First read is on us.

Subscribe today to keep up with the latest travel industry news.

Carnival's Q4 Impacted by Higher Advertising Spend, Advance Bookings Show Weakness


Skift Take

Increased advertising, lowering cruise prices and trying to win back the hearts and minds of travel agents have been key to Carnival's brand-rebuilding efforts. Advanced bookings for 2014, even though they are on par with last year's lower pricing, have been sluggish, pointing to the challenges ahead for Carnival.

Turning around a brand is costly -- just ask Carnival Corp.

The cruise giant today reported its fourth quarter earnings, with profits adversely impacted by a 6.5% increase in cruise costs, excluding fuel.

Adverting spend was a drag on earnings. In Carnival's fourth quarter, which ended November 30, selling and administrative expenses, which includes advertising and marketing, rose 15.9% to $532 million.

These higher costs were driven by increased advertising spend for initiatives such as Carnival's "Moments that Matter" campaign.

[youtube https://www.youtube.com/watch?v=j1ep4wA__rs]

In the fourth quarter, Carnival's U.S. GAAP net income, which included $31 million in unrealized gains from fuel derivatives, came in at $66 million versus $93 million a year earlier.

And, Carnival's fourth quarter revenue, driven by higher-than expect ticket prices and increased onboard spending, rose a paltry 2.2 percent to $3.65 billion.

Passengers were shelling out more money during sailings as onboard and other revenue climbed 3.9% to $929 million in the fourth quarter.

CEO Arnold Donald acknowledged that 2013 was a "challenging year" for Carnival Corp., although he pointed to the bright spots.

"Accelerated progress in Carnival Cruise Lines’ brand recovery had a positive impact on fourth quarter results," Donald said. "A steady stream of innovative product initiatives, the launch of a nationwide marketing campaign and travel agent outreach program, as well as an industry-leading vacation guarantee fueled the brand’s improvement.”

There are indeed headwinds, however.

In outlining its full-year 2014 outlook, Carnival reported that advance bookings for 2014 are behind the same period in 2013, and at similar prices. And Carnival can't be helped by ongoing concerns about safety on its ships, as well as PR challenges to its brand positioning.

Since September, booking volumes for the first three quarters of 2014 are picking up and overtaking last year's levels, albeit at lower prices.

For full year 2013, which ended November 30, Carnival saw U.S. GAAP net income decline 16.9% to $1.08 billion on revenue of $15.45 billion, which was down slightly.

Up Next

Experiences

How Travel Brands Can Seize the ‘Q5’ Opportunity on TikTok

Driven by increased spending on experiences and the digital habits of younger audiences, TikTok has emerged as a key platform for inspiring and shaping travel decisions. Leveraging the platform’s reach early in the year presents a unique opportunity for travel brands to connect with eager travelers.
Sponsored
Hotels

Oyo’s Strong UK Performance Spurs Ambitious Growth Plans

With budget hotels facing increasing challenges in the UK, Oyo is smartly shifting its focus toward premium properties. With this, Oyo is not just diversifying its portfolio, but also ensuring a sustainable, long-term growth.