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View Poll Results: Why are Caribbean prices so low right now?
Most cruisers feel like they have "been there and done that" 10 83.33%
The pending passport requirements were putting a damper on interest in leaving the country 2 16.67%
Sunworshipping as an activity is too passe, it ruins your skin 0 0%
Voters: 12. You may not vote on this poll

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  #1 (permalink)  
Old October 2nd, 2006, 02:28 PM
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Default Why are Caribbean Prices so LOW??? - POLL

We have seen Caribbean prices as low as $199 for a 4-day cruise that goes to Key West and Cozumel on a fairly new (launched 2005) cruise ship. We see one-week cruises going as low as $329 per person!

Price is guided by demand. Low prices mean demand for Caribbean Cruises is down. But WHY IS DEMAND DOWN?

The popular theory is that most experienced cruisers are saying "been-there, done that" -

Another theory is the new passport requirement -- which we have just gotten a reprieve on (will prices go up?)

But here are some other theories - health consciousness and the sun. For one thing, the age of the average cruiser is just a little younger than it was 10 years ago - 47, but the average 47 year old is different than she was 10 years ago. She is far more health conscious, though she may weigh a little more. One thing she definitely does NOT want is WRINKLES. And she may be a little self-conscious about being in a bathing suit.

So, my question for my poll is "Why are Caribbean Prices so LOW right now?"
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Old October 2nd, 2006, 02:35 PM
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Hi Paul,

I really think the passport thing is upsetting people. I have no idea why that would be. I can't imagine not having a passport.

I secretly hope its going down because I'm trying to make plans.
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Old October 2nd, 2006, 03:54 PM
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I did not cast a vote because I THINK: Reason the price is as low as it is because of Hurricane Season. Many people do not want to go out into the seas when there may be a storm to contend with. Then if there is a storm maybe the Itin may be changed.
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Old October 2nd, 2006, 04:08 PM
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I had to go with number one: "Been there done that" because of my personal preference but the question is much more complicated than the choices listed.

There are many combinations that have lead to this years "Low Low Prices".

Last year's heavy hurricane season caused a downturn in summer and fall bookings.

The Caribbean Princess fire, the suspicious circumstances surrounding the Smith death on board the Brilliance of the Seas. Publicity that makes it Oprah and other "news" channels does hurt bookings.

The overbuilding has caught up with the cruise industry and there is an overcapacity in the industry. Something has to be done to draw more people onto these ships and first time cruisers are now becoming the target. Low fares are what draw them.

In the second quarter of this year both CCL and RCL's stock plummeted. CCL resorted back to the post 9/11 pricing paradigm to lure people back on board and to fill the ships and to get their stock prices back up. So far it has worked fairly well. RCL tried two times to do a stock buy back to increase the price of their stock shares. It worked but not really well, now they have lowered prices and it's helping. Stock prices have recovered but not to where they were in March of this year.

Perhaps the idea of having to get a passport is an issue for many people and can have an impact on travelers not wanting to cruise, it does add a significant amount of money to first time cruisers. I know that the Caribbean Tourism Authority had a major impact in having the original deadline pushed back and it may still have an impact on their tourism numbers once it's impacted. I personally feel that the cost of a passport should be lowered now that it has become mandatory.

I personally feel that the fear of sun may have something to do with a downturn in bookings but I really don't think it's driving the thousands away that are causing the $199 bookings we're seeing today.

Take care,
Mike
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Old October 2nd, 2006, 08:02 PM
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Default Re: Why are Caribbean Prices so LOW??? - POLL

Paul,

Quote:
Originally Posted by Paul Motter
We have seen Caribbean prices as low as $199 for a 4-day cruise that goes to Key West and Cozumel on a fairly new (launched 2005) cruise ship. We see one-week cruises going as low as $329 per person!

Price is guided by demand. Low prices mean demand for Caribbean Cruises is down. But WHY IS DEMAND DOWN?

The popular theory is that most experienced cruisers are saying "been-there, done that" -

Another theory is the new passport requirement -- which we have just gotten a reprieve on (will prices go up?)

But here are some other theories - health consciousness and the sun. For one thing, the age of the average cruiser is just a little younger than it was 10 years ago - 47, but the average 47 year old is different than she was 10 years ago. She is far more health conscious, though she may weigh a little more. One thing she definitely does NOT want is WRINKLES. And she may be a little self-conscious about being in a bathing suit.

