Carnival and Europe

Carnival Corporation has announced that it has agreed to exchange its interest in the cruise ship Mardis Gras for a small equity interest in Epirotiki Lines.

In addition, both companies will continue to hold discussions which could result in a more significant relationship between the two companies, according to Micky Arison, Chairman of Carnival.

The new relationship between Carnival and Epirotiki clearly signals Carnival’s intentions to expand into the European market. Epirotiki has a sales organization in Europe and fills 35 percent to 40 percent of the capacity of its aging 11-ship fleet from the European market.

Carnival, meanwhile, has ships that it can redeploy in Europe as new tonnage arrives in the North American market.

In addition, the relationship between Carnival and Epirotiki could benefit the provisioning and bunkering of Holland America Line, Seabourn Cruise Line and Windstar Cruises ships in Europe during the summer season.

The Mardis Gras is a good way for Carnival to test the market and its relationship with Epirotiki. Later, it is fair to speculate that other ships could be redeployed to Europe such as the Festiyale and the Tropicale. Carnival may also be considering redeployment of HAL’s Rotterdam pending the cost of upgrading the ship to new SOLAS fire safety regulations.

Especially newer ships would help to upgrade Epirotiki’s fleet and even give the joint venture a competitive edge in the European market and eventually allow a tiered marketing effort.

Implications

While Carnival executives were unavailable for comment, there are several interesting implications in the company’s interest in Epirotiki.

Initially, the joint venture gives Carnival an opportunity to redeploy aging ships in a different market, although it would seem to have been easier for Carnival simply to sell the vessels.

Thus, it makes more sense that Carnival is anticipating redeploying more vessels to make room in the North American market so to speak for its newbuildings arriving later this year and in 1994, 1995 and 1996, and probably with more ships in the planning stages.

lf in fact Carnival has “to make room for its newbuildings” it means that the company does not believe that the North American market can sustain continued growth at its historical nearly 10 percent annual average expansion rate.

That is not necessarily a bad omen for Carnival which would continue to dominate much of the market with its marketing resources and product, and would have a newer fleet maximizing the benefits to be derived from economies of scale.

ln addition, Carnival will be building up a fleet in Europe, tapping into what many consider a vast market potential with nearly 400 million people in the European Economic Community and in Western Europe (the countries that are not members). In addition, European cruise market experts are starting to look at Eastern Europe as a potential market.

The common denominator is three- to four-weeks of vacation.

Mardis Gras

Carnival will deliver the Mardis Gras to Epirotiki as scheduled, following completion of its final three-day cruise to the Bahamas this September.

The Mardis Gras will then sail to Pireaus where it will undergo refurbishment prior to joining the Epirotiki fleet in the Greek Isles as the Olympic in March, 1994.

The Mardis Gras has reportedly already been charted for a month by the government of Qatar to serve as hotel accommodations during a soccer tournament.

Dolphin Cruise Line is no longer part of the joint venture. However, the company “will work with Carnival and Epirotiki in directing North American sales and marketing activities for their Aegean and Mediterranean products.”

Carnival

The long-term perspective, according to industry insiders, is that Carnival will eventually assume control of the joint venture.

Other industry sources, meanwhile, have reported that Carnival is also interested in acquiring ownership in Renaissance Cruises. The Italian group, which is part owner of Renaissance, is believed to be in financial straits, and its interest in the cruise line may be for sale. Executives at the respective companies were unavailable for comment.

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