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RCCL and ITM Group team up to form Holistica destination venture

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Written by Kari Reinikainen Kari Reinikainen

Category: Top Headlines Top Headlines

Published: 25 June 2019 25 June 2019

Royal Caribbean Cruises Ltd. (RCCL), the world’s second largest cruise shipping group, and the ITM Group, which is headquartered in Cancun in Mexico, are teaming to form a new destination company, to be called Holistica, RCCL said in a statement.

Holistica would create an inclusive model for destination development that works holistically – thus the name – to meet the needs of coastal communities, local governments, and land, sea, and air travelers."The continuing growth and rising popularity of cruise vacations make it clear that the sustainable development of coastal destinations, including the thoughtful evolution of existing ones, is in the travel industry's best interest," said Michael Bayley of RCCL.

"We have spent five decades learning what works and what doesn't, and we know the potential of strategic development to deliver extraordinary guest experiences and meet the needs of local communities."

Mauricio Hamui of ITM Group said: "A well-designed destination brings economic benefits to communities and cultural enrichment to travelers, while creating the least possible disruption to the human and natural environment. There is a way to do these projects inclusively, collaboratively, and sustainably – and those are the characteristics this new partnership is meant to embody."

Holistica Destinations, Ltd. will be a 50-50 partnership between RCCL and ITM Group. The partners have commenced a search for a CEO for the new company, which will be headquartered in Miami.

Holistica's first project: a $275 million development in Freeport, The Bahamas, was originated by RCCL and ITM and is currently under review by the Bahamian government. Centered on the regeneration of the Grand Lucayan resort, the project includes ambitious plans for local ownership, employment, job training, community investment and sustainable construction practices.

In addition to the Freeport project, the companies said the new venture will own and operate destinations in Costa Maya, Mexico; Roatan, Honduras; and Kumamoto, Japan. These projects, among others, will serve 8 million visitors annually, and be accessible to all travelers, including land and air vacationers and guests of multiple cruise lines. Holistica is also engaged in discussions regarding multiple existing and proposed destinations around the world.

"The timing is right for a venture of this type," said Hamui. "A collaborative development approach, paired with meaningful private financial resources, gives local destinations the opportunity to grow the right way."

Added Bayley: "Having more destinations, and developing them in a responsible manner, gives travelers greater vacation quality, and expands the landscape of available travel options as the tourism industry grows."

Comment – Carnival interims raise concerns over Continental Europe’s health

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Written by Kari Reinikainen Kari Reinikainen

Category: Top Headlines Top Headlines

Published: 24 June 2019 24 June 2019

Carnival Corporation & plc, the world’s largest cruise shipping group, cut its earnings forecast for the 2019 financial year in its second quarter interims, citing ongoing headwinds faced by the company's Continental European brands as a key reason.

Carnival’s key brands on the Continent are Costa Crociere, which sells its cruises in virtually all over Europe (plus elsewhere, too) and AIDA Cruises, which caters for the German speaking market.

The Continental European market produced more than 4.0 million passengers in 2018 out of a global market of just under 30 million passengers.  The principal Continental European source markets were Germany, with 2.2 million, Italy 0.8 million and Spain and France both 0.5 million passengers, according to CLIA figures.

The Italian economy, which is important for Costa Crociere, has been struggling for a long and the country’s GDP contracted by 0.1% in the first three months of the year compared to the same period in 2019. On the previous quarter, the figure grew by 0.1%

Italy is a major market for Costa Crociere, so a weak home market is bad news to the company. It also operates in a rather low price point, which makes it vulnerable to competition from attractively priced land based holidays.

AIDA Cruises is not a budget offering, but it has grown its fleet rapidly over the past several years as has TUI Cruises, its Hamburg based competitor. Neither company has a further newbuilding due before the next AIDA vessel in 2021 and the break in capacity growth may come at a good time.

German economy has lost momentum in recent times and on 17 June, the Bundesbank revised down its 2019 GDP growth forecast to a mere 0.6% from an earlier forecast of 1.6%. Its 2020 forecast was cut to 1.2% from 1.6%.

Meanwhile, TUI Cruises, which is jointly owned by Royal Caribbean Cruises, Ltd (RCCL) and TUI AG, said in in its second quarter interims release that the average daily rate the cruise line had obtained decreased by 0.8% to €146, year-on. In the first six months of its financial year, the decrease had been 0.3% to €148.

Going forward, the average daily rate of TUI Cruises will probably be an indicator worth looking for, at least when it comes to the assessment of the health of the German market.

