As service goes down profits go up

[Sopwith]

Carnival Corporation & plc Reports Record Full Year And Record Fourth Quarter Earnings

 

MIAMI, Dec. 20, 2016 /PRNewswire/ -- Carnival Corporation & plc (NYSE/LSE: CCL; NYSE: CUK) announced U.S. GAAP net income for the full year 2016 of $2.8 billion, or $3.72 diluted EPS, compared to $1.8 billion, or $2.26 diluted EPS, for the prior year. Full year 2016 adjusted net income of $2.6 billion, or $3.45 adjusted EPS, was higher than adjusted net income of $2.1 billion, or $2.70 adjusted EPS, for the full year 2015. Adjusted net income excludes unrealized gains and losses on fuel derivatives and other items, totaling $199 million in gains for the full year 2016 and $349 million of losses for the full year 2015. Revenues for the full year 2016 were $16.4 billion, $0.7 billion higher than the $15.7 billion in the prior year.

 

Methinks the cruise lines are going the way of the airlines: as long as we choose our cruises based on lowest price rather than best value the race for the bottom will continue.

 

http://www.carnivalcorp.com/phoenix.zhtml?c=140690&p=irol-newsArticle&ID=2230918

[OlsSalt]

Why do you assume increased profits short-changes service? Might mean there is more money for improvements to the physical inventory.

[rgruenhaus]

Methinks the cruise lines are going the way of the airlines: as long as we choose our cruises based on lowest price rather than best value the race for the bottom will continue.

 

http://www.carnivalcorp.com/phoenix.zhtml?c=140690&p=irol-newsArticle&ID=2230918

If we agree on a price it is something neither the Cruiseline nor consumer can argue about, but if the consumer pays for value and doesn't get it after paying for it guess who gets screwed? Not the cruiseline!

 

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[Sopwith]

Why do you assume increased profits short-changes service? Might mean there is more money for improvements to the physical inventory.

 

I don't think I'm assuming anything. We have done at least a dozen HAL cruises over the past 16 years and probably another ten on other lines, so I speak from first hand experience. There is no question that the service provided by HAL has been declining over the past 5-10 years.

 

It is not the physical inventory that's the problem, it's the soft product. Food quality has deteriorated. The number of client-facing crew has diminished. Deck area has been taken away in favour of rentable cabanas. More cabins and passengers have been crammed onto the ships. New ships are bigger. Surcharges for speciality restaurants have gone up; there are even surcharges on the surcharges in the PG now. Entertainment quality has declined.

 

After our most recent cruise on the NA in October, wife and I decided HAL was no longer for us. Fair enough. I just found it interesting that while clients like us leave, HAL seems to have found their success formula.

 

I see a lot of similarities to the airline industry. Fixed costs are extremely high, so filling the ships is of critical importance. The market is saturated these days, and thus highly competitive. As long as we sheep follow the recent buying trends, the most effective way to fill the ships is to keep prices low. The best way to keep prices low is to keep costs low.

 

As for the physical inventory, people buy what they can see, so keeping it up is important. The soft product they can't see when making a purchase is less important when it comes to filling the ships.

 

My $0.02 worth.

[OlsSalt]

We have seen a lot of improvements in the past 8 years. For pretty much the same prices per cabin.

[bUU]

There is no question that the service provided by HAL has been declining over the past 5-10 years.

We have seen a lot of improvements in the past 8 years. For pretty much the same prices per cabin.

Reasonable people disagree. And that's okay.

 

What the article shows is that the company is doing the right thing, even if some (reasonable) people disagree.

[Krazy Kruizers]

All cruise lines have made cut backs in service.

 

Those new to cruising have not really been affected as they don't remember what some of us experienced back in the 80's and earlier.

 

JMO

[chengkp75]

One thing I look at, rather than just how much the profits are going up, is the "return on investment". Based on the data quoted, and the average stock price for the year, the ROI was about 7%, which is considered fairly average for a large company stock. I'm not a financial wizard, or stock market junkie, but I do know that a crafty old shipowner, Maersk McKinney Moller, past owner of Maersk Lines, told his corporate officers "if I can get the same return by putting my money in a bank, or investing in the market, why should I have the hassle of operating ships?".

[bUU]

Precisely right: Every dollar to be spent always competes with every other way that dollar can be spent.

[RocketMan275]

Methinks the cruise lines are going the way of the airlines: as long as we choose our cruises based on lowest price rather than best value the race for the bottom will continue.

 

http://www.carnivalcorp.com/phoenix.zhtml?c=140690&p=irol-newsArticle&ID=2230918

 

We should be glad the cruise lines are making a profit because without profits there would be no cruise lines.

[navybankerteacher]

We have seen a lot of improvements in the past 8 years. For pretty much the same prices per cabin.

