Question for travel agents

[Sky Sweet]

As of April 20, Raymond James downgraded its rating for Royal Carribean Stock from "outperform" to "market perform". One of the reasons that was stated in this downgrade report is "weak bookings". Is this consistent with your experience as a travel agent?

[ocngypz]

Alaska is fine. Europe has softened a little. Hawaii from CA has softened, too.

 

The Caribbean where most of the tonnage is located is terrible.

 

It's not merely the number of bookings, it is the net yield per berth for the cruiseline which is terrible.

 

So, is it any wonder, Celebrity has no ships in the Caribbean in the summer.. and has extended the European season into Nov?

 

So you add this to the increase in fuel costs..... and RCI just finished borrowing $570 million to pay for Freedom... yeesh........

 

It's a tough business!

 

PS> Your best buys in the Caribbean will be 10+ night sailings.

[cusyl]

Do you think the millions of dollars lost for the QM2 fiasco with the damage in Ft Lauderdale and the millions lost on the Star Princess fire has something to do with their financial outlook also?

[ocngypz]

Do you think the millions of dollars lost for the QM2 fiasco with the damage in Ft Lauderdale and the millions lost on the Star Princess fire has something to do with their financial outlook also?

 

Not much. Insurance comes into play with those two scenarios.

[cusyl]

I am betting they have a really big deductible, but still not like paying all of it out of their pocket.

[gooch47]

I'm a little confused. The Star Princess fire wouldn't have anything to do with the RCI report except that it might affect cruising in general.

[Lsimon]

As of April 20, Raymond James downgraded its rating for Royal Carribean Stock from "outperform" to "market perform". One of the reasons that was stated in this downgrade report is "weak bookings". Is this consistent with your experience as a travel agent?

 

I might be missing the boat here, but: seems like any such change one day before the earnings press release is just silly. RCCL released their earnings this morning, and it is 10% above analysts estimates and above previous guidance. They announced anticipated future increases in yields - which could be due to pricing and/or bookings. They have a conference call scheduled for mid day - anyone can listen in through their investor web site. I look for today to be a potentially good day in RCCL's stock. I think the main reason the cruise stocks have been stagnant is twofold: 1) concern about future fuel prices and 2) overall travel industry where stocks have been lagging the overall market in recent years.

[ocngypz]

While profit beat street and company expectations, it was down from the same period last year.

 

Note, that it was onboard revenue, not ticket prices which added to the kitty.

[hajekfam]

I'm a little confused. The Star Princess fire wouldn't have anything to do with the RCI report except that it might affect cruising in general.

 

You're not the only one who is confused.

 

Do you think the millions of dollars lost for the QM2 fiasco with the damage in Ft Lauderdale and the millions lost on the Star Princess fire has something to do with their financial outlook also?

Both of those ships are owned by Carnival - Totally different company.

[cusyl]

Yes,I am aware of that but rather cruising in general.

[Iamboatman]

I think there is a shift in cruise business as well as an adjustment in the cruise mentality.

 

Right now there are more people who are taking their 3rd, 4th or more cruise. Many people believe that the Caribbean is nice, but "if you've been to one island you have been to them all." While that may be a bit unfair, the fact remains that destinations are becoming more of the focus of many passengers while the cruise lines are focused on making the ships themselves the destinations. (After you have been on a particular ship x times, don't you focus more on what the ports are and what excursions you are going to take?)

 

I think the shift to Europe is manifold. One is the foregoing coupled with the growing desire for Americans to actually see some of the rest of the world. Another is that there is a huge market in Europe which has yet to be really tapped into. (Cruises are not just for Americans!).

 

A third reason for the European shift: The cruise lines go where the money is. European cruises sell at a premium while the Caribbean cruises are more "value" oriented.

 

I have also observed that the luxury and near luxury cruise lines are sailing at or near capacity. Try to book a Seabourn cruise for this summer and you will be very frustrated if you want your first choice. The reason is not only better service (usually), it is more exotic ports.

 

RCI just reported some pretty strong numbers. Carnival did not report bad numbers, just not what it had been reporting over the last few years of growth. This is not an industry in turmoil, but adjustment; profitable, but with the profits fluctuating.

 

"Market perform" from "Outperform" is not such a bad thing when the stock market is rising. BTW, Goldman Sachs made a huge blunder last month with its "the industry needs to get rid of travel agents" observation as a way to increase profitability. Sometimes the analysts don't really know what they are saying, so take the comments with a grain of salt.