Carnival cuts 2019 earnings forecast on Continental Europe, Cuba, geopolitics

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Written by Kari Reinikainen Kari Reinikainen

Category: Top Headlines Top Headlines

Published: 20 June 2019 20 June 2019

Carnival Corporation & plc, the Anglo-American cruise shipping group, has cut its earnings forecast for the financial year to 30 November 2019 on a host of factors.

The company expects full year 2019 adjusted earnings per share to be in the range of $4.25 to $4.35, compared to March guidance of $4.35 to $4.55 and 2018 adjusted earnings per share of $4.26, it said in a statement.

President and Chief Executive Officer Arnold Donald said in the statement:, "Recent booking trends have been impacted by ongoing geopolitical and macroeconomic headwinds affecting our Continental European brands. We continue to expect higher yields in our North America and Australia brands offset by lower yields in our Europe and Asia brands for the remainder of the year."

Voyage disruptions related to Carnival Vista are expected to have a financial impact of approximately $0.08 to $0.10 per share.

The U.S government's policy change on travel to Cuba has a financial impact of approximately $0.04 to $0.06 per share. While the company was able to quickly adjust its itineraries to provide guests with attractive alternative vacation experiences, the suddenness of the regulatory change to this high yielding destination has led to a near-term impact on revenue yields.

In addition, the company is adjusting its full year net revenue yield guidance by 50 basis points mainly due to lower ticket prices forecasted in the second half of the year, resulting primarily from ongoing headwinds faced by the company's Continental European brands.

At this time, cumulative advanced bookings for the remainder of the year are slightly ahead of the prior year at prices that are in line with the prior year on a comparable basis. Pricing on bookings taken since March have been running behind the prior year on lower booking volumes in part because the company had less inventory remaining for sale. Cumulative advanced bookings for the full year 2020 are well ahead at prices that are in line compared to 2019.

The decline in revenue yields is mostly offset by $0.02 per share impact from lower fuel consumption and a net favorable $0.08 per share impact from changes in fuel prices and currency exchange rates since the time of March guidance.

Based on current booking trends, the regulatory change and voyage disruptions, the company now expects full year 2019 constant currency net cruise revenues to be up approximately 4.5%, with capacity growth of approximately 4.5%.

Net revenue yields in constant currency are expected to be in line with the prior year compared to March guidance of up approximately 1.0%. Net revenue yields in constant currency are expected to be flat to down slightly for the third quarter and lower for the fourth quarter when compared to the prior year. The company now expects full year net cruise costs excluding fuel per ALBD in constant currency to be up approximately 0.7% compared to the prior year. The 0.2% increase compared to March guidance is due to the aforementioned voyage disruptions.

Donald commented: "Over the past five years we have demonstrated our ability to overcome multiple headwinds and deliver strong operational improvement. This year our growth has been hampered by a confluence of events, which we are focused on mitigating. Generating over $5 billion of cash flow and with a robust business model, our business is strong and we remain confident over time we will deliver double-digit earnings growth and growth in return on invested capital."

Carnival group’s interims weaken as cost rises outpaces revenue growth

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Written by Kari Reinikainen Kari Reinikainen

Category: Top Headlines Top Headlines

Published: 20 June 2019 20 June 2019

Carnival Corporation & plc, the world’s largest cruise shipping group, has reported a fall in both second quarter and first half net profit due to higher fuel costs and adverse foreign exchange movements, which more than offset higher revenues.

Group net profit fell to $451 million in three months to 31 May from $564 million in the same period last year. Operating profit fell to $515 million from $559 million, but revenues increased to $4.84 billion from $4.36 billion, boosted by a bigger fleet.

In the first six months of the group’s financial year, net oprofit contracted to $797 million from $955 million, while operating profit shrunk to $902 million from $978 million. Revenues grew to $9.51 billion from $8.59 billion.

The group’s fuel bills increased to $423 million in the second quarter from $373 million year on and to $804 million from $731 million in the first six months of its financial year compared to the same period a year earlier. “Changes in fuel prices and currency exchange rates decreased earnings by $0.09 per share,” the company said.

President and Chief Executive Officer Arnold Donald said in a statement: "Second quarter earnings included revenue growth from higher capacity and improved onboard spending, more than offset by a drag from fuel and currency compared to the prior year. Second quarter adjusted earnings were better than March guidance by $0.08 per share substantially due to the timing of expenses between quarters."

Gross revenue yields (revenue per available lower berth day or "ALBD") increased 5.6%. In constant currency, net revenue yields increased 0.6%, better than March guidance of approximately flat.

Gross cruise costs including fuel per ALBD increased 9.6%. In constant currency, net cruise costs excluding fuel per ALBD decreased 1.3%, better than March guidance of up approximately 1.0%, substantially due to the timing of expenses between quarters.