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Carnival undertakes vast market study, revenue management review, global sourcing initiatives

Donald - leveraging scale in air ticket and food purchases
A massive market research effort, a review of company-wide revenue management systems and more joint sourcing initiatives are under way at Carnival Corp. & plc.

CEO Arnold Donald said the company is talking with thousands of consumers, both cruisers and non-cruisers, and is reviewing 30m guest records to better understand its brands' appeal and what can be done to increase loyalty.

'We believe it's the largest ever quantitative market research study of the cruise and leisure market,' Donald told analysts on Tuesday.

At the same time, Carnival has commissioned a team of leading revenue management experts to assess the company's revenue management systems and strategies. The team has begun visiting Carnival brands to identify best practices and opportunities to improve revenue management tools and modeling.

These efforts will 'allow us to capture higher yields,' Donald said.

On the cost side, an earlier announced group travel sourcing initiative is well under way. The company recently issued a global RFP to the airlines it uses around the world.

'We are among the largest air travel buyers in the world and have historically taken a regional view of these relationships. Now we will take a global view,' Donald said.

The Carnival chief expects to begin to see the benefits as early as next year.

Other initiatives include issuing RFPs for global sourcing of the largest food products in regions of common deployment.

In light of Carnival's efforts to maximize cross-brand efficiencies, William Blair & Co. lowered its constant-currency net cruise cost assumption for the company, excluding fuel, to flattish for 2015, analyst Sharon Zackfia said in a note.

Wells Fargo Securities also expects the company to announce 2015 cost savings goals from the initial phase of its long-term cost savings opportunities based on cross-brand collaboration efforts. Net savings goals for 2016 and beyond will likely be outlined in the latter part of next year, analyst Tim Conder said in a note, as Carnival takes time to decide the best return options for generated cost savings—that is, whether they will flow to the bottom line or be reinvested.

'Considering higher “new normal” levels of marketing/advertising spending needed to drive a recovery in net yields, still 11% below prior peaks, we see net cruise costs excluding fuel likely netting out to be flattish over the next several years,' Conder summed up.