Cruise lines seeing calm financial seas despite economic tidal waves
With fuel prices going up and the US economy going down, the consensus might be that the cruise industry is facing harder times in 2008. But that’s not the case at all.
“The booking picture is quite strong at this time,” Howard Frank, the vice chairman of Miami-based Carnival Corp., told investors.
In fact, Frank added, even though Carnival’s fleet capacity is expected to rise by 9% in 2008, “we have less inventory left at this time to sell through the remainder of the year.”
Analysts say there are a couple of reasons the cruise industry is upbeat despite the strong economic headwinds.
For one, cruise lines are increasingly shifting resources to Europe.
Carnival’s capacity in Europe, for example, will grow 21.7% this year; in contrast, its capacity in North America will grow just 3.4%
European cruises can command higher prices and are shielded somewhat from the struggling American economy.
“For those who wrestle with how Carnival could be seeing such strong booking trends when there is so much concern about the US consumer, the answer is: Easy comps and a lower mix of Caribbean deployments,” wrote Robin Farley, a cruise industry analyst for UBS, in a note to investors.
But skyrocketing fuel costs still pose a threat. UBS analysts projected that Carnival’s fuel costs per day will rise nearly one third from a year ago.
Cruise lines are also counting on consumers to shoulder more of the expense. Carnival, Royal Caribbean Cruises Ltd. and most other cruise companies — with the exception of Disney Cruise Line — have announced new fuel surcharges that will cost passengers an extra $5 per day.
Report by David Wilkening
David
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