So, my question for my poll is "Why are Caribbean Prices so LOW right now?"
I have to vote for Mother Theresa on this one. (Shie's the Nun of the Above.)

Actually, I have noticed a growing disparity in fares across the cruise industry. Royal Caribbean International, Celebrity Cruises, and to some extent Princess Cruises and Holland America Lines generally seem to have a lot more of what we Fools call "pricing power" than Carnival Cruises, Costa Cruises, and, to a lesser extent, Norwegian Cruise Line (NCL). Indeed, Carnival's discounting has crushed most of the traditional "budget" cruise operators. This degree of disparity indicates that many people are willing to pay a premium for what they deem to be a more desirable product.

The factors behind this disparity in pricing power probably are quite complex. It's very likely that Carnival's attempts to shed its "frat party at sea" image over the past decade would turn off those who liked that kind of cruise experience, yet the reputation continues to trun off passengers who don't want that kind of cruise experinece. I also consistently hear very mixed comments from people who have taken cruises on Carnival, Costa, and NCL, and the negative comments are sufficeint to send a lot of first time cruisers to other lines with higher fares.

Norm.
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Old October 2nd, 2006, 08:19 PM
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Mike,

Quote:
Originally Posted by Mike M
There are many combinations that have lead to this years "Low Low Prices".

Last year's heavy hurricane season caused a downturn in summer and fall bookings.

The Caribbean Princess fire, the suspicious circumstances surrounding the Smith death on board the Brilliance of the Seas. Publicity that makes it Oprah and other "news" channels does hurt bookings.

The overbuilding has caught up with the cruise industry and there is an overcapacity in the industry. Something has to be done to draw more people onto these ships and first time cruisers are now becoming the target. Low fares are what draw them.
The problem here is that none of these factors explain the fact that fares are not so cheap -- indeed, higher than last year in some cases -- at other lines like Royal Caribbea Inernational, Celebrity Cruises, and Holland America Lines. Clearly there are some line-specific factors involved.

Quote:
Originally Posted by Mike M
In the second quarter of this year both CCL and RCL's stock plummeted.
True, but look at what was happening with (1) fuel prices and (2) the political situaton in the middle east. I think that speculators were reacting out of fear that fuel would rise to outrageous prices that would kill profitability or even that unavaialability of fuel would force the companies to withdraw ships from service. Wall Street has a long history of overreacting to such dynamics, creating phenomenal opportunities to buy stokc of solid companies at "bargain basement" prices. Thus, I would not read anything into the drop in share prices.

BTW, note that share prices are rebounding with the recent drop in decline prices. The market is still jittery, though.

Norm.
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Old October 2nd, 2006, 09:15 PM
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Norm:

Quote:
Originally Posted by Norm
True, but look at what was happening with (1) fuel prices and (2) the political situation in the middle east. I think that speculators were reacting out of fear that fuel would rise to outrageous prices that would kill profitability or even that unavailability of fuel would force the companies to withdraw ships from service. Wall Street has a long history of overreacting to such dynamics, creating phenomenal opportunities to buy stock of solid companies at "bargain basement" prices. Thus, I would not read anything into the drop in share prices.

Fuel prices did have a short term impact on all cruise lines but stock price downturn was based on fore casted bookings for third quarter. They were WAY down. Stocks prices are based on forecasts and the forecasts were not good actually they were horrible The "Head and Shoulders patterns on June 1, 2006 made CCL and RCL look like either a good time to sell or buy depending on your position.

The prices are going back up because the fourth quarter 2006 and 2007 forecasts are looking up. This is based on fuel, bookings and political climate. Though booking forecasts need to look much better for Royal Caribbean. Their stock price and forecast is far below what Carnival's is even if you calculate their size in relationship to Carnival's. Also their recovery has been much slower.

Quote:
Originally Posted by Norm
The problem here is that none of these factors explain the fact that fares are not so cheap -- indeed, higher than last year in some cases -- at other lines like Royal Caribbean International, Celebrity Cruises, and Holland America Lines. Clearly there are some line-specific factors involved.
Royal Caribbean was slower to lower prices than Carnival opting for a stock buy back to bring share prices back and indeed they raised prices in some areas to increase revenues. Holland America also has the least exposure in the Caribbean. The 800 pound gorilla has more money and the ability to lower fares to put bodies on the ships and when it comes to the bottom line you need bodies on the ship at the lowest, profitable fare, in order to make money.

