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Carnival, Royal and Norwegian at Odds Over Caribbean Capacity

  • August 10, 2016

Second quarter earnings calls from Carnival Corporation, Royal Caribbean Cruises and Norwegian Cruise Line Holdings painted a differing picture of Caribbean capacity concerns.

Frank del Rio, president and CEO of Norwegian Cruise Line Holdings, said that a doubling of Caribbean capacity during the lowest-yielding season delivered pricing that was less robust than (high) expectations.

“The strong fundamentals (of the region) remain intact,” he said, adding that expectations of strong pricing growth did not fully materialize. Additionally, a 40-day charter of the Norwegian Getaway to serve as a hotel ship for the Rio Olympics helped alleviate pricing pressure, said del Rio.

Del Rio noted a steep capacity increase in Miami for Caribbean itineraries.

“The whole story on the Caribbean for us is not one of market weakness,” said del Rio. “Our ships our outperforming year-over-year. It’s a recognition that the high expectations just aren’t being met and we believe that is almost exclusively due to the heavy concentration of inventory in the weak period (summer). That is why we announced the Norwegian Getaway is moving out of Miami to the Baltic.”

Later in the call del Rio noted lofty expectations, and underscored that performance was up year-over-year in the Caribbean. He said Norwegian had more capacity in the Caribbean in 2016 compared to 2015, while competitors had less capacity, and the opposite situation will happen in 2017.

That Caribbean capacity increase will continue in 2017, as Celebrity Cruises has already confirmed the Equinox will stay year-round in Miami, dropping its Europe program, and more ships from other brands are expected to follow as geopolitical tensions continue in Europe.

At Royal Caribbean Cruises, Jason T. Liberty, chief financial officer, said that the Caribbean was performing on his company’s earnings call.

“Our Caribbean, Alaska and Bermuda itineraries account for about 50 percent of our full year capacity and continue to trend very well,” said Liberty. “We expect each of these products to generate nice yield improvements this year and also expect to see record yields in Alaska. We are generally seeing solid trends for our entire Caribbean portfolio which ranges from three-night Bahamas sailings to 14-night- Southern Caribbean itineraries.”

Carnival Corporation’s President and CEO Arnold Donald also pointed to a stable region on Carnival’s Q2 call.

“Bookings in the Caribbean and Alaska for the remainder of the year are very strong for our brands, enabling us to raise our revenue yield expectations and affirming our conviction to deliver over 20 percent earnings growth this year,” said Donald on the June 28 call.

David Bernstein, chief financial officer, Carnival Corporation also added: “Caribbean occupancy is well-ahead of the prior year at nicely higher prices.”

MSC Cruises, which is a private company and does not report earnings, is offering week-long Caribbean Cruises on its MSC Divina starting at $399 per person.

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