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Cruising is Coming back

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The recent spate of bad luck for the cruise industry is finally starting to turn around. Cruisers are coming back to their favorite pastime, and the cruise lines are reporting better than expected profits once again.

The most recent Carnival Corp. earnings statement just released this week shows that cruise bookings are picking up significantly over the preceding quarters. The industry has suffered from a series of incidents that just made it seem that the cruise industry couldn’t catch a break. Of course, the worst of those events was the horrible Concordia calamity that happened in Italy last November. Now, while earnings are not quite back to where they were a year ago (before the Concordia incident), this last quarter (Q3 for 2012) offered up company earnings that were significantly better than most analysts had expected to see at this time.

Notably, the time period just after the Concordia incident is now the worst booking period the industry has experienced for years – almost equal to the crash of 2009 and the 9/11 tragedy. Cruise bookings were down significantly, mostly for Carnival Corp. who is the parent company of Costa Cruises in Italy. Unfortunately, at this time last year most cruise lines were just starting to predict a renaissance in cruise bookings, as if the economic recovery was finally here just when the worst happened.

The first quarter after Concordia saw bookings go down as much as 10% – and it affected all cruise lines, but Costa was affected the most and Carnival the second most. It makes sense since Costa was the line responsible for the accident, but furthermore it did not help that Europeans in general have been booking fewer cruises due to a really bad economy over there, especially in the Mediterranean nations of Greece, Italy and Spain.

In general, the hardest hit sector were the mainstream cruise lines like Carnival, Royal Caribbean and Norwegian. But Premium lines like Princess, Holland America and Celebrity were also affected. For these mainstream cruise lines, the number of bookings is about the same as they were a year ago, but at lower prices. The cruise lines that saw the least decrease in bookings were the luxury cruise lines like Silversea, Seabourn, Regent and Crystal, and the river cruise lines like Viking Rover, UniWorld, AmaWaterways and Avalon.

On the other hand these same cruise lines are reporting that people who are cruising are also spending more aboard than usual – spending the money they saved on the cruise fare. This is actually different from previous recessionary times when people who got lower fares also tended to spend less aboard the ship during the cruise.

The Worst is Over

But right now things seem to be a lot better, although some experts are warning it is too soon to predict how well 2013 will do. After all, we are currently facing an election that will shape the ideas of many people in terms of where the economy is going, and many money experts are warning that the situation in Europe is getting worse. In fact, people are now booking closer in than they have in the past, and 2013 is still too far way to really predict how well bookings will be.

Much of the uncertainty in Europe continues – there is the economy, but there is also a lot of unrest in the Middle East which tends to also affect bookings for cruises to Greece, Turkey and even Spain.

Some luxury cruise lines that are still scheduled to cruise to exotic middle eastern ports like La Goulette in Tunis (ancient Carthage) have cancelled those calls. Other cruise lines that are still scheduled to go to Egypt have been putting off the call on whether they will still go there or not. Some are scheduled to stop in Alexandria the first week of October, but it appears they are putting off making the announcement for as long as they possibly can.

What does all of this mean for you? First of all, it is always good when cruising picks up. The food and service during the cruise tends to get better as morale picks up. Cruise Lines have more money to spend on food and entertainment. But as cruise ships start to fill up it is inevitable that cruise prices will soon go higher, so it might be a good idea to book that cruise you are considering sooner rather than later.

But the stock market is up and even housing prices are finally starting to turn around. The period of sustaining people out of work is still with us, but those people who have some money in the bank are starting to feel a little more confident going forward due to the “wealth effect.” In general the economy does seem to be getting better – which is to be expected since most recessions only last about a year, not four years. But this has now been dubbed “The Great Recession” by certain politicians, and they are correct, it has been a doozy.

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Comment from Steve
Time September 27, 2012 at 9:56 am

The Costa incident was January not November

Comment from Kenneth Eden
Time September 27, 2012 at 10:14 am

Cruising is coming back, never thought it went away , some may have thought so.

One area that has made the cruise so profitable, regardless of the economy, is the on board revenue which Paul points very clearly.

A cruise can be discounted as low as posible, and when the inclusions are lesser, and the charges for them escalate, then there is your bottom line profit for the cruise line – it is that simple.

I remember Bostons Top of the Hub Restaurant, late ’60’ – early ’70’s, where by the foos was excellent, the view from what was then Bostons tallest builing was exceptional, what could go wrong?

Stouffers, that is what went wrong. The restaurant became Stouffers Top of the Hub, all pre-made and frozen food. For those not familiar Stouffers products are sold in supermarkets here, frozen and usuallymicrowaved at home. Filled with preservatives too.

A very well known upscale chain of hotels still uses this practice, although who prepares and then freezes this food is unkown. Same thing is going on with the main stream ships and on one “premium” line that I have experienced.

I ordered the signature lobster mac and cheese, in a pay for alternative restaurant, and it was still frozen in the middle. Totally unacceptable. By the by, lobster mac and cheese is sold in wal Mart, as is the “exclusive” lava cake. Get the point?

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