Carnival Corp. CEO Says Cuba Is a ‘Longer Term Play’

Skift Take

Cruise operators are counting on Cuba to stir up new interest in long-established Caribbean sailings. That could ultimately increase demand and prices for cruises that are typically budget-friendly. But as Carnival’s CEO said, adding Cuba as a destination may not do much for the bottom line at first.

— Hannah Sampson

Cuba is still an important part of Carnival Corporation’s future plans — even if the financial benefit from sailing to the island so far is tiny.

President and CEO Arnold Donald told analysts this week that he expects slow expansion in Cuba, which only this year opened up for U.S. cruise ships to visit.

While the single ship the company sends to the island sells out and commands premium prices, Donald said that in the context of the 10-brand, 102-ship portfolio, the numbers don’t add up to much.

“The most important thing is positioning for the longer haul and positioning to lift overall demand and interest in the Caribbean — and ultimately because of that, create additional opportunity for capturing more of the value through increased yields,” he said. “And so Cuba is a longer term play, but you have to build it today and that’s what we’re doing. But in terms of the financial impact on the corporation, you couldn’t find it probably.”

The comments came Tuesday during Carnival’s earnings call for the fourth fiscal quarter. The cruise giant reported profits of $609 million, up from $270 million a year earlier, for the quarter that ended Nov. 30. Full-year profits increased from $1.8 billion last year to $2.8 billion this year.

Carnival’s Fathom line started sailing to Cuba in May with the 704-passenger Adonia, while several other U.S. cruise operators got the green light earlier this month to include Havana in itineraries starting in 2017.

“We’re really privileged that we were the first, and in doing so paved the way for the rest of the industry,” Donald said. “We still will have more calls to Cuba than any other major U.S.  cruise company.”

Carnival is scheduled to keep sailing with Fathom through the end of May. After that, Adonia will return to its former brand in the UK and Fathom will change from a cruise line into a branded experience for passengers on other ships.

The parent company is awaiting permission from Cuban officials to send “larger ships and multiple brands” starting in June.

“We’re in the process of receiving the authorizations from Cuba as we speak here now,” Donald said. “We have every intention of cruising to Cuba. We have every expectation one or more of our brands will be approved from June on.”

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