EARLY MARCH CRUISE PRICING SURVEY

CCL the positive standout in our most recent survey. NCLH still struggling a bit.

 

Snowstorms abating, but are consumers still booking?  In the Caribbean, we saw discounting across the board among the lower priced itineraries in the Caribbean in mid-February, but the Carnival brand pricing stood out in March, outperforming its peers.  Carnival sequential pricing picked up among the Eastern Caribbean itineraries.  More importantly, sequential pricing rose among the Western Caribbean itineraries for 2H 2014.  This is encouraging given Western Caribbean pricing has lagged.  While Caribbean pricing overall remains sluggish and pricing has been quite volatile in the busy, promotional period of Wave Season, we continue to see Carnival as best positioned due to easy comps and low Street expectations. 

Not surprisingly, the picture is starkly different in Europe.  The RC brand and Norwegian are leading the charge in a rosy booking and pricing environment.  CCL has the most exposure to Europe but it is still trying to find a solid footing there with mixed pricing performance in March.  The Ukraine-Russia situation could be a wild card.  So far, no Black Sea sailings have been rescheduled or canceled on RCL and CCL brands.  There’s speculation that Baltic Sea itineraries could eventually be impacted; that would be significant for CCL and RCL if it happens. Alaska will be the weakest market pricing wise in 2014 – who wants to go somewhere cold nowadays?

While our study focuses on sequential pricing trends and pivots, we would point out that YoY pricing for Carnival is up significantly due to the lapping of the Triumph fire incident in 2013.  RCL and NCLH face more difficult comparisons in the Caribbean.  The Street is finally catching on to the low bar set by Carnival as even the most bearish sell-side have been raising yield and EPS estimates for CCL before they report earnings in three weeks.  According to Factset, recent FY2014 estimate changes have trended around the $1.75 EPS range (at the upper end of CCL’s $1.40-$1.80 guidance).  Our $1.90 EPS and 0.3% yield forecast for FY2014 remains unchanged from our note in December “CCL: $2 ON THE HORIZON.”

Here are the highlights from our latest pricing survey (+13,500 itineraries) on March 3-4. 

 

OVERALL SURVEY SENTIMENT

• CCL: Positive
• RCL: Neutral
• NCLH: Negative

 

CCL

• Caribbean 
• Carnival brand showed the greatest positive momentum in sequential pricing among the big 3 operators in March.  This is a big reversal from weaker pricing in mid-February. 
1. Better pricing pretty much across all brand names especially Sensation and Paradise
2. While F2Q pricing was pressured in the Western Caribbean, they may be some light at the end of the tunnel for 2H 2014 as the chart below shows
• Princess has been busy with promotions but pricing for FQ2 itineraries have been higher.  This is offset by heavy discounting by Holland America; a recent high profile on board crime may be the cause of the discounting across all itineraries for the brand.
• Europe
• Costa lost a little bit of pricing power in March, although overall Summer ‘14 pricing is still solid
• AIDA continues to be mixed.  Baltic Sea strength is offset by discounting in the Mediterranean particularly in F3Q.  This could be a potential red flag as we roll into Spring.
• Princess pricing improved slightly, helped by Ocean Princess
• Cunard pricing remain higher for summer ’14 while Holland America pricing plunged.
• P&O Cruises UK pricing backed off in F2Q but remain higher in F3Q/F4Q
• Alaska
• Holland America sequential pricing fell slightly
• Princess pricing recovered somewhat after heavy discounting the last couple of months
• While a small market player, Carnival brand outperformed in pricing in the Alaska market
• Asia
• Princess pricing slightly higher in FQ3 and FQ4

RCL

• Caribbean
• Overall, RC brand pricing was flat sequentially and remain slightly lower YoY. 
1. Close-in pricing for 1Q lost momentum in March
2. Quantum pricing unchanged relative to February
• Celebrity pricing remain at depressed levels.  We’re hearing good feedback for its popular 1-2-3 program.
• Pullmantur pricing steady
• Europe
• Easiest the best region for the RC brand – pricing up high double-digits for F2Q and high single digits for F3Q-F4Q
• Celebrity pricing showed sequential gains for FQ3/FQ4
• Azamara pricing was generally positive
• Pullmantur pricing showed decent growth considering very easy comps
• Alaska
• Both RC brand and Celebrity pricing were down close to double digits YoY with trend stabilizing

NCLH

• Caribbean
• More discounting off of already low prices for F1Q-F3Q.  F4Q pricing is stable.
• Getaway 2Q premium increased for 2Q but it’s misleading because its comp brands (Sun, Pearl, Sky, Epic) pricing fell 20% on average since February guidance while Getaway pricing declined 10%.  Getaway premiums for 4Q was steady around 26% but only flat with Epic prices
• Breakaway 3Q premium remain in the low single digits for F3Q and ~25% for 4Q.
• Alaska
• Bleeding stopped in March but pricing remain modestly lower
• NCLH has 10% and 19% exposure to Alaska in FQ2 and FQ3.
• Europe pricing looks outstanding for the summer
• Hawaii summer pricing stable