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Cruise Industry Idea Proposal (CCL, NCLH, RCL)

Cruise Industry Idea Proposal (CCL, NCLH, RCL)
 

Will the cruise industry’s 2020 bookings continue to be ahead of 2019’s pace?

Report Available: January 8, 2020

 

Blueshift’s ongoing research found NCLH’s and RCL’s bookings and pricing for 2020 ahead of last year’s pace while CCL reported a slowdown on economic concerns in Europe and Asia. New ship deliveries, new destinations, fleet modernization, and technology enhancements combine with a strong U.S. economy and high consumer confidence to push demand for cruise travel heading into the new year. As wave season begins, confidence abounds and great deals are available, but CCL’s disappointing Q3 earnings and the tourism industry’s concerns about the effect of the 2020 election are areas to watch.

Observations

  1. NCLH’s Q3 beat earnings and revenue expectations, with revenue up nearly 3% year to year. Passenger ticket revenue and onboard revenue were both ahead of estimates and strong demand in its core markets helped offset the effect of Hurricane Dorian. The launch of new ships Norwegian Encore and Seven Seas Splendor bode well for a good 2020. NCLH’s Regent brand was nearly 70% booked for 2020 and at higher prices than a year ago despite a 26% increase in capacity. The company’s advanced ticket sales increased 12.5% year to year as forward capacity increased only 8.7% — showing ticket deposit growth outstripping capacity growth by about 44%.
  2. RCL missed its Q3 earnings and revenue expectations, though EPS was 7% higher than a year ago and revenue climbed nearly 14% year to year. RCL reported net yields of 5.2% for the quarter compared to 5.8% consensus. The company said the impact from Hurricane Dorian was the largest from any hurricane in the company’s history. It also noted a strong year in China despite economic concerns. RCL expects to end the year with more revenue than any previous year with high booking numbers and attractive pricing for 2020. Its focus for Q4 is on new ship deliveries, new destinations, fleet modernization and technology initiatives. Three of its brands will welcome new ships in 2020, while onboard revenue areas will be added to the existing fleet. Bookings and pricing for 2020 are trending ahead of last year’s pace.
  3. In its Q3 earnings report, CCL warned of lower than expected profit in Q4 and for the full year as booking volume and price for the first half of 2020 were lower than the previous year’s trends. CCL noted that macroeconomic factors in Europe and Asia, as well as volatility with fuel prices played a role in the muted outlook. CCL’s revenue did climb nearly 12%, beating expectations for the quarter. CCL is estimated to report its Q4 earnings Dec. 19.
  4. Demand for cruises is expected to continue growing. More ships and a greater variety of cruise options will encourage travelers to consider taking cruises. High consumer confidence and a strong U.S. economy made up of consumers with less debt and more savings presents more opportunities for travel agents to fulfill high expectations for the 2020 season where industry executives are keeping the focus on the positive signs about the coming year.
  5. With demand for cruises growing in China, one of the largest cruise-ports operators is looking for more ports in Southeast Asia, including Thailand, Malaysia, Indonesia, and Vietnam to offer more destinations for cruises originating in Singapore.
  6. Blueshift’s Jan. 16 report said cruise lines were on track to see bookings growth in 2019 outpace 2018, according to 18 of 22 sources, continuing the trend found in Blueshift’s Jan. 10, 2018, report. All seven travel agents in the United States are seeing sales grow year to year, four of whom said growth is 10% above last year. Demand for cruises showed no signs of slowing down. All four U.S. suppliers to the cruise industry saw their business grow 5% to 10%, driven mostly by new ships increasing orders for uniforms, linens, alcoholic beverages, and duty-free products. Three of the five U.S. port city businesses reported cruise-related sales increases, and the two sources who did not said their businesses faced increased competition from those entering the market to serve cruise passengers. Onboard spending was increasing and becoming a greater point of emphasis for cruise lines as they make it easier for passengers to spend money.

 

How do booking trends compare to a year ago? How do pricing trends compare with a year ago? Will booking in 2020 exceed 2019? By how much? How is onboard spending compared to a year ago? What are the newest trends in passenger experiences that are resonating with cruise travelers and getting them to spend more money? What is the latest development with technology/apps/wearables on cruise lines? How far along are cruises in deploying their latest innovations? What are the most concerning developments the cruise industry is watching for 2020? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Travel agents in the U.S., Suppliers to cruise ships in the U.S., Port city businesses in the U.S., Travel agents in China, and Industry specialists.  

 

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

 

Research Begins: December 16, 2019

 

To see other ideas Blueshift Research is currently working on, please click here.

 

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