Her concern is for 2009, which so far has little or no visibility. Much of the business for 2008 is already booked, she explained, but how many may not cruise next year, because of the economy, is the big question.
At William Blair & Company, Leisure Analyst Bob Simonson said: “I think we are in a recession, and the consumer will be much tighter with his money this year than last year.” He admitted taking a somewhat contrarian position, but believes that what he called the “budding recession” will start having an impact on middle income households.
Simonson expects Caribbean pricing to go down during the year and that European cruises will start to become affected, too. It is the aspirational buyer that will be impacted, he said, the customer who needs to borrow and buys a European cruise on credit.
Those who travel first class will go anyway, he said.
At Wachovia Capital Markets, Senior Analyst Tim Conder did not see much that can derail the cruise industry, which he said “has proven that it can do well in hard times if necessary.”
It is important to note that pricing is up for 2008, said Robin Farley, leisure and gaming analyst at UBS Investment Research. She said that yield and pricing are driven by deployment – such as moving more ships to Europe, by introducing new ships, and by reducing capacity in the Caribbean.
“While business could slow down,” she said, “I believe that is already factored into the forecasts.”
Earnings forecasts (per share) for the year are from $3.10 to $3.30 by Carnival Corporation, compared to actual earnings of $2.95 in 2007, and from $3.20 to $3.40 by Royal Caribbean Cruises, compared to actual earnings of $2.82 for 2007.
Excerpted from the Cruise Industry News Quarterly Magazine: Spring 2008