Carnival Expects a Strong Year Despite Tensions in Asia

Carnival Corp. is sailing out of wave season with advance bookings galore, higher prices year-over-year, and booming business for its core Caribbean and European sailings, according to its quarterly earnings report released today.

The one big headache is China, which also happens to be a key growth area for the company.

Cruise operators including Carnival have been changing itineraries for China-based ships to remove South Korean ports amid tensions over the deployment in Seoul of a U.S. missile defense system. The disruptions came earlier this month after China told travel agencies to stop selling tours to South Korea, a popular spot for Chinese travelers to visit.

Instead, ships are adding additional ports in Japan or spending extra time at sea. The timing is especially tricky for Carnival’s Princess Cruises brand, which is about to start sailing a new ship built especially for Chinese cruisers.

Carnival Corp. president and CEO Arnold Donald said the company already has a strong foundation and leading presence in the region, and is pushing forward with its development strategy despite the restrictions on Korea, which are expected to last through the year.

“In any event, it’s early,” Donald said Tuesday during an earnings call to discuss first-quarter results. “We have disruptions often around the world.”

Bookings in China are still outpacing last year’s numbers, according to chief financial officer David Bernstein.

“This is an evolving market and it’s a [business-to-business] market and so the next month or two we’ll learn a lot more and we’ll be able to provide more information as we move forward,” Bernstein said.

If necessary, Donald said the company could make additional itinerary changes or work to further develop a strategy to fly Chinese passengers to other locations, where they would embark on cruises.

“We think China’s still going to be the largest cruise market in the world, cruising is in their five-years plan, we’re excited about our partnership in China,” Donald said. “We’re very positive on China. We continue to make good money there.”

Carnival, the world’s largest cruise company, made plenty of money in the quarter that ended Feb. 28. The company reported $352 million in net income on revenues of $3.8 billion, compared to profits of $142 million on nearly $3.7 billion revenue a year ago.

Based on the strong performance during peak booking season, Carnival increased its full-year forecast to adjusted earnings per share of $3.50-$3.70, an increase over December’s guidance of $3.30 to $3.60 a share. The company operates 10 brands around the world including Carnival Cruise Line, Princess Cruises, Holland America Line, Costa Cruises, Aida Cruises, and P&O Cruises.

Looking to the rest of the year, bookings and ticket prices are up for sailings in the Caribbean, Alaska, and Europe.

In response to an analyst’s question about policies by the new administration — expected or enacted — Donald said there had been no impact yet.

The company already visits Cuba with a small ship, but will replace it with a larger vessel in June.

“What’s regulating Cuba right now is Cuba,” Donald said. “So they’re determining how many ships are coming and which ships and what timing and all of that. Should the Trump administration take a different position than exists today, then we’ll have to deal with that.”

He said he doesn’t try to predict regulations or legislation under new political leaders.

“We obviously believe that people having the ability to travel is a good thing and we hope that steps will be taken to encourage travel rather than to restrict it,” Donald said.

Likewise, the latest executive order banning travel from several Muslim-majority countries — on hold amid challenges in court — have not hurt the company’s cruise business.

“We haven’t really been able to measure any impact from the noise around the travel bans or the actual bans themselves at this point in time,” Donald said. ” The only thing that can really directly impact us is severe restrictions of travel, because we are discretionary travel. If people can’t travel, that will impact us. We haven’t seen anything to date. We aren’t anticipating anything, but obviously we would adapt and react. Our assets are mobile.”