Take care,
Mike
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Old October 3rd, 2006, 07:11 PM
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Mike,

Fuel prices did have a short term impact on all cruise lines but stock price downturn was based on fore casted bookings for third quarter. They were WAY down. Stocks prices are based on forecasts and the forecasts were not good actually they were horrible The "Head and Shoulders patterns on June 1, 2006 made CCL and RCL look like either a good time to sell or buy depending on your position.

The prices are going back up because the fourth quarter 2006 and 2007 forecasts are looking up. This is based on fuel, bookings and political climate. Though booking forecasts need to look much better for Royal Caribbean. Their stock price and forecast is far below what Carnival's is even if you calculate their size in relationship to Carnival's. Also their recovery has been much slower.


Hmmm...

The last several quarterly reports from Royal Caribbean Cruises Ltd. (NYSE: RCL) have indicated a strong upturn in bookings and yields. This does not seem consistent with your analysis. Indeed, it's the pattern of strong bookings and pricing power that have caused the company to order so much new capacity! Nonetheless, I'll grant you that Carnival Corporation (NYSE: CCL) seems to generate a lot of confusion by claiming that various adverse situations are "industry-wide" even though the lines that the situaton seems to affect are lines that Carnival Corporation owns.

Royal Caribbean was slower to lower prices than Carnival opting for a stock buy back to bring share prices back and indeed they raised prices in some areas to increase revenues.

Companies rarely buy back their own stock in a direct effort to boost the price of the shares. Rather, they buy back their own stock because the directors believe that the company's stock is so cheap that it's the best possible investment of the company's free cash. Of course, the fact that a company chooses to buy back its own stock often does inspore confidence in the company on the part of the part of potential investors and thus a recovery in the stock price -- but this is the effect of a buyback rather than the motivation for it.

Norm.
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Old October 3rd, 2006, 07:55 PM
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Quote:
Originally Posted by Norm
Companies rarely buy back their own stock in a direct effort to boost the price of the shares. Rather, they buy back their own stock because the directors believe that the company's stock is so cheap that it's the best possible investment of the company's free cash. Of course, the fact that a company chooses to buy back its own stock often does inspire confidence in the company on the part of the part of potential investors and thus a recovery in the stock price -- but this is the effect of a buyback rather than the motivation for it.
In early June, Royal Caribbean redeemed all of their outstanding liquid yield option notes and convertible debt due 2021, and by implementing a 4.1 million share buyback plan. This was a direct strategy to stop the slide of their stock price at that time and to bolster stock price. The strategy failed. It temporarily slowed the slide and had a very temporary positive effect but it didn't have the results predicted. It wasn't until the end of August, when fares were lowered, and booking forecasts increased that share prices increased.

Carnival corporation had more capital to ride out the storm and their stock prices are now almost to where they were in May since booking forecasts are up.

As of now, both companies need cash and are looking at expansion, especially Royal Caribbean and filling the berths and finding new markets is paramount.

We can discuss financial strategies for days. No one agrees not even the "professionals". If we were both right we would be cruising a lot more than we are now after playing the puts and the calls.

No matter what: August was a good time to buy.

Take care,
Mike



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Old October 3rd, 2006, 07:59 PM
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O.K. Should I buy or sell?
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Old October 3rd, 2006, 08:04 PM
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Ready:

Contact your financial professional.

Take care,
Mike
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Old October 3rd, 2006, 08:13 PM
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Chicken! Easy way out, huh?
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Old October 5th, 2006, 01:02 AM
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ready2gonow,

Quote:
Originally Posted by ready2gonow
Chicken! Easy way out, huh?
No. Legally necessary way out. We are not qualified financial advisors.

Norm.
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Old October 5th, 2006, 07:58 AM
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I know, Norm. I was just pickin'.
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Old October 5th, 2006, 01:37 PM
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RayB mentioned the hurricane problems. The Eastern coast and Atlantic Ocean have far more hurricanes than the Carribean Sea. The storms mainly form in the Atlantic and make their West and then turn to the North. The Carolinas seem to be hit every year as well as the Atlantic coast of Florida. I would not want to live in Florida as they are hit somehow every year. Ooppps, I can hear my friend, Rescuedad, running to defend.

IMHO, it is the been there, done that mentality.
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