Wall Street wasn't fond of what Carnival revealed about 2019 booking trends. Was the share price slump an overreaction?
Higher ticket prices in Alaska, Europe, and Asia helped propel Carnival Corp. to a record third quarter, though the Caribbean continued to suffer in comparison to pre-storm results in 2017.
The world’s largest cruise company on Thursday reported revenue of $5.8 billion for the quarter that ended Aug. 31, up from $5.5 billion during the same time last year. Profit increased from $1.3 billion last year to $1.7 billion this year.
But commentary about bookings for the first half of 2019 sent Carnival shares down more than 4.8 percent to $63.74 near the end of the day.
The company said cumulative advanced bookings for the first half of next year are ahead, but at prices in line with 2018. Since June, Carnival said in a release, booking volumes for early 2019 were “significantly higher” than the previous year, but at lower prices.
For the first half of September, though — comparing to the period that took place during last year’s active storm season — booking volumes are “significantly higher” at higher prices.
Chief Financial Officer David Bernstein said Europe and Alaska cruises are bright spots for 2019, with higher occupancy and prices. Both of those markets are seeing capacity increases next year.
“We’re very confident and that’s what gave us the conclusion that we expect solid revenue yield improvement in 2019,” he said.
Morningstar analyst Jaime Katz wrote in a note to investors that she did not believe any “imminent concern” was warranted.
“In our opinion, concern about pricing growth in 2019 is overblown; we think that the pricing model is intact and any weakness was a result of Caribbean overhang from a disastrous weather season last year,” she wrote. “We still expect that cruising is a demand-driven story, and with low global penetration rates, the value proposition has the ability to connect with a rising cohort of consumers going forward. With a still-strong U.S. consumer, a key constituent base for the cruise industry, we don’t expect any imminent strain on demand to persist in the first half of 2019.”
The cruise giant also said one of its brands, Princess Cruises, had reached a long-awaited milestone. The Ocean Medallion technology project, first announced in early 2017, is in use for all 3,100 passengers on one ship, Caribbean Princess.
The cruise line had been phasing the technology in by groups of passengers rather than launching it all at once as originally planned.
During the earnings call, Carnival Corp. CEO Arnold Donald said guest satisfaction scores on the ship were up and are among the highest in the Princess fleet.
“We continue to make refinements and add more features while pacing ourselves toward expanding deployment across the Princess fleet,” he said. A spokeswoman for the cruise line said details on the future rollout were not yet available.
In a release, Princess said guests are using the wearable devices to get keyless access to staterooms, pay on board, make wagers on some casino devices, navigate on ships using portals, find their itineraries, and take part in other activities. More features will continue to be rolled out, the cruise line said.
“We are delivering truly personalized service by reducing tons of small little friction points in the guest experience and saving them time so guests can enjoy more of what they love in our vacations,” Princess Cruises President Jan Swartz said Thursday at Skift Global Forum in New York City.
In addition to allowing passengers to navigate, get into their rooms, pay for items, and more, Swartz said the technology enables the cruise line to gather more than 400 million points of data over the course of a cruise.
“We can enhance the guest experience in real time as well as mine that information to do a better job designing that experience for the future,” Swartz said. “This level of personalized service has previously only been available to the truly elite traveler. Today it’s delivered to Princess Cruises at scale.”
Photo credit: Carnival Elation is shown in the ocean in this photo from 2017. Parent company Carnival Corp. reported record third-quarter earnings Thursday. Brook Ward / Flickr