[cruisintwinsmom]

Great Question! You must follow Peter Lynch's philosophy. Not a travel agent, but I remember a couple of years ago one of the analyst on a stock market TV show said that RCI was not a good buy as there was no growth or something to that effect. Glad I didn't listen, as the stock took off. Than again, I'm something of a contrarian (sp?).

[Andy]

Hi Everyone !

 

I agree about the Analysts comments. At times, it amazes me where some of their logic and comments come from.

 

I can recall numerous analysts, that said right after 9/11, that the Cruise industry would be terrible for many years to come, and were advising people to sell (or not buy) the Cruise stocks. As we all know, if you listend to the experts then, you missed an excellent buying opportunity.

 

FWIW, while I can see that Europe/Alaska is hot right now, I do not believe that Caribbean bookings are that slow. The ships are leaving full, but what may be the issue, is that the fares/yields are not where the lines would like. Celebrity made a comment today, that suggested the Caribbean is doing fine. I would not read too much into all of this.

[BEAV]

Celebrity made a comment today, that suggested the Caribbean is doing fine. I would not read too much into all of this.

 

Then why does Celebrity keep extending the Europe season each year? Galaxy ain't leavin' Rome until December to head back to the Caribbean. Millie is leaving the Caribbean mid-March (rather than late

April/early May) in 2007 to head back to Europe.

 

HAL, I believe, is doing the same thing with no ships in the Caribbean this summer.

 

If the Caribbean was so hot, they wouldn't keep shortening the season.

 

Last I checked, the ten commandments didn't include "all ships must home port in Florida!" :D

[YYC F/A]

BEAV is correct in that Europe is potentially a very strong market for the cruise industry.

 

Yields in Europe easily outperform the Caribbean. A 10 night cruise on RCI in the Med or Baltics can easily set you back $2,000+ per person for an Oceanview/Balcony, unthinkable in the Caribbean.

 

Even if the ship sails at only 75% capacity instead of closer to 100 in the Caribbean, the average tariff's of over 40-50% more easily make Europe still out in the lead for $$ return, even factoring in any loss of onboard revenue etc from a lower passenger load.

[cruisintwinsmom]

Do you think part of the reason that Europe sells (no pun intended) for more than the Caribbean is that people now see Europe as "affordable"? In 2004 when we sailed the Millie, BCN to Venice, it was booked close to full in early June. I know several years ago, my "dream" vacation was to cruise the med, never really thinking it was attainable, but now it is. Also, the caribbean may be a place for people to try out the cruise experience and once you've done that to move on to more expensive venues.

 

It is difficult to believe, though, that with all the new ships coming out that capacity could be full on all the ships.

[Iamboatman]

I think the only way Europe is affordable for most people is on a cruise, as Europe is terribly expensive. If you consider the cost of hotels, transportation and meals on a land-based trip, a cruise can save you up to 30-40% and there is a much lower hassle value (repacking, airports, etc.)

 

I also think more Americans are starting to look beyond our borders and have an increased interested in the rest of the world.

[ocngypz]

When it comes to berths in the Caribbean for 4th qtr 2006, there are very few Celebrity berths.. and that is why they are not as flat as the other lines.

 

Where I think revenue is going to fall flat, are the late fall Europe sailings. Air from North America is still outrageous considering the time of year. If North Americans don't sail.. and the berths are empty, they will be dumped in Europe to fill the ship.

 

One thing I have noticed about the Europe price points for 07, they are more realistic than the intial price points set for 06.

[YYC F/A]

The fall has always been 'prime time to interline' with a fall off in demand in October/November before Christmas. However, this spring, I was surprised at the levels of deep discounting in the industry, with all lines offering very low pricing to dump the extra capacity.

 

Norwegian, who have always seemed to have had a policy of filling the ship, no matter what price point, offered a range of $199 cruises on the Spirit and the infamous $10 cruise plus port charges on the POA.

 

Celebrity joined the fray with it's T/Atlantic deals such as $600 for the Connie Concierge Balcony...

 

Finally, even HAL is joining in, they just last week offered a Lisbon - Dover 5 night segment on the Prinsendam for a paltry $199 oceanview...

 

Yes - I think that yields will be good for the cruise lines, particularly in Europe, but I expect to see the mainstream cruiselines continue to be more aggressive in the dumping excess capacity to ensure every berth goes occupied, every time. Could be some good deals in Europe in the fall guys!