CCL F2Q 2014 REPORT CARD

In an effort to evaluate performance, we compare how the quarter measured up to previous management commentary and guidance

 

CCL F2Q 2014 REPORT CARD - ccl1 

 

CCL F2Q 2014 REPORT CARD - ccl2

 

OVERALL

  • MIXED:  Every quarter, CCL manages to mess something up.  This time, management is blaming lower forward occupancy in the Caribbean. However, we are encouraged by the pricing environment we're seeing out of the Caribbean (even if it is uneven among their brands) and if pricing is sustained, this will bode well for 2015 performance in that region, in the face of declining supply.  While the hold price and sacrifice occupancy strategy may prove risky for CCL for another quarter, the pieces are set for CCL, at least, to meet their internal expectations for the year.  While we were neutral heading into today's print, we continue to believe CCL has to overcome the lowest bar among the 3 big operators this year; CCL should not set it any lower. 

 

CARNIVAL CRUISE LINE BRAND 

  • MIXED:  Pricing is better at the expense of lower occupancy
  • PREVIOUSLY:  
    • Cautiously optimistic pricing will continue to firm and improve. 
    • On a number of voyages, willing to give up a couple of points of occupancy to hold price

BOOKINGS

  • WORSE:  Since March, fleetwide booking volumes for the next three quarters are running slightly behind, due to North America bookings. Mgmt expects the booking curve to continue to lengthen.
  • PREVIOUSLY:  
    • Fleet-wide booking values during this year's wave season have been running almost 20% ahead of the prior year, significantly outpacing capacity, albeit at lower prices.
    • Cumulative bookings for the next three quarters were ahead of the prior year as overall booking curve has started to lengthen.
    • Currently still toward the lower end of historical booking curve.

COSTA

  • SAME:  Costa continues to improve its performance in F2Q.  Spain was one region of particular strength.
  • PREVIOUSLY:  
    • Costa achieved strong booking volumes during wave season, and in fact, we were almost up 50% year-over-year.  We've seen a continued improvement in perception with an almost doubling of trust and confidence in the core Italian market. 
    • The European economy is still choppy, but it's obviously strengthened. And we do see accelerated progress in the Costa brand

NA BRANDS (EX ALASKA)

  • WORSE:  NA yields will be slightly negative (down from slightly positive) with the Caribbean behind on occupancy.
  • PREVIOUSLY:  
    • Our North American brands have caught up on occupancy compared to prior year
    • Seasonal European program for NA brands is strong; well ahead on both price and occupancy.

ALASKA

  • BETTER:  nicely ahead on both price and occupancy
  • PREVIOUSLY:  
    • Behind on price but well ahead on occupancy, which bodes very well for pricing on the remaining inventory.

EAA BRANDS

  • BETTER:   Significantly ahead on occupancy with flat pricing. 
  • PREVIOUSLY:   Year-round European program, which represents 70% of the EAA brands capacity for the remainder of the year, is behind on price but well ahead on occupancy.  Recent booking volumes have been substantially ahead of last year, which again bodes well for pricing on the remaining inventory.

JAPAN

  • SAME:  The weak 3Q guidance was partially attributed to Japan  (Princess brand)
  • PREVIOUSLY: 3Q will be impacted to some degree by Japan

COSTS

  • BETTER:  Lowered FY NCC ex fuel guidance to 'flat to slightly up'.  Mgmt sees opportunities for cost cuts in its air program for 2015.
  • PREVIOUSLY: 
    • Increased our investment in advertising and expect to spend over $600 million in 2014.
    • Crew travel and ports are two examples of large areas where CCL is conducting deeper dives.  CCL is still at early stage in sizing the [cost] opportunities in these and other categories. 

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