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Pricing survey suggests weaker RCL pricing 

The concentration of recent cruise ship issues has begun to impact RCL.  During our recent pricing survey, we saw pricing deterioration, particularly with the Celebrity and RC brands. This is a sharp downward shift from more optimistic trends seen in April and May, when RCL seemed to have weathered Carnival’s troubles relatively well.  The high end of RCL’s 2013 net yield guidance of +2-4% looks very aggressive if the pricing weakness continues into the summer months. CCL brands, with the exception of Costa, actually experienced stable pricing since its revised guidance on May 20.  Could CCL yield expectations finally be reasonable?  We would likely need another month of data to answer that. 

 

The cruise industry continues to deal with a litany of problems in 2013 e.g. fires, operational failures, norovirus, and government-related issues.  While the number of incidents at sea is on par with past years, scrutiny from the media has been heightened this year because of the seriousness of some of these issues.  The latest incidents are the Royal Caribbean Grandeur of the Seas fire (May 27), two Celebrity Xpedition itinerary cancellations to the Galapagos due to violations of local law (May 31), and operational problems aboard  the newly revitalized Carnival Sunshine that led to a cancellation. (June 1).  Moreover, historic flooding in Eastern Europe is a downer in an already weak macro environment.

 

Here is what we’re seeing from our proprietary pricing survey for early June in Europe and North America.  We analyze YoY trends, as well as relative trends, which are determined by pricing compared to the last earnings/guidance date for a cruise operator i.e. RCL: 4/25, CCL: 5/20, NCLH: 5/6.

EUROPE

Based on our survey, RCL overall pricing lost a couple of % points in pricing relative to May.  RC brand F3Q pricing in June was only marginally higher YoY in Europe, down from mid-single digit growth in May.  F4Q RC pricing remains lower YoY .  Celebrity pricing also took a hit in F3Q and F4Q while Pullmantour pricing was steady.  European capacity accounts for 25% of total capacity in F4Q.

 

Costa F3Q pricing has deteriorated moderately in the last two weeks.  However, Costa’s FQ4 pricing remains strong at low double digit growth. Princess, Cunard, Holland F3Q pricing are lower YoY but the trend is stable to slightly higher. AIDA 3Q pricing also stabilized in June. Generally, F4Q pricing is looking better than F3Q, but the trend is worsening.

 

Norwegian’s European very close-in F2Q pricing is particularly weak.  F3Q and F1Q 2014 pricing hasn’t moved much since May.

 

NORTH AMERICA

Caribbean

The Caribbean accounts for roughly 34%, 23% and 29% of Carnival’s total itineraries for F2Q, F3Q, and F4Q.  In June, Carnival brand pricing bounced back for F3Q, although lower YoY pricing continues to be in the high single digits.  Pricing trend for F4Q and F1Q 2014 was consistent with that of two weeks ago.

 

RC brand pricing for F3Q is now declining in the mid-single digits, a sharp reversal from the mid-single digit growth seen in May.  F4Q pricing is also moderately lower compared with slightly lower pricing in May.  A similar trend is emerging for very early F1Q 2014 pricing. 

 

Celebrity’s pricing trend is stable for F4Q but lower for F1Q 2014.

 

Norwegian's Caribbean pricing is as stable as it can get.  Breakaway and Getaway pricing for Jan 2014 has not moved since April. 

 

Alaska

The biggest disappointment was premium pricing in Alaska.  Holland America and Celebrity continue to discount heavily to fill up cabins.  On the brighter side, RC brand pricing is nicely higher.   

Mexico

Carnival’s pricing struggles in Mexico remain for F3Q, with pricing down 15% YoY, partially due to hard comps.  F4Q and F1Q pricing are both slightly higher.  Pricing trend is positive for all three periods.