 

Have you been sailing the same HAL I have sailed since 2002?

 

If you have not seen any diminishment in quality in a number of aspects of HAL's service and food: reduced dining room staff, reduced cabin steward services, reduced quality of cuts of meat in the MDR, reduced MDR menu selections, reduced public spaces by adding cabins and converting promenade deck space to reserved lanai space, to identify just a few, you have either not been looking or simply do not recognize quality.

 

As I have not seen "a lot of improvements", I would appreciate your indicating what and where they are - and please do not talk about specialty restaurants - because they do not fall within the (questionable) "same prices per cabin" concept.

[Randyk47]

All cruise lines have made cut backs in service.

 

Those new to cruising have not really been affected as they don't remember what some of us experienced back in the 80's and earlier.

 

JMO

 

That's absolutely true. I hear the same thing on even the supposedly luxury lines. Kind of a "it's not what it was XX number of years ago". Now my personal experience is that the level of service on the luxury lines reminds me more of the old service of HAL 20+ years ago. Point is that, using HAL as the example, the level of service to us took a big downturn around 2006-2008. To us it has stayed fairly steady since then so if you started with HAL, and maybe or probably other lines, in the last eight or so years you may not be seeing the same drop in service. You can't miss it if you never experienced it. What service is like today is maybe acceptable but for us it's far from what it once was. Something drove that and I'm hard pressed to come up with anything besides cost containment and the bottom line.

[Hlitner]

We have seen a lot of improvements in the past 8 years. For pretty much the same prices per cabin.

 

Can you please explain "what improvements you have seen?"

 

Hank

[chengkp75]

And yet, no one compares the cost of the cruise to the level of service. As an extreme, I found an ad for a 30 day HAL cruise in 1970 from San Francisco to the Caribbean via Panama Canal starting at $1295. That equates to $8124 in today's dollars. The closest I can come in a quick search is a 28 day Alaska and Panama Canal, that starts at $2800, and even the Neptune suite is only $9400. So, in order to maintain the level of service available in 1970 today, would price the cruises out of business.

 

What was HAL's profit margin in the 70's?

[Randyk47]

And yet, no one compares the cost of the cruise to the level of service. As an extreme, I found an ad for a 30 day HAL cruise in 1970 from San Francisco to the Caribbean via Panama Canal starting at $1295. That equates to $8124 in today's dollars. The closest I can come in a quick search is a 28 day Alaska and Panama Canal, that starts at $2800, and even the Neptune suite is only $9400. So, in order to maintain the level of service available in 1970 today, would price the cruises out of business.

 

What was HAL's profit margin in the 70's?

 

I'm not sure what HAL's profit margin was in the 70's but by mid to late 80's the line was in financial trouble. The line and it's aging fleet was bought by Carnival in 1989 supposedly saving it from possible bankruptcy. And you're spot on with the cost comparisons. Competition has driven or at least contained the fares. For sure, because I have the paperwork, comparing our honeymoon cruise in March 1998 to the same almost exact cruise for next March is only marginally more expensive. Allowing for inflation it should be at least half again more.

[Lizzie68]

You cannot even begin to equate cruise ships with airlines:(. Everywhere, every industry, has cut back. If you've been around HAL a long time you mourn what we used to have - but as long as the cutbacks do not compromise my safety, I'm OK with it because it's simply the way it is these days.

[cbr663]

Have you been sailing the same HAL I have sailed since 2002?

 

If you have not seen any diminishment in quality in a number of aspects of HAL's service and food: reduced dining room staff, reduced cabin steward services, reduced quality of cuts of meat in the MDR, reduced MDR menu selections, reduced public spaces by adding cabins and converting promenade deck space to reserved lanai space, to identify just a few, you have either not been looking or simply do not recognize quality.

 

As I have not seen "a lot of improvements", I would appreciate your indicating what and where they are - and please do not talk about specialty restaurants - because they do not fall within the (questionable) "same prices per cabin" concept.

 

I so agree. Yet again this year when it came time to book airline tickets and hotels for our HAL cruise, DW & I looked at each other and asked, "Do you really want to go?" The response was a resounding NO and the cruise was cancelled. We are finding it more and more difficult to become excited about a HAL cruise.

[cbr663]

And yet, no one compares the cost of the cruise to the level of service. As an extreme, I found an ad for a 30 day HAL cruise in 1970 from San Francisco to the Caribbean via Panama Canal starting at $1295. That equates to $8124 in today's dollars. The closest I can come in a quick search is a 28 day Alaska and Panama Canal, that starts at $2800, and even the Neptune suite is only $9400. So, in order to maintain the level of service available in 1970 today, would price the cruises out of business.

