Still not enough stability in the Caribbean puts us on the sideline despite continued improvement in Europe. NCLH at risk.
OVERALL SURVEY SENTIMENT
- CCL: NEUTRAL
- RCL: NEUTRAL
- NCLH: NEGATIVE
CALL TO ACTION
Our pricing survey on May 27-28 showed continued pricing pressure in the Caribbean, although some of it could be attributed to a seasonally slower summer. European pricing was stronger in May for the Royal Caribbean brand, Celebrity and Costa. We’re also seeing pockets of strength in the upcoming summer cruising season in Alaska.
Norwegian remains the brand at most risk given the unabated, pervasive discounting in the Caribbean. Can Breakaway premiums withstand the new competition from Quantum later in the year?
CCL reports FQ2 earnings in four weeks. CCL has the easiest comps among the three publicly traded cruise companies, particularly for the Caribbean. Hence, Carnival brand Caribbean pricing YoY for 2H 2014 is still up mid-to-high single digits YoY, despite the heavily competitive environment. Europe is more of a mixed picture with Costa leading the charge.
We’ll have a more detailed earnings preview on CCL the next time we run the pricing survey on June 18th.
- Carnival brand: Rough seas in the Caribbean as pricing is off substantially for the early summer itineraries in FQ3. More discounting was seen in the Western Caribbean segment, which has been a weak spot. FQ4 2014 and FQ1 2015 pricing are fairly steady. On a YoY basis, pricing dipped for FQ3 in late May but for the past 3 months, it has averaged close to high single digit growth.
- Princess/Holland America: Pricing recovered slightly but remain at lower levels than that seen in late March
- Seasonal discounting for some June itineraries at Holland America
- Princess pricing unchanged
- Costa pricing for FQ3/FQ4 mainly kept its course in late May, suggesting higher YoY comps, +20% in some cases.
- It’s a different picture for CCL’s other brands. Princess pricing fell further, suggesting a modest decline overall for FQ3. While Cunard pricing has stabilized, comps are very difficult, particularly for FQ4. Holland America is struggling with pricing in FQ3. AIDA pricing slipped again for both FQ3 and FQ4 across all itineraries. P&O Cruises UK is doing a little better with pricing holding steady for the latter half of FY2014.
- Fairly quiet with some summer discounting in Princess’s Japan itineraries.
RCL is probably best positioned for this year with its price leadership in Europe and the highly anticipated arrival of Quantum to the New York/New Jersey market. But so far, the brands haven’t been immune to the Caribbean discounting. RCL is doing exceptionally well in Europe and the favorable pricing for Anthem’s 2015 sailings bodes well for that region. After an unusually slow start to the year for the Alaska itineraries, pricing is beginning to pick up.
- For the summer, RC brand pricing slumped in the Caribbean, especially in June/July. However, this is slightly offset by stronger pricing in Alaska.
- Celebrity pricing is down significantly for FQ4 in the Caribbean
- Quantum pricing for Nov/Dec itineraries remain relatively unchanged
- Pullmantur pricing steady
- Pricing in Europe has been extremely robust and they got stronger at the end of May for both the RC and Celebrity brands. Pricing was up high double-digits for the rest of FY 2014.
- Azamara modest declines in pricing for summer itineraries
- While Pullmantur pricing fell sequentially in both the Mediterranean and Baltic Sea regions, comps are so easy that on a YoY basis, they are still able to maintain high double digit pricing growth.
- Slight uptick in Anthem pricing for 2015 itineraries
- While this region will be more material in the 2nd half of 2015, pricing has been generally steady among the RCL brands with the exception of Celebrity which slashed pricing for its January 2015 Singapore itineraries.
- YoY pricing is still significantly behind for winter 2014 but sequential pricing trends have been positive
NCLH maintains the most exposure to the Caribbean which remains a struggle for brand. The charts below show no pricing power. Strength from Europe is a buffer to the bleeding but as the recent lower FY yield guidance indicated, the Caribbean declines have been overpowering.
- Caribbean pricing still has not bottomed for NCLH as it suffered almost a double digit pricing decline since late April. The quarter we're now focused on is FQ4 given Breakaway’s pricing with Quantum of the Seas entering the NY/NJ market. For FQ4, Breakaway’s APD is averaging $86, while Quantum’s APD is ~$200.
- Although premiums for the most part improved for NCLH’s newer ships as seen below, Q4 Breakaway premium shrunk from 24% in April to 15% at the end of May.
- NCLH has 49%, 40% and 62% of its capacity in the Caribbean (including Bermuda) for Q2/Q3/Q4 2014, respectively. Compared with last year, Caribbean (including Bermuda) capacity is up 6% points.
- Pricing environment is challenging with pricing barely up.
- NCLH has 10% and 18% exposure to Alaska in FQ2 and FQ3.
Europe and Hawaii
- Europe looks outstanding for the summer with steady sequential pricing and strong double digit YoY pricing growth
- Hawaii FQ2 summer pricing was slightly weak
STOCK VS SURVEY
Survey has been mostly positive for CCL in the past 6 months
Survey has suggested mixed signals for RCL in the past 6 months
Survey has been bearish on NCLH since the 02/12/14 survey