Takeaway: With slight variations, our proprietary cruise pricing survey has proven to be an accurate forecaster of gross yields.
A backtest of our cruise pricing database for RCL and CCL shows consistency in predicting actual gross ticket yield for both Carnival and Royal. Directionally and in identifying pricing pivots, the model has performed spot on. The only criticism can be that the model tends to slightly overestimate CCL ticket yields while slightly underestimating for RCL. The differential from our model could result from geographical mix and occupancy trends. Regardless, the results support the efficacy of our pricing survey.
We track YoY and sequential pricing for ~13,500 ship itineraries spanning across 8 geographic regions for CCL, RCL and NCLH. Prices are compiled twice monthly during Wave Season.
For CCL and RCL, we ran a backtest covering the time period from October 2012 to August 2014, wherein we aggregated the pricing change for all the itineraries in a particular region and weighted them according to an operator’s deployment mix. For example, for Carnival’s F2Q 2014, the Caribbean accounts for ~37% of total fleet-wide capacity for F2Q. The 37% weighing is split between the price changes for the Carnival brand, Princess, and Holland America for Eastern and Western Caribbean itineraries.
We then compared the YoY change in the operator-reported gross ticket yields with our capacity-weighted price YoY change beginning with Q2 2013.
As the charts below show, our survey is very accurate in measuring ticket yields although the model tends to be biased in different directions for RCL and CCL. There could be two reasons for this bias: 1) RCL had a greater presence in Asia-Pacific than CCL had in 2013-2014, and also experienced stellar results in this newer market. Asia-Pacific accounts for the smallest portion of our survey and YoY volatility in Asia pricing can be very high as ships frequently move from one market to another. 2) Since we do not track occupancy, RCL may be showing more improvement in occupancy YoY than CCL. But since most ships sail close to full occupancy, this should be less of a driver going forward.
FQ1 appears to be an anomaly. For RCL, the differential may have been due to a weaker than expected yield performance from the Caribbean and some voyage cancellations in FQ1. For CCL, a greater impact from better ticket prices for the Carnival brand in FQ1 could have nudged yields higher than we estimated.
LOOKING AHEAD TO FQ3
Based on the latest pricing trends, we believe CCL will post better than expected gross ticket yields while RCL will meet raised investor ticket yield expectations for FQ3. We will have a cruise pricing update later this week.