SHIP SHARE - CRUISERS

A delicate time for the cruisers – we’d like to share our thoughts

Fears that overcapacity in the Caribbean is causing soft bookings volume and down pricing persist.  Cruise Week pedaled the weak Q4/Q1 again this week.  While not a new theme, it’s not abating.

As pointed out by Cruise Week, agents continue to see RCL as best positioned in the current demand environment.  However, we remain cautious as RCL’s capacity in the Caribbean will be at its highest since 2010 due to the debut of Quantum of the Seas in November 2014.  Moreover, we’re not sure RCL’s guidance reflects the potentially weak environment.

For CCL, we believe the low yield guidance for 1H 2014 already takes into account the soft picture from the Caribbean, particularly for FQ1.  As seen from our recent pricing survey, CCL may be experiencing incremental improvement in that market despite the negative scuttlebutt

Here is what we are seeing/hearing/feeling:

  • On a longer-term trend, the number of cruise passengers has been steady but selling price is down.
  • River cruising segment is outperforming ocean cruising by a wide margin particularly in the summer.  Onboard spend has been exceptional.
  • Luxury cruises have been immune to the recent weakness
  • Europe 2014 is trending much higher than 2013
  • Onboard yield will continue to go higher
    • Bar drink prices not discounted
    • Oasis of the Seas and Allure of the Seas getting higher yields due to strong onboard spending
  • Mainstream land vacations for Mexico/Florida have been doing well
  • OTAs are not having a significant impact on the cruise business

Recent industry news:

  • (Nov 7) Costa Cruises will spend 10MM euros for 3 dry docks
    • Costa Voyager starting 11/7/13 for about two weeks
    • Costa neoRiviera from 11/7/13 to 11/12/13 
    • Costa Classica from November 12 to December 21.
  • (Nov 7) Starting January 2014, the number of cruise ships that are permitted to enter Venice is cut by 20% while in November 2014, any ship over 96k tons will be banned from the Giudecca Canal (lies south of Venice).
  • (Nov 11) Small fire on Dawn Princess on 11/8 on New Zealand sailing. There were no passenger or crew injuries and the itinerary did not need to be altered. 
  • (Nov 11) Due to propulsion problems on Allure of the Seas, the ship may be drydocked in 2014 rather than 2015. The Oasis of the Seas drydock is scheduled for 2014 but may be pushed back to 2015.
  • (Nov 13) Starting in 2014, the VAT in Mexico's border states will rise to 16% from 11% previously.  This means the cost of goods and services will rise 5% in leading cruise ports like Cozumel, Costa Maya, Ensenada and Cabo San Lucas, among others.  Transportation - not subject to VAT anywhere in the country before - will be taxed at 16%.  CCL recently learned about the increase and is currently examining the matter. 
  • (Nov 13) Princess Cruises said it will pay 2% bonus commissions on short cruises departing January through April next year.  The 3-5 day cruises leave from Los Angeles and Fort Lauderdale. The bonus applies on bookings made Nov. 15 through April 22.