RCL)

Cruise Lines Idea Proposal (CCL, RCL)
 

Will bookings growth for wave season 2018 continue to be ahead of last year’s pace?

Report Available: January 10, 2018

 

Blueshift’s initial research shows solid revenue and bookings for major cruise lines in Q3, especially considering the devastation from the hurricanes in the Caribbean this fall. Coupled with expected growth in Q4 and bookings for 2018 ahead of last year’s pace, the cruise industry appears on a strong path to continued success. Technology is playing an increased role in enhancing customers’ on-board experience like using an app to make dinner reservations, plan excursions, and board more efficiently. Cruise lines are also emphasizing the on-board retail experience, adding more high-end retailers to their ships and seeing higher on-board revenues than in the past. A challenge for the cruise industry was the rapid growth in capacity in China and the resulting pressure on prices.

 

Observations

  1. RCL beat Q3 earnings expectations and saw revenue climb 0.4% year to year, in-line with estimates despite the effects of Hurricanes Harvey, Irma, and Maria. Net revenue was up 5% based on strong demand in China, Europe and North America, while on-board revenue also climbed 5% through shore excursions and Internet packaging. Total bookings were higher than a year ago, setting up for a good Q4. RCL is also seeing better early booking trends for 2018 compared to a year ago.
  2. CCL’s Q3 earnings and revenue exceeded expectations, with year-to-year revenue growth of 8%. Adjusted earnings were nearly 20% higher than a year ago and surpassed the upper end of the company’s guidance, resulting in CCL raising its full-year earnings expectations. Capacity increased 3%, net ticket yields were up 5.6% and on-board yields climbed 3.2%. Booking volume for the first half of 2018 is ahead of last year’s pace and at higher prices.
  3. The hurricanes of August and September hit along the cruise lines’ major trade routes in the Caribbean, with a direct cost of $55 million for RCL. Recovery efforts have been swift and RCL is now operating from San Juan and St. Thomas with plans to return to St. Maarten later this month. RCL noted a quick rebound in its Caribbean bookings which are now mostly back to pre-storm levels, a sign that travelers are becoming more resilient and move on faster from events of this nature.
  4. Demand is being driven by consumers shifting to a greater emphasis on buying experiences instead of material goods. As such, RCL is investing heavily in technology to allow its guests to plan their next vacation with RCL through the use of virtual reality, and plan activities and reserve lounge chairs from dedicated mobile devices. NCLH launched an app to enable dinner and show reservations, excursions, photo sharing, and paperless boarding. CCL developed a guest experience platform, Ocean Medallion, which is a wearable device that serves as a room key, can be used to enhance the boarding experience, make dinner reservations, play casino games, and get information on excursions. It was slowly introduced to select guests last month with wider use expected in the first quarter of 2018. CCL is also making on-board shopping a bigger part of the cruise experience, with Swarovski jewelry on 25 ships and Pandora jewelry boutiques on 10 ships, selling items that can only be purchased on a CCL cruise.
  5. Construction on RCL’s newest Quantum Ultra Class ship began in August. Spectrum of the Seas will joins Quantum of the Seas and Ovation of the Seas in the Chinese market, debuting in 2019 and designed specifically for the Asia Pacific region. RCL will launch two new ships in 2018. CCL experienced a few challenges in China this year as industry capacity growth led to pricing pressure and tension between China and South Korea, a popular port stop, led to some tour cancellations. CCL’s Princess Cruises will not sail year-round from China as originally intended, instead setting up base in Australia in late 2018, with the hope that reduced capacity will boost pricing.
  6. Blueshift’s 11 report found sources expecting cruise bookings and revenue generated for support businesses to exceed 2016 levels. Wave season was on track to match or exceed the average passenger growth rate of 7.2% per year. Bookingswere expected to grow 5% to 10% in the United States and 20% to 40% in China. Travel agents, cruise line suppliers, industry specialists and port city businesses said demand was being driven by the improving U.S. economy, new ships hitting the water, and travelers realizing the value proposition of cruises.

 

How are booking trends for 2018? How do they compare to a year ago? What effect is the cruise industry feeling from the hurricanes in the Caribbean this fall? What role are technology enhancements playing in booking trends and on-board experiences? What role is increased on-board retail opportunities playing in booking trends and revenue increases for cruise lines? How are booking trends in China? What are pricing trends in China? How is the industry dealing with its rapid capacity growth in China? To gain insight into trends in the cruise industry for wave season 2018, Blueshift will gather data and issue a market research report from independent sources in the following areas: Travel agents in the United States, Travel agents in China, Suppliers to cruise ships, Port city businesses, and Industry specialists.

  

Companies: Carnival Corp. (CCL), Walt Disney Co. (DIS), Norwegian Cruise Line Holdings Ltd. (NCLH), Royal Caribbean Cruises Ltd. (RCL)

 

Research Begins: December 18, 2017