 

What was HAL's profit margin in the 70's?

 

Cruise prices from the 1970s is not relevant to today's cruise prices. The cruise experience of today is nothing like it was in the 1970s when there were far fewer ships offering a very different experience than that offered today.

 

Cruise lines have expanded and grown substantially since the 1970s. All cruise lines have benefited from economies of scale that have allowed them to offer cruises at lower prices. It is to be expected in a mature maketplace, which the cruise industry is in.

 

To expect a cruise that sold for $1295 in 1970 to sell for $8124 today is to expect that the cruise line had not learned nothing and had not gained any efficiency whatsoever in 46 years of operation.

[iancal]

What is wrong with making a profit.

 

Without profit, those of us working, or who worked, in the private sector would be jobless.

 

I have no doubt that the decline in price of oil and oil futures has helped their bottom line.

 

Look on the bright side....at least they are not looking for bail out money from the Government....unlike the auto and banking sectors in the recent past. And since the ships are built in other countries, we in North America do not have to indirectly pay for any of the huge shipbuilding subsidies that are enjoyed in Europe.

 

Cruises compete with other forms of vacation options and each other. No doubt the market will find an equilibrium.

Edited December 28, 2016 by iancal

[OlsSalt]

The ability to exploit cheap labor is not what it used to be compared to 20 years ago, after the rise of the Asian Tiger countries.

[OlsSalt]

... What service is like today is maybe acceptable but for us it's far from what it once was. Something drove that and I'm hard pressed to come up with anything besides cost containment and the bottom line.

 

Did you consider the cost and competition for labor into your thinking?

[OlsSalt]

Can you please explain "what improvements you have seen?"

 

Hank

 

In our 8 years on HAL ships we have noticed no difference in cabin service, entertainment and onboard services. Except the loss of the librarian, but that also coincided with the huge passenger shift to electronic readers also observed over that same time period.

 

The main improvements have been in the variety and freshness of the food choices both in the dining room, Lido and auxiliary dining options. Another major improvement has been the refinement of the overall decor.

 

We travel for the travel experience itself; not necessarily for the onboard experience. So our onboard expectations may differ widely from others. The inherent charms and courtesies of HAL staff at every level have remained consistent and welcoming.

Edited December 28, 2016 by OlsSalt

[Platoon Leader]

Prior to our October 2016 cruise on NA, we had not cruised on HAL since 1998 on Ryndam. We thought the service we received by our room steward was outstanding on both occasions. We enjoyed the food in the MDR though the selections were reduced. We had the same wait staff and wine steward each night and my drink was waiting for me after the first night. We couldn't have been happier with their service.

The main difference we noticed was in the Cruise Director and the entertainment. I believe the CD was in hiding when he wasn't introducing a performance. He walked the ship with his head down so he would not have to speak to anyone. If not for the BB Kings All-stars and the one very funny comedian, the entertainment would have been poor.

I say all this to state that we did notice some negative changes, but not enough to prevent us from booking with Hal again.

 

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[OlsSalt]

HAL is a mass market cruise line offering mass market services at mass market value. We never thought HAL was supposed to be a "premium" cruise line. We always thought HAL delivered exceptional value for the money.

 

Irony being we did expect premium value when our first cruise was on Crystal. After that experience we also realized we did not really particularly care about the Crystal "premium" difference they offered for their premium pricing. We preferred the increased number of cruises and better cabin options we could equally enjoy on HAL ships.

 

It seems irrelevant to put down current HAL value cruising experiences using comparisons to when the cruise line was on the verge of bankruptcy in the past. Glad HAL was able to pull itself out and retain its special uniqueness to become what it is today, and to observe its ongoing responses to changing customer tastes.

 

Even 8 years ago "Formal Night" was really formal and strictly enforced in the MDR. No longer the case, but does that represent a decline in HAL quality or keeping up with a changing customer base? Even Crystal today is now "black tie optional" when 8 years ago they demanded all passengers, even those dining at their Lido be dressed according to the dress code of the day..

[iancal]

We have found that cabin service levels have remained constant.

 

We have noticed a significant decline in the food and food service. Service the the MDR's has deteriorated. Less staff.

 

We have definately noticed a decline in the quality of the food, the offerings, and the preparation in the MDR. Most noticeable to us are the beef dishes, and the Lido offerings. Especially cheeses, salads,fruits, and cold meats.

 

I believe that all of the mass market lines are attempting to herd customers to

pay dining venues and packages that include optional dining venues by cutting back in the base MDR and Lido type venues.

 

Entertainment is hit and miss. Though we expect to board one day and see pay for play jukeboxes in the lounges. The shows are hardly of a quality that they could charge a fee for admissions....otherwise they would.

Edited December 28, 2016 by iancal