Seatrade Cruise News is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Economy buoys Carnival's N. American brands, Europe a mixed picture

1788522637f6d261721fb0c85191df2e_XL
Arnold Donald - Carnival doesn't have to raise prices to do better, it just has to avoid discounting
The strength of the economy in North America and Carnival Cruise Line's recovery are helping fuel better pricing and on-board spending at Carnival Corp. & plc but Europe remains a mixed picture, company management said Tuesday.

The booking curve for Carnival's North American brands is at the higher end of its historical range, while the booking curve for the European brands has improved but is in the lower half of its historical range.

Continental Europe, overall, has been challenged by economic issues and the refugee crisis, which is impacting all travel, not just cruising.

That said, 'Our European brands have performed well,' Carnival Corp. & plc president and ceo Arnold Donald told analysts, adding: 'I don't want to leave an impression they're stumbling and bumbling.'

He singled out Cunard's 175th anniversary events, the big splash from Britannia's introduction and AIDA Cruises continuing to perform well despite competitors' capacity increases. Also, while the AIDAprima delay has an impact, it's expected to be a 'fantastic' ship when it finally does arrive—anticipated for March a year from now.  

A Costa ship will be moving to Asia as the company continues to ramp up capacity there, with six ships planned for China in 2016, up from four now. And that should help pricing in Europe.

While China yields 'may come down a bit' next year—and though that's 'plausible and possible,' it's too early to know, Donald clarified—returns can be accretive because of higher capacity in that market and reduced capacity in other markets.

In 2016, only 2% of Carnival's 3.7% capacity growth overall is outside Asia.

Questioned repeatedly about pricing power, Donald told analysts Carnival doesn't have to raise prices to do better; it just has to avoid discounting. Thanks to added capacity, returns can be accretive even if there are some challenges with yields, he said.

'Slower than you might expect yield growth does not mean slower than you might expect return accretion,' as Donald put it.

Carnival's fourth quarter guidance, under analysts' expectations, was a sticking point on the earnings call.

A quarter of the company's capacity was in the Caribbean in the third quarter and 45% in Europe; that switches in Q4 to 30% of capacity in the Caribbean and 30% in Europe. So with the Caribbean doing well, and Europe challenged, analysts were looking for upside that management seemed reluctant to give.

However, Donald confirmed the Caribbean-heavy Carnival brand 'outperformed late last year and continues to outperform. There's a lot of momentum there. We feel very